Dollar Tree Cuts Annual Forecasts

By Anuja Bharat Mistry

(Reuters) – Dollar Tree has joined main rival Dollar General in reducing its annual forecasts after missing quarterly estimates on Wednesday. The discount store operator is struggling to attract price-sensitive shoppers amidst rising competition.

Shares of Dollar Tree, which have lost nearly half their value this year, were down about 20% after hitting a four-year low of $64.04.

Bigger rivals such as Walmart and Target, along with PDD Holding’s ecommerce platform Temu, have managed to draw in shoppers with lower prices on a variety of items, including groceries and apparel, as consumers seek value.

“While rising prices drove shoppers to low-cost retailers like Dollar Tree and Dollar General, that wave has crested, and those merchants are now struggling to compete,” said eMarketer analyst Zak Stambor.

Dollar Tree CFO Jeff Davis indicated that the annual forecast cut stemmed from expectations of conservative sales for the year. “Customers are expanding their consumption on low-margin essentials while contracting their spending on discretionary items due to macro belt-tightening,” Davis mentioned during a post-earnings call.

Last week, rival Dollar General’s shares fell nearly 30% as low-income households face increased pressure on discretionary spending.

Dollar Tree has been restructuring its business and announced in June that it was exploring options, including a potential sale or spinoff of its Family Dollar banner. Earlier, the company had outlined plans to close 970 Family Dollar stores. As of August 3, Dollar Tree has closed around 655 stores and plans to shut down another 45 by the end of the year.

Chesapeake, Virginia-based Dollar Tree now expects annual sales between $30.6 billion and $30.9 billion, down from its previous forecast of $31 billion to $32 billion. The company anticipates adjusted annual earnings per share in the range of $5.20 to $5.60, down from its earlier forecast of $6.50 to $7 per share.

For the second quarter, Dollar Tree reported net sales of $7.37 billion, below analysts’ estimates of $7.49 billion. The company reported a quarterly adjusted profit of 67 cents per share, falling short of analysts’ expectations of $1.04 per share.