Dollar Tree said shrink and purchasing shifts to consumables across its assortment impacted its first-quarter performance as earnings came up short of analyst estimates despite a revenue beat.
For the quarter, Dollar Tree posted net income of $299 million, or $1.35 per diluted share, versus $536.4 million, or $2.37 per diluted share, in the year-earlier period. Adjusted for one-time events, net income was $325.1 million, or $1.47 per diluted share, versus $536.4 million, or $2.37 per diluted share, in the period a year prior when Dollar Tree took no adjustments.
Analysts polled by Yahoo Finance, on average, expected adjusted diluted earnings per share to be $1.52 with revenues of $7.28 billion.
Comparable sales increased 4.8% in the period year over year with the Dollar Tree store segment up 3.4% and the Family Dollar store segment up 6.6%, the company reported.
Net sales were $7.32 billion versus $6.9 billion in the year-before quarter. Operating income was $419.7 million versus $731.5 million in the period a year previous while adjusted operating income was $449.7 million versus $731.5 million in the year-past quarter.
The company in the first quarter opened 107 new stores, relocated 33 stores, and closed 29 stores. It expanded the multi-price Plus offering to an additional 408 Dollar Tree stores while completing 252 Family Dollar store renovation projects.
“Our initiatives to drive customer traffic and increase store productivity are having the desired impact,” said Rick Dreiling, Dollar Tree chairman and CEO. “The Dollar Tree segment delivered a 3.4% comp, successfully cycling the 11.2% comp from the prior year’s quarter. Family Dollar continued its sales momentum with a 6.6% same-store sales increase. Importantly, both segments experienced a mid-single digit percent step-up in comp traffic. We are clearly gaining market share across the entire enterprise. While we are seeing early results from our initiatives, we are not immune to the external pressures affecting all of retail, notably, the margin impact of elevated shrink and the product mix shift to consumables.”
Shrink and mix have played into Dollar Tree’s outlook for the year. “While we are maintaining our full-year 2023 sales outlook, we are adjusting our EPS outlook as we expect the elevated shrink and unfavorable sales mix to persist through the balance of the year,” Dreiling said. “We still expect earnings to be more back-end loaded this year as the benefits of lower ocean freight rates flow through.”
