It’s a Tough Time to Be a Dollar Store. These Earnings Show Why.

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Aug. 26, 2021 10:26 americium ET

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People shopped astatine a Dollar Tree store successful Chicago successful March.

Scott Olson/Getty Images

Shares of Dollar General and Dollar Tree are falling arsenic investors respond to the dollar-store firms’ July 4th results. Higher freight costs continued to measurement connected their margins.

Dollar General (ticker: DG) reported fiscal second-quarter nett income of $637 million, oregon $2.69 a share. That edged retired Wall Street’s statement estimation of $2.62, according to FactSet. Net income of $8.65 cardinal were down 0.4% twelvemonth over-year but successful enactment with Wall Street’s statement estimation astatine $8.61 billion. Same-store income declined 4.7%, but were up 14.1% compared with 2019.

Dollar Tree (DLTR) reported nett income of $282.4 million, oregon $1.23 a share. That was up of statement estimates astatine $1.01 a share. Sales of $6.34 cardinal were up 1% year-over-year but beneath Wall Street’s statement estimation of $6.44 billion. Same-store income declined 1.2% connected a changeless currency basis, but were up 6% comparative to 2019.

Dollar General banal was down 5.4% to $234.74 successful aboriginal trading Thursday portion Dollar Tree banal was down 8.8% to $97. Through Wednesday’s close, Dollar General shares were up 12% twelvemonth to day portion Dollar Tree banal had fallen 1.6%.

Unlike department stores, which precocious reported acold amended results than expected amid a betterment in apparel shopping, dollar stores faced pugnacious comparisons with past year, erstwhile they saw an uptick successful sales amid the pandemic.

Dollar General said its gross borderline complaint of 31.6% was down 0.8 percent constituent from 2020. Increased proscription costs, a greater proportionality of income coming from lower-margin consumable goods, and an summation successful inventory damages weighed connected the figure. Raymond James expert Bobby Griffin, who has a Strong Buy standing connected Dollar General banal with a $210 target, said the fig bushed his expectations contempt a challenging supply-chain environment.

For the remainder of the year, Dollar General raised the little extremity of its scope of forecasts for net per stock to $9.60 from $9.50. It besides expects a comparable- income diminution of betwixt 3.5% and 2.5%, an betterment from a anterior scope betwixt 5% and 3%.

Dollar Tree’s gross borderline complaint of 29.4% was down 1.1 percent points from 2020, chiefly owed to higher freight costs. For the afloat year, the institution present expects $185 cardinal to $200 cardinal much successful further freight costs than it anticipated successful May. Dollar Tree lowered its full-year earnings-per-share outlook to betwixt $5.40 and $5.60 from a anterior scope betwixt $5.80 and $6.05.

“Regarding the continuing and well-publicized challenges successful the planetary proviso chain, arsenic good arsenic higher freight costs and different inflationary pressures, our teams are moving hard to navigate these issues portion staying focused, arsenic always, connected delivering the worth and convenience our shoppers expect,” CEO Michael Witynski said successful the net release.

Write to Connor Smith astatine connor.smith@barrons.com

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