Dollar Tree (DLTR) Stock Falls on Q1 Earnings & Sales Miss
Dollar Tree Inc. DLTR posted first-quarter fiscal 2018 results, wherein both earnings and sales lagged the Zacks Consensus Estimate but improved year over year. Further, management updated guidance for second-quarter and fiscal 2018.
Following the lower-than-expected quarterly results, shares of the company have lost nearly 8.5% in pre-market trading. This Zacks Rank #3 (Hold) stock has declined 7.5% in the past three months against the industry‘s growth of 3.1%.
Quarter in Detail
Dollar Tree’s quarterly adjusted earnings of $1.19 per share missed the Zacks Consensus Estimate of $1.23. However, the metric rose 21.4% from the prior-year quarter. Also, earnings came within the company’s guided range of $1.18-$1.25 per share.
On a GAAP basis, earnings per share came in at 67 cents, down from 85 cents in the year-ago quarter.
Consolidated net sales were up 5% to $5,553.7 million in the quarter but came below the Zacks Consensus Estimate of $5,571 million.
Further, enterprise same-store sales (comps) grew 1.4%. Comps at Dollar Tree rose 4% on a constant currency basis, driven by improved average ticket and traffic. Including the Canadian currency fluctuations impact, comps at Dollar Tree grew 4.1%. However, comps at Family Dollar dipped 1.1%.
The company’s quarterly gross profit advanced 4.5% year over year to $1,699.6 million, while gross margin contracted 20 basis points (bps) to 30.6%. The margin contraction was mainly due to increased shrink, distribution and occupancy expenses, somewhat compensated by lower markdowns and merchandise costs.
Selling, general and administrative expenses increased 20 bps to 22.7% of sales, owing to increased store payroll expenses, partly mitigated by lower depreciation and amortization expenses as a percentage of sales.
Further, operating income dipped 0.5% to $437.6 million in the reported quarter. Also, operating margin came in at 7.9%, down 40 bps from the year-ago quarter.
Dollar Tree ended the quarter with cash and cash equivalents of $475.2 million, net merchandise inventories of $3,248.2 million, net long-term debt excluding current maturities of $5,040.1 million and shareholders’ equity of $7,355.7 million.
Dollar Tree opened 130 outlets, expanded or relocated 26 outlets and shuttered 5 outlets in the reported quarter.
Management updated guidance for second-quarter and fiscal 2018. It forecasts consolidated net sales for the second quarter in the band of $5.47-$5.57 billion, with low-single-digits comps growth. Earnings are envisioned in the range of $1.07-$1.16 per share.
For fiscal 2018, the company projects consolidated net sales in the range of $22.73-$23.05 billion versus $22.70-$23.12 billion guided earlier. The company expects low-single-digit comps increase and a 3.7% rise in square footage. Further, earnings per share for the full fiscal are envisioned in the $4.80-$5.10 range versus $5.25-$5.60 guided earlier.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.18 and for the fiscal year, it stands at $5.66.
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