Is Dollar Tree in Trouble This Holiday Season?

Dollar Tree Inc. (NYSE: DLTR) reported fiscal third-quarter results before markets opened Tuesday. The discount retailer posted $1.08 in earnings per share (EPS) and $5.75 billion in revenue, almost in line with the consensus estimates of $1.13 in EPS on revenue of $5.74 billion. The same period of last year reportedly had EPS of $1.18 and $5.54 billion in revenue.

During the latest quarter, enterprise same-store sales increased by 2.5%. At the same time, same-store sales for the Dollar Tree banner increased by 2.8%. Same-store sales for the Family Dollar banner increased by 2.3%. The comparable store sales results at both segments were driven by increases in both average ticket and transaction count.

Looking ahead to the fiscal fourth quarter, Dollar Tree expects to see EPS in the range of $1.70 to $1.80 and revenue between $6.33 billion and $6.44 billion. But consensus estimates so far are calling for $2.02 in EPS and $6.41 billion in revenue.

Gary Philbin, president and CEO, commented:

The third quarter represented another period of solid sales performance for both brands, Dollar Tree and Family Dollar. Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree re-banners, more than 1,000 Dollar Tree Snack Zones and launched our Dollar Tree Plus! test already this year. Fiscal 2019 has been a unique year as the result of several factors: the material acceleration in our Family Dollar store optimization initiatives, the consolidation of our two store support centers into southeast Virginia, the global helium shortage, and the continued uncertainty regarding trade and the related tariffs. I am proud of our team’s efforts and the sales execution through this environment.

Shares of Dollar Tree closed Monday at $112.39, in a 52-week range of $81.02 to $119.71. The consensus price target is $116.56. Following the announcement, the stock was down roughly 14% at $96.67 in early trading indications Tuesday.