Dollar Tree’s Stock Suffers Following Earnings Miss and Announcement to Close 600 Family Dollar Locations

Dollar Tree (Nasdaq:DLTR), a leading figure in the discount retail sector, experienced a significant decline in its stock value following the release of its fourth-quarter earnings, which fell short of expectations, and a gloomy forecast for the upcoming quarter. The company also noted a reduction in shopper spending in its stores, which contributed to its financial challenges.

On a particularly rough trading day, Dollar Tree’s shares dropped 13% to $130.18, according to Dow Jones Market Data. This downturn marked the stock’s most severe decline since May 18, 2022, positioning it as the day’s weakest performer on the S&P 500 index.

During a strategic assessment of its store performance and market trends, Dollar Tree announced its decision to close 600 Family Dollar stores in the first half of the year. Further, the company plans to shut down an additional 370 Family Dollar stores and 30 Dollar Tree locations as their leases come to an end over the next few years. These closures are part of a larger evaluation of the company’s store portfolio, which led to a fourth-quarter charge of $594.4 million.

Despite a collective 3% rise in same-store sales for Dollar Tree and Family Dollar during the fourth quarter—surpassing the predicted 2.8% increase—Family Dollar saw a 1.2% decrease in its same-store sales, a larger drop than the 0.5% decline analysts had anticipated. While both brands experienced an increase in customer visits, the average expenditure per visit fell.

Dollar Tree reported fourth-quarter adjusted earnings of $2.55 per share with revenue at $8.63 billion, missing the expected earnings of $2.66 per share on $8.67 billion in revenue forecasted by analysts. However, this was an improvement from the previous year’s earnings of $2.04 per share on $7.72 billion in revenue.

For the first quarter, Dollar Tree expects earnings to be between $1.33 and $1.48 per share, below the Wall Street consensus of $1.70 per share. The company’s earnings per share projection for the fiscal year is set between $6.70 and $7.30, compared to analysts’ prediction of $7.04 per share.

Following the announcement, Dollar Tree’s competitors also saw their stock values drop, with Dollar General (DG) declining by 2.5%, and Ollie’s Bargain Outlet Holdings (OLLI) and Five Below (FIVE) experiencing decreases of 0.5% and 2.2%, respectively.