Dollar Tree Cuts Its Outlook as Theft Hurts Profit

Shares of Dollar Tree (DLTR) slumped 12% on Thursday after the discount store chain’s profit missed forecasts, and it cut its full-year guidance because of the effects of theft and changing consumer habits.

Dollar Tree reported first quarter earnings per share (EPS) of $1.47, $0.05 below estimates. Revenue was up 6.1% to $7.32 billion, better than expected. Same-store sales at its namesake locations were 3.4% higher, and rose 6.6% at its Family Dollar stores. 

CEO Rick Dreiling explained that Dollar Tree “was not immune” to the external pressures affecting retailers, “notably, the margin impact of elevated shrink and the products mix shift to consumables.”

The difficulties at Dollar Tree mirror those of others in the sector. Target (TGT) and Foot Locker (FL) recently indicated their bottom lines would be hurt by losses from shoplifting. Lower-priced stores such as Dollar Tree have also reported that because of inflation, shoppers are spending less on more profitable discretionary items, squeezing earnings.

Dreiling added that the company anticipates elevated shrink and an unfavorable sales mix will “persist through the balance of the year.” Dollar Tree reduced its EPS outlook to a range of $5.73 to $6.13, down from the previous $6.30 to $6.80. Sales are expected to be about in line with earlier projections. 

Thursday's selloff sent Dollar Tree shares into negative territory for the year.