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Here's How Dollar Tree (DLTR) Is Placed Ahead of Q1 Earnings
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Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for revenues is pegged at $7.6 billion, indicating an improvement of 4.3% from the prior-year quarter’s reported figure.
The bottom line of the operator of discount variety retail stores is expected to have declined year over year. The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at $1.45 per share, suggesting a decline of 1.4% from the year-ago period’s reported figure. The consensus mark has moved up by a penny in the past seven days.
The company has a trailing four-quarter negative earnings surprise of 1.9%, on average. In the last reported quarter, the Chesapeake, VA-based company lagged the Zacks Consensus Estimate by 4.5%.
Dollar Tree’s first-quarter fiscal 2024 performance is likely to have gained from growth across both segments, higher traffic and robust market share gains. The company has been reporting robust comparable store sales (comps), driven by improved customer traffic and a rise in average ticket.
As investors prepare for Dollar Tree’s fiscal first-quarter earnings, question emerges regarding earnings beat or miss. Our proven conclusively predicts an earnings beat for Dollar Tree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.24%.
Here are some of the underlying factors that suggest Dollar Tree remains a compelling investment opportunity.
What Makes Dollar Tree a Stock to Watch
Dollar Tree has been benefiting from a range of initiatives like a multi-price point strategy, restructuring and expansion initiatives, and efforts to optimize its store portfolio through store openings, renovations, re-banners and closings. These actions have led to consistent sales growth across various segments, rising traffic trends and substantial gains in market share.
Dollar Tree’s Key Real Estate Initiatives, including expansions of H2, Dollar Tree Plus! and Combo Stores, have been on track. Efforts to evolve assortments to drive the consumables category at Dollar Tree and initiatives to improve the value proposition at Family Dollar are expected to have led to top-line gains in the fiscal first quarter.
Further, growth in key metrics, such as sales per square foot, transactions and units sold, indicates positive momentum and progress toward the company’s operational objectives. These are expected to have boosted the top-line performance in the to-be-reported quarter.
DLTR’s digital and omni-channel capabilities, and same-day delivery service with Instacart are expected to have driven traffic trends in the fiscal first quarter.
On the last reported quarter’s earnings call, the company cited that it remained confident of its progress on the key growth initiatives and its business transformation plan. It expects the benefits of favorable freight rates and moderating headwinds from reduced SNAP benefits to aid results throughout fiscal 2024. This is expected to have a positive impact on the first-quarter fiscal 2024 results.
For first-quarter fiscal 2024, DLTR expects consolidated net sales of $7.6-$7.9 billion, based on low to mid-single-digit comps growth for the enterprise. Comps are also likely to improve in the low to mid-single digits at the Dollar Tree banner. Meanwhile, comps for the Family Dollar banner are likely to be flat year over year. EPS is estimated to be $1.33-$1.48 for the fiscal first quarter.
Our model predicted year-over-year enterprise comps growth of 2.8% for the fiscal first quarter, with a 5.2% increase in comps for the Dollar Tree banner and a 0.1% rise in Family Dollar comps. Our model estimates a 4.2% rise in sales per square foot at Dollar Tree and a 0.4% increase at Family Dollar.
However, the company has been witnessing an unfavorable sales mix, higher shrink, product cost inflation, a product recall, and wage investments in the distribution center payroll, which have been weighing on its bottom-line performance. On the last reported quarter’s earnings call, the company expected elevated shrink and an adverse sales mix to be headwinds throughout fiscal 2024. These factors are likely to have weighed on the company’s gross margin performance in the to-be-reported quarter.
Additionally, Dollar Tree’s Family Dollar segment has been pressured by soft spending trends among low-income consumers, resulting in soft demand for discretionary items. The lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits. Although the company expects the headwinds from reduced SNAP benefits to moderate in fiscal 2024, the extent of moderation in the fiscal first quarter is unknown. This is likely to have led to continued pressures on the Family Dollar business in the to-be-reported quarter.
Dollar Tree has also been witnessing higher SG&A expenses for the past few quarters, owing to elevated operating costs, including labor investments in stores and field payroll, investments in repairs and maintenance, and higher depreciation and amortization.
We expect the gross margin to be flat year over year at 30.5% in the fiscal first quarter. As a percentage of sales, we expect SG&A expenses to increase 40 basis points to 24.8% in the fiscal first quarter. In dollar terms, SG&A expenses are expected to increase 6.1% year over year in the fiscal first quarter.
Driven by the flat gross margin and a higher SG&A rate, our model predicts an adjusted operating margin of 5.7% for the fiscal first quarter, suggesting a 40-bps contraction from the year-ago quarter’s actual.
Valuation Picture
From a valuation perspective, Dollar Tree shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 15.72X, below the five-year median of 18.35X and the Retail-Discount Stores industry’s average of 29.25X, the stock offers compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of A, further validating its appeal.
Recent market movements show that Dollar Tree’s shares have lost 19.2% year to date against the industry’s rise of 10.6%. Trading at $114.70 as of May 21, shares of Dollar Tree are likely to gain momentum, as our proven model predicts that the company is likely to beat earnings estimates in the impending release.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:
Abercrombie & Fitch (ANF - Free Report) presently has an Earnings ESP of +2.87% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports first-quarter fiscal 2024 results. The consensus mark for ANF’s quarterly revenues is pegged at $940 million, which suggests 12.4% growth from the figure reported in the prior-year quarter.
The consensus mark for ANF’s quarterly earnings has moved up 2.6% in the past 30 days to $1.57 per share. The consensus estimate suggests growth of 302.6% from the year-ago quarter’s actual.
Dollar General (DG - Free Report) currently has an Earnings ESP of +0.24% and a Zacks Rank of 3. The company is likely to register top-line growth when it reports first-quarter fiscal 2024 results. The consensus mark for DG’s quarterly revenues is pegged at $9.9 billion, which suggests growth of 5.4% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DG’s earnings has been unchanged at $1.57 per share in the past 30 days. The consensus estimate indicates a 32.9% decrease from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +6.84% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports first-quarter fiscal 2024 results. The consensus mark for AEO’s quarterly revenues is pegged at $1.2 billion, which suggests growth of 5.9% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for American Eagle’s earnings has moved up by a penny to 27 cents per share in the past 30 days. The consensus estimate indicates growth of 58.8% from the year-ago quarter’s actual.
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Here's How Dollar Tree (DLTR) Is Placed Ahead of Q1 Earnings
Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for revenues is pegged at $7.6 billion, indicating an improvement of 4.3% from the prior-year quarter’s reported figure.
The bottom line of the operator of discount variety retail stores is expected to have declined year over year. The Zacks Consensus Estimate for fiscal first-quarter earnings is pegged at $1.45 per share, suggesting a decline of 1.4% from the year-ago period’s reported figure. The consensus mark has moved up by a penny in the past seven days.
The company has a trailing four-quarter negative earnings surprise of 1.9%, on average. In the last reported quarter, the Chesapeake, VA-based company lagged the Zacks Consensus Estimate by 4.5%.
Dollar Tree’s first-quarter fiscal 2024 performance is likely to have gained from growth across both segments, higher traffic and robust market share gains. The company has been reporting robust comparable store sales (comps), driven by improved customer traffic and a rise in average ticket.
Dollar Tree, Inc. Price and EPS Surprise
Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. Quote
What the Zacks Model Unveils
As investors prepare for Dollar Tree’s fiscal first-quarter earnings, question emerges regarding earnings beat or miss. Our proven conclusively predicts an earnings beat for Dollar Tree this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.24%.
Here are some of the underlying factors that suggest Dollar Tree remains a compelling investment opportunity.
What Makes Dollar Tree a Stock to Watch
Dollar Tree has been benefiting from a range of initiatives like a multi-price point strategy, restructuring and expansion initiatives, and efforts to optimize its store portfolio through store openings, renovations, re-banners and closings. These actions have led to consistent sales growth across various segments, rising traffic trends and substantial gains in market share.
Dollar Tree’s Key Real Estate Initiatives, including expansions of H2, Dollar Tree Plus! and Combo Stores, have been on track. Efforts to evolve assortments to drive the consumables category at Dollar Tree and initiatives to improve the value proposition at Family Dollar are expected to have led to top-line gains in the fiscal first quarter.
Further, growth in key metrics, such as sales per square foot, transactions and units sold, indicates positive momentum and progress toward the company’s operational objectives. These are expected to have boosted the top-line performance in the to-be-reported quarter.
DLTR’s digital and omni-channel capabilities, and same-day delivery service with Instacart are expected to have driven traffic trends in the fiscal first quarter.
On the last reported quarter’s earnings call, the company cited that it remained confident of its progress on the key growth initiatives and its business transformation plan. It expects the benefits of favorable freight rates and moderating headwinds from reduced SNAP benefits to aid results throughout fiscal 2024. This is expected to have a positive impact on the first-quarter fiscal 2024 results.
For first-quarter fiscal 2024, DLTR expects consolidated net sales of $7.6-$7.9 billion, based on low to mid-single-digit comps growth for the enterprise. Comps are also likely to improve in the low to mid-single digits at the Dollar Tree banner. Meanwhile, comps for the Family Dollar banner are likely to be flat year over year. EPS is estimated to be $1.33-$1.48 for the fiscal first quarter.
Our model predicted year-over-year enterprise comps growth of 2.8% for the fiscal first quarter, with a 5.2% increase in comps for the Dollar Tree banner and a 0.1% rise in Family Dollar comps. Our model estimates a 4.2% rise in sales per square foot at Dollar Tree and a 0.4% increase at Family Dollar.
However, the company has been witnessing an unfavorable sales mix, higher shrink, product cost inflation, a product recall, and wage investments in the distribution center payroll, which have been weighing on its bottom-line performance. On the last reported quarter’s earnings call, the company expected elevated shrink and an adverse sales mix to be headwinds throughout fiscal 2024. These factors are likely to have weighed on the company’s gross margin performance in the to-be-reported quarter.
Additionally, Dollar Tree’s Family Dollar segment has been pressured by soft spending trends among low-income consumers, resulting in soft demand for discretionary items. The lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits. Although the company expects the headwinds from reduced SNAP benefits to moderate in fiscal 2024, the extent of moderation in the fiscal first quarter is unknown. This is likely to have led to continued pressures on the Family Dollar business in the to-be-reported quarter.
Dollar Tree has also been witnessing higher SG&A expenses for the past few quarters, owing to elevated operating costs, including labor investments in stores and field payroll, investments in repairs and maintenance, and higher depreciation and amortization.
We expect the gross margin to be flat year over year at 30.5% in the fiscal first quarter. As a percentage of sales, we expect SG&A expenses to increase 40 basis points to 24.8% in the fiscal first quarter. In dollar terms, SG&A expenses are expected to increase 6.1% year over year in the fiscal first quarter.
Driven by the flat gross margin and a higher SG&A rate, our model predicts an adjusted operating margin of 5.7% for the fiscal first quarter, suggesting a 40-bps contraction from the year-ago quarter’s actual.
Valuation Picture
From a valuation perspective, Dollar Tree shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 15.72X, below the five-year median of 18.35X and the Retail-Discount Stores industry’s average of 29.25X, the stock offers compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of A, further validating its appeal.
Recent market movements show that Dollar Tree’s shares have lost 19.2% year to date against the industry’s rise of 10.6%. Trading at $114.70 as of May 21, shares of Dollar Tree are likely to gain momentum, as our proven model predicts that the company is likely to beat earnings estimates in the impending release.
Other Stocks With Favorable Combination
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:
Abercrombie & Fitch (ANF - Free Report) presently has an Earnings ESP of +2.87% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports first-quarter fiscal 2024 results. The consensus mark for ANF’s quarterly revenues is pegged at $940 million, which suggests 12.4% growth from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for ANF’s quarterly earnings has moved up 2.6% in the past 30 days to $1.57 per share. The consensus estimate suggests growth of 302.6% from the year-ago quarter’s actual.
Dollar General (DG - Free Report) currently has an Earnings ESP of +0.24% and a Zacks Rank of 3. The company is likely to register top-line growth when it reports first-quarter fiscal 2024 results. The consensus mark for DG’s quarterly revenues is pegged at $9.9 billion, which suggests growth of 5.4% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DG’s earnings has been unchanged at $1.57 per share in the past 30 days. The consensus estimate indicates a 32.9% decrease from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +6.84% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports first-quarter fiscal 2024 results. The consensus mark for AEO’s quarterly revenues is pegged at $1.2 billion, which suggests growth of 5.9% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for American Eagle’s earnings has moved up by a penny to 27 cents per share in the past 30 days. The consensus estimate indicates growth of 58.8% from the year-ago quarter’s actual.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.