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What to Expect Ahead of Dollar Tree's (DLTR) Q3 Earnings?

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Dollar Tree, Inc. (DLTR - Free Report) is likely to register an increase in the top line when it reports third-quarter fiscal 2021 results on Nov 23, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $6.42 billion, indicating an improvement of 4% from the prior-year quarter.

The bottom line of this operator of discount variety retail stores is expected to decrease year over year. The Zacks Consensus Estimate for third-quarter earnings is pegged at 95 cents per share, suggesting a decline of 31.7% from the year-ago period. The figure has been unchanged in the past 30 days.

The company has a trailing four-quarter earnings surprise of 13.8%, on average. In the last reported quarter, this Chesapeake, VA-based company outperformed the Zacks Consensus Estimate by a margin of 19.4%.

Dollar Tree, Inc. Price and EPS Surprise

Dollar Tree, Inc. Price and EPS Surprise

Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. Quote

Key Factors to Note

Dollar Tree’s fiscal third-quarter results are expected to reflect gains from its decision to introduce additional multi-price points to its Dollar Tree Plus! stores and plans to expand Combo stores. The company has been witnessing strong momentum at the Combo and Dollar Tree Plus! stores, which feature multi-price assortments. Expansion of these stores is likely to have contributed to incremental sales in the to-be-reported quarter. The company’s store rationalization and renovation efforts, backed by the success of the H2 program and Crafter’s Square, might have favored the to-be-reported quarter’s top line.

The company’s digital and omni-channel endeavors, same day delivery service with Instacart and introduction of Chesapeake Media Group are also expected to have driven traffic trends in the fiscal third quarter.

Industry experts believe that discretionary category, including apparel, home décor, beauty care and floral, is likely to have performed well. The company has been witnessing encouraging results at stores that added fresh produce and frozen meats to their assortment.

Clearly, aforementioned factors instill optimism regarding the outcome of the results. On the last reported quarter’s earnings call, management predicted consolidated net sales for third-quarter fiscal 2021 to be $6.40-$6.52 billion, with comps growth in low-single digits. It anticipated earnings of 88-98 cents per share.

However, margins still remain an area to watch. The company has been witnessing elevated freight cost, which has been plaguing the industry for a while now. The increased freight cost has been denting the company’s gross margin to a large extent.

On the last quarter’s earnings call, management stated that it anticipates the elevated freight cost environment across the industry to continue through the year. The company predicted regular carriers to now fulfill only 60-65% of their commitments. It noted that the spot market rates for ocean freight from China have been trending higher than the all-time highs, increasing more than 20% since the first-quarter earnings report in May. The company also informed that it expects the volatility in the ocean carriers’ ability to fulfill commitments to continue in the near term.

The company’s Dollar Tree banner is extremely sensitive to higher freight costs due to its one-dollar price point. The company has been taking several steps to mitigate the impacts of freight and otherwise improve gross merchandise margin. However, impacts from these headwinds are likely to get reflected in the fiscal third-quarter results.

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Dollar Tree this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar Tree has a Zacks Rank #3 and an Earnings ESP of 0.00%.

3 Stocks With a Favorable Combination

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Abercrombie & Fitch (ANF - Free Report) currently has an Earnings ESP of +8.27% and a Zacks Rank of 3. The company is expected to have registered top-line growth in third-quarter fiscal 2021. The Zacks Consensus Estimate for ANF's quarterly revenues is pegged at $894.4 million, which suggests growth of 9.1% from the figure reported in the prior-year quarter.

You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie's quarterly earnings moved up 4.7% in the last seven days to 67 cents per share. However, the figure suggested a 12% decline from the year-ago quarter's reported number. However, ANF has delivered an earnings beat of 510.9%, on average, in the trailing four quarters.

Nordstrom (JWN - Free Report) currently has an Earnings ESP of +0.40% and a Zacks Rank #3. JWN is anticipated to have registered top and bottom-line growth in third-quarter fiscal 2021. The Zacks Consensus Estimate for quarterly earnings of 56 cents per share moved up 3.7% in the last seven days and suggests growth of 154.6% from the year-ago quarter's reported number.

The Zacks Consensus Estimate for Nordstrom's quarterly revenues is pegged at $3.54 billion, indicating an improvement of 14.5% from the prior-year quarter. JWN has delivered an earnings beat of 557.3%, on average, in the trailing four quarters.

DICK'S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +27.97% and a Zacks Rank #3. DKS is likely to register top-line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for its quarterly earnings moved up 3.3% in the last 30 days to $1.88 per share. The figure suggested a decline of 6.5% from the year-ago quarter.

The Zacks Consensus Estimate for DICK'S quarterly revenues is pegged at $2.42 billion, which suggests growth of 0.4% from the figure reported in the prior-year quarter. DKS has delivered an earnings beat of 117.4%, on average, in the trailing four quarters.

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