We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Dollar Tree (DLTR) Down 3.9% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Dollar Tree (DLTR - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dollar Tree due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Dollar Tree Q4 Earnings & Sales Beat, High Costs Hurt
Dollar Tree reported fourth-quarter fiscal 2022 results, wherein sales and earnings beat the Zacks Consensus Estimate. The top and bottom lines also improved year over year. The results have benefited from the continued demand for the company’s products, offset by unfavorable product mix driven by the demand shift toward low-margin consumable goods.
The company remains optimistic about its fiscal 2023 top-line performance. Hence, it has raised the fiscal 2023 sales view. Despite the strong sales trends across both banners, the company expects the increased demand for consumables and inflationary costs to affect margins and the bottom line in the near term. Consequently, it has provided a bleak earnings view for fiscal 2023.
Quarter in Detail
Dollar Tree’s earnings improved 1.5% year over year to $2.04 per share and beat the Zacks Consensus Estimate by a penny. Bottom-line growth can be attributed to robust top-line growth, as well as improved gross margins.
Consolidated net sales advanced 9% year over year to $7,716.2 million and surpassed the Zacks Consensus Estimate of $7,611 million. Enterprise same-store sales (comps) improved 7.4% year over year. For the Dollar Tree banner, comps were up 8.7%, while the same for the Family Dollar banner improved 5.8%.
Comps at Dollar Tree benefited from a double-digit increase in average ticket, partly negated by a decline in traffic. Comps at Family Dollar were aided by increases in both ticket and traffic.
The gross profit increased 11.6% year over year to $2,385.5 million, while the gross margin expanded 70 basis points (bps) to 30.9%. Gains from improved initial mark-on and lower freight costs aided the gross margin. This was partly negated by higher markdowns and shrink and unfavorable product mix related to a shift toward lower-margin consumable products. The gross margin expanded 110 bps to 36.7% at the Dollar Tree banner and 20 bps to 23.6% at the Family Dollar segment.
Selling, general and administrative expenses, as a percentage of sales, increased 80 bps to 22.9%. The increase was primarily driven by a $23.9 million non-cash store impairment charge, higher expenditures related to repairs, higher costs for store payroll and maintenance to improve store standards. This was partially offset by comparable store net sales leverage.
While the operating income rose 6.8% to $618.1 million, the operating margin declined 20 bps to 8%. Segment-wise, the operating margin expanded 180 bps to 16.8% for Dollar Tree. Meanwhile, the Family Dollar segment reported an operating income $1.4 million compared with an operating income of $86.8 million in the year-ago quarter.
Balance Sheet
Dollar Tree ended the fiscal fourth quarter with cash and cash equivalents of $642.8 million. As of Jan 28, 2023, net merchandise inventories increased to $5,449.3 million from $4,367.3 million reported in the year-ago period. It had net long-term debt of $3,421.6 million and shareholders’ equity of $8,751.5 million as of Jan 28, 2023.
The company bought back 4,613,696 shares for $647.5 million in fiscal 2022. As of Jan 28, 2023, Dollar Tree had $1.85 billion remaining under its existing authorization.
Store Update
In fourth-quarter fiscal 2022, Dollar Tree opened 123 stores, relocated 38 outlets and shuttered 77 stores. The company completed the renovation of 112 Family Dollar stores. Additionally, it expanded the multi-price plus offerings to another 119 Dollar Tree stores in the quarter. As of Jan 28, 2023, the company operated 16,340 stores in 48 states and five Canada provinces.
Guidance
For fiscal 2023, the company expects consolidated net sales of $29.9-$30.5 billion, which is a year-over-year increase from $26.3 billion reported in fiscal 2022. The company expects gross and operating margins to decline in the first half of fiscal 2023. Management expects earnings per share (EPS) in the range of $6.30 to $6.80 (including the contribution from the 53rd week) for fiscal 2023. The company estimates that diluted EPS will be comprised approximately 40% in the first half and 60% in the second half.
For first quarter fiscal 2023, the company expects consolidated net sales of $7.2-$7.4 billion based on a mid-single-digit comp growth at family Dollar, mid-single-digit increase in same-store sales for the enterprise, a low single-digit comp increase at Dollar Tree and a mid-single-digit comp improvement at Family Dollar. EPS is estimated in the range of $1.46-$1.56 in the fiscal first quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.76% due to these changes.
VGM Scores
Currently, Dollar Tree has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Dollar Tree has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Dollar Tree belongs to the Zacks Retail - Discount Stores industry. Another stock from the same industry, TJX (TJX - Free Report) , has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended January 2023.
TJX reported revenues of $14.52 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $0.89 for the same period compares with $0.78 a year ago.
For the current quarter, TJX is expected to post earnings of $0.71 per share, indicating a change of +4.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
TJX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Dollar Tree (DLTR) Down 3.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Dollar Tree (DLTR - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Dollar Tree due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Dollar Tree Q4 Earnings & Sales Beat, High Costs Hurt
Dollar Tree reported fourth-quarter fiscal 2022 results, wherein sales and earnings beat the Zacks Consensus Estimate. The top and bottom lines also improved year over year. The results have benefited from the continued demand for the company’s products, offset by unfavorable product mix driven by the demand shift toward low-margin consumable goods.
The company remains optimistic about its fiscal 2023 top-line performance. Hence, it has raised the fiscal 2023 sales view. Despite the strong sales trends across both banners, the company expects the increased demand for consumables and inflationary costs to affect margins and the bottom line in the near term. Consequently, it has provided a bleak earnings view for fiscal 2023.
Quarter in Detail
Dollar Tree’s earnings improved 1.5% year over year to $2.04 per share and beat the Zacks Consensus Estimate by a penny. Bottom-line growth can be attributed to robust top-line growth, as well as improved gross margins.
Consolidated net sales advanced 9% year over year to $7,716.2 million and surpassed the Zacks Consensus Estimate of $7,611 million. Enterprise same-store sales (comps) improved 7.4% year over year. For the Dollar Tree banner, comps were up 8.7%, while the same for the Family Dollar banner improved 5.8%.
Comps at Dollar Tree benefited from a double-digit increase in average ticket, partly negated by a decline in traffic. Comps at Family Dollar were aided by increases in both ticket and traffic.
The gross profit increased 11.6% year over year to $2,385.5 million, while the gross margin expanded 70 basis points (bps) to 30.9%. Gains from improved initial mark-on and lower freight costs aided the gross margin. This was partly negated by higher markdowns and shrink and unfavorable product mix related to a shift toward lower-margin consumable products. The gross margin expanded 110 bps to 36.7% at the Dollar Tree banner and 20 bps to 23.6% at the Family Dollar segment.
Selling, general and administrative expenses, as a percentage of sales, increased 80 bps to 22.9%. The increase was primarily driven by a $23.9 million non-cash store impairment charge, higher expenditures related to repairs, higher costs for store payroll and maintenance to improve store standards. This was partially offset by comparable store net sales leverage.
While the operating income rose 6.8% to $618.1 million, the operating margin declined 20 bps to 8%. Segment-wise, the operating margin expanded 180 bps to 16.8% for Dollar Tree. Meanwhile, the Family Dollar segment reported an operating income $1.4 million compared with an operating income of $86.8 million in the year-ago quarter.
Balance Sheet
Dollar Tree ended the fiscal fourth quarter with cash and cash equivalents of $642.8 million. As of Jan 28, 2023, net merchandise inventories increased to $5,449.3 million from $4,367.3 million reported in the year-ago period. It had net long-term debt of $3,421.6 million and shareholders’ equity of $8,751.5 million as of Jan 28, 2023.
The company bought back 4,613,696 shares for $647.5 million in fiscal 2022. As of Jan 28, 2023, Dollar Tree had $1.85 billion remaining under its existing authorization.
Store Update
In fourth-quarter fiscal 2022, Dollar Tree opened 123 stores, relocated 38 outlets and shuttered 77 stores. The company completed the renovation of 112 Family Dollar stores. Additionally, it expanded the multi-price plus offerings to another 119 Dollar Tree stores in the quarter. As of Jan 28, 2023, the company operated 16,340 stores in 48 states and five Canada provinces.
Guidance
For fiscal 2023, the company expects consolidated net sales of $29.9-$30.5 billion, which is a year-over-year increase from $26.3 billion reported in fiscal 2022. The company expects gross and operating margins to decline in the first half of fiscal 2023. Management expects earnings per share (EPS) in the range of $6.30 to $6.80 (including the contribution from the 53rd week) for fiscal 2023. The company estimates that diluted EPS will be comprised approximately 40% in the first half and 60% in the second half.
For first quarter fiscal 2023, the company expects consolidated net sales of $7.2-$7.4 billion based on a mid-single-digit comp growth at family Dollar, mid-single-digit increase in same-store sales for the enterprise, a low single-digit comp increase at Dollar Tree and a mid-single-digit comp improvement at Family Dollar. EPS is estimated in the range of $1.46-$1.56 in the fiscal first quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.76% due to these changes.
VGM Scores
Currently, Dollar Tree has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Dollar Tree has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Dollar Tree belongs to the Zacks Retail - Discount Stores industry. Another stock from the same industry, TJX (TJX - Free Report) , has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended January 2023.
TJX reported revenues of $14.52 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $0.89 for the same period compares with $0.78 a year ago.
For the current quarter, TJX is expected to post earnings of $0.71 per share, indicating a change of +4.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
TJX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.