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Will Strong Comps Help Dollar Tree (DLTR) Beat on Q2 Earnings?
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Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports second-quarter fiscal 2023 results on Aug 24, before market open. The Zacks Consensus Estimate for revenues is pegged at $7.2 billion, indicating an improvement of 6.8% 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 second-quarter earnings is pegged at 88 cents per share, suggesting a decline of 45% 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 earnings surprise of 0.42%, on average. In the last reported quarter, the Chesapeake, VA-based company underperformed the Zacks Consensus Estimate by 2.7%.
Dollar Tree’s second-quarter fiscal 2023 performance is likely to have gained from robust product demand, efforts to evolve assortments to drive the consumables category at Dollar Tree and initiatives to improve the value proposition at Family Dollar. Dollar Tree’s Key Real Estate Initiatives, including expansions of H2, Dollar Tree Plus! and Combo Stores, have been on track.
The company’s restructuring and expansion initiatives, including store openings and improvement of distribution centers, are likely to have boosted revenues in the to-be-reported quarter. Dollar Tree has been on track to leverage Family Dollar and Dollar Tree distribution center systems, and combined merchandise.
DLTR’s digital and omni-channel capabilities, and same-day delivery service with Instacart are also expected to have driven traffic trends in the fiscal second quarter. The aforementioned factors instill optimism regarding the upcoming results.
The company has been reporting robust comparable store sales (comps), driven by improved customer traffic and a rise in average ticket.
On the last reported quarter’s earnings call, the company expected consolidated net sales of $7-$7.2 billion for second-quarter fiscal 2023, based on a mid-single-digit comps growth for the enterprise. Comps sales are also expected to improve in the mid-single digits at Dollar Tree and Family Dollar. EPS is estimated at 79-89 cents for the fiscal second quarter.
We expect consolidated comps growth of 4.8% for the fiscal second quarter. Our model predicts comps growth of 4.9% for the Dollar Tree segment and 4.8% for the Family Dollar segment in the fiscal second quarter.
However, the company’s bottom line is expected to have witnessed pressures from the ongoing external factors affecting the retail industry, mainly including the impacts of elevated shrink and the product mix shift to consumables on margins. Lower initial mark-on, an unfavorable sales mix and shrink are likely to have affected the gross margin in the to-be-reported quarter.
We expect the gross margin to contract 140 basis points (bps) year over year to 30% in the fiscal second quarter, reflecting an increase in the cost of sales due to unfavorable product mix, driven by the demand shift toward low-margin consumable goods. Our model predicts an adjusted operating margin of 4%, suggesting a 350-bps contraction from the year-ago quarter.
Additionally, Dollar Tree is expected to have witnessed elevated SG&A expenses, owing to higher store and field payroll costs, increased expenditure for repairs and maintenance to improve store standards, and professional fees. This, along with a soft gross margin, is expected to have led to a bleak operating margin in the to-be-reported quarter.
As a percentage of sales, we expect SG&A expenses to increase 200 basis points to 26% in the fiscal second quarter. In dollar terms, SG&A expenses are expected to increase 14.6% year over year to $1859.5 million.
What the Zacks Model Unveils
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’re reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.95%.
Stocks With Favorable Combination
Here are some other companies 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:
Five Below (FIVE - Free Report) currently has an Earnings ESP of +1.33% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for FIVE’s quarterly revenues is pegged at $760.5 million, which suggests growth of 13.7% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for FIVE’s earnings has been unchanged at 83 cents per share in the past 30 days. The consensus estimate indicates 12.2% growth from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +11.07% and a Zacks Rank #2. The company is likely to register growth in the bottom line when it reports second-quarter fiscal 2023 numbers. The consensus mark for AEO’s quarterly earnings has moved up 25% to 15 cents per share in the past 30 days. The consensus estimate suggests significant growth of 275% from the year-ago quarter’s reported EPS of 4 cents.
The Zacks Consensus Estimate for American Eagle’s quarterly revenues is pegged at $1.2 billion, which suggests a decline of 1.3% from the figure reported in the prior-year quarter.
Ulta Beauty (ULTA - Free Report) currently has an Earnings ESP of +0.20% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $2.5 billion, which suggests 9% growth from the figure reported in the prior-year quarter.
The consensus mark for ULTA’s quarterly earnings has moved up 0.5% in the past seven days to $5.84 per share. The consensus estimate suggests growth of 2.5% from the year-ago quarter.
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Will Strong Comps Help Dollar Tree (DLTR) Beat on Q2 Earnings?
Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports second-quarter fiscal 2023 results on Aug 24, before market open. The Zacks Consensus Estimate for revenues is pegged at $7.2 billion, indicating an improvement of 6.8% 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 second-quarter earnings is pegged at 88 cents per share, suggesting a decline of 45% 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 earnings surprise of 0.42%, on average. In the last reported quarter, the Chesapeake, VA-based company underperformed the Zacks Consensus Estimate by 2.7%.
Dollar Tree, Inc. Price and EPS Surprise
Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. Quote
Factors to Consider
Dollar Tree’s second-quarter fiscal 2023 performance is likely to have gained from robust product demand, efforts to evolve assortments to drive the consumables category at Dollar Tree and initiatives to improve the value proposition at Family Dollar. Dollar Tree’s Key Real Estate Initiatives, including expansions of H2, Dollar Tree Plus! and Combo Stores, have been on track.
The company’s restructuring and expansion initiatives, including store openings and improvement of distribution centers, are likely to have boosted revenues in the to-be-reported quarter. Dollar Tree has been on track to leverage Family Dollar and Dollar Tree distribution center systems, and combined merchandise.
DLTR’s digital and omni-channel capabilities, and same-day delivery service with Instacart are also expected to have driven traffic trends in the fiscal second quarter. The aforementioned factors instill optimism regarding the upcoming results.
The company has been reporting robust comparable store sales (comps), driven by improved customer traffic and a rise in average ticket.
On the last reported quarter’s earnings call, the company expected consolidated net sales of $7-$7.2 billion for second-quarter fiscal 2023, based on a mid-single-digit comps growth for the enterprise. Comps sales are also expected to improve in the mid-single digits at Dollar Tree and Family Dollar. EPS is estimated at 79-89 cents for the fiscal second quarter.
We expect consolidated comps growth of 4.8% for the fiscal second quarter. Our model predicts comps growth of 4.9% for the Dollar Tree segment and 4.8% for the Family Dollar segment in the fiscal second quarter.
However, the company’s bottom line is expected to have witnessed pressures from the ongoing external factors affecting the retail industry, mainly including the impacts of elevated shrink and the product mix shift to consumables on margins. Lower initial mark-on, an unfavorable sales mix and shrink are likely to have affected the gross margin in the to-be-reported quarter.
We expect the gross margin to contract 140 basis points (bps) year over year to 30% in the fiscal second quarter, reflecting an increase in the cost of sales due to unfavorable product mix, driven by the demand shift toward low-margin consumable goods. Our model predicts an adjusted operating margin of 4%, suggesting a 350-bps contraction from the year-ago quarter.
Additionally, Dollar Tree is expected to have witnessed elevated SG&A expenses, owing to higher store and field payroll costs, increased expenditure for repairs and maintenance to improve store standards, and professional fees. This, along with a soft gross margin, is expected to have led to a bleak operating margin in the to-be-reported quarter.
As a percentage of sales, we expect SG&A expenses to increase 200 basis points to 26% in the fiscal second quarter. In dollar terms, SG&A expenses are expected to increase 14.6% year over year to $1859.5 million.
What the Zacks Model Unveils
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’re reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.95%.
Stocks With Favorable Combination
Here are some other companies 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:
Five Below (FIVE - Free Report) currently has an Earnings ESP of +1.33% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for FIVE’s quarterly revenues is pegged at $760.5 million, which suggests growth of 13.7% 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 FIVE’s earnings has been unchanged at 83 cents per share in the past 30 days. The consensus estimate indicates 12.2% growth from the year-ago quarter’s reported figure.
American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +11.07% and a Zacks Rank #2. The company is likely to register growth in the bottom line when it reports second-quarter fiscal 2023 numbers. The consensus mark for AEO’s quarterly earnings has moved up 25% to 15 cents per share in the past 30 days. The consensus estimate suggests significant growth of 275% from the year-ago quarter’s reported EPS of 4 cents.
The Zacks Consensus Estimate for American Eagle’s quarterly revenues is pegged at $1.2 billion, which suggests a decline of 1.3% from the figure reported in the prior-year quarter.
Ulta Beauty (ULTA - Free Report) currently has an Earnings ESP of +0.20% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $2.5 billion, which suggests 9% growth from the figure reported in the prior-year quarter.
The consensus mark for ULTA’s quarterly earnings has moved up 0.5% in the past seven days to $5.84 per share. The consensus estimate suggests growth of 2.5% from the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.