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.
Here's Why Dollar Tree (DLTR) is Poised for Q4 Earnings Beat
Read MoreHide Full Article
Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports fourth-quarter fiscal 2023 results on Mar 13, before market open. The Zacks Consensus Estimate for revenues is pegged at $8.7 billion, indicating an improvement of 12.4% from the prior-year quarter’s reported figure.
The bottom line of the operator of discount variety retail stores is expected to have increased year over year. The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $2.68 per share, suggesting growth of 31.4% from the year-ago period’s reported figure. The consensus mark has moved up 0.8% in the past seven days.
The company has a trailing four-quarter negative earnings surprise of 0.68%, on average. In the last reported quarter, the Chesapeake, VA-based company underperformed the Zacks Consensus Estimate by 4%.
Dollar Tree’s fourth-quarter fiscal 2023 performance is likely to have gained from growth across both segments, higher traffic and robust market share gains.
Additionally, DLTR’s progress on optimizing its store portfolio through store openings, renovations, re-banners and closings bodes well. 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 fourth quarter.
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 fourth 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 $8.6-$8.8 billion for fourth-quarter fiscal 2023, based on low-single-digit comps growth for the enterprise. Comps sales are expected to improve in the mid-single digits at the Dollar Tree banner. Meanwhile, comps for the Family Dollar banner are likely to be between a decline of 1% and an increase of 1%. EPS is estimated to be $2.58-$2.78 for the fiscal fourth quarter.
For fiscal 2023, Dollar Tree predicts consolidated net sales of $30.5-$30.7 billion, with mid-single-digit comps growth. Comps are likely to increase in the mid-single digits for the Dollar Tree banner and in the low-single digits for the Family Dollar segment.
We expect consolidated comps growth of 2.7% for the fiscal fourth quarter and 4.5% for fiscal 2023. Our model predicts comps growth of 5.7% for the Dollar Tree segment and a decline of 1% for the Family Dollar segment in the fiscal fourth quarter. Comps for fiscal 2023 are expected to increase 5.5% for the Dollar Tree segment and 3.2% for Family Dollar.
However, on the last reported quarter’s earnings call, the company expected softer demand from low-income households, persistent increase in shrink and sales mix to remain headwinds throughout fiscal 2023. It noted that its guidance incorporates the effects of the continued momentum in the Dollar Tree banner, incremental freight savings, softer demand from low-income households, and a continuation of the shrink and sales mix headwinds throughout fiscal 2023. It excludes any potential impacts of the strategic review of the Family Dollar portfolio. These factors are likely to have weighed on the company’s bottom-line performance in the to-be-reported quarter.
On the last reported quarter’s earnings call, management estimated an EPS of $5.81-$6.01 for fiscal 2023 and $2.58-$2.78 for the fourth quarter.
Additionally, 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. An unfavorable sales mix, higher shrink, product cost inflation, a product recall and wage investments in distribution center payroll are likely to have affected the gross margin in the to-be-reported quarter.
We expect the gross margin to expand 170 basis points (bps) year over year to 32.7% in the fiscal fourth quarter and contract 90 bps to 30.6% for fiscal 2023.
Additionally, Dollar Tree is expected to have witnessed elevated SG&A expenses due to elevated payroll, increased repair and maintenance expenses, and store facility costs. This, along with a soft gross margin, is expected to have led to a decline in the operating margin in fiscal 2023.
As a percentage of sales, we expect SG&A expenses to increase 70 basis points to 23.6% in the fiscal fourth quarter and 100 bps to 24.7% for fiscal 2023. In dollar terms, SG&A expenses are expected to increase 15.2% year over year in the fiscal fourth quarter and 12.8% in fiscal 2023.
Driven by the soft gross margin and higher SG&A rate, our model predicts an adjusted operating margin of 5.9% for fiscal 2023, suggesting a 200-bps contraction from the year-ago quarter’s actual. For the fiscal fourth quarter, our model suggests a 100-bps improvement in the operating margin to 9%.
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 are reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +1.51%.
Other 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:
DICK'S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +1.80% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DKS’s quarterly revenues is pegged at $3.8 billion, which suggests growth of 4.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DICK'S Sporting earnings has moved up 1.2% to $3.34 per share in the past 30 days. The consensus estimate indicates growth of 14% from the year-ago quarter’s actual.
Dollar General (DG - Free Report) currently has an Earnings ESP of +0.84% and a Zacks Rank of 3. The company is likely to register top and bottom-line declines when it reports fourth-quarter fiscal 2023 results. The consensus mark for DG’s quarterly revenues is pegged at $9.8 billion, which suggests a dip of 4.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DG’s earnings has moved up by a penny to $1.74 per share in the past 30 days. The consensus estimate indicates a 41.2% decrease from the year-ago quarter’s reported figure.
Ulta Beauty (ULTA - Free Report) presently has an Earnings ESP of +0.05% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports fourth-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $3.5 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 by a penny in the past 30 days to $7.48 per share. The consensus estimate suggests growth of 12% from the year-ago quarter’s actual.
Image: Bigstock
Here's Why Dollar Tree (DLTR) is Poised for Q4 Earnings Beat
Dollar Tree, Inc. (DLTR - Free Report) is likely to register top-line growth when it reports fourth-quarter fiscal 2023 results on Mar 13, before market open. The Zacks Consensus Estimate for revenues is pegged at $8.7 billion, indicating an improvement of 12.4% from the prior-year quarter’s reported figure.
The bottom line of the operator of discount variety retail stores is expected to have increased year over year. The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $2.68 per share, suggesting growth of 31.4% from the year-ago period’s reported figure. The consensus mark has moved up 0.8% in the past seven days.
The company has a trailing four-quarter negative earnings surprise of 0.68%, on average. In the last reported quarter, the Chesapeake, VA-based company underperformed the Zacks Consensus Estimate by 4%.
Dollar Tree, Inc. Price and EPS Surprise
Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. Quote
Factors to Consider
Dollar Tree’s fourth-quarter fiscal 2023 performance is likely to have gained from growth across both segments, higher traffic and robust market share gains.
Additionally, DLTR’s progress on optimizing its store portfolio through store openings, renovations, re-banners and closings bodes well. 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 fourth quarter.
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 fourth 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 $8.6-$8.8 billion for fourth-quarter fiscal 2023, based on low-single-digit comps growth for the enterprise. Comps sales are expected to improve in the mid-single digits at the Dollar Tree banner. Meanwhile, comps for the Family Dollar banner are likely to be between a decline of 1% and an increase of 1%. EPS is estimated to be $2.58-$2.78 for the fiscal fourth quarter.
For fiscal 2023, Dollar Tree predicts consolidated net sales of $30.5-$30.7 billion, with mid-single-digit comps growth. Comps are likely to increase in the mid-single digits for the Dollar Tree banner and in the low-single digits for the Family Dollar segment.
We expect consolidated comps growth of 2.7% for the fiscal fourth quarter and 4.5% for fiscal 2023. Our model predicts comps growth of 5.7% for the Dollar Tree segment and a decline of 1% for the Family Dollar segment in the fiscal fourth quarter. Comps for fiscal 2023 are expected to increase 5.5% for the Dollar Tree segment and 3.2% for Family Dollar.
However, on the last reported quarter’s earnings call, the company expected softer demand from low-income households, persistent increase in shrink and sales mix to remain headwinds throughout fiscal 2023. It noted that its guidance incorporates the effects of the continued momentum in the Dollar Tree banner, incremental freight savings, softer demand from low-income households, and a continuation of the shrink and sales mix headwinds throughout fiscal 2023. It excludes any potential impacts of the strategic review of the Family Dollar portfolio. These factors are likely to have weighed on the company’s bottom-line performance in the to-be-reported quarter.
On the last reported quarter’s earnings call, management estimated an EPS of $5.81-$6.01 for fiscal 2023 and $2.58-$2.78 for the fourth quarter.
Additionally, 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. An unfavorable sales mix, higher shrink, product cost inflation, a product recall and wage investments in distribution center payroll are likely to have affected the gross margin in the to-be-reported quarter.
We expect the gross margin to expand 170 basis points (bps) year over year to 32.7% in the fiscal fourth quarter and contract 90 bps to 30.6% for fiscal 2023.
Additionally, Dollar Tree is expected to have witnessed elevated SG&A expenses due to elevated payroll, increased repair and maintenance expenses, and store facility costs. This, along with a soft gross margin, is expected to have led to a decline in the operating margin in fiscal 2023.
As a percentage of sales, we expect SG&A expenses to increase 70 basis points to 23.6% in the fiscal fourth quarter and 100 bps to 24.7% for fiscal 2023. In dollar terms, SG&A expenses are expected to increase 15.2% year over year in the fiscal fourth quarter and 12.8% in fiscal 2023.
Driven by the soft gross margin and higher SG&A rate, our model predicts an adjusted operating margin of 5.9% for fiscal 2023, suggesting a 200-bps contraction from the year-ago quarter’s actual. For the fiscal fourth quarter, our model suggests a 100-bps improvement in the operating margin to 9%.
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 are reported with our Earnings ESP Filter.
Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +1.51%.
Other 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:
DICK'S Sporting Goods (DKS - Free Report) currently has an Earnings ESP of +1.80% and a Zacks Rank of 2. The company is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 results. The consensus mark for DKS’s quarterly revenues is pegged at $3.8 billion, which suggests growth of 4.2% 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 DICK'S Sporting earnings has moved up 1.2% to $3.34 per share in the past 30 days. The consensus estimate indicates growth of 14% from the year-ago quarter’s actual.
Dollar General (DG - Free Report) currently has an Earnings ESP of +0.84% and a Zacks Rank of 3. The company is likely to register top and bottom-line declines when it reports fourth-quarter fiscal 2023 results. The consensus mark for DG’s quarterly revenues is pegged at $9.8 billion, which suggests a dip of 4.2% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for DG’s earnings has moved up by a penny to $1.74 per share in the past 30 days. The consensus estimate indicates a 41.2% decrease from the year-ago quarter’s reported figure.
Ulta Beauty (ULTA - Free Report) presently has an Earnings ESP of +0.05% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports fourth-quarter fiscal 2023 results. The consensus mark for ULTA’s quarterly revenues is pegged at $3.5 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 by a penny in the past 30 days to $7.48 per share. The consensus estimate suggests growth of 12% from the year-ago quarter’s actual.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.