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Dollar Tree (DLTR) Stock Falls on Q1 Earnings & Sales Miss

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Dollar Tree Inc. (DLTR - Free Report) posted first-quarter fiscal 2018 results, wherein both earnings and sales lagged the Zacks Consensus Estimate but improved year over year. Further, management updated guidance for second-quarter and fiscal 2018.

Following the lower-than-expected quarterly results, shares of the company have lost nearly 8.5% in pre-market trading. This Zacks Rank #3 (Hold) stock has declined 7.5% in the past three months against the industry's growth of 3.1%.



 Quarter in Detail

Dollar Tree’s quarterly adjusted earnings of $1.19 per share missed the Zacks Consensus Estimate of $1.23. However, the metric rose 21.4% from the prior-year quarter. Also, earnings came within the company’s guided range of $1.18-$1.25 per share.

On a GAAP basis, earnings per share came in at 67 cents, down from 85 cents in the year-ago quarter.

Consolidated net sales were up 5% to $5,553.7 million in the quarter but came below the Zacks Consensus Estimate of $5,571 million.

Further, enterprise same-store sales (comps) grew 1.4%. Comps at Dollar Tree rose 4% on a constant currency basis, driven by improved average ticket and traffic. Including the Canadian currency fluctuations impact, comps at Dollar Tree grew 4.1%. However, comps at Family Dollar dipped 1.1%.

The company’s quarterly gross profit advanced 4.5% year over year to $1,699.6 million, while gross margin contracted 20 basis points (bps) to 30.6%. The margin contraction was mainly due to increased shrink, distribution and occupancy expenses, somewhat compensated by lower markdowns and merchandise costs.

Dollar Tree, Inc. Price, Consensus and EPS Surprise

Dollar Tree, Inc. Price, Consensus and EPS Surprise | Dollar Tree, Inc. Quote

Selling, general and administrative expenses increased 20 bps to 22.7% of sales, owing to increased store payroll expenses, partly mitigated by lower depreciation and amortization expenses as a percentage of sales.

Further, operating income dipped 0.5% to $437.6 million in the reported quarter. Also, operating margin came in at 7.9%, down 40 bps from the year-ago quarter.

Balance Sheet

Dollar Tree ended the quarter with cash and cash equivalents of $475.2 million, net merchandise inventories of $3,248.2 million, net long-term debt excluding current maturities of $5,040.1 million and shareholders’ equity of $7,355.7 million.

Store Update

Dollar Tree opened 130 outlets, expanded or relocated 26 outlets and shuttered 5 outlets in the reported quarter.

Guidance

Management updated guidance for second-quarter and fiscal 2018. It forecasts consolidated net sales for the second quarter in the band of $5.47-$5.57 billion, with low-single-digits comps growth. Earnings are envisioned in the range of $1.07-$1.16 per share.

For fiscal 2018, the company projects consolidated net sales in the range of $22.73-$23.05 billion versus $22.70-$23.12 billion guided earlier. The company expects low-single-digit comps increase and a 3.7% rise in square footage. Further, earnings per share for the full fiscal are envisioned in the $4.80-$5.10 range versus $5.25-$5.60 guided earlier.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.18 and for the fiscal year, it stands at $5.66.

Want More of Retail Stocks? Check These

Big 5 Sporting Goods Corporation (BGFV - Free Report) pulled off an average positive earnings surprise of 10.5% in the last four quarters. Also, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Urban Outfitters, Inc. (URBN - Free Report) , also a Zacks Rank #1 stock, has a long-term earnings growth rate of 12%.

The Buckle, Inc. (BKE - Free Report) delivered an average positive earnings surprise of 9.7% for the trailing four quarters and carries a Zacks Rank #2 (Buy).

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