In a September 4^th release, Dollar Tree, Inc. (DLTR) announced Q2 FY 2024 results for the period ending August 3^rd 2024.  The Company fell far short of expectations for revenue and earnings with an 11 percent decline in share price at the post-release open and falling 25 percent in subsequent trading. The holding company operates Dollar Tree and Family Dollar banners.

Dollar Tree Inc. posted net income of $132 million on total revenue of $7,379 million with a diluted EPS of $0.62. Expectations were for revenue of $7,480 million  and an EPS of $1.04. Comparable values for Q2 FY 2023 ending July 29^th were net income of $200 million on revenue of $7,325 million with a diluted EPS of $0.91.

Comparing the respective quarters, revenue was up 0.7 percent in Q2 2024. During the most recent quarter, Dollar Tree attained a gross margin of 30.1 percent (29.2 percent in Q2 FY 2023) and an operating margin of 2.8 percent, compared to 3.9 percent in Q2 2023.

For Q2, consolidated comparable store sales, increased by 0.7 percent, with Dollar Tree achieving 1.3 percent and Family Dollar, -0.1 percent.

In commenting on results, Rick Dreiling, Chairman and CEO stated, “We are encouraged by the continuous progress we are making in the transformation underway at Dollar Tree and Family Dollar, despite immense pressures from a challenging macro-environment,” He added “Customers are responding favorably to initiatives like our expanded multi-price offering and we are already seeing a meaningful sales lift at the 1,600 Dollar Tree stores that have been converted to our newest in-line multi-price format. With thousands of stores left to convert, we believe we are still in the very early innings of this rollout, with many years of runway left ahead of us.”

Chief Financial Officer Jeff Davis added, “Our adjusted EPS of $0.67 was $0.38 below the midpoint of our previous outlook range. While the vast majority of this variance was attributable to an adjustment of our general liability accrual, a portion was attributable to a comp shortfall which reflected the increasing effect of macro-pressures on the purchasing behavior of Dollar Tree’s middle- and higher-income customers.”

Guidance for FY 2024 was downgraded from the Q1 report and included consolidated sales of $30,600 million to $30,900 million; a low-single-digit percent increase in comparable store sales and an EPS ranging from $5.20 to $5.60, down 20 percent.

Effective August 3^rd 2024, Dollar Tree posted total assets of $22,617 million including $3,063 as goodwill and intangibles and carried long-term debt and lease obligations of $8,302 million.  DLTR had a market capitalization of $17,555  million on September 4^th compared to $24,460 on October 31^st. The share has traded over the past 52 weeks from $151.22 down to $60.82 with a 50-day moving average of $100.63. DLTR closed at $81.50 on September 3^rd, pre-release, opening September 4^th at $72.81, down 11 percent and falling further in trading by 25 percent to $61.19 at 15H00 EDT. Dollar Tree trades with a forward P/E of 12.5.  For the trailing-12 months the company posted an operating margin of 5.5 percent and a profit margin of negative 3.2 percent.  The company returned 4.9 percent on assets and negative 12.3 percent on equity over the past twelve months.

Effective March 4^th the company operated 16,397 stores (Dollar Tree, 8,520; Family Dollar 7,897). During Q2 the company continued renovations and opened 27 new Dollar Tree and 28 Family Dollar stores. Responding to complaints from civic organizations Dollar Tree continued to add frozen and fresh foods to stores in areas deemed “food deserts”  

In the investors’ call the company commented on theft as a headwind and announced preventive measures including removal of self-checkout stations. Management noted recipt of $70 million in part settlement of an insurance claim for $110 million following the complete loss of the Marietta, OK. distribution center and inventory to a toronado on April 28^th.

Dollar Tree is now evaluating the possible sale of the Family Dollar chain after recently announcing an intention of closing 1,000 stores. The banner was acquired in 2015 for $9 billion.