Dollar Tree lowers its earnings prediction in response to Family Dollar’s anticipated pricing cutbacks.
(corrects final paragraph to show that same-store sales increased 4.9%, not 7.5%).
Dollar Tree Inc. dropped its full-year profit prediction on Thursday, citing price cuts at its Family Dollar stores for boosting demand among lower-income buyers and competing with other retailers that have increased discounts.
In premarket trade, shares of the bargain retailer fell more than 8%.
Extra inventory levels at Walmart (NYSE: WMT) Inc. and Target Corp. (NYSE: TGT) have driven the retail chains to remove excess supplies by providing substantial discounts, a move experts say might limit the number of customers moving from traditional shops to off-price outlets.
Dollar Tree (NASDAQ: DLTR) expects to earn $7.10 to $7.40 per share in fiscal 2022, up from $7.80 to $8.20 previously.
Dollar General (NYSE: DG) increased its annual sales forecast on Thursday as a result of the bearish projection.
Family Dollar is suffering more than rival Dollar General because it relies more on discretionary items like party supplies and Christmas greetings.
Family Dollar caters to a lower-income customer group than Dollar Tree and Dollar General, emphasizing the strain that substantially fewer well-off Americans are facing as a result of high inflation.
Dollar Tree also selected former Walmart executive Jeffrey Davis as its new chief financial officer on Thursday, succeeding veteran CEO Kevin Wampler.
According to Refinitiv IBES, Dollar Tree’s total same-store sales increased 4.9% in the second quarter, compared to analysts’ forecasts of a 5% growth, but its profit of $1.60 per share was above predictions of $1.59.
