Dollar Tree shares plunged 7.8% Wednesday after the company said tariff costs will squeeze margins despite strong demand for its low-price goods.
It forecast current-quarter profit of 57 cents – missing Wall Street expectations of $1.33, according to LSEG data.
“Tariffs remain a source of ongoing volatility and operating in an environment where rates change frequently (and this) remains one of our largest challenges,” CEO Mike Creedon said during a post-earnings call.
Creedon said the impact from tariffs is now expected to hit Dollar Tree later in the year – echoing a warning from rival Dollar General last week that customers could feel price pressures during the key holiday shopping season.
Dollar Tree said it expects to mitigate most of the additional costs by shifting sourcing and raising prices on some items.
“Dollar Tree plans to offset most of the tariff headwinds associated with current rates, yet it will need to be nimble, given the volatile geopolitical landscape,” Evercore analyst Michael Montani said.
The stock was up about 45% so far this year before Wednesday’s drop as investors bet that economic anxiety would send Americans on the hunt for cheaper goods.
More middle- and high-income shoppers have been flocking to Dollar Tree stores as sticky inflation pushes them to trim their budgets, Creedon said.
Households earning above $100,000 annually contributed meaningfully to growth in the most recent quarter, he added.
Dollar Tree now expects annual net sales between $19.3 billion to $19.5 billion – above a prior forecast of $18.5 billion to $19.1 billion.
It raised its adjusted annual earnings per share forecast to $5.32 to $5.72 – about a 12 cent hike at the mid-point.
Dollar General and Five Below also recently hiked their forecasts. Dollar stores are unique outliers in the retail industry, as they typically perform well during economically challenging times.
Sales jumped 12% to $4.57 billion, surpassing Wall Street expectations of $4.48 billion.
Comparable sales rose 6.5% – beating estimates of a 4.9% rise thanks to growth in traffic and amount spent per visit.
It reported a profit of $188.4 million, or 91 cents a share, in the second quarter. That’s up from $132.4 million, or 62 cents, the year before.
Adjusted earnings per share of 77 cents also beat expectations of 42 cents.
The company is in the middle of a transition year after its July sale of the Family Dollar business to Brigade Capital Management and Macellum Capital Management for roughly $1 billion.
Dollar Tree said it has opened over 100 new stores and converted about 585 locations to include more price points.
This story originally appeared on NYPost
