Dollar Tree Cuts FY21 Guidance, Stock Down; Dollar General Posts Lower Q2 Profit

Dollar Tree, Inc. (DLTR) reported a year-over-year increase of 11.8% in its second quarter earnings per share. However, the company reduced its fiscal 2021 earnings guidance due to additional freight costs since the previous guidance.

Dollar General Corp. (DG) recorded a year-on-year decline of 13.8% in its second quarter earnings per share. Same-store sales were down 4.7%, for the quarter. The company updated its fiscal 2021 financial guidance despite an expected increase in transportation and distribution costs for the remainder of fiscal 2021.

Dollar Tree reported that its second-quarter earnings per share increased 11.8% to $1.23, from $1.10, last year. On average, 23 analysts polled by Thomson Reuters expected the company to report profit per share of $1.01, for the quarter. Analysts’ estimates typically exclude special items. Net income increased to $282.4 million from $261.5 million, last year.

Dollar Tree reported that consolidated net sales increased 1.0% to $6.34 billion from $6.28 billion. Analysts expected revenue of $6.44 billion, for the quarter. Enterprise same-store sales decreased 1.2% on a constant currency basis, or 1.1% when adjusted to include the impact of Canadian currency fluctuations.

For fiscal 2021, Dollar Tree now expects consolidated net sales to range from $26.19 billion to $26.44 billion, based on a low single-digit increase in same-store sales and 3.4% square footage growth. The company now estimates earnings per share will range from $5.40 to $5.60. Previously, the company projected fiscal 2021 earnings per share in a range of $5.80 and $6.05. Analysts expect the company to report profit per share of $5.99 on revenue of $26.40 billion.

Freight costs for fiscal 2021 are now expected to be $1.50 to $1.60 per share higher than fiscal 2020. The updated outlook includes $0.60 to $0.65 per share, of additional freight costs since the prior guidance. The company’s previous freight outlook assumed that its regular ocean carriers would fulfill only 85% of their contractual commitments and also assumed higher spot market rates. However, Dollar Tree now projects that its regular carriers will fulfill only 60-65% of their commitments. Also, the spot market rates for ocean freight from China have increased more than 20%.

For the third quarter, Dollar Tree estimates consolidated net sales will range from $6.40 billion to $6.52 billion, based on a low single-digit increase in same-store sales for the combined enterprise. Earnings per share are estimated to be in the range of $0.88 to $0.98. Analysts expect the company to report profit per share of $1.26 on revenue of $6.43 billion.

Shares of Dollar Tree were down 7% in pre-market trade on Thursday.

Dollar General Corp. reported that its second-quarter earnings per share decreased 13.8% to $2.69 from $3.12, last year. On average, 22 analysts polled by Thomson Reuters expected the company to report profit per share of $2.57, for the quarter. Net income was $637.0 million, a decrease of 19.1%. Net sales decreased 0.4% to $8.65 billion. Analysts expected revenue of $8.59 billion, for the quarter.

For fiscal 2021, Dollar General now expects earnings per share in the range of $9.60 to $10.20, compared to previous expectation in the range of $9.50 to $10.20. Analysts expect the company to report profit per share of $10.22. Net sales growth is projected in a range of 0.5% to 1.5%; compared to prior expectation of a 1% decline to an increase of 1%. The company now targets same-store sales decline of 3.5% to 2.5%, compared to its prior expectation of a decline of 5% to 3%. Share repurchases are projected to be approximately $2.4 billion; compared to prior guidance of approximately $2.2 billion.

Shares of Dollar General were down 5% in pre-market trade on Thursday.

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