Shares of Dollar Tree Inc. (NASDAQ: DLTR) plunged 12% on Thursday after the Company missed analysts’ expectations for second quarter same-store sales due to a struggle to boost sales from its Family Dollar business.
The discount store operator also said it could look at suppliers outside China, among other measures to mitigate any impact of tariffs it may face, as the trade war between the United States and China escalates. Imported merchandise accounts for about 40% to 42% of Dollar Tree segment’s total retail value purchases, making the Company vulnerable to higher tariffs.
“We will not stand still like other sharks to the system,” Chief Executive Officer Gary Phibin said, adding that it would be open to negotiating pricing concessions and changing product mix.
Dollar Tree posted a 1.80% rise in same store sales in the second quarter, below analysts’ average estimate of 1.84%. Margins fell by 70 basis points due to higher freight costs, which the Company said would continue to weigh on its results in the next two quarters. Same-store sales at its Family Dollar business were flat, versus analysts’ average expectation of a rise of 0.51%.
The Company said it had net income of USD 273.9 Million, or USD 1.15 a share, in the quarter, up from USD 233.8 Million, or 98 cents a share, in the year-earlier period. Sales rose to USD 5.525 Billion from USD 5.281 billion.
Dollar Tree said it now expects third-quarter earnings per share of USD 1.11 to USD 1.18 on sales of USD 5.53 Billion to USD 5.64 Billion. For the full year, it now expects sales of USD 22.75 Billion to USD 22.97 Billion, compared with a previous range of USD 22.73 Billion to USD 23.05 Billion. Earnings per share is expected to range from USD 4.85 to USD 5.05, compared with a prior range of USD 4.80 to USD 5.10.