Dollar Tree (NASDAQ: DLTR) shares fall after reporting mixed quarter financial results. Amid the ongoing covid-19 pandemic, increasing shipping costs and delays have severely affected the retailer’s profits. Shares were down 11% following the news.
The discount variety chain reported earnings of USD1.23 per share, compared to the expected USD1.01 a share. Nevertheless, sales disappointed by amounting to USD6.34 Billion, lower than analysts anticipated USD6.44 Billion.
The growing demand for a variety of goods has put a strain on both shipping networks and ports. The surge of Covid-19 cases has caused delays and or closures of some ports, with transit lasting nearly 30 days longer than recent years, according to Dollar Tree.
“We believe the Dollar Tree banner imports more containers per $100 million in sales than other large retailers, and combined with our low $1 price point, we have an outsized impact from freight costs,” Chief Executive Officer Mike Witynski said.
According to Chantico Global founder and CEO Gina Sanchez, consumers have also moved away from budget-consciousness, meaning all dollar stores are in jeopardy.
“They’re getting hit with demand falling at the same time that their margins are getting squeezed. It’s going to be a tough ride,” she said.
Other retailers have been able to transfer the increasing costs onto their customers amid inflation, however dollar stores often do not have that luxury.
“Margins have been expanding unless your whole value proposition is ‘We sell stuff cheap,’ and that is the whole Dollar General, Dollar Tree story,” she said. “As we see these freight costs rising and inflation generally hitting their inventory, they’re not able to pass it through and it just makes it more of a struggle.”