By Ananya Mariam Rajesh
(Reuters) -Dollar Tree Inc on Wednesday missed Wall Street expectations for quarterly sales and flagged insipid annual sales, in another sign of rising inflation and declining stimulus hitting shoppers' pockets.
Like other retailers, discount stores, traditionally known for their wide array of $1 products, have been raising prices and focusing on more expensive products such as clothes and home decor to deal with shrinking margins.
"As we look at the year, we do not see things getting better in the supply chain world," Chief Financial Officer Kevin Wampler said on a call with analysts.
"It's not just the rates to pay for the goods, it's also the rates you pay ... once it gets into the port, it's costing more to move the product."
Chesapeake, Virginia-based Dollar Tree said a headline-grabbing decision to start selling most products for $1.25 was implemented in its U.S. stores two months ahead of schedule.
Though this enabled the company to forecast strong annual profits, demand is expected to slow in an economic backdrop of decades-high inflation and a slowing of massive state cash stimulus during the COVID-19 crisis.
Evercore ISI analyst Michael Montani said rival Dollar General should benefit from "customer leakage" after Dollar Tree's price regime change.
Dollar General, which has cut annual forecast for both sales and profit, will report its fourth-quarter earnings on March 17.
Dollar Tree forecast full-year sales between $27.22 billion and $27.85 billion, below analysts' average estimate of $28.04 billion, according to IBES data from Refinitiv.
For the fourth-quarter that ended Jan. 29, sales came in at $7.08 billion, compared with the average analyst estimate of $7.12 billion. The company's earnings of $2.01 per share, excluding items, topped estimates of $1.77.
Shares of Dollar Tree were down about 4% at $134.04 in early trade on Wednesday.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Shinjini Ganguli and Andrew Cawthorne)