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Dollar Tree Slips as Revenue Falls Short, Outlook Disappoints

·2 min read

By Dhirendra Tripathi

Investing.com – Dollar Tree stock (NASDAQ:DLTR) traded 1.22% lower in premarket Wednesday on missing fourth quarter revenue estimates while all its U.S. stores transitioned to a new price point of $1.25 by February-end, two months ahead of schedule.

The company’s outlook was disappointing too. Consolidated net sales for 2022 are expected between $27.22 billion and $27.85 billion, compared to $26.31 billion in 2021.

After being loyal to the founders’ principle of selling most items at $1 or less for 35 years, Dollar Tree junked the original brand identity in November as inflation weighed and the company found it difficult to sell many products at that price point. It had to continuously keep pulling more and more products out of that price level until it just lost its relevance.

Higher freight costs and recall-related markdowns weighed on the margins that fell in the fourth quarter.

Net profit in the fourth quarter fell 10% to $454 million. The company took a hit of $34 million in the period after discovery of more than 1,000 dead rodents at a distribution facility in West Memphis, Arkansas led to the shutting of 404 Family Dollar stores in six states and the recall of several products.

Selling, general and administrative expenses rose due to higher store payroll, card transaction fees, legal fees, and costs associated with the $1.25 price point conversions at all U.S. Dollar Tree stores.

Consolidated net sales rose 4.6% to $7.08 billion. Enterprise same-store sales were up 2.5%. Same-store sales at Dollar Tree and Family Dollar increased 3.1% and 1.7%, respectively.

Net sales in the current quarter are seen between $6.63 billion and $6.78 billion at a consolidated level.

The company currently has $2.5 billion remaining under a share repurchase program.

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