Yahoo Finance Live checks out shares of Dollar Tree after the chain reported a revenue beat while missing on EPS.
Video Transcript
JULIE HYMAN: Let's talk about Dollar Tree as well. Those shares are going down. And the fall now is amounting to some 14%.
DIANE KING HALL: Well, 14% now.
JULIE HYMAN: Yeah. Missing on profit expectations, cutting its full year outlook as well. And this is really a surprise--
DIANE KING HALL: We're surprised by that one.
JULIE HYMAN: --as well. Right, because the thinking was--
DIANE KING HALL: And it's a discount retailer.
JULIE HYMAN: Yes, that it would be benefiting people who are trading down. And that did not seem to be the case.
DIANE KING HALL: Exactly. I thought it would gain some-- well, continue to hold on to its market share because what we saw with Walmart. And because of their pricing they could continue to hold on to their customers. And you know, I just-- I expected to see the same kind of story with Dollar Tree. But they saw a profit decline. Sales did rise, but again, they just-- that margin wasn't there.
JULIE HYMAN: Yeah, the margin really seems to be the issue here, because yes, it might be selling more food. But food is a lower margin business. Somebody like Walmart can absorb that to some extent, right?
DIANE KING HALL: Because they sell everything.
JULIE HYMAN: And because they're doing so much volume also. Now Dollar Tree is doing some volume, but the margins are shrinking to your point because food is lower margin. But there's also some other one offs. They did talk about shrink as well, that sort of retail euphemism for theft.
DIANE KING HALL: Yes, exactly.
JULIE HYMAN: But also there was a rat infestation at a warehouse in Arkansas.
DIANE KING HALL: Oh, I missed that one.
JULIE HYMAN: The company shut that down, but there was a legal reserve of $0.12 a share that was a cost tied to that.
DIANE KING HALL: So that certainly hit their bottom line.
JULIE HYMAN: Presumably, that's not happening again. But--
DIANE KING HALL: Hopefully, that's a one off--
JULIE HYMAN: Hopefully, that is a one off.
DIANE KING HALL: --for them.
JULIE HYMAN: But that's something that also affected the numbers.
DIANE KING HALL: Yeah, exactly. And so again, different picture. We're looking at that chart where Dollar Tree shares sinking down 15% on the day, down for the week as well. So definitely not benefiting, again, and that we had this tale of two retailers, they're not on the side. They're not on the good side.
JULIE HYMAN: Definitely no.
