Dollar Tree stock tumbles on store closures, weak Q4
Shares of Dollar Tree (DLTR) sank during Wednesday morning pre-market trading as the company announced plans to shutter 600 Family Dollar locations within the first half of this year. Broadly, the retailer aims to close 1,000 stores in a move to improve profitability. The company recently posted its fourth quarter report, which missed revenue expectations.
Yahoo Finance Anchors Seana Smith and Madison Mills break down the latest development for Dollar Tree and how freight rates are impacting retailers.
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
MADISON MILLS: Dollar Tree sinking in the pre-market after giving weaker than expected full year forecast. Also announcing plans to shut down 600 Family Dollar locations in the first half of this year. They, more broadly, Dollar Tree is planning to close about 1,000 stores in this move to improve their profitability. And one of the things, though, that the CEO is citing, and we've heard this from a lot of executives throughout the course of this earnings cycle is freight rates coming down. So that to me is an indication that maybe more broadly, we could see some inflation easing as retailers start to get a little bit of pressure taken off the pedal there.
When it comes to freight rates, that could be something that leads to profit margin increases without having to push up prices for consumers, but I'm also just interested, given the inflation picture we're in right now that we're not seeing a name like Dollar Tree performing a little bit better. You would think, typically, this is a name that would do well in a trade down environment when consumers are feeling a little bit of that inflation pressure. So I'm curious to see what happens with that moving forward.
SEANA SMITH: Yeah, and we're going to be learning a little bit more on the call just in terms of those future plans and exactly what that looks like here for Dollar Tree, maybe a bit more color just about their store traffic and how they see that playing out for the remainder of the year. You take a look, though, at a one year chart, the stock is still up just about 5%, but you're right far underperforming what we've seen, more broadly speaking within the market. Year to date, we're also still looking at some gains here, but that drop here in the pre-market just about 13%, they are seeing some weakness within their business.
They are seeing reason to shut some of their stores, the brick and mortar print, their approach, their strategy. They're shifting as consumers change the way that they shop and change the way that they get some of their consumer staples brands, but I do agree with you. You would think foot traffic through these stores would really be through the roof compared to the levels that we saw just a few years ago, given the fact that Americans are still under a tremendous amount of pressure from higher prices on many of their staples.
MADISON MILLS: That's exactly right, Seana. And I'm just looking, too because you're mentioning trade down. It makes me think about a Walmart up 15% year to date. So when you compare that to Dollar Tree, obviously, seeing bifurcation in that performance their Dollar Tree up 5% year to date, but still struggling in comparison. So maybe some market share taking from Walmart.
SEANA SMITH: Yeah, and we'll see. Dollar General is reporting on Thursday tomorrow morning before the bell, so we'll get some comparisons there and see if we're noticing any trends and through line with some of those discount stores.
