The Modest Man
[Dollar Tree Falls Short of Earnings Expectations, Lowers Profit Outlook](https://www.cnbc.com/2019/05/30/dollar-tree-earnings-q1-2019.html)
Shares of Dollar Tree dropped over 16% during intraday trading on Thursday following the company’s announcement that it fell short of Wall Street’s earnings expectations for Q1 2019 and lowered its profit outlook for the full year. The company reported revenue of $7.32 billion compared to the expected $7.28 billion. Same-store sales rose by 4.8%, topping the estimated 3.6%. However, the company’s reported net income for the three-month period ended 29 Apr was $299 million, or $1.35/share, compared to $536.4 million, or $2.37/share, a year earlier. On an adjusted basis, earnings per share came out to $1.47, below Wall Street predictions. Dollar Tree reduced its profit outlook for 2019 to a range of $5.73 to $6.13/share, down from a prior range of $6.30 to $6.80/share. The lower outlook was attributed to elevated shrink, or damaged, lost, or stolen products, and a shift in product mix to consumables.
### Q1 2019 Performance
Dollar Tree’s Q1 2019 performance has fallen below Wall Street expectations:
– **Earnings per share:** $1.47, adjusted, vs. $1.52 expected
– **Revenue:** $7.32 billion vs. $7.28 billion expected
– **Net income:** $299 million, or $1.35/share, compared to $536.4 million, or $2.37/share, a year earlier
– **Sales:** rose to $7.32 billion, up from $6.9 billion a year earlier
– **Same-store sales:** up 4.8%, compared to the expected uptick of 3.6%
### Lowered Profit Outlook
Following the Q1 2019 results, Dollar Tree has reduced its profit outlook for the year to a range of $5.73 to $6.13/share, lower than the previous range of $6.30 to $6.80/share. The lower outlook is due to elevated shrink and a shift in product mix to consumables which carry lower margins.
### Analyst Comments
Analyst Neil Saunders, managing director of GlobalData, has said that while Family Dollar has made progress, many stores remain sub-par and very down-at-heel. It is imperative that Family Dollar offers a reasonable experience to keep up with the competition from the expansion of other dollar store rivals and players like Aldi.
### Margins Decline
Gross margins for the Q1 2019 declined 3.4 percentage points to 30.5% compared to the year ago period. The company says that this is due to an outsized margin benefit that came when the company was first transitioning to its raised price.
### Future Outlook
Dollar Tree is predicting earnings per share of $0.79 to $0.89 in Q2 2019, compared to Refinitiv consensus estimates of $1.22. The company predicts sales in the range of $30 billion to $30.5 billion.
### Turnaround Efforts
Dollar Tree has been undertaking a turnaround effort, increasing prices and shuffling executive leadership, with former Dollar General executive Rick Dreiling taking over as CEO in January. Despite this, the company still fell short of Wall Street’s expectations.
### Increased Shopper Share
The company’s effort to turn around Family Dollar has reportedly been yielding positive results, with consumers responding to the improvements being made. However, increased competition in the value space with expansions from other dollar store rivals and players like Aldi is putting pressure on the company.
### Consumer Trends
Even with the company’s low prices, Dollar Tree shoppers have been focusing their spending on essential items, which carry lower margins, over discretionary purchases.
### Conclusion
Dollar Tree’s Q1 2019 results disappointed with earnings and profits below Wall Street expectations. Despite its efforts to improve, the company is facing increased competition and shifting consumer trends that may be challenging.
