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Dollar Tree, Inc. (DLTR) reported its financial results for the second quarter of fiscal 2024, ending August 3, 2024. The company saw a modest increase in consolidated net sales, which rose by 0.7% to $7.37 billion compared to the same period in fiscal 2023. Same-store net sales for the enterprise also grew by 0.7%, driven by a 1.1% increase in traffic, although this was slightly offset by a 0.5% decrease in the average ticket.

The company’s gross profit saw a more substantial increase of 3.7%, reaching $2.21 billion. This growth was primarily attributed to lower freight costs, which helped expand the gross margin by 80 basis points to 30.0%.

However, Dollar Tree’s operating income experienced a significant decline, dropping 29.4% to $203.1 million. The operating margin also fell by 110 basis points to 2.8%. On a non-GAAP basis, adjusted operating income decreased by 24.2% to $218.1 million, and the adjusted operating margin declined by 90 basis points to 3.0%.

Dollar Tree Fails to Meet EPS, Revenue Expectations in Q2 Fiscal 2024
 

The financial results for Dollar Tree fell short of market expectations. Analysts had anticipated an earnings per share (EPS) of $1.04 and revenue of $7.49 billion for the quarter.

However, the actual diluted EPS came in at $0.62, a 31.9% decrease from the previous year, and adjusted diluted EPS stood at $0.67, which included $0.30 of costs related to general liability claims. The company’s revenue of $7.37 billion also did not meet the forecasted $7.49 billion.

The shortfall in EPS was primarily due to an adjustment in the general liability accrual and a comp shortfall reflecting the increasing macroeconomic pressures on Dollar Tree’s middle- and higher-income customers.

The company’s selling, general, and administrative expenses rose to 27.3% of total revenue, up from 25.3% in the same period last year. This increase was driven by unfavorable developments in general liability claims, higher depreciation expenses, and temporary labor costs to support the multi-price rollout.

Dollar Tree Adjusts Full Year Fiscal 2024 Outlook
 

Looking ahead, Dollar Tree has adjusted its full-year fiscal 2024 outlook to account for the second quarter results and other factors. The company now expects consolidated net sales to range between $30.6 billion and $30.9 billion.

This revised outlook incorporates a more conservative sales forecast for Dollar Tree for the remainder of the year, as well as incremental start-up costs associated with the conversion of the recently acquired 99 Cents Only Stores leases.

For the third quarter of fiscal 2024, Dollar Tree projects consolidated net sales to be between $7.4 billion and $7.6 billion, with comparable store net sales growth in the low single digits for both the Dollar Tree and Family Dollar segments.

Adjusted diluted EPS for the third quarter is estimated to range from $1.05 to $1.15. The full-year adjusted diluted EPS is expected to be between $5.20 and $5.60, reflecting the impact of the general liability charge, revised sales outlook, and additional costs related to the 99 Cents Only Stores leases.

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