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Shares of Dollar Tree Inc (Nasdaq: DLTR) are down 11% this morning after the discount retailer reported a significant year-on-year decline in its earnings for the second quarter.

Dollar Tree stock down on guidance

The stock is being punished also because the management tightened its outlook for the full year. Dollar Tree now forecasts its sales to come in between $30.6 billion and $30.9 billion in fiscal 2023 – still above analysts at $30.4 billion.

Its guidance for per-share earnings of about $5.93 a share, though, missed consensus by some 10 cents. Jeff Davis – the Finance Chief of Dollar Tree said today in a press release:

 

Our outlook takes into consideration several factors including shifting sales mix, unfavourable shrink trends, higher diesel fuel prices, incremental savings on ocean freight, and improved sales performance.

Dollar Tree stock is now down roughly 20% versus its year-to-date high.

Notable figures in Dollar Tree Q2 results

• Earned $200.4 million versus the year-ago $359.9 million
• Per-share earnings also declined from $1.61 to 91 cents
• Adjusted EPS also printed at 91 cents as per the press release
• Revenue increased 8.0% year-on-year to $7.325 billion
• Consensus was 87 cents a share on $7.182 billion in revenue
• Gross margins lost 220 basis points to come in at 29.2%

Much like its peers, Dollar Tree attributed the weakness in its recently concluded quarter partly to shrink. Still, its CEO Rick Dreiling said in the press release:

While factors like sales mix and elevated shrink continue to pressure margins, we generated a year-over-year increase in gross profit dollars.

Note that comparable sales went up a better-than-expected 7.8% in Q2. Wall Street currently rates Dollar Tree stock at “overweight”.

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