Dollar Tree Raises Full-Year Earnings Outlook as Inflation Sends Shoppers Hunting for Deals
Dollar Tree raised its full-year earnings outlook after first-quarter adjusted earnings per share of $1.74 beat the Wall Street consensus of $1.53.
Total revenue grew 7.2% to $4.98B, per The Wall Street Journal. That narrowly beat analyst estimates of $4.96B.
Comparable net sales, measuring stores open at least 15 months, rose 3.5%, marking the seventh consecutive quarter the company topped that estimate, per MarketWatch.
The stock surged roughly 17% on the news, its biggest single-day gain since May 2022. Shares had fallen 22.1% year-to-date through Wednesday.
Less Traffic, Higher Spending
Store traffic fell 1% year-over-year during the quarter. Average transaction value rose 4.5%.
That divergence has now held for three straight quarters, reflecting a consumer base shopping less frequently but loading up more when they do visit.
CEO Mike Creedon linked the behavior to persistent inflation pressures, particularly among lower-income households navigating higher fuel costs.
Creedon said customers are shopping closer to need, focused on affordability, convenience, and trip efficiency, per MarketWatch.
Dollar Tree has been deliberately moving away from its legacy $1 price point. The company has been adding items priced between $3 and $5, including toys and party supplies, per Bloomberg.
That strategy is now live at more than half of its roughly 9.0K US locations.
The repricing is pulling in a wider customer base, with value-seeking higher-income shoppers holding up well despite rising fuel costs.
"Importantly, our model is built for environments like this," Creedon said, per The Wall Street Journal.
Sales gains were broad across categories including beverages, home decor, and household consumables such as cleaning supplies and paper goods, per The Wall Street Journal.
Guidance and New Partnerships
For the full year, Dollar Tree raised its adjusted EPS guidance to a range of $6.70 to $7.10, per MarketWatch. That's up from a prior range of $6.50 to $6.90.
Dollar Tree held full-year net sales guidance steady at $20.5B to $20.7B, with comparable sales growth expected at 3% to 4%.
For the current quarter, the company guided for adjusted EPS of $1 to $1.15, above analyst forecasts of $0.99 a share.
Dollar Tree also announced a partnership with DoorDash to offer on-demand delivery across its full US store footprint, per MarketWatch.
"A clearly good quarter," Jefferies analyst Corey Tarlowe wrote. Dollar Tree "delivered a clean beat, with broad-based sales strength," he added, per MarketWatch.
Rival Dollar General, which reports its own earnings June 2, rose 5.6% on the news.
Dollar Tree still plans to open 400 new stores this year while closing 75, keeping its expansion pace intact despite broader macro uncertainty.
