Shares of Dollar Tree fell on Thursday after the company lowered its financial outlook for the year, citing its push to offer more competitive prices at its Family Dollar stores.
The move came after the company reported second-quarter earnings that beat Wall Street estimates by a penny, while revenue was broadly in line with expectations.
Shares of rival Dollar General, which reported better-than-expected results, also fell after initially rising.
Dollar Tree CEO Mike Witynski said in a release that the company’s second-quarter results reinforce the company’s importance to families burdened by higher food, gas and rent costs. He said the company’s Family Dollar chain has closed the price gap with major competitors and that “its value proposition is the most competitive it has been in the last ten years.”
Dollar General and Dollar Tree stores
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The company said it made the price moves after seeing increased savings from customers, with Dollar Tree’s private brands outperforming national brands. Consumers are moving from discretionary products to consumer necessities, the company said, and are choosing to forgo extra purchases of items like fabric softener.
Witynski said the company’s investments in offering more competitive prices are expected to put pressure on gross margins in the back half of the year, along with shoppers’ increasing focus on essential products.
“We are confident that these awards and other investments will generate very attractive returns in the long term,” he said.
For its 2022 fiscal year, Dollar Tree now expects earnings to be in the range of $7.10 to $7.40 per share. It had previously forecast earnings of $7.80 to $8.20 per share. The company also tightened its net sales guidance for the year to a range of $27.85 billion and $28.10 billion. The previous range was $27.76 billion to $28.14 billion.
For the second quarter, Dollar Tree said it earned $1.60 per share, a penny more than Wall Street expected. Its revenue for the period was $6.77 billion, which was broadly in line with estimates of $6.79 billion. Same-store sales rose 7.5%.
Dollar Tree also named Jeffrey A. Davis as its new chief financial officer. Davis previously served as treasurer of Walmart Stores, the primary financial offering of Walmart’s US unit, and chief financial officer of JC Penney.
Meanwhile, Dollar General reported earnings of $2.98 per share and revenue of $9.43 billion. That was better than earnings of $2.93 per share and revenue of $9.4 billion that analysts were expecting. Same-store sales for the period rose 4.6%.
Dollar General CEO Todd Vasos was skeptical about Dollar Tree’s push to compete on price.
“It’s not just a long journey for them, I’d say it’s been even harder than that,” Vasos said on Thursday’s earnings call. “We’ve completely left our main competitor in the dust, it would take years, years for them to catch up”
Shares of Dollar General fell less than 1% at the close, while Dollar Tree ended the day up more than 10%.
