Dollar Tree stock cratered Wednesday as the discount store chain delivered a disappointing second-quarter earnings report, suffering its worst day on Wall Street in more than two decades.
Dollar Tree management took the rare step of admitting it “was not pleased” with its earnings ... [+]
Shares of Dollar Tree tanked 22% to $63.56, suffering its worst daily decline since March 15, 2001, and closing at their cheapest price since Nov. 2015.
The historic losses came after the company reported Q2 results far below expectations—its $0.67 adjusted earnings per share was well short of its prior guidance of $1.00 to $1.10 and its $7.37 billion fell short of consensus analyst forecasts of $7.49 billion—and slashed its full-year profit outlook by about 20% from $6.50 to $7 per share to $5.20 to $5.60.
“Clearly, we are not pleased with our second quarter results or having to revise our full year outlook,” Mike Creedon, Dollar Tree’s chief operating officer, said on Wednesday’s earnings call, a rare admission for a public company to take considering the rose-colored view management typically takes on such calls.
Creedon attributed the poor results to the reality of “navigating through one of the most challenging macro environments we've ever seen,” alluding to the weak American consumer referenced by several retail companies in recent months.
This is “another reminder of the headwinds facing the core low to middle income consumer,” according to Evercore ISI analysts Michael Montani and Greg Melich. The Evercore analysts wrote to clients the “dollar store space remains challenged” as a whole, with Dollar Tree rivals Dollar General and Five Below similarly grappling with a rocky backdrop.
Shares of all three national dollar store chains have flailed this year, with Dollar General returning -39% year-to-date, Dollar Tree -57% and Five Below -65%. Dollar Tree is 2024’s third-worst performing stock on the S&P 500 index of the U.S.’ most prominent public companies, joined by several other prominent brick-and-mortar retailers at the bottom of the S&P, with drug store chains Walgreens and CVS and beauty chains Ulta and Bath & Body Works all in the index’s bottom 25 returners. Dollar Tree’s market capitalization sank from $17.6 billion to $13.6 billion on Wednesday, having peaked at nearly $40 billion in 2022. Dollar Tree, which also operates the Family Dollar chain, has more than 16,000 locations across the U.S. and Canada.
Dollar Tree stock is trading at its cheapest level compared to projected forward 12-month profits since its 1995 initial public offering, according to FactSet data, with its 8.9 price-to-earnings ratio down more than 50% from January. That indicates it’s a buying opportunity for those who believe in Dollar Tree’s turnaround story, according to Truist analysts led by Scot Ciccarelli who maintained their buy target for the stock Wednesday despite slashing their price target from $140 to $79. “While the stock has been a disaster, it seems to be fully discounting the negatives at these levels,” the Truist group wrote to clients.