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Dollar Tree (NASDAQ: DLTR) has taken a significant hit, revealing disappointing quarterly results that have prompted the company to revise its annual forecasts downward. This announcement arrives on the heels of similar news from its competitor, Dollar General (NYSE: DG), underscoring the fierce competition in the discount retail space.
As price-sensitive consumers become increasingly elusive, Dollar Tree has struggled to maintain its market share against larger rivals like Walmart (NYSE: WMT) and Target (NYSE:TGT). The company's stock plummeted approximately 14% in premarket trading following the news, adding to a staggering decline of nearly 50% over the year.
In a statement, Dollar Tree's CFO, Jeff Davis, acknowledged that the downward revision was a response to a particularly challenging macroeconomic environment, which is putting pressure on consumer spending. The company has been restructuring its operations and evaluating its strategic options, including a potential sale or spinoff of its Family Dollar chain. Notably, earlier in the year, Dollar Tree announced plans to close 970 Family Dollar locations, and as of early August, around 655 store closures have already taken place. The company is set to close an additional 45 stores by year’s end.
This struggle to attract customers is not unique to Dollar Tree. Dollar General recently saw its shares drop nearly 30%, as management indicated that increased promotional activities would inevitably squeeze sales and profit margins for the remainder of the fiscal year. In light of these developments, Dollar Tree now anticipates annual sales to fall between $30.6 billion and $30.9 billion, down from a previous estimate of $31 billion to $32 billion. Furthermore, the company's adjusted earnings per share forecast has been revised considerably lower—from an anticipated $6.50 to $7 to a new range of $5.20 to $5.60.
