Dollar Tree Stock Slides as Weak Outlook Offsets Earnings Beat
Investors focus on a muted third-quarter forecast despite strong Q2 sales growth and a raised full-year outlook.
Shares of Dollar Tree, Inc. (NASDAQ: DLTR) fell in early trading despite the company reporting second-quarter results that significantly surpassed analyst expectations. The off-price retailer's stock dropped approximately 7% as investors reacted to a downbeat forecast for the current quarter, which overshadowed an otherwise strong financial report and an increased full-year outlook.
For the second quarter of fiscal 2025, Dollar Tree announced a robust performance. The company posted a 12.3% increase in net sales to $4.6 billion, with same-store sales growing by 6.5%, driven by gains in both customer traffic and average ticket value. , easily beating the consensus estimate of $0.42. The results included a $0.20 positive impact related to the timing of tariffs.
However, the market's enthusiasm was dampened by the company's third-quarter guidance. Dollar Tree anticipates its adjusted earnings per share will be similar to the previous year, a projection that fell short of analyst expectations for growth. The company noted that the , weighing on near-term profitability.
The mixed results come as Dollar Tree refines its business focus. The company recently , a strategic move aimed at concentrating resources on its core brand. “With the Family Dollar sale complete, Dollar Tree is now a fully focused business and every ounce of our leadership attention, capital investment, and operating resources is now directed toward strengthening the Dollar Tree brand,” said CEO Mike Creedon in the earnings release.
Despite the muted short-term forecast, Dollar Tree raised its full-year guidance. The company now expects net sales for fiscal 2025 to be between $19.3 billion and $19.5 billion, with adjusted earnings per share in the range of $5.32 to $5.72. The firm also highlighted its capital return program, having completed over $1 billion in share repurchases year-to-date. Nonetheless, the immediate focus for investors remains on the challenging third-quarter outlook, which has, for now, eclipsed the company's recent operational successes.