Shares of discount retailer Dollar Tree plunged more than 20% on Wednesday after the company missed quarterly expectations and sharply cut its full-year forecast, another sign that inflation-weary consumers are cutting back on spending.
“Macroeconomic austerity policies are causing customers to spend more on (low-margin essentials) while reducing spending on discretionary items,” Dollar Tree CFO Jeff Davis said on a conference call after the earnings release.
Dollar Tree's stock is trading at about $65 a share, its lowest price in more than four years.
Last week, shares of discount retailer rival Dollar General Inc. also fell nearly 30% after the company sharply cut its full-year sales and profit forecasts.
Dollar Tree is feeling the pain of increasing competition in the retail industry, as wealthier big-box chains such as Walmart Inc. and Target Corp. offer discounted items from groceries to clothing to lure lower- and middle-income shoppers.
American consumers are also gravitating towards new online discount retailers such as Temu and Shein.
Dollar Tree has been restructuring and announced in April that it was considering options including a sale or spinoff of its Family Dollar division.
The company announced plans earlier this year to close 970 Family Dollar stores. Dollar Tree had closed about 655 stores as of Aug. 3 and plans to close 45 more by the end of the year, the company said Wednesday.
The Chesapeake, Virginia-based company now expects full-year sales of $30.6 billion to $30.9 billion, below its previous range of $31 billion to $32 billion.
The company now expects full-year adjusted earnings per share to be in the range of $5.20 to $5.60, up from its previous guidance range of $6.50 to $7 per share.
Dollar Tree's net sales were $7.37 billion, beating analysts' expectations of $7.49 billion, according to LSEG data.
With post wire
