Dollar Tree plummets 17% after slashing its profit forecast over trade-war issues

Mario Anzuoni/Reuters
  • Dollar Tree reported third-quarter earnings Tuesday that fell short of Wall Street’s expectations. The company also slashed its full-year profit guidance due to uncertainty around tariffs.
  • Shares of the company fell as much as 17% on the news.
  • The company said that the global helium shortage, higher freight and distribution costs, and higher sales of low-margin goods also weighed on the quarter.
  • Watch Dollar Tree trade live on Markets Insider.

Dollar Tree is suffering its biggest intraday drop since 2012 over the effect of tariffs.

Shares of the discount retailer fell as much as 17% Tuesday after the company reported disappointing third-quarter earnings and lowered its full-year guidance due to uncertainty around the trade war and tariffs.

Here’s what the company reported, versus what analysts surveyed by Bloomberg expected:

  • Adjusted earnings per share: $US1.08 reported versus $US1.08 (expected)
  • Revenue: $US5.75 billion reported versus $US5.74 billion (expected)
  • Same-store sales: +2.5% reported versus +2.6% (expected)

Dollar Tree lowered both its fourth-quarter and full-year guidance due to the potential impact of tariffs. For the full year, Dollar Tree expects earnings per share to be between $US4.66 and $US4.76, below its previous estimate of earnings between $US4.90 and $US5.11 per share.

It now forecasts fourth quarter earnings per share between $US1.70 and $US1.80, where analysts expected $US1.94 per share.

Dollar Tree expects that tariffs placed on Chinese imports, if fully implemented, will boost cost of goods sold by approximately $US19 million in the fourth quarter. That means earnings per diluted share will fall about 6 cents, the company expects. It remains undetermined whether a new tariff increase will take place on December 15.

“Fiscal 2019 has been a unique year as the result of several factors,” including the global helium shortage and continued uncertainty regarding trade and the related tariffs, said Gary Philbin, Dollar Tree’s CEO, in a press release.

The company also said that increased sales of lower-margin goods and higher freight and distribution costs negatively affected gross margin, which sank to 29.7% in the quarter from 30.2% a year earlier.

As the trade war between the US and China continues on, retailers and consumers are still caught in the crosshairs. A recent report from the New York Federal Reserve showed that increased tariffs on China are falling mostly on US consumers and businesses.

Dollar Tree has a consensus price target of $US116.20 and 16 “buy” ratings, 10 “hold” ratings, and one “sell” rating, according to Bloomberg data.

Dollar Tree is up 24% year-to-date through Monday’s close.

DltrMarkets Insider

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.