Dollar Tree Misses Expectations, Stock Suffers

Dollar Tree (DLTR) stock dropped 22% on Wednesday as its 2^nd quarterly earnings report was released. The stock price drop was the sharpest on the S&P 500 index.

However, the company’s stock price jumped 6.62% on Thursday as the price corrected, but the stock is still far below its pre-drop numbers.

The S&P 500 was down overall, with a drop of 0.24% on Thursday. September is a typically tough month for the stock market, and Dollar Tree has taken one of the biggest hits already.

Dollar Tree owns the Family Dollar chain of stores, which like Dollar Tree, operates as a discount retailer. The company is struggling at the same time that Walmart is making record profits and seeing sky high stock gains.

The Dollar Tree Report

For the 2^nd fiscal quarter of the year, Dollar Tree was expected to bring in $7.1 billion and brought in $7.1 billion, but the net income for the quarter was a disappointing $132 million.

The company had to adjust its expected earnings for the remainder of the year as a result. Dollar Tree initially anticipated $31-32 billion in earnings for the year, but they have since lowered that to $30.6-30.9 billion.

Why is Dollar Tree running below expectations and struggling in an economy where retail sales are up? It is likely that Walmart is taking the majority of their expected increases, and the company also blames tremendous pressure being placed on the lower and middle income customers that it targets.

If interest rates are cut later this month ( and they should be), that could relieve some of the pressure, as could the slightly decreasing inflation rate. But with both numbers still high, investors should still expect Dollar Tree to continue struggling through the remainder of the year.