Subject: o/t, the new dltr , VL, is out,
Dollar Tree posted mixed results in its
fiscal first quarter (ended April 29th).
Total sales of $7.32 billion surpassed our
expectation by about $30 million, fueled by
stronger in-store traffic at the discount
retailer's core Dollar Tree and Family Dollar concepts. However, earnings came in a
bit light due to an unfavorable sales mix
and elevated shrink (an industry term
that refers to lost inventory due to
shoplifting and other factors). With these
pressures expected to persist over the balance of the year, leadership reduced its fiscal 2023 earnings guidance to $5.73-$6.13
a share (previously $6.30-$6.80). It continues to target net sales in a range of $30.0
billion to $30.5 billion this year.
We have cut $0.60 from our fiscal 2023
share earnings estimate, now $6.00.
The revision reflects a greater-thananticipated impact from the abovementioned headwinds tied to sales mix
and shrink. Persistently high inflation and
ongoing labor market challenges are additional overhangs that will likely continue
to weigh on performance in the near term.
Our revised fiscal 2023 earnings call implies a year over-year pullback of 17%.
The company is well positioned for a
bottom-line rebound in fiscal 2024. Expectations for an improved macroeconomic
backdrop ought to be increasingly supportive to consumer spending habits in the
back half of this year and into next. Challenges related to shrink should also ease
meaningfully over this time, through a
combination of defensive merchandising
and government action at the local level.
All in all, we look for earnings to recover
sharply to $7.30 a share in fiscal 2024. It
is worth noting that management recently
announced a long-term goal of earnings
surpassing $10 a share by fiscal 2026.
The stock holds a Below Average (4)
rank for Timeliness. DLTR has outperformed rival Dollar General thus far in
2023, but is still only showing a marginal
gain on the year. With the equity currently trading at about 24x forward earnings,
the entry point does not seem overly compelling from a pure valuation standpoint.
Based on our longer-term earnings projections, price appreciation potential over the
pull to 2026-2028 is below the current
Value Line median