What Happened:
Shares of discount treasure-hunt retailer Dollar Tree (NASDAQ:DLTR) fell 20.4% in the morning session after the company reported second-quarter earnings results. Its revenue and EPS missed analysts' expectations, and it lowered its full-year revenue guidance. The company noted that the unfavorable macro environment is impacting the purchasing behavior of middle- and higher-income customers and this played a role in the decision to revise the financial forecasts. Overall, this was a weaker quarter.
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What is the market telling us:
Dollar Tree’s shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. Moves this big are very rare for Dollar Tree and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 15.8% on the news that the company reported fourth-quarter results, with revenue and EPS falling short of expectations. The main driver of the weak revenue growth was a drop in sales from existing stores and store closures. However, this was partly offset by the sales generated from newly opened stores. In addition, its full-year revenue and EPS guidance both missed Wall Street's estimates.
Despite these weaknesses, some positive signs were improvements in certain sales metrics like customer traffic and market share gain in both dollars and unit terms. Overall, this was a mixed but weaker quarter for Dollar Tree.
Dollar Tree is down 53.8% since the beginning of the year, and at $65.98 per share it is trading 56% below its 52-week high of $150.02 from March 2024. Investors who bought $1,000 worth of Dollar Tree’s shares 5 years ago would now be looking at an investment worth $628.38.
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