Why Dollar Tree (DLTR) Shares Are Sliding Today

Anthony Lee /
2024/03/13 12:55 pm EDT

What Happened:

Shares of discount treasure-hunt retailer Dollar Tree (NASDAQ:DLTR) fell 15.8% in the pre-market session after 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.

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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 3 moves greater than 5%. But moves this big are very rare even 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 7 months ago, when the stock dropped 7.7% on the news that the company reported second quarter results with operating margin much lower than expected. This drop likely shocked investors. On the other hand, it was good to see Dollar Tree lift its full year revenue guidance and top analysts' revenue expectations during the quarter, driven by strong same-store sales growth. That really stood out as a positive in these results. Overall, it was a mixed quarter for Dollar Tree.

Dollar Tree is down 9.6% since the beginning of the year, and at $128.55 per share it is trading 20% below its 52-week high of $160.68 from May 2023. Investors who bought $1,000 worth of Dollar Tree's shares 5 years ago would now be looking at an investment worth $1,256.

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