Dollar Tree missed market estimates for holiday-quarter sales and earnings, announcing plans to close 970 Family Dollar locations as the retailer seeks to revitalize its faltering business.
The company’s shares tumbled roughly 14% in early trading as it projected lower revenue and profits in 2024.
Dollar stores have struggled as customer buying has shifted to lower-margin essentials rather than higher-margin discretionary goods. They also face intense competition from rivals such as Walmart, and Chinese e-commerce site Temu.
“Our biggest problem right now is getting enough merchandise into the stores fast enough so the consumer can respond,” said CEO Rick Dreiling, adding that Family Dollar was continuing to be hurt by macroeconomic uncertainties.
Dollar Tree announced in November that it would assess its Family Dollar business, including the possibility of closing underperforming stores, to resume development.
Major retail chain to shut down over 600 Family Dollar stores and 30 Dollar Tree locations in strategic pullback
The firm, which has around 16,774 stores, announced that it would close nearly 600 Family Dollar stores in the first half of fiscal year 2024 and 370 more over the next several years, as well as 30 Dollar Tree locations, as their lease agreements expired.
As a result, the business took a $594.4 million charge for a portfolio optimization review, suffered a $1.07 billion goodwill impairment charge, and suffered $950 million in other asset impairment costs during the reporting quarter.
“There are plenty of investors that don’t like to see so many charges,” Telsey Advisory Group analyst Joseph Feldman said.
Dollar Tree reported a net loss of $1.71 billion, or $7.85 per share, in the quarter ended, compared to a year ago profit of $452.2 million, or $2.04 per share.
According to LSEG data, it forecasts 2024 sales of $31 billion to $32 billion, with the midpoint falling short of the estimated $31.65 billion. Annual earnings are estimated to range between $6.70 and $7.30 per share, with the midpoint somewhat lower than forecasts of $7.04 per share.
