Shares of Dollar Tree (DLTR) dropped Tuesday morning after the discount retailer lowered its full-year guidance, citing the impact of higher tariff costs on certain products while it posted mixed results for its third quarter.
Sales for the company’s fiscal 2019 year are now expected to range from $23.62 billion to $23.74 billion compared with the company’s previously expected range of $23.57 billion to $23.79 billion released in August. The latest projection from analysts polled by Capital IQ is for revenue of $23.7 billion.
Shares of Dollar Tree were more than 15% lower recently.
In August, the US Trade Representative announced that tariffs on numerous products would increase on various, specified dates over the coming months. The Section 301 tariffs will increase Dollar Tree’s cost of goods sold by approximately $19 million, or $0.06 per diluted share, in the fourth quarter of 2019 if tariffs are fully implemented, Dollar Tree said Tuesday.
The company now estimates that sales for the fourth quarter will range from $6.33 billion to $6.44 billion, based on a low single-digit increase in same-store sales for the enterprise. Street projections are for $6.4 billion. Diluted earnings per share for the quarter, including tariff costs, are estimated to be in the range of $1.70 to $1.80. The Street is projecting $2.03 per share.
Also feeding into the updated fourth-quarter guidance was additional pressure on merchandise margin based on lower-margin consumables growing faster than originally forecasted and payroll cost pressure in distribution centers among other factors, the results stated.
Meanwhile, Dollar Tree reported revenue of $5.75 billion in the three months ended Nov. 2, up from $5.54 billion a year earlier. This was ahead of the consensus estimate of analysts polled by Capital IQ for $5.74 billion.
Enterprise same-store sales rose by 2.5%. Same-store sales for the Dollar Tree segment increased by 2.8%. while same-store sales for the Family Dollar segment increased 2.3%. The company said that the comparable store sales results at both segments were driven by increases in both average ticket and transaction count.
Earnings per share came in at $1.08, down from $1.18 a year earlier and below the Street’s projection of $1.13.
“Fiscal 2019 has been a unique year as the result of several factors: the material acceleration in our Family Dollar store optimization initiatives, the consolidation of our two store support centers into southeast Virginia, the global helium shortage, and the continued uncertainty regarding trade and the related tariffs,” Gary Philbin, chief executive of Dollar Tree, said.