Why Dollar Tree, Inc. Stock Plunged Today
What happened
Shares of Dollar Tree Inc. (NASDAQ: DLTR) fell 14.5% on Wednesday, after the discount retail chain announced weaker-than-expected fiscal fourth-quarter results and an underwhelming forward outlook.
More specifically, Dollar Tree's quarterly net sales climbed 12.9% year over year to $6.36 billion, which translated to adjusted earnings of $1.89 per share. Analysts, on average, were expecting higher earnings of $1.90 per share on sales of $6.39 billion.
So what
Even so, Dollar Tree CEO Gary Philbin insisted he was "proud" of the company's performance, particularly as it delivered 2.4% growth in enterprise same-store sales, improved gross margin, and improved leveraging costs. Dollar Tree also opened 603 new locations over the past year, including 137 in the fourth quarter alone.
Now what
Looking to the first quarter, Dollar Tree expects net sales in the range of $5.53 billion to $5.63 billion, up from $5.29 billion in the same year-ago period, with earnings per diluted share in the range of $1.18 to $1.25. But consensus estimates predicted higher earnings of $1.31 per share on revenue of $5.60 billion.
Finally, for the full fiscal-year 2018, Dollar Tree anticipates net sales of $22.70 billion to $23.12 billion, and earnings per share of $5.25 to $5.60. The midpoints of both ranges sit well below investors' expectations for full-year earnings of $5.90 per share on sales of $23.1 billion.
That's not to say Dollar Tree is a broken business. To the contrary, the chain is delivering positive comps even in today's difficult retail environment, and it enjoys room to continue significantly increasing its location base.
But the market obviously wanted more today. And with shares up nearly 40% in the year leading up to this report, it's no surprise to see the stock pulling back as a result.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.