US retailer Dollar Tree’s third-quarter profit and sales beat market expectations on Wednesday as more customers shopped at its discount stores for inexpensive items, including groceries.
Shares of the company, which have lost nearly half of their value so far this year, rose 3% before the bell as the dollar store raised the lower end of its annual forecasts, whose midpoint exceeded analysts’ expectations.
Dollar Tree also said CFO Jeff Davis will step down after roughly two years on the job, but will remain with the company until the end of the 2024 financial year.
Davis’s departure is another high-profile exit from the dollar store just weeks after its CEO Rick Dreiling resigned.
‘A Relative Win’
An analyst with Truist Securities Scot Ciccarelli said on the results, “Given the string of recent disappointments, the quarterly results and guide are a relative win.”
Discount retailers in the US such as Dollar Tree and Dollar General have been losing market share in a race with big players including Walmart, Target, and PDD Holding’s e-commerce platform Temu as they keep prices low to attract cost-conscious customers.
Analysts have raised doubts that the lack of permanent leadership at Dollar Tree could impact key business decisions for the crucial holiday season as well as early 2025.
Results
The retailer is also in the middle of an overhaul after closing 970 of its Family Dollar stores.
In the reported quarter, Dollar Tree benefitted from higher store traffic as well as shoppers buying more per trip on average.
Store traffic rose 1.6% with growth in both Dollar Tree and Family Dollar banners.
Its quarterly gross margin expanded 120 basis points to 30.9% – partly due to low freight costs.
Net sales of $7.56 billion beat expectations of $7.44 billion, while the company’s adjusted earnings per share of $1.12 exceeded estimates by 5 cents, according to data compiled by the London Stock Exchange Group.
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