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Shares of the discount store operator were down about 4% in
premarket trading after it also forecast first-quarter profit
below expectations.
With the U.S. on the verge of recession, rising rental and
consumer prices have forced shoppers to rethink their purchases
and rein in spending on non-essential items ranging from
homeware to toys.
This slowing demand for higher-margin goods, typically more
profitable than consumables like snacks and cookies, is expected
to further dent margins while the company also battles higher
labor and commodity costs.
Last week, Walmart Inc also forecast full-year earnings below
estimates and said people were increasingly shifting toward
buying more food and consumables from general merchandise.
Dollar Tree said it expected gross and operating margins to
decline in the first half of fiscal 2023, followed by expansion
in the second half.
Dollar General Corp, the other top discount store in the U.S.,
last week forecast 2023 profit well below expectations after
cutting its earnings estimate for the all-important holiday
quarter on heavy discounts, higher costs and inventory damage
due to winter storm Elliott.
Dollar Tree saw gross margin improve 70 basis points to 30.9% in
the fourth quarter, helped by higher initial mark-on and lower
freight costs.
The company expects 2023 profit between $6.30 and $6.80 per
share, well below analysts' estimate of $7.78 in Refinitiv IBES
data.
However, it forecast 2023 sales between $29.9 billion and $30.5
billion, above estimates of $29.86 billion.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by
Milla Nissi)
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