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Dollar Tree cuts forecast due to tariffs; Q3 earnings miss Street

Dollar Tree warned that its fourth-quarter earnings will take a hit due to the ongoing trade war between the U.S. and China.

The discounter on Tuesday said that tariffs imposed on Chinese imports will add $19 million, or 6 cents per share, to its costs of goods for the fourth quarter of 2019. (Abercrombie & Fitch on Tuesday said it expects tariffs to impact its holiday quarter earnings as well.

Dollar Tree also reported that its net income fell to $255.8 million, or $1.08 a share, in the quarter ended Nov. 2, down from $281.8 million, or $1.18 a share, in the year-ago period. Analysts had expected earnings per share of $1.13

Sales rose 3.7% to $5.75 billion, just topping estimates of $5.74 billion. Same-store sales rose 2.5%. 

Dollar Tree said it has completed more than 1,150 Family Dollar renovations to its updated format and nearly 200 Dollar Tree re-banners year to date. It also launched a Dollar TreePlus! test this year.

“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,” said Gary Philbin, president and CEO.

The company’s revised fourth-quarter outlook, which now includes the impact of tariffs, forecasts earnings per share in a range between $1.70 and $1.80, below analysts expectations of $2.02. Fourth-quarter sales are expected to fall in the range of $6.33 billion to $6.44 billion. Analysts are expecting sales of $6.41 billion. 

Dollar Tree cut its fiscal year earnings outlook to $4.66 to $4.76 per share, compared to its prior forecast of $4.90 to $5.11. The company said the new estimate includes 28 cents in “discrete cost” adjustments and 5 cents in store closure costs. 

Dollar Tree operated 15,262 stores across 48 states and five Canadian provinces as of November 2, 2019.

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