Dollar Tree shares fall after company cuts guidance, invests in competitive pricing
Dollar General and Dollar Tree stores
Shares of Dollar Tree fell Thursday after the company cut its financial outlook for the year, citing its investments in offering more competitive prices at its Family Dollar stores.
The move came after the company reported second-quarter earnings that topped Wall Street estimates by a penny, while revenue was essentially in line with expectations. Its shares were down 8% in pre-market trading.
Shares of rival Dollar General, which reported better-than-expected results, also slid after initially rising.
Dollar Tree CEO Mike Witynski said in a release that the company’s pricing investments at Family Dollar has closed the pricing gap with its key competitors and said its “value proposition is the most competitive it has been in the past ten years.”
He said the company expects gross margins to be pressured in the back half of the year by in part by the moves, but they should pay off over time.
“We are confident these pricing and other investments will generate very attractive returns over the long term,” he said.
For the second quarter, Dollar Tree said it earned $1.60 per share. Wall Street expected $1.59 per share. Its revenue for the period was $6.77 billion, which was essentially in line with estimates of $6.79 billion. Same-store sales rose 7.5%.
Dollar General, meanwhile, reported earnings of $2.98 per share, which was better than the $2.93 per share Wall Street expected. Revenue was $9.43 billion, above the $9.4 billion analysts expected. Same-store sales rose 4.6%.
Shares of Dollar General were down 2% in pre-market trading.