WMT - Retail rumblings: Dollar Tree and peers fall on margin worries

2023-05-25 13:03:03 ET

The retailer sector took notice after Dollar Tree ( NASDAQ: DLTR ) missed estimates with its Q1 earnings report and cut its profit outlook.

The discounter said it was not immune to the external pressures affecting all of retail, singling out an impact on margins from a shift in product mix to consumables and elevated level of shrink. DLTR said it expect earnings to be more back-end loaded this year as the benefits of lower ocean freight rates flow through to the bottom line.

On Wall Street, Wells Fargo kept an Overweight rating on Dollar Tree ( DLR ). "While the entire industry is being impacted by shrink and mix, these issues are not exactly new, not every company is cutting on this, and we question why initial guidance wasn't more conservative," updated analyst Edward Kelly. Looking ahead, Kelly and team expect a positive investor day from new Dollar Tree ( DLTR ) CEO Rick Dreiling, but noted they will need some strong reassurance around the timing and magnitude of upside over the next three to five years.

On Seeking Alpha, Investing Group Leader Quad 7 Capital called out an attractive entry point on Dollar Tree ( DLTR ) following the sell-off.

Shares of Dollar Tree ( DLTR ) were down 10.85% at 12:55 p.m. on Thursday and carved out a new 52-week low of $129.26 earlier in the session.

Sector watch: Dollar General ( DG ) shed 3.24% , Ollie's Bargain Outlet Holdings ( OLLI ) fell 5.10% , Big Lots ( BIG ) was off 5.48% , and Five Below ( FIVE ) sank 8.15% . Also running lower and trailing broad market averages, Walmart ( WMT ) was down 1.45% and Target ( TGT ) dropped 2.68% .

More on Dollar Tree:

• Dollar Tree Q1 Earnings Overreaction Sets Up A Trade
• Dollar Tree: Positive Traffic Growth Being Overlooked
• More articles from Seeking Alpha analysts
• Growth metrics on Dollar Tree
• Seeking Alpha's Quant Rating for Dollar Tree

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