Shares of Dollar Tree (NASDAQ:DLTR) fell around 1% on August 21 after news broke that the discount retailer reported stronger-than-expected revenue, but earnings that fell short of analyst expectations. For the quarter, the company reported revenue of $2.03 billion, up nearly 10% from the $1.85 billion reported the same quarter a year earlier. This rise in revenue was driven by a 4.5% jump in comparable store sales, combined with a 7% increase in store count from 4,842 locations to 5,166.
|Earnings per Share||$0.56||$0.64||$0.59|
Profits also rose during the quarter, but not as much as Mr. Market had hoped for. For the quarter, Dollar Tree reported earnings per share of $0.59. While this represents a 5% increase from the $0.56 reported last year and can be attributed to higher sales that were partially offset by an increase in its cost of goods sold from 65% of sales to 65.8%, the company's bottom line fell short of the $0.64 analysts hoped to see. Even after adding back its acquisition-related costs for the quarter, earnings would have amounted to only $0.61 on a per share basis.
In a previous article on the subject, I announced that Dollar Tree's high expectations would be a challenge to meet, but that its proposed acquisition of Family Dollar (NYSE:FDO) would likely be the means through which management can grow the enterprise more quickly. While this prospect was thrown into doubt when rival Dollar General (NYSE:DG) announced a bid for nearly $5 billion more for Family Dollar, the latter's refusal on grounds of anti-trust issues implies that Dollar Tree can still have a good shot of completing the transaction and using the larger store base and historically faster growth of Family Dollar to leverage its own growth.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.