Earnings Preview: Dollar Tree

Aug.26.08 | About: Dollar Tree, (DLTR)

Dollar Tree (NASDAQ:DLTR) is expected to report Q2 earnings before market open Wednesday, Aug. 27, with a conference call scheduled for 9:00 am ET.


Analysts are looking for a profit of 41c on revenue of $1.08B. The consensus range is 38c to 46c for EPS, and revenue of $1.05B to $1.09B, according to First Call. In May, Dollar Tree forecast Q2 EPS 33c to 36c, revenue $1.045B to $1.075B and same-store sales up in the low single digits. Additionally, the retailer guided FY08 EPS $2.23 to $2.39 vs. First Call consensus of $2.38 and FY08 revenue $4.52B to $4.63B vs. First Call consensus of $4.6B.

Analyst Views

The company's guidance was reaffirmed in June. Additionally, in early August, Dollar Tree reported Q2 sales $1.093B and said same-store sales for the quarter increased 6.5%. On the report, JP Morgan analyst Charles Grom raised his Q2 profit forecast to 43c from 38c, citing lower spending at the discount retailer and a favorable comparison to the same period in the prior fiscal year. Grom noted the company said sales were steady throughout the quarter and were boosted by the government's stimulus checks.

As Dollar Tree and many other retailers face rising commodity and fuel costs, the company keeps prices down by changing its brands and product mix if the price of an item rises. At the Wachovia Securities Nantucket Equity Conference, Tim Reid, vice president of investor relations, said the company manages to keep the price of most items down to $1 in an inflationary environment in part by not staying loyal to any one brand. Reid said the company is also managing to keep prices down by sourcing more products from low-cost manufacturers overseas.