Dollar Tree Slips To Hefty Loss In Q4 On Charges

(RTTNews) - Dollar Tree, Inc. (DLTR) reported Wednesday a hefty net loss for the fourth quarter compared to a profit last year, hurt by huge charges, despite gross margin improvement and revenue growth. Adjusted earnings per share and net sales also missed analysts' expectations. The company also provided weak earnings guidance for the first quarter.

In Wednesday's regular trading session on the Nasdaq, Dollar Tree share are plunging $22.21 or 14.83 percent to trade at $127.49.

"We finished the year strong, with fourth quarter results reflecting positive traffic trends, market share gains, and adjusted margin improvement across both segments," said Rick Dreiling, Chairman and Chief Executive Officer.

For the fourth quarter, the company reported a hefty net loss of $1.71 billion or $7.85 per share, compared to net income of $452.2 million or $2.04 per share in the prior-year quarter.

The results for the latest quarter primarily include a $4.91 per share Goodwill Impairment Charge, and a $4.36 per share Trade Name Intangible Asset Impairment Charge.

Excluding items, adjusted earnings for the quarter were $2.55 per share, compared to $2.04 per share in the year-ago quarter.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $2.65 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 11.9 percent to $8.63 billion from $7.72 billion in the same quarter last year. Analysts expected revenues of $8.67 billion for the quarter.

Enterprise same-store sales were up 3.0 percent, driven by a 4.6 percent increase in traffic, partially offset by a 1.5 percent decline in average ticket.

Dollar Tree brand net sales grew to $4.96 billion from $4.30 billion, with same-store sales growth of 6.3 percent, and Family Dollar brand net sales increased to $3.67 billion from $3.42 billion last year, with same-store sales decline of 1.2 percent.

Gross margin for the quarter improved 120 basis points to 32.1 percent, primarily driven by lower freight costs, sales leverage, the impact of the 53rd week in fiscal 2023, and higher allowances, offset by product cost inflation, unfavorable sales mix, elevated shrink, and higher distribution and markdown costs.

Selling, general and administrative expenses soared 3110 basis points to 54.0 percent, due primarily to a non-cash goodwill impairment charge, a non-cash trade name impairment charge, a non-cash store asset impairment charge, a litigation charge and unfavorable development of general liability claims.

During the fourth quarter, the Company announced that it had initiated a comprehensive store portfolio optimization review which involved identifying stores for closure, relocation, or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors.

The portfolio optimization review identified approximately 600 Family Dollar Stores for closure in the first half of fiscal 2024 and approximately 370 additional stores as their leases expire.

"We are making solid progress on our key growth initiatives and are encouraged by the early results of our business transformation efforts," CFO Jeff Davis noted.

Looking ahead to the first quarter, the company estimates earnings in a range of $1.33 to $1.48 per share on consolidated net sales between $7.6 billion and $7.9 billion, based on a low-to-mid-single-digit increase in same-store sales for the combined enterprise.

Analysts expect the company to report earnings of $1.69 per share on sales of $7.68 billion for the quarter.

For fiscal 2024, the company now projects earnings in a range of $6.70 to $7.30 per share on consolidated net sales between $31.0 billion and $32.0 billion, based on a low to mid-single-digit increase in same-store sales for the combined enterprise.

The Street is looking for earnings of $7.04 per share on sales of $31.65 billion for the year.

The fiscal 2024 outlook reflects approximately $0.15 per share benefit from the anticipated Family Dollar store closures, mostly in the second half of the year as it closes underperforming stores throughout the first half of fiscal 2024.

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