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Dollar Tree Raises Forecast as Consumers Trade Down, CEO Predicts Broad Appeal This holiday Season
CHESAPEAKE, VA - August 24, 2023 - Dollar Tree is anticipating a strong holiday season and beyond, raising its full-year sales forecast Wednesday as consumers across income brackets increasingly seek value, according to CEO Rick Creedon. The company reported second-quarter earnings that significantly exceeded expectations, fueled by a surge in sales at its $1 sections and a growing influx of higher-income shoppers.
Dollar Tree’s optimistic outlook comes as economic pressures prompt a ”trading down” phenomenon,were consumers typically purchasing from more expensive retailers are shifting to discount stores. this trend benefits Dollar Tree uniquely, Creedon explained, as the retailer appeals to both budget-conscious shoppers and those seeking unexpected deals. “They’re targeting the seasons, the holiday, the back-to-school-all that, and they’re saying ‘Wow, I can’t get over that I can get Dixie plates for $3,'” Creedon said, according to a transcript of the earnings call.
The company reported adjusted earnings per share of $0.77 on revenue of $4.6 billion for the quarter ended August 2nd, surpassing analyst estimates of $0.38 EPS on $4.5 billion in revenue, according to Visible Alpha.Dollar Tree now estimates comparable store sales will grow 4% to 6% year-over-year,an increase from its prior forecast of 3% to 5%. Sales in the company’s $1 sections climbed at double the rate of same-store sales across its portfolio.beyond low-income consumers stretching their budgets, Dollar Tree anticipates continued business from higher-income households. “Dollar Tree has ‘the answer’ for everyone,” Creedon stated. Other discounters, including Ollie’s Bargain Outlet (OLLI) and Kohl’s (KSS), are also experiencing gains from this shift in consumer behavior. Even shoppers are adjusting purchasing habits,such as buying batteries in bulk to lower long-term costs,according to Energizer (ENR).
Despite being down 9% recently, Dollar Tree shares remain up approximately 35% year-to-date.
