What Happened?
Shares of discount treasure-hunt retailer Dollar Tree (NASDAQ: DLTR) jumped 7.6% in the pre-market session after the company reported impressive third-quarter results, which blew past analysts' sales, profit, and earnings expectations. Sales were driven by a 1.6% increase in traffic and a 0.2% increase in average tickets. The company added that it is making progress on plans to sell the Family Dollar business. The company also noted the plan to close 24 more underperforming stores as a part of its portfolio optimization drive. While these closures are expected to improve operational efficiency and contribute to margin expansion over time, they may create a temporary headwind for earnings growth, which likely contributed to the underwhelming EPS guidance for the next quarter. Overall, this was a strong quarter, with several promising aspects.
After the initial pop the shares cooled down to $74.32, up 2.5% from previous close.
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What The Market Is Telling Us
Dollar Tree’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 20.4% on the news that the company reported second-quarter earnings results. Its revenue and EPS missed analysts' expectations, and it lowered its full-year revenue guidance. The company noted that the unfavorable macro environment is impacting the purchasing behavior of middle- and higher-income customers and this played a role in the decision to revise the financial forecasts. Overall, this was a weaker quarter.
Dollar Tree is down 47.9% since the beginning of the year, and at $74.32 per share, it is trading 50.5% below its 52-week high of $150.02 from March 2024. Investors who bought $1,000 worth of Dollar Tree’s shares 5 years ago would now be looking at an investment worth $832.58.
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