Dollar Tree became the latest retailer to cut its forecasted profits for 2022, as inflation squeezed both its competitors and primary consumers, Reuters reported Thursday.
Competitors like Walmart and Target have been failing to sell their inventories as inflation limits consumers’ discretionary spending, leading to significant discounts that forced Dollar Tree to respond with similar cuts at Family Dollar, which Dollar Tree owns, Reuters reported. Despite the reduced forecast year-on-year, Dollar Tree and competitor Dollar General saw sales rise 4.9% and 4.6%, respectively, in the second quarter, according to The Wall Street Journal. (RELATED: Here’s One Business That’s Thriving As Inflation Soars Under Biden — Dollar Stores)
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With heavy discounts at midrange retailers, dollar stores became less appealing to customers who had been abandoning their typical retailers in favor of dollar stores, Reuters said, citing analysts. While Dollar General was able to stem the tide and maintain a higher volume of customers, Family Dollar, and consequently Dollar Tree, wasn’t able to keep up, according to Reuters.
“Competitive pricing at Family Dollar will over the long term enhance our sales productivity and profitability, and ultimately our opportunity to accelerate store growth,” said Dollar Tree President and CEO Mike Witynski in a press release. Witynski also said that so-called “competitive pricing” would allow Family Dollar to undercut “key competitors” and allow the company to position itself for long-term growth, according to the release.
Family Dollar “stores didn’t look as good,” Telsey Advisory Group analyst Joe Feldman told Reuters. “Their assortment wasn’t as strong as Dollar General and their prices were higher … Family Dollar has been playing catch-up with Dollar General for many, many years.”
“We are pleased with our second quarter results, and I want to thank our associates for delivering another quarter of strong performance during a period of inflation and economic uncertainty,” said Dollar General CEO Todd Vasos in a press release. “The quarter was highlighted by same-store sales growth of 4.6%, a slight increase in customer traffic, accelerated growth in market share of highly consumable product sales, and double-digit growth in [earnings per share].”
Dollar Tree’s shares were down about 11.2% at the time of writing Thursday, while Dollar General shares were down about 1.4%, according to the WSJ.
Net sales for Dollar General rose 9% to $9.4 billion, with earnings per share at $2.98 in quarter two, according to the WSJ. In contrast, Dollar Tree saw sales rise 6.7% to $6.77 billion with earnings per share of $1.60.
Dollar Tree is not alone in cutting forecasts, joining Macy’s and Nordstrom who cut forecasts Wednesday, and Walmart, Target and Best Buy, who had already cut earnings estimates earlier in 2022.
Dollar General is preparing for Vasos to be replaced by top lieutenant Jeff Owens on Nov. 1 after Vasos steps down, according to the WSJ. Dollar Tree’s longtime Chief Financial Officer Kevin Wampler was replaced Thursday by former Walmart executive Jeffrey Davis, according to Reuters.
Dollar General referred a Daily Caller News Foundation request for comment to the webcast of its earnings call, and Dollar Tree could not be reached for comment.
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