Well you know things are getting bad when the cheapest stores in the country are finding themselves in financial warfare. The sad reality is that prices are just too damn high for us regular folk in the middle of the country where stores like Dollar General and Dollar Tree, who (used) to sell everything for $1 dolla bill, are nestled on every four corner intersection. 

(Source: Thunder Dungeon) 

However, after Dollar General's fateful demise, whiffing analyst EPS and revenue estimates by -4.98% and -1.55% during their last report, Dollar Tree is now following suit with its own set of losses. Spoiler: They were worse than everyone thought.

(Source: Barrons) 

In short, Dollar Tree’s recent earnings announcement felt like watching a rerun of a bad sitcom—predictable, disappointing, and somehow still airing. The company reported earnings per share (EPS) of $0.67, a far cry from the expected $1.04. That’s a 35.55% nosedive from analyst expectations, which is basically the corporate equivalent of showing up to a 100m sprint and tripping over the starting line.

Revenue didn’t fare much better, landing at $7.38 billion—just shy of the $7.5 billion forecast. For those keeping score, this is the fourth straight quarter Dollar Tree has failed to meet revenue targets. Meaning, at this point, missing estimates is starting to look like a company tradition, and not one worth celebrating. 

(Source: Market Watch) 

Additionally, Dollar Trees operating income story is equally grim, down -11.8% year-over-year, as it’s played a key factor in Dollar Trees freefall of a -42.72% YTD plummet, with a -15.06% drop over the past five days alone. Translation: If you’re a shareholder, my condolences go out to you. 

(Source: Giphy) 

Of course, CFO Jeff Davis attempted to explain away the earnings miss, citing higher costs related to general liability claims as a contributing factor. He also pointed to softer sales as a drag on performance, but remained cautiously optimistic about the company’s long-term prospects. Translation: “We’re in trouble, but hey, it could be worse… right?” Translation #2: It is worse Jeff, a lot worse. 

(Source: Giphy) 

So as we can all see, Dollar Tree isn’t floundering in a vacuum; it’s getting absolutely bodybagged as another key factor in the company's demise has come from the hands of Walmart and Target. Not surprising there, as these two conglomerates have been luring away budget-conscious shoppers with aggressive pricing strategies that make Dollar Tree’s $1.25 pricing scheme look like a luxury brand in comparison.

And if that wasn’t enough, Chinese sweatshops fueling digital insurgents like Temu are coming for whatever scraps are left, offering low-cost goods full of wonderfully dosed “lead” without the hassle of leaving your couch. What a time to be alive, amirite? 

(Source: Yahoo Finance) 

This situation has analysts like Zak Stambor from eMarketer noting that while rising prices initially drove consumers to flock to low-cost retailers, that trend has now fizzled out like a flat soda. "The wave has crested," Stambor said, which is a polite way of saying, “You’re screwed, Dollar Tree.”

Of course, in response to these challenges, Dollar Tree seems to have looked at the epitome of corporate clusterf**ks, like Intel, as they are following the big tech’s “strategic options” gameplan with their own calls of “strategic adjustments”. Which in the grand scheme of things is just corporate speak for desperately trying to plug the holes in a sinking ship.

(Source: Investing.com) 

The strategy, you ask? Shutting down underperforming stores. For example, Dollar Tree has announced plans to close approximately 970 Family Dollar locations, with 655 already shuttered. See: How to lose weight by cutting off your leg - sure, you’ll see some results, but at what cost? 

(Source: Dollar Tree) 

Additionally, Dollar Tree is also said to be toying with the idea of actually selling off or spinning off its Family Dollar banner. Think, if Dollar Tree and Dollar General are the cornerstone retailers of the classy midwest, Family Dollar is the bottom feeder crab in towns with populations of 50.

Now of course, with that said, let's not forget the main elephant in the room with Dollar Trees situation. It’s clear that the real knife driver comes from economic pressures that are squeezing the life out of Dollar Tree’s bottom line. And even though inflation has slowed, it’s obvious that  prices for essentials like food and housing are still high, and consumers are clutching their wallets tighter than ever.

(Source: Tenor) 

In result, this has led to reduced spending on non-essential items, which happens to be Dollar Tree’s bread and butter—or rather, their off-brand bread and margarine. Which is why many retailers, and American citizens for that matter, are all anxiously awaiting potential rate cuts that could give consumers some breathing room. Until then though, Dollar Tree is in a sh*t pickle that they can’t seem to get out of. 

(Source: Giphy) 

However, despite the current doom and gloom, some brave souls in the analyst community are holding out hope. And while no new analyst ratings have come in since UBS’ June 28th rating with a price target of $155, the consensus price target for Dollar Tree is $149.44, suggesting a potential upside of 83.03% from its current trading value of $81.65. Meaning, there still seems to be a lot of optimism for a company that’s been serving up disappointment like it’s on the dollar menu.

In the end, for you investors eyeing Dollar Tree like it’s a “BTFD” opportunity, take the analyst optimism with a grain of salt. Of course, with the retailer being another pivotal mark in discount retailing - there’s definitely still a future for the company.

But like anything these days, only grandpa Powell can save the day with rate cuts. Or at least so it seems. Because, until prices come down, and consumers wallets come off the Ozempic style diets - the landscape for retailers like Dollar Tree and Dollar General doesn’t look promising for the time being.

(Source: Giphy) 

On the other hand, why worry about rate cuts or Dollar Trees comeback story when the last four of our Stocks.News alerts all exploded to peak moves of +110%, +185%, +110.10%, and +300%... in LESS than 48 hours?! 

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In the meantime… stay safe and stay frosty, friends! Until next time…

Stocks.News holds positions in Walmart and Intel as mentioned in the article.