Dollar Tree forecasts weak second-quarter profit on tariff uncertainty
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A shopping cart is seen outside a Dollar Tree store in Mount Rainier, Maryland, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo
(Reuters) -Discount store operator Dollar Tree forecast its second-quarter adjusted profit to be down as much as 50% from a year ago, accounting for cost pressures due to tariffs and the pending Family Dollar sale.
The Donald Trump administration's rollercoaster tariff swings have thrown businesses into turmoil and unsettled consumers worldwide who now brace for price hikes on everything from groceries to sneakers.
While Dollar Tree is expected to benefit from resilient demand for affordable essentials in the back half of the year, it still forecast second-quarter profit from continuing operations, which exclude the Family Dollar business, could be down as much as 45% to 50% year-over-year.
Dollar Tree's shares fell about 8% in early trading as it reiterated that the sale would hurt its full-year earnings per share by 30 cents to 35 cents, mainly in the first two quarters.
In March, the company said it would sell its less-profitable Family Dollar banner for $1 billion to a group of private equity investors.
"The fiscal year is shaping up to be a volatile one for DLTR, not only due to tariffs and related mitigation efforts, but also because of the pending Family Dollar sale," said Arun Sundaram, analyst with CFRA Research.
With fewer consumables at the Dollar Tree business than Family Dollar, the company is "more exposed to tariff risks now," Sundaram added.
Rival Dollar General on Tuesday raised its full-year targets after beating quarterly estimates on resilient demand.
Dollar Tree said it expects fiscal 2025 adjusted profit to be in the range of $5.15 to $5.65 per share, compared with prior forecast of $5.00 to $5.50.
The company posted first-quarter revenue of $4.64 billion, compared with analysts' estimates of $4.54 billion, as per data compiled by LSEG.
Its adjusted profit of $1.26 per share topped estimates of $1.20.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Anil D'Silva and Maju Samuel)
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