Shares of Dollar Tree fall after company cuts guidance, citing investments in competitive pricing

Shares of Dollar Tree fell Thursday after the company cut its financial outlook for the year, citing its investments in offering more competitive prices at its Family Dollar stores.

The move came after the company reported second-quarter earnings that topped Wall Street estimates by a penny, while revenue was essentially in line with expectations. Its shares were down 8% in pre-market trading.

Shares of rival Dollar General, which reported better-than-expected results, also slid after initially rising.

Dollar Tree CEO Mike Witynski said in a release that the company’s second-quarter results reinforces the relevance of the company’s products for households pressured by higher costs for food, fuel and rent. He also noted the company’s Family Dollar chain has closed the pricing gap with key competitors and that its “value proposition is the most competitive it has been in the past ten years.”

But he said the company’s investments in offering more competitive pricing is expected to pressure gross margins in the back half of the year, along with shoppers’ growing focus on necessary products.

“We are confident these pricing and other investments will generate very attractive returns over the long term,” he said.

For its fiscal 2022, Dollar Tree now expects earning to be in the range of $7.10 to $7.40 per share. It had previously forecast earnings of $7.80 to $8.20 per share. The company also tightened its net sales guidance for the year to a range of $27.85 billion and $28.10 billion. The previous range was $27.76 billion to $28.14 billion.

For the second quarter, Dollar Tree said it earned $1.60 per share, a penny more than Wall Street expected. Its revenue for the period was $6.77 billion, which was essentially in line with estimates for $6.79 billion. Same-store sales rose 7.5%.

Dollar General, meanwhile, reported earnings of $2.98 per share and revenue of $9.43 billion. That was better than the earnings of $2.93 per share and revenue of $9.4 billion analysts expected. Same-store sales for the period rose 4.6%.

Shares of Dollar General were down 2% in pre-market trading.