On Thursday, JPMorgan made adjustments to its financial outlook on Dollar Tree (NASDAQ:DLTR) shares, reducing the price target to $135.00 from the previous $152.00, while continuing to endorse the stock with an Overweight rating.
The firm's analysis pointed to near-term challenges, including a lower than anticipated earnings per share (EPS) for the second quarter, which management expects to be between $1.00 and $1.10.
This includes a $0.10 negative impact from the recent loss of the Marietta distribution center, a factor that brings the forecast below the consensus estimates of $1.17, excluding one-time distribution center costs.
The revised outlook is also based on expectations of low-single-digit consolidated comparable store sales (comps), which contrasts with the Street's projection of a 2.7% increase.
Specifically, Dollar Tree is anticipated to see 2-4% comps while Family Dollar is expected to have flat comps. This performance translates to an implied EBIT margin of approximately 4.4% at the midpoint of the guidance.
JPMorgan's updated analysis follows a previous forecast that predicted a 3% increase in second-quarter same-store sales for Dollar Tree.
However, the company is now facing what is described as the most challenging same-store-sales comparison of the year in the second quarter, with a 440 basis points more difficult comparison versus the first quarter.
Management has indicated that quarter-to-date performance aligns with the provided guidance, noting consistent comparisons with the previous year's second quarter.
Despite the lowered price target, JPMorgan's Overweight rating suggests the firm still sees potential in Dollar Tree's stock, albeit with tempered expectations for the immediate future.
The company's management has acknowledged the current performance trends and is navigating through these near-term headwinds as reflected in the updated guidance.
In other recent news, Dollar Tree, Inc. (NASDAQ:DLTR) is currently reviewing its Family Dollar business as part of a broader growth strategy. The company reported a consolidated net sales increase of 4.2% to $7.6 billion in its first quarter earnings call. Dollar Tree's comparable store sales rose by 1.7%, while Family Dollar's slightly increased by 0.1%.
Despite challenges from an early Easter and adverse weather conditions, Dollar Tree is expanding its brand and implementing a multi-price strategy.
The company also closed 506 underperforming Family Dollar stores. Looking ahead, Dollar Tree anticipates Q2 net sales to be between $7.3 billion and $7.6 billion, with full-year net sales expected to reach $31 billion to $32 billion. The full-year adjusted EPS is projected to be in the range of $6.50 to $7.
During the earnings call, CEO Rick Dreiling and CFO Jeff Davis discussed growth strategies, including the successful multi-price strategy and the potential for long-term profitability through improved private label offerings. These recent developments reflect Dollar Tree's commitment to optimizing operations and driving growth.
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