Family Dollar, the unit Dollar Tree bought in 2015, reported underwhelming holiday-quarter same-store sales growth despite Dollar Tree making several plans to attract customers.
For the full year, Dollar Tree said it estimates net sales to range between $22.70 billion and $23.12 billion, based on a low single-digit increase in same-store sales. It expects profit in the range of $5.25 to 5.60 per share. Analysts on average were expecting a profit of $5.90 per share on revenue of $23.1 billion.
“The guide suggests greater than expected margin pressures,” Oppenheimer analysts wrote in a note, pointing to increased investments in labor and stores. They, however, cautioned that Dollar Tree’s outlook tends to be very conservative.
While Dollar Tree sells goods at a fixed-price point of $1 or less, its Family Dollar chain follows a multi price-point strategy, selling goods for $10 or less.
Same-store sales rose 1 percent at Family Dollar and 3.8 percent at Dollar Tree in the fourth quarter.
Wall Street analysts had expected same-store sales at Family Dollar to rise 1.46 percent and 3.99 percent at Dollar Tree stores, according to Thomson Reuters I/B/E/S.
Overall, sales at established stores rose 2.4 percent, lower than the average analyst estimate of 2.73 percent.
Net income rose to $1.04 billion, or $4.37 per share, in the fourth quarter ended Feb. 3, from $321.8 million, or $1.36 per share, a year earlier.
Excluding items, Dollar Tree earned $1.89 per share, missing analysts’ average estimate by a cent.
The Chesapeake, Virginia-based company recorded a tax benefit of $583.7 million in the latest quarter due to changes in the U.S. tax code.
Net sales rose to $6.36 billion from $5.64 billion.
Dollar Tree also said it expects net sales for the first quarter of 2018 to range from $5.53 billion to $5.63 billion, based on a low single-digit increase in same-store sales. It expects profit in the range of $1.18 to $1.25 per share.
Analyst on average were expecting earnings of $1.31 per share on sales of $5.60 billion.