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What to Expect from Dollar Tree’s First-Quarter Earnings

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Earnings versus expectations

Dollar Tree (DLTR) beat analysts’ earnings forecast in two of the four quarters of fiscal 2018. In the fourth quarter of fiscal 2018, which ended on February 2, Dollar Tree’s adjusted EPS grew 2.1% to $1.93 and beat analysts’ forecast of $1.92.

The company is slated to announce its results for the first quarter of fiscal 2019 on May 30. The quarter ended on May 4. Wall Street expects Dollar Tree’s adjusted EPS to fall 4.2% to $1.14 in the first quarter. Higher sales are expected to be offset by increased expenses associated with the company’s growth initiatives.

Dollar Tree expects its first-quarter EPS in the range of $1.05–$1.15, based on low-single-digit growth in same-store sales.

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What will investors look for?

Dollar Tree announced in March that it was accelerating plans to improve the performance of its Family Dollar banner. Investors would like to see some progress in the Family Dollar business, which has been dragging on Dollar Tree’s overall performance lately.

In March, Dollar Tree announced that it will renovate at least 1,000 Family Dollar stores, re-brand 200 Family Dollar stores to the Dollar Tree banner, and close 390 underperforming Family Dollar stores. Dollar Tree also disclosed its plans to open 350 new Dollar Tree stores and 200 new Family Dollar stores.

The company expects costs related to its strategic initiatives to drag down its operating income in the first half of fiscal 2019 but recover in the second half of fiscal 2019. Based on the guidance issued in March, Dollar Tree expects its fiscal 2019 EPS in the range of $4.85–$5.25, including discrete costs of $95 million. The company’s guidance accounted for the hike in tariffs to 25%.

As of May 24, Dollar Tree stock was up 9.0% on a year-to-date basis, lagging behind the 12.7% rise in the S&P 500 Index.

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