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Why Did Dollar Tree, Inc. Shares Drop 12% in August?


Despite Dollar Tree (NASDAQ: DLTR) posting reasonably solid second-quarter numbers, investors appear to dislike that the company lowered its full-year guidance.

What happened

Dollar Tree reported an overall sales increase in Q2 of 4.6% to $5.52 billion. It also saw earnings per share (EPS) rise 17.3% to $1.15 from the same period in 2017. Same-store sales were up 3.7% at the company's namesake brand, but flat at its Family Dollar stores. CEO Gary Philbin seemed generally happy with the results in his remarks in the Q2 earnings release.

"In addition to posting earnings near the top end of our guidance range, our Dollar Tree banner delivered increases in both traffic and ticket, and our Family Dollar banner's same-store sales were flat compared to last year's 1% increase," he said. "Importantly, Family Dollar's consumables business was positive for the seventh consecutive quarter."

A tree is made of dollars

Money may not grow on trees, but Dollar Tree is doing well. Image source: Getty Images.

So what

The company changed its forecasts for both overall sales and earnings per share, It now expects full-year net sales "to range from $22.75 billion to $22.97 billion compared to the company's previously expected range of $22.73 billion to $23.05 billion." The change for EPS was similarly small. Dollar Tree had previously expected earnings of $4.80 to $5.10 a share, but has revised that to $4.85-$5.05 per share.

Those are some pretty small swings, but investors were clearly not happy. After closing July at $91.28, the shares plunged after the chain reported on Aug. 30, closing the month at $80.51, a nearly 12% drop, according to data provided by S&P Global Market Intelligence .

Now what

Drops like this can be short-lived, especially if the company reports Q3 results at the high end of or above its forecast. This is a case of investors finding the "bad" news in an otherwise positive report. Dollar Tree is growing, makes money, and is going to continue to do both of those. This was a slight tweak to the company's forecast, and it should not be taken as a sign that things have taken a turn for the worse.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: EPS , DLTR



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