Shares of Dollar Tree, Inc. (NASDAQ: DLTR) are falling today, down 13.3% as of 12:52 p.m. EDT, after the discount retailer posted disappointing second-quarter results and lowered its guidance slightly for the year.
Dollar Tree, which also owns Family Dollar, said companywide same-store sales increased 1.8%. Same-store sales rose 3.7% in Dollar Tree stores but were flat at Family Dollar.
Image source: Getty Images.
Overall sales increased 4.6% to $5.53 billion, which was just shy of estimates for $5.54 billion. Gross margin in the quarter fell 70 basis points to 30.1% due to "higher domestic freight, shrink and distribution costs." Selling, general, and administrative expenses also increased by 30 basis points, and consequently, operating income fell 9% to $382.5 million.
Due to a lower interest expense and a lower tax rate from the new tax law, adjusted earnings per share still rose 17% to $1.15, missing estimates by $0.01.
CEO Gary Philbin sounded optimistic about the performance, saying the company posted earnings at the high end of its guidance and that Family Dollar's consumables business was positive for the seventh consecutive quarter in spite of the flat comparable sales.
Investors also seemed disappointed with Dollar Tree's guidance. The company is targeting revenue of $5.53 billion-$5.64 billion for the current quarter on a low-single-digit increase in comparable sales, and earnings per share of $1.11-$1.18, which compares to estimates for $1.16.
The company also narrowed its full-year revenue guidance slightly down, and said an anti-dumping duty on ribbon from China would result in a $0.04 per share charge for the fourth quarter.
Though Dollar Tree's results weren't far off expectations, investors may have been hoping for more more considering recent strong reports from retailers across the sector.
10 stocks we like better than Dollar Tree Stores
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Dollar Tree Stores wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018
Jeremy Bowman 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 .