Dollar Tree Beat Its Q2 Revenue Estimates

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Jharonne Martis, Director of Consumer Research at LSEG, comments: “This Q2 earnings season has seen more retailers missing revenue estimates (38%) compared to the previous four quarters’ average (34.8%). Still, as the pandemic and supply chain woes have faded away, they are dealing with better management of cost controls and lower freight and shipping expenses. As a result, more retailers are beating earnings estimates (78%) than the previous four quarters’ average (70.6%).

Exhibit 1: Earnings and Revenue Scorecard – Q2 2023

Earnings and Revenue Scorecard

Source: LSEG I/B/E/S

Dollar Tree’s Q2 Earnings

Dollar Tree Inc (NASDAQ:DLTR) beat its Q2 revenue, earnings and same store sales estimates. Traffic was up at both Dollar Tree and its Family Dollar brand during the quarter. Their private label is seeing strong demand, and as a result they intend to expand this offering.

The discounter is also receiving a boost from all income levels seeking every day low prices: “In the past year, we have added nearly 5 million new customers across both segments with 2.6 million of these customers having a household income over $125,000. Importantly, our research tells us that a very high percentage of these new customers come back, visiting an average of 5x in the year following their initial trip.

In fact, we now rank in the top 10 retailers measured by annual new customer activations. These positive traffic and new customer trends are leading to strong market share gains.” (Source: DLTR Q2 2023 Earnings Call).

Both Walmart Inc (NYSE:WMT) and Dollar Tree are seeing higher traffic from all types of consumers. Moreover, both are seeing a rise in general merchandise spending, during a time when most retailers are giving cautious guidance because of inflation, the ongoing shift towards services, and a cautious consumer.

Dollar Tree said that “regarding the industry-wide shift in consumer purchasing behaviors to consumables, we believe this is reflective of the current macroeconomic environment and continuing rotation to a prepandemic balance after years of elevated spending across discretionary categories. We believe we are winning in consumables as more customers come to see Dollar Tree and Family Dollar as the compelling destinations for value”. (Source: DLTR Q2 2023 Earnings Call).

Despite weakness in apparel, Target (NYSE:TGT), Kohl’s (NYSE:KSS), and Macy’s (NYSE:M) all cited strength in beauty during their earnings call. Accordingly, Ulta Beauty is on track to report another strong quarter with a 6.3% SSS, despite facing difficult comparisons from a year ago.

On the flip side, Gap (NYSE:GPS), and Nordstrom (NYSE:JWN) are expected to report weak SSS after the market closes today. Nordstrom is on track to post a -8.6% SSS, followed by Gap Inc.’s -2.6%, where the Banana Republic division is facing the most difficult comparisons from a year ago, and has a -4.5% SSS estimate. Meanwhile, its Old Navy brand has a -3.3% SSS estimate, and its Gap division a -1.0% SSS estimate.”

Here are the Q2 2023 earnings and same store sales estimates for the companies reporting this week:

Exhibit 2: Same Store Sales and Earnings Estimates–Q2 2023

Same Store Sales and Earnings Estimates

Source: LSEG I/B/E/S

Below is the latest Q2 2023 Retail Earnings Dashboard:

  • EARNINGS: The Q2 blended earnings growth estimate is 19.9%
    • Of the companies in the index that have reported earnings to date for Q2 2023:
    • 78% have reported earnings above analyst expectations
    • 5% have reported earnings matching analyst expectations
    • 17% reported earnings below analyst expectations.
  • REVENUE: The Q2 blended revenue growth estimate is 3.3%
    • 62% reported revenue above analyst expectations
    • 38% reported revenue below analyst expectations
Q2 Earnings