Dollar Tree (DLTR) stock fell 5% Wednesday after the dollar-store chain reported revenue and earnings results that were in-line with analysts' expectations and announced a strategic review of its Family Dollar business segment, which could include a sale.
In the 13 weeks ended May 4, the retailer saw its revenue rise 4.2% year-over-year to $7.6 billion, driven by a 1.7% increase in same-store sales at its Dollar Tree segment. The company said earnings per share (EPS) came in at $1.43, a decrease of 2.7% from the year-ago period.
"Our operating performance was solid despite a soft Easter season for Dollar Tree," said Jeff Davis, chief financial officer of Dollar Tree, in a statement. "The results reflect our operating discipline and careful expense management throughout the quarter."
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The results were in-line with analysts expectations. According to CNBC, Wall Street was anticipating revenue of $7.6 billion and earnings of $1.42 per share.
Dollar Tree also reiterated its full-year sales forecast, which calls for net sales in the range of $31 billion to $32 billion. However, the dollar store lowered its earnings per share outlook to $6.50 to $7 from $6.70 to $7.30 due to issues related to tornado damage at its distribution center in Oklahoma.
Why would Dollar Tree sell Family Dollar?
In a separate press release, Dollar Tree announced a strategic review of its Family Dollar business segment, which "could include among others, a potential sale, spin off or other disposition of the business." This move comes less than three months after the company announced it would close 970 underperforming Family Dollar stores.
"The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business," Dollar Tree CEO Rick Dreiling said in a statement. The ultimate goal is to help both brands "progress further and faster, and to determine whether the exclusive attention of a dedicated team will benefit both, while creating value for Dollar Tree shareholders and other stakeholders."
Dollar Tree did not provide a timeline for any potential transaction.
Is Dollar Tree stock a buy, sell or hold?
The consumer staples stock has struggled on the charts this year, down roughly 20%. Still, analysts are overwhelmingly bullish toward DLTR.
According to S&P Global Market Intelligence, the consensus analyst target price for DLTR stock is $146.92, representing implied upside of nearly 30% to current levels. Meanwhile, the consensus recommendation is a Buy.
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