Not all dollar stores are created equal. Look at what happens between the Dollar General and the Dollar Tree if you want a clue. Both dollar stores beat earnings expectations, but what matters is the expectations of retailers. Dollar General has raised its same-store sales guidance for the fiscal year, and is now above Wall Street expectations. It expects gains of 4.0% to 4.5% compared to an average estimate of 3.2%, according to StreetAccount estimates. However, he only repeated his earnings estimates. Shares fell more than 1% in Thursday trading on the news. This is still much better than what happens at the Dollar Tree. That discount gave a fiscal third-quarter revenue forecast that was slightly below consensus and released an earnings estimate that was well below street expectations. It expects earnings per share in the range of $1.05 to $1.20 compared to the $1.81 per share Refinitiv estimate. Shares fell more than 11% after this report. The reason for the Dollar Tree’s poor outlook is the price cuts being made at Family Dollar stores that will impact profit margins. So what is going on here? Dollar General said he sees a lot of customers visiting his stores to buy food and groceries. Even CEO Todd Vasos praised his ability to gain market share from “sales of high-consumer products”. Dollar Tree also commented that shoppers tend to buy food as well. But the problem with Dollar Tree is that it is less exposed to the grocery business than Dollar General. Low-income consumers feeling upset Dollar Tree Company stores are adding more discretionary items such as party supplies such as serving plates, paper plates, and balloons, as well as greeting cards. The strategy hopes to capitalize on the increase in entertainment to exit the pandemic. Instead, inflation has grown at a high pace for 40 years and stimulus checks no longer envelope bank accounts. Family Dollar customers tend to have lower incomes than both the Dollar Tree and Dollar General, and these shoppers are clearly feeling the pressure of months of price hikes. Executives hope that price cuts will create a more loyal customer and that the company will benefit with lower inflation. “Family Dollar’s competitive pricing will in the long run enhance our sales productivity and profitability, and ultimately our opportunity to accelerate store growth,” management said during the earnings call. Dollar Tree President and CEO Mike Witinsky said the price gap has closed with competitors and “…the value proposition is the most competitive over the past 10 years.” Time will tell if the investment pays off as expected. Hard times for clothing sales Meanwhile, the image of clothing retailers still looks bad. Burlington Stores profits outperformed, but revenue and same-store sales were worse than expected. Additionally, guidance is particularly poor with fiscal third-quarter earnings seen at 36 cents to 66 cents a share, after adjustments, compared to $1.39 a share, according to Refinitiv estimates. Shares fell more than 8% in the wake of the report. It also lowered its full-year forecast to a range of $3.70 to $4.30 per share, on an adjusted basis, from the previous range of $6.00 to $7.00 per share and below the estimate of $5.70. “Low-to-medium income shoppers continue to face massive economic pressures driven by the rising cost of living,” the non-price retailer said. He also blamed higher write-downs over the rest of the year due to his poor outlook. The picture is no better in Abercrombie & Fitch either. The retailer reported an unexpectedly heavy loss on poor sales, and shares fell more than 5%. The stock hit a 52-week low of $15.87 on Thursday. Abercrombie expects third-quarter fiscal revenue to decline at a high single-digit pace versus estimates of a 1% decline. Full-year sales will be less than $3.7 billion in fiscal 2021, compared to an average estimate of 0.4% by analysts. The company has a major problem with its Hollister stores, and this has contributed significantly to the weakness. Prepare yourself for what could be an ugly report from the Gap this afternoon. According to Refinitv, the company, which also owns Old Navy and Athleta, is expected to post a second-quarter financial loss of 5 cents per share on revenue of $3.82 billion.
/cdn.vox-cdn.com/uploads/chorus_asset/file/23935560/acastro_STK103__03.jpg)
