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What’s happening: Shares of Dollar Tree fell sharply on Wednesday, after the company released results for its second quarter.
What happened: The discount variety stores chain reported weaker-than-expected sales and earnings for the latest quarter.
Dollar Tree also slashed its outlook for the year, which exerted further pressure on the stock.
How were the results: The Chesapeake, Virginia-based company reported some growth in sales for the latest quarter.
Why it matters: Dollar Tree has been unable to attract price-sensitive customers to its stores amid stiffening competition. The company’s main rival, Dollar General, also lowered its annual guidance as it struggles to attract customers with lower prices.
During the second quarter, Dollar Tree had announced a formal review of strategic alternatives for Family Dollar, including a potential sale or spin-off of this business division. The company closed around 655 Family Dollar stores by early August and announced plans to shut 45 stores over the rest of the year.
Dollar Tree’s same-store sales grew by 1.3% in the second quarter, while the Family Dollar segment recorded a 0.1% decline. Same-store sales at the Enterprise segment rose 0.7%.
Management lowered its 2024 guidance for consolidated net sales to between $30.6 billion and $30.9 billion, from the earlier forecast of between $31 billion and $32 billion. They also cut their guidance for adjusted diluted earnings to $5.20-$5.60 per share, from the earlier projection of $6.50-$7.00 per share.
CFO Jeff Davis said the lower guidance reflects a “more conservative sales outlook at Dollar Tree for the balance of the year, and incremental start-up costs associated with the conversion of our recently acquired portfolio of 99 Cents Only Stores leases.”
How shares responded: Dollar Tree’s shares tanked 22.2% to close at $63.56 on Wednesday, following the release of quarterly results. The stock has lost around 55% year to date.
What to watch: Investors will continue monitoring overall discretionary spending of customers, which could significantly impact the company’s results ahead.
Context: The GBP/USD forex pair moved higher on Wednesday, as investors assessed services activity data.
Details: Data released on Wednesday showed UK’s services activity rising at the fastest pace since April last month. This is a sign of growth momentum in the economy.
The S&P Global UK services PMI climbed to 53.7 in August, from July’s reading of 52.5. The figure also came in higher than the preliminary reading of 53.3. The UK’s composite PMI improved to 53.8 in August, from 52.8 a month ago.
The US, on the other hand, recently reported weakness in manufacturing activity, ahead of the much-awaited NFP (non-farm payrolls) report, due to be released on Friday.
Traders widely expect the Federal Reserve to cut interest rates by just over 100 basis points (bps) by the end of the year, while the Bank of England is projected to lower rates by around 39 bps this year. The British central bank has already begun cutting rates, with the first cut being announced in March.
The GBP/USD pair rose to 1.3146 on Wednesday, after hitting a two-week low in the previous session. The British pound has been under pressure this week, after climbing through August to its highest in over two years.
The EUR/USD forex pair rose to 0.8429 on Wednesday, recording gains for the fourth straight session, after declining to a one-month low last week. Eurozone’s composite PMI rose to 51.0 in August, from 50.2 in July, while producer prices in the Eurozone rose 0.8% in July, the most since December 2022.
The FTSE 100 pared early losses to settle slightly lower by 0.35% at 8,269.60 on Wednesday, hitting its weakest level in more than three weeks.
What to watch: Investors await the release of data on new passenger car registrations and construction PMI from the UK today. The UK new car market, which grew by 2.5% year-over-year to 147,517 in July, is expected to rise by 2% in August.
Analysts expect the S&P Global UK construction PMI to decline to 54.9 in August, from 55.3 in July.
Other Markets: US trading indices closed mixed on Wednesday, with the S&P 500 and Nasdaq 100 down by 0.16% and 0.20%, respectively, and the Dow Jones index up by 0.09%.
Poland is reportedly looking to increase its production of 155mm artillery rounds to ensure sufficient supplies in case Russia attacks NATO. The news sent the RUB/USD slightly higher in forex trading this morning.
Australia’s trade surplus on goods widened to A$6.01 billion in July, from A$5.43 billion a month ago. The latest reading topped market estimates of A$5 billion and lent support to the AUD/USD forex pair.
The Philippines said its annual inflation rate eased to 3.3% in August, from 4.4% in July. Inflation declining to its lowest level since January sent the PHP/USD pair higher in forex trading this morning.
Japan’s average cash earnings rose by 3.6% year-over-year in July, compared to June’s 4.5% growth. The latest reading came in better than market estimates of 3.1%, lending support to the JPY/USD forex pair.
The US reported a decline in the number of job openings of 237,000 to 7.673 million in July, from 7.910 million in the prior month, which sent the Nasdaq 100 lower on Wednesday.
Germany’s factory orders, construction PMI and new passenger car registrations, Eurozone’s construction PMI and retail sales, France’s construction PMI and passenger car registrations, Italy’s construction PMI, South Africa’s current account, Turkey’s gross foreign exchange reserves and balance of trade, US Challenger job cuts, ADP employment change, initial jobless claims, continuing jobless claims, nonfarm business sector labour productivity, unit labour costs, ISM services PMI, composite PMI, services PMI, crude oil inventories, gasoline stocks and distillate stocks, Canada’s productivity, composite PMI and services PMI, as well as Brazil’s car production, new vehicle sales and balance of trade.
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