Retail giant Dollar Tree, Inc. has announced its Q2 2024 earnings, falling short of expectations and prompting a significant drop in stock value. The company reported an adjusted earnings per share (EPS) of $0.67, missing the consensus estimate of $1.04 and reflecting a 26.4% decrease compared to the previous year.

Dollar Tree's Chief Financial Officer, Jeff Davis, acknowledged that the lower EPS was primarily due to an adjustment in their general liability accrual. However, he also noted the increasing influence of macro pressures on the purchasing behavior of the company's middle- and higher-income customers, resulting in a comp shortfall.

Moreover, Dollar Tree reported revenue of $7.38 billion, an insignificant 0.07% increase, missing the consensus estimate of $7.5 billion. While the company experienced same-store sales growth of 1.3% in its flagship Dollar Tree segment, its Family Dollar segment witnessed a marginal decline of 0.1%. The Enterprise segment reported a modest same-store sales growth of 0.7%.

In response to these challenges, Dollar Tree initiated a formal review of strategic alternatives for its Family Dollar business segment. This review encompasses potential options such as a sale, spin-off, or other disposition of the segment.

As a result of its disappointing Q2 performance, Dollar Tree has revised its full-year fiscal 2024 consolidated net sales outlook range. The company now expects net sales to range between $30.6 billion and $30.9 billion, down from the previous guidance of $31 billion to $32 billion. This adjustment takes into account the general liability charge, a more cautious sales outlook at Dollar Tree for the remainder of the year, and additional startup costs associated with the conversion of recently acquired leases from 99 Cents Only Stores.

Looking ahead, Dollar Tree anticipates low-single-digit comparable store net sales growth for both the Dollar Tree and Family Dollar segments, as well as the enterprise as a whole. The company projects an adjusted diluted EPS of $5.20 to $5.60 for the full fiscal year, compared to the previous guidance of $6.50 to $7.00.

For the third quarter of 2024, Dollar Tree forecasts sales in the range of $7.4 billion to $7.6 billion, with comparable store net sales growth in the low single digits. Adjusted diluted EPS for the same period is estimated to be between $1.05 and $1.15.

Following the announcement of the disappointing earnings report, Dollar Tree's stock experienced a significant drop of 11.8% during the premarket session, reaching $72 per share.

As Dollar Tree navigates the continuing challenges of macro pressures impacting customer spending, the company remains focused on implementing strategies and exploring alternatives to mitigate the effects and maintain its position in the highly competitive retail sector.