(Reuters) -Dollar Tree trimmed its full-year sales forecast on Wednesday after missing third-quarter estimates, indicating that persistent inflation was weighing on demand for non-essential products at its stores.
Shares were down 2% in premarket trading after it also tightened its full-year profit outlook amid higher costs.
As higher food prices, borrowing costs and rising credit card debt hammers household budgets, customers are curtailing the purchase of higher-margin discretionary items such as party products and toys.
Several U.S. retailers including Walmart, Best Buy and Lowe’s have also sounded caution in recent weeks about spending during the crucial holiday season, which is expected to grow this year at its slowest pace in five years.
The company’s gross margins were down 20 basis points at 29.7% in the quarter as it grappled with a spiraling supply chain, wages and raw material expenses.
Dollar Tree – known for selling everything from cosmetics to homeware at discounted prices – has also been struggling with higher retail shrink, where inventory is either lost, damaged or stolen.
The company now expects fiscal 2023 consolidated net sales to be between $30.5 billion and $30.7 billion, compared with a prior estimate of $30.6 billion to $30.9 billion.
The discount-store chain also said it expects per share profit in the range of $5.81 to $6.01 in fiscal 2023, compared with its prior outlook of between $5.78 and $6.08. Analysts expect a profit of $5.97 per share.
Dollar Tree logged total sales of $7.31 billion in the third quarter, below estimates of $7.4 billion, according to LSEG data.
On an adjusted basis, the company earned a profit of $1.02 per share for the quarter, compared with estimates of $1.01, according to LSEG data.
(Reporting by Granth Vanaik in Bengaluru; Editing by Krishna Chandra Eluri)
