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Is Dollar Tree's Stock Headed Lower After a Disappointing Q1?

Discount retailer Dollar Tree (NASDAQ:DLTR) reported its first-quarter earnings numbers last week. The company's stock nosedived on Thursday by 12% as the company fell short of expectations with theft and inflation weighing on its numbers.

The positive was that the company's same-store sales were still encouraging across its major brands with Dollar Tree's same-store numbers up 3.4% and Family Dollar doing even better at 6.6%. But despite the decent top-line growth, it was further down the income statement that gave investors pause. Diluted earnings per share of $1.35 were down more than a full dollar from the $2.37 per-share profit that Dollar Tree reported in the same period last year.

CEO Rick Dreiling also raised caution for the rest of the year, saying that, "while we are maintaining our full-year 2023 sales outlook, we are adjusting our EPS outlook as we expect the elevated shrink and unfavorable sales mix to persist through the balance of the year. We still expect earnings to be more back-end loaded this year as the benefits of lower ocean freight rates flow through."

It has been a positive year for Dollar Tree up until the release of earnings as up to that point the stock was up around 10% in 2023. But with the big drop in share price last week, it has now fallen into negative territory. The stock hit a new 52-week low and the danger is that the weakness could continue, especially with the economy still battling the effects of inflation and a recession likely to happen at some point this year.

Dollar Tree is still a good long-term buy, but you may want to wait to buy it as its shares could slide further as the year goes on.