CHICAGO – Dollar Tree Stores Inc. (DLTR) on Wednesday said quarterly profit fell because of unusually cool weather in parts of the United States and high gasoline prices that cut consumer spending.
The retailer, which specializes in merchandise priced at $1 or less, said it expects high fuel costs to continue hurting profits in the current second quarter, and forecast earnings per share at or below Wall Street estimates.
The company, which also cut its full-year outlook, said it was taking steps to boost profit, including increasing spending on advertising. Its shares were up nearly 1 percent in early trading on the Nasdaq.
Some analysts pointed out that gasoline prices have come down recently and questioned the weaker full-year profit forecast. The company acknowledged that its forecast was "conservative," but said economic trends remain worrisome.
"Consumer confidence has continued to decline for three consecutive months, and most significantly to our customers, high gasoline prices continue to be a drag on our customers' disposable income," Chief Executive Officer Bob Sasser said on a conference call with analysts.
The retailer earned $29 million, or 26 cents per share, in the first quarter ended April 30, compared with $35.2 million, or 31 cents per share, in the same period a year earlier.
Dollar Tree warned earlier this month that first-quarter profit would be 25 cents to 26 cents per share, below analysts' average estimate at the time of 29 cents per share.
Dollar Tree confirmed figures it released earlier this month that first-quarter sales rose 5.5 percent to $749.1 million, with sales at stores open at least a year -- or same-store sales -- down 3.7 percent.
Gross margin, a measure of profitability, fell to 33.9 percent from 35.6 percent a year earlier, hurt by markdowns to clear out Easter products that did not sell well and high fuel prices that raised freight costs.
Dollar Tree said heavy spring snow in the U.S. Northeast hurt sales during the key Easter shopping season (search), while "torrential rain" kept shoppers away in some western states.
The retailer said it was bringing in new summer merchandise including dinnerware, place mats, beach bags and flip-flops in hopes of boosting sales this quarter.
The company also said it would start accepting debit cards in more than half of its stores by mid-year, a move it said would help sales because customers tend to spend more when they pay by debit card. The retailer had previously accepted only cash and checks.
Dollar Tree said a recently launched television and radio advertising campaign was well-received but not a "runaway success," and it would increase advertising spending, particularly in new markets and for new store openings.
For the second quarter, Dollar Tree forecast earnings of 25 cents to 27 cents per share, with sales of $755 million to $770 million. Analysts, on average, expected earnings of 27 cents per share.
For the full year, it forecast sales between $3.34 billion and $3.415 billion, and earnings between $1.61 and $1.72 a share. That is down from the forecast it gave in February for sales of $3.435 billion to $3.535 billion, and earnings of $1.77 to $1.87 a share.
Dollar Tree stock gained 24 cents to $25.23 on the Nasdaq.