(AOF) – The discount store chain Dollar Tree revealed disappointing profits. In the fourth quarter, ended at the beginning of February, the group recorded a net loss of 1.71 billion dollars, or -7.85 dollars per share, compared to 452.2 million or 2.04 dollars per share, a year earlier. Excluding one-off items, earnings per share came to $2.55, 10 cents lower than expected. Quarterly sales rose 11.9% to $8.64 billion, beating analysts’ expectations of $8.67 billion.
The portfolio optimization review identified approximately 600 Family Dollar stores to close during the first half of fiscal 2024 and approximately 370 additional stores as their leases expire.
“In the fourth quarter of 2023, we incurred charges of $594.4 million related to the store portfolio review. Additionally, we recorded a goodwill impairment charge of $1.07 billion and a impairment charge for the intangible asset of the trade name of $950 million,” the distributor said.
For the new financial year, the discount store chain is targeting earnings per share of between $6.70 and $7.30 for revenues between $31 and $32 billion. It also forecasts growth of between 1% and 5% in its sales on a comparable basis.
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Two major challenges for the sector
The turnover of distribution brands increased by 6.6% in the third quarter of 2022 according to the IRI panelist. Such a performance had not been recorded since the confinements of 2020. However, since the end of September, volumes have declined following the increase in prices. The results of French players, rather spared until now, should therefore suffer. Moreover, in the United States, Walmart and Target have issued warnings about their results.
Another challenge: logistical disorganization. According to NielsenIQ data, the out-of-stock rate increased further on the shelves to reach 5.8% at the end of October. This represents a shortfall of 3.5 billion euros since the start of the year. According to Système U, these disorders have never been observed for more than fifty years. The reasons are multiple: both climatic, geopolitical, logistical, inflationary, and also linked to the behavior of consumers, who stock certain items. On the other hand, the strike in the refineries seems to have had little impact because the brands managed to organize themselves.