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Dollar Tree shrinks Q4 forecasts due US-China trade war tariffs

By Ramla Soni

Dollar Tree predicts US-China trade war tariffs will increase its costs by $19 million

American discount retailer says that the US-China trade war tariffs will increase its costs of goods sold by approximately $19 million (£15m, €17m), or 6 cents per share, in the fourth quarter of 2019 if the tariffs are fully implemented.

The company now forecasts its consolidated net sales for the fourth quarter of 2019 to range from $6.33 billion (£5bn, €5.7bn) to $6.44 billion and earnings per share for the quarter, including tariff costs, to be in the range of $1.70 to $1.80, which is below analysts’ expectations of $2.02 per share.

Gary Philbin, president and chief executive officer said: “Fiscal 2019 has been a unique year as a result of several factors: the material acceleration in our Family Dollar store optimisation initiatives, the consolidation of our two store support centres into southeast Virginia, the global helium shortage, and the continued uncertainty regarding trade and the related tariffs.”

Meanwhile, in the quarter ended November 2, consolidated net sales increased 3.7 per cent to $5.75 billion from $5.54 billion in the prior year’s third quarter.

Enterprise same-store sales increased 2.5 per cent while same-store sales for the Dollar Tree segment increased 2.8 per cent. Same-store sales for the Family Dollar segment increased 2.3 per cent.

Store sales results at both segments were driven by increases in both average ticket and transaction count, the company said.

Gross profit increased by $32.6 million to $1.70 billion in the quarter compared to the prior year’s third quarter.

As a percentage of net sales, gross margin was 29.7 per cent compared to 30.2 per cent in the prior year. The decrease in gross profit margin was driven by higher freight and distribution costs, higher sales of lower margin consumable merchandise primarily in the Family Dollar segment, and shrink.

FURTHER READING: Dollar falls for fourth day as investors doubt trade deal agreement

FURTHER READING: Equities and dollar ease, gold gains as investors remain wary of US-China trade war

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