Earnings Preview | The Consumer Barometer Affects Market Sentiment Will Dollar Tree's Q1 Earnings Report Surprise Us?

According to Zhitong Finance APP, Dollar Tree (DLTR.US) will announce its first-quarter earnings before the U.S. stock market opens on June 4. This financial report will serve as an important indicator for observing the resilience of U.S. consumer spending, with the market particularly focused on the substantive impact of tariff policies and economic uncertainty on the retail sector.

In the current economic environment, consumers are actively tightening their spending, which may create growth opportunities for discount retailers. However, the retail sector is showing a mixed performance: Target (TGT.US) reported a 2.8% year-on-year decline in revenue to $23.8 billion in the first quarter, while companies like Best Buy (BBY.US) have lowered their earnings guidance amid trade fluctuations. Dollar Tree faces challenges due to its high proportion of imported goods, whereas its competitor Dollar General (DG.US), which will announce its earnings the following day, has a lower reliance on imports. Dollar Tree's CEO Michael Creedon Jr. claims the company has the ability to absorb tariffs, but this quarter's performance will validate the truth of that statement.

UBS analysts point out that in the current environment, the opportunities for dollar stores outweigh the risks and uncertainties. The trend of consumers downgrading their spending is a key benefit, coupled with increased foot traffic due to store closures by competitors Big Lots and Party City. Additionally, the potential removal of the "minimum exception" policy could lead to price increases by cross-border e-commerce platforms like SHEIN and Temu, which may result in a consumption rebound at offline discount stores.

Oppenheimer analysts state, "Overall, it is expected that Dollar Tree and Dollar General will at least meet the consensus expectations for the first quarter," but they believe Dollar General may maintain its full-year outlook, while Dollar Tree may lower its earnings guidance due to a higher proportion of imported goods and exposure to discretionary consumer products affected by tariff policies.

In the previous quarter, Dollar General's profits fell short of expectations due to its store optimization plan, which involves closing about 150 stores under the same name and pOpshelf stores. Dollar Tree, on the other hand, excluded the performance of its Family Dollar business in its fourth-quarter report, as the company has announced the sale of the brand to two private equity firms for $1 billion.

The market generally expects Dollar Tree to report earnings per share of $1.21 and revenue of $4.54 billion, a significant decline from the previous year's earnings per share of $1.43 and revenue of $7.63 billion.

Most analysts hold a neutral stance on the stock, with 10 rating it as "strong buy," 15 as "hold," and 1 as "sell," with a 12-month average target price of $87.60, indicating a potential decline of 4.37%