March 1, 2016 / 12:44 PM / 3 years ago

Strong dollar, weak consumer spending weigh on Dollar Tree's sales

(Reuters) - Dollar Tree Inc (DLTR.O), the biggest U.S. discount chain, reported lower-than-expected quarterly sales, hurt by a strong dollar and challenging economic conditions.

An exterior view of a Dollar Tree store is seen in Pasadena, California August 31, 2015. REUTERS/Mario Anzuoni

The company also forecast 2016 earnings below analysts estimates, sending shares down 5 percent in premarket trading on Tuesday.

Dollar Tree’s fourth-quarter earnings were below the average analyst estimate, hurt mainly by the lower-margin product mix at its Family Dollar unit and markdowns related to rebranding some stores.

The company closed its acquisition of bigger rival Family Dollar last July.

Sales at established Dollar Tree stores rose 1.3 percent, coming in below the 2.1 percent rise expected by analysts polled by research firm Consensus Metrix.

Excluding the impact of Canadian currency fluctuations, sales at those established stores rose 1.7 percent.

Results from Dollar Tree and its closest rival, Dollar General Corp (DG.N), serve as a barometer to gauge the spending behavior of low-income consumers.

Sales at big-box rival Wal-Mart Stores Inc (WMT.N) missed market expectations last month, hurt by a strong dollar, declining prices for grocery products and sluggish apparel demand.

Dollar Tree’s net income was $229 million, or 97 cents per share, in the fourth quarter ended Jan. 30, compared with $206.6 million, or $1 per share, a year earlier.

Excluding items, Dollar Tree earned $1.01 per share, with gross margin falling to 30.8 percent from 37.1 percent. Net sales rose to $5.37 billion from $2.48 billion, boosted by the Family Dollar acquisition.

Analysts on an average had expected earnings of $1.07 per share on revenue of $5.41 billion, according to Thomson Reuters I/B/E/S.

Dollar Tree forecast earnings of $3.35-$3.65 a share for the year ending January 2017, below the average analyst estimate of $3.77.

The company’s shares were trading at $76.20 before the bell on Tuesday.

Reporting by Sruthi Ramakrishnan and Yashaswini Swamynathan in Bengaluru; Editing by Shounak Dasgupta

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