According to Zhitong Finance, Dollar Tree (DLTR.US) released its third-quarter financial results. The data shows that Q3 sales improved, indicating progress for the discount store in fending off competition and attracting more shoppers. Net sales increased by 3.6% year-on-year to $7.57 billion, while analysts' average expectation was $7.44 billion. The company's adjusted eps was $1.12, according to data compiled by LSEG, while the expectation was $1.07.

For the three months ending November 2, same-store sales increased by 1.8%. The same-store sales for the Dollar Tree and Family Dollar segments grew by 1.8% and 1.9% respectively, better than Wall Street analysts' expectations.

Due to more customers purchasing affordable essentials, including groceries, at discount stores, the discount retailer raised its full-year sales forecast, now expecting sales of $30.7 billion to $30.9 billion (previously expected $30.6 billion to $30.9 billion), with the midpoint higher than market expectations.

After the earnings announcement, the stock rose 4.1% in pre-market trading on Wednesday. As of Tuesday's close, the stock price has fallen 49% this year, while the s&p 500 index has risen 27% during the same period.

Dollar Tree also stated that its chief financial officer, Jeff Davis, will resign early next year. The company has begun looking externally for a successor. The aforementioned performance will alleviate the pressure on interim CEO Michael Creedon. Last month, former CEO Rick Dreiling resigned due to health issues, and Creedon succeeded him. Dollar Tree and other discount stores have experienced weak sales this year as low-income shoppers continue to face pressure following years of high inflation and high interest rates.

Dollar stores also struggle to compete effectively with companies like Walmart (WMT.US), which offers delivery options and a wider range of low-priced products. Some retailers, including Aldi Inc., are ramping up promotions. Dollar Tree has expanded its product variety, including commodities priced up to $7. Dollar Tree competitor, dollar general (DG.US), is scheduled to announce earnings before the US market opens on Thursday.

So far, the stock prices of these discount companies have been falling in 2024. Due to lower-than-expected sales, retailers have previously lowered their full-year forecasts. The two major dollar store giants, Dollar Tree and dollar general, have both experienced leadership reshuffles: dollar general parted ways with its former chief financial officer in October 2023, and the chief executive officer of Dollar Tree resigned on November 4th. Dollar Tree is also considering selling its grocery-focused brand, Family Dollar.

For what was once a Wall Street darling, these results represent a significant shift. Piper Sandler's retail trade analyst Peter Keith said that a series of challenging factors have hurt retailers. Low-income customers tend to shop at chain stores, and they are the most affected by economic changes such as inflation. He stated that streamlined staffing and low hourly wages have led to a thin operational model, resulting in messy aisles and a poor shopping experience. Competition has also intensified from traditional retailers like walmart. During the pandemic, walmart made substantial investments in e-commerce to keep up with changing consumer habits.

Sandler explained, "Dollar stores are convenient because they have many locations, but they do not have very strong digital products, and I think that has become a disadvantage in the current environment."