Why Dollar Tree Stock Is Sinking Today

Dollar Tree (NASDAQ: DLTR) stock is losing ground in Wednesday's trading following the company's recent quarterly report. The discount retailer's share price was down 8.5% as of 3 p.m. ET.

After the market closed yesterday, Dollar Tree published results for the first quarter of its current fiscal year -- which ended May 3. The company posted sales and earnings for the period that beat Wall Street's expectations, but management's forward guidance suggested that tariff impacts will likely be a significant headwind.

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Dollar Tree stocks sinks despite Q1 beats

Dollar Tree reported non-GAAP (adjusted) earnings per share from continuing operations of $1.26 on sales of $4.64 billion in the first quarter. The performance came in significantly ahead of the average Wall Street analyst estimate, which had called for adjusted earnings per share of $1.21 on sales of $4.53 billion. Dollar Tree's revenue was up 11.3% year over year in the period, with same-store sales increasing 5.4% annually.

The growth for same-store sales was driven by a 2.5% increase in customer traffic and a 2.8% increase for average ticket size. But even though the company delivered sales and earnings beats in Q1, investors aren't happy with the forward outlook.

What's next for Dollar Tree?

Dollar Tree reiterated its full-year guidance for sales to be between $18.5 billion and $19.1 billion. With the average analyst estimate calling for full-year sales of $18.95 billion, management's sales forecast disappointed investors.

Dollar Tree did guide for adjusted full-year earnings to be between $5.15 per share and $5.65 per share, a prediction that came in ahead of the average Wall Street forecast's call for adjusted earnings of $5.21 per share for the year. On the other hand, the new earnings guidance reflects the impact of significant stock buybacks. Dollar Tree's sales guidance suggests that performance could soften, and investors are responding by selling the stock today.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.