Dollar Tree (DLTR.O) joined main rival Dollar General (DG.N) in cutting annual forecasts after missing quarterly estimates on Wednesday as the discount store operator struggles to attract price-sensitive shoppers amid rising competition.
Shares of the company, which have lost nearly half of its value so far this year, were down about 12% in premarket trading.
Bigger rivals including Walmart (WMT.N)and Target (TGT.N) as well as newer entrant, PDD Holding's (PDD.O) ecommerce platform Temu, have been able to lure in shoppers with lower prices for everything ranging from groceries to apparel as consumers looks for value, hitting sales at dollar stores who are struggling to boost demand.
"While rising prices drove shoppers to low-cost retailers like Dollar Tree and Dollar General, that wave has crested and those merchants are now struggling to compete," eMarketer analyst Zak Stambor said.
Dollar Tree CFO Jeff Davis said in a statement on Wednesday that the annual forecast cut was partly due to expectations of conservative sales for the balance of the year amid a challenging macro-environment.
The company has been in the process of restructuring its business and in April said it was exploring options, including a potential sale or spinoff of its Family Dollar banner.
Earlier this year, it had outlined plans to shutter 970 Family Dollar stores. As of Aug. 3, Dollar Tree has shuttered about 655 stores and would close 45 stores through the remainder of the year, the company said on Wednesday.
Last week, rival Dollar General's shares also slumped nearly 30% and executives said that the company would have to increase promotional activity that would pressure sales and margins for the remainder of the year.
Chesapeake, Virginia-based Dollar Tree expects annual sales between $30.6 billion and $30.9 billion, compared with its prior forecast range of $31 billion to $32 billion.
The company sees annual adjusted earnings per share in the range of $5.20 to $5.60, compared with its prior forecast range of $6.50 to $7 per share.
