Inflation hits retail chain stocks on Wall Street

Dollar Tree Stock falls as inflation pinches earnings. The outlook on food purchasing in the US is downward. Walmart and Target Corp's inventory level increased due to a decline in discretionary purchases
Inflation hits retail chain stocks on Wall Street

Shares of US discount chain Dollar Tree fell Thursday after the company cut its financial outlook for the year, citing its push to offer more competitive prices at its Family Dollar stores. The move came after the company reported second-quarter earnings that topped Wall Street estimates by a penny, while revenue was essentially in line with expectations, according to CNBC media group.

Dollar Tree said it made the pricing moves after seeing increased frugality from customers, with the company’s private brands outpacing national brands. Consumers are shifting from discretionary to necessary consumable products, the company said, and opting out of extra purchases of items like fabric softener.

For its fiscal 2022, Dollar Tree now expects earnings to be in the range of $7.10 to $7.40 per share. It had previously forecast earnings of $7.80 to $8.20 per share.

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High inventory levels at two competitors such as Walmart and Target Corp – due to inflation-hit consumers cutting back on discretionary purchases forced retail chains, including Dollar Tree, to dispose of excess inventory by offering steep discounts. According to analysts, this has limited the number of customers switching from traditional retailers to off-price stores.

Not surprisingly, the grocery retail market’s downward forecast also put pressure on the shares of Dollar General, Dollar Tree’s direct rival, which raised its annual sales forecast due to an increased grocery assortment in its stores. However, investors also punished its stock with a -1.1 percent drop.

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