Gap stocks fall when retailers warn of tariff sacrifices on profits
Even as apparel manufacturers aim to diversify their supply chains and ease the blow by investing in US cotton, gap stocks fell 20% in early trading on Friday after older navy owners warned that US tariffs would squeeze profits this year.
Dollar Tree warned investors that tariffs and price volatility could lead to a profit decline of up to 50% in the current quarter.
The discount retail chain said on Wednesday, June 4th that it adjusted its profits for the second quarter, which ends on August 2, could fall by 45%-50% compared to a year ago.
“Given the volatility of today’s operating environment, it is difficult to accurately predict the short-term performance of a business in the second quarter, particularly in regards to tariffs and other cost mitigation efforts,” DollTree CEO Mike Creedon said in a call with investment analysts on Wednesday.
For a year, Dollar Tree assumes that “most, if not the potential revenue impact of higher tariffs, can be mitigated, assuming the current level is appropriate.”
Dollar Tree was able to offset 90% of the first round of 10% tariffs. This was announced by President Donald Trump in the first quarter in April, Creedon said.
However, some purchases made when tariffs on goods from China were absorbed by 145% this quarter, Chief Financial Officer Stewart Glendinning said during the call. These tariffs will result in a cost increase of approximately $70 million in the second quarter, he said.
In early trading on Wednesday, June 4th, stocks in the discount retail chain fell by about 8%.
Dollar Tree: Tariff Status “High Liquid”
To address the tariffs, the company said it was negotiating with suppliers to select new products, drop products, buy from other countries and raise prices.
“The tariff landscape is very fluid and changes weekly, so we are focused on agility and improving its agility,” Creedon said.
Dollar Tree also showed signs of consumer concerns about price and volatility, as it reported an increase in 2.6 million new customers.
“We believe there is a unique opportunity here because these new customers have found us,” he said. “We want to make a great first impression for that customer, and we want to create a sticky relationship with that customer for years to come.”
Net sales rose 11.3% in the first quarter to $4.6 billion, closing on May 3, according to Dollar Tree.
Sales at the same store increased by 5.4% over the period, while store traffic increased by 2.5%. Shoppers increased by 2.8% per transaction, the company said.
Dollar Tree opened a total of 148 new Dollar Tree stores in the quarter, including its 9,000th store in Plano, Texas, and concluded the quarter with 9,016 open stores.
The company plans to open approximately 400 new Dollar Tree locations a year. This does not include the $57 Tree Family Dollar Combo Store that is converted to a Dollar Tree Store.
The sale of family dollars announced in March is expected to close in early summer, Creedon said.
Contribution: Reuters.
Mike Snyder is a reporter for the trending team at USA Today. You can follow him in the thread, send BlueSky, X with X and send him an email Bliss & @mikegsnider.bsky.social & @mikesnider &msnider@usatoday.com
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