🦧 dollar tree's expensive tbh

🌳 not really a dollar, but yeah they did okay today

DLTR 0.00%↑: dollar tree’s earnings came out today, and i wanted to highlight this one because it’s a good example of why and how results and stock prices do not always move in the same direction

• dollar tree posted an eps (earnings per share) of $1.60, a cent above analysts' forecasts for q2 '22

• the company's revenue for the quarter was $6.77b, slightly below expectations, but not too bad

then why did the stock tank? in fact it wasn't just today when the stock fell more than 10%. it's fallen for seven straight days now, the longest losing streak since 2019

• this is because of management's guidance – although q2 results were not too bad after all, in the earnings call, the company's management (ceo and other executives) updated its projections on how the company will perform in the future

  • and that meant more to investors than q2 results, numbers representing the past

  • management now expects 2022 annual eps to be between $7.10 to $7.40, down from previous estimate of between $7.80 and $8.20

• ceo witynski noted that consumers are being pressured by higher costs across the board (food, fuel, rent, etc.), but that's no news

• adding to that, management admitted that dollar tree's performance faced backlash from raising prices from $1 to $1.25

  • ever since the price change, dollar tree’s official stance is that it’s allowed the business to sell a broader range of items, ones that simply cannot be sold for a dollar, or a price too low

  • the other side of the story is that loyal fans are angry, resulting in harm to the brand’s image

imo: y’all, dollar tree is the most expensive!! at least in this example, among many other items

• dollar tree makes bank by charging us prices based on egregiously high unit economics

• by that i mean, yeah, everything is a dollar, $1.25, or whatever, but when you consider how much, say, a crest toothpaste is per ounce:

  • dollar tree (DLTR 0.00%↑): $0.42

  • target (TGT 0.00%↑): $0.25

  • walmart (WMT 0.00%↑) : $0.35

  • costco (COST 0.00%↑) : $0.20

• so, really, yes, it’s convenient that one could buy tiny toothpaste packs that’s worth a dollar

• but over time, with items like tooth paste that we’ll inevitably use for a lifetime, the difference will turn out to be more than noticeable

• businesses like dollar tree are making higher-than-should-be margins hiding behind the “one dollar” brand image

hope today’s letter was interesting! if you’d like to see more content like this, shoot me an email (apeofomaha@substack.com )!

💡 something im thinking about

it didn’t really work out when instagram tried to be tiktok - now they’re trying to be bereal (click image)

that's all, folks 🐒

as always, i’m no financial advisor! (i’m no substitute for professional financial services)