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Dollar Tree lowers FY'19 outlook despite Q1 net income beating estimates

Dollar Tree Inc. on May 30 lowered its guidance for fiscal 2019 despite posting first-quarter adjusted net income that narrowly beat analysts' estimates.

For full year 2019, the discount retailer said it now expects diluted EPS to come in between $4.77 to $5.07, down from the range of $4.85 to $5.25 it forecast in March, as it expects $140 million in new costs.

Dollar Tree said it expects about $95 million or 31 cents per share in discrete costs, $30 million or 10 cents per share in store closure costs and $15 million or 5 cents per share in growing freight costs.

The revised outlook includes the assumption of 25% Section 301 tariffs on Chinese imports on List 1, List 2 and List 3 goods. CEO Gary Philbin said in a statement that while the outlook does not include potentially higher tariffs on List 4 goods due to uncertainty over whether or not they will be introduced, they would "be impactful to both our business and especially to consumers in general."

In the three months to May 4, 2019, the retailer's adjusted net income fell to $273.1 million from $284.1 million in the year-ago period but beat the S&P Global Market Intelligence mean consensus estimate for normalized net income of $272.0 million. Adjusted diluted EPS fell 4.2% to $1.14 for the quarter, meeting the Market Intelligence estimate.

GAAP net income surged 66.92% to $267.9 million, beating the Market Intelligence mean consensus estimate of $261.4 million

Consolidated net sales grew to $5.81 billion in the quarter, up 4.6% year over year. Same-store sales rose 2.2%.

During the quarter, Dollar Tree repurchased 960,683 shares for a total consideration of $100 million. As of May 30, the company still plans to repurchase about $900 million in shares. During the same period, Dollar Tree opened 91 stores and closed 25 stores under its Family Dollar and Dollar Tree banners.

In April, activist investor Starboard Value LP withdrew its slate of nominees to the board of Dollar Tree after the discount chain decided to restructure its store base and test multiple price points at its locations.

Shares of Dollar Tree rose 5.61%, or $5.35, to $100.66 in morning trading.