(Reuters) -Dollar Tree Inc on Thursday cut its annual profit forecast as high inflation dampens demand for higher-margin items such as party supplies and fashion accessories, sending shares of the company down 11%.
A fall in demand for higher-margin discretionary goods, typically more profitable than perishables like snacks and cookies, has further dented margins at a time when freight and labor expenses remain elevated despite easing from their highs.
"We expect the elevated shrink and unfavorable sales mix to persist through the balance of the year," CEO Rick Dreiling said in a statement.
Last week, big-box retailer Target Corp forecast second-quarter profit below Wall Street expectations, while Home Depot Inc projected a greater earnings fall than had been anticipated owing to escalating cost pressures.
Chesapeake, Virginia-based Dollar Tree said it now expects fiscal 2023 earnings of $5.73 to $6.13 per share, compared with its prior outlook of between $6.30 and $6.80 per share.
Analysts on average were expecting a per-share profit of $6.68 for the year, according to Refinitiv IBES.
(Reporting by Aatrayee Chatterjee and Granth Vanaik in Bengaluru; Editing by Maju Samuel)
