Bloomberg News

Shares of Dollar Tree Inc. (DLTR) reversed course and jumped 5.3% on Thursday, Nov. 29, rebounding from premarket losses, as investors shrugged off disappointing quarterly sales numbers and what executives noted will be a challenging 2019.

The owner of both the Dollar Tree and Family Dollar Stores chains reported that sales rose 4.2% to $5.54 billion in the quarter ended Nov. 3, though sales at existing Family Dollar Stores offset the broader gains. Analysts surveyed by Refinitiv had expected $5.55 billion in sales in the third quarter.

Same-store sales rose 2.3% at Dollar Tree, though sales at existing stores under the Family Dollar banner fell 0.4%, the company said. 

Third-quarter profit rose 5.1% to $281.8 million, or $1.18 a share, compared with analysts' expectations of $1.14.

"We delivered earnings within the range of our expectations despite continued cost pressures related to domestic freight and our investment in store wages," CEO Gary Philbin said in a statement.

An Abrupt u-Turn

Shares of Dollar Tree dropped nearly 5% in premarket trading Thursday as the company also lowered its sales guidance for the current year.

The company expects sales in the range of $22.72 billion to $22.83 billion, down from its previous forecast of between $22.75 billion and $22.97 billion. It also lowered its per-share earnings guidance to between $4.86 and $4.95, compared with $4.85 to $5.05 a share.

However, the stock did an abrupt u-turn in late-morning trading Thursday, rising nearly 5%, or $3.48, to $86.80.

Speaking on a post-earnings conference call, Philbin added that he anticipates challenges in 2019 as slowing economic growth squeezes consumers' pocketbooks, and also impacts the company's costs.

That said, "I want to go into next year thinking we have the right assortment for our customers first, and drive business," Philbin said. "As I look into 2019 it's going to be about staying close to our customer and responding to what they buy under both banners."

Dollar Tree also announced Thursday it will renovate at least 1,000 Family Dollar stores in the coming fiscal year and open another 350 new Dollar Tree locations and 200 new Family Dollar stores.

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