Dollar Tree shares surged in early trading as the discount retailer announced the resignation of Rick Dreiling from his role as chairman and chief executive, effective November 3, due to health challenges. Dreiling, who took on the CEO position in January 2023, made this announcement in a statement issued late Monday.
Michael Creedon Jr., the Chief Operating Officer, has been named the interim CEO as the board seeks a permanent replacement from both internal and external candidates. "With my health presenting some new challenges over the past two months, the time is right for me to step away and focus on myself and my family," Dreiling expressed in his statement, which propelled Dollar Tree shares up by 3.8% in premarket trading. The company also appointed Edward Kelly III, the lead independent director, as the new chairman. Truist Securities noted the unexpected yet anticipated nature of Dreiling's resignation, highlighting his absence from the last earnings call and ongoing health issues.
They commented, "The thesis that he and his team would be able to quickly turn around Family Dollar and drive incremental improvement at Dollar Tree has not worked out." Amidst these leadership changes, Dollar Tree reaffirmed its third-quarter outlook, indicating that same-store net sales have been on track this quarter.
In September, the retailer projected adjusted earnings of $1.05 to $1.15 per share while expecting total sales to range between $7.4 billion and $7.6 billion. Current forecasts on Capital IQ estimate normalized EPS of $1.06 alongside revenue of $7.44 billion for the quarter. Scheduled to unveil its latest financial results in December, the company also confirmed its commitment to conducting a formal review of strategic alternatives regarding the Family Dollar segment, which may lead to a sale or a spinoff of the brand. "We are excited about our current trajectory and are focused on delivering a successful holiday season," Creedon remarked.
"We will continue accelerating growth at Dollar Tree while identifying the best path forward for Family Dollar." The dollar store sector is navigating a challenging landscape driven by economic strains affecting low- and middle-income shoppers, compounded by fierce competition, notably from Walmart.
Nonetheless, the brokerage asserts that Dollar Tree's unique positioning allows it to deliver substantial value to both consumers and investors..