Dollar Tree Inc (NASDAQ:DLTR) stock fell 2.55% (As on March 2, 11:21:42 AM UTC-4, Source: Google Finance) after the company forecast annual profit well below estimates, as the discount store operator battles higher wages and freight costs while consumers cut back on discretionary items. Operating income increased 6.8% to $618.1 million, or 8% of total revenue, a 20 basis-point decline in operating margin. This was compared to a 70 basis-point improvement in gross profit margin, which was more than offset by SG&A. Gross profit increased 11.6% to $2.39 billion. The Dollar Tree segment gross margin improved 110 basis points, primarily from higher initial mark-on, lower freight cost, and sales leverage, partially offset by product mix, product cost inflation, and higher costs from markdowns, shrink, and distribution. Family Dollar’s gross margin increased 20 basis points. This quarter represented Family Dollar’s first improvement in gross margin in the last seven quarters. The improvement was driven by higher initial mark-on, lower freight costs, and leverage on occupancy, partially offset by mix, markdowns, shrink, and higher distribution costs.

DLTR in the fourth quarter of FY 22 has reported the adjusted earnings per share of $2.04, beating the analysts’ estimates for the adjusted earnings per share of $2.03, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 19 percent to $7.71 billion in the fourth quarter of FY 22, beating the analysts’ estimates for revenue of $7.62 billion. Combined, cash and cash equivalents totaled $643 million compared to $985 million. Inventory increased 24.8%, primarily from unit growth associated with early receipts of spring 2023 merchandise, Family Dollar combo expansion, and new store unit growth. Capital expenditures were $328 million in the fourth quarter versus $271.6 million. For fiscal 2023, the company expects capital expenditures to total approximately $2 billion.

For the current quarter ending in April, Dollar Tree said it expects revenue in the range of $7.2 billion to $7.4 billion. Analysts surveyed by Zacks had expected revenue of $6.77 billion.

The company expects full-year earnings to be $6.30 to $6.80 per share, below analysts’ estimate of $7.78 per share in Refinitiv IBES data with revenue ranging from $29.9 billion to $30.5 billion. The Dollar Tree segment will realize approximately 80% of these freight savings, which will support a gross margin rate in the range of 36% to 37% in fiscal 2023.