Dollar Tree Inc, following weak guidance, experienced a sharp decline, with Dollar General Corp and Five Below also falling.

Dollar Tree Inc (NASDAQ:DLTR) fell at the start of trading on Wednesday due to lower-than-expected second-quarter results.

The revenue for this quarter, which ended on August 3, increased by 0.7% to $7.37 billion, with a 0.7% increase in same-store sales due to a 1.1% increase in traffic, partially offset by a 0.5% decrease in average ticket. Same-store sales for the dollar tree department increased by 1.3%, while same-store sales for the family dollar department decreased by 0.1%.

Gross profit margin increased by 80 basis points to 30.0%. The improvement in profitability was mainly due to a decrease in freight charges, offset partially by an increase in labor costs for the dollar tree department due to the growth in sales of high-cost consumable products and a single-digit growth in same-store sales, and an increase in logistics costs for the family dollar department. Selling and general administrative expenses increased to 27.3% of revenue, up from 25.3% in the same period last year. This was mainly due to unfavorable developments in claims for damages, an increase in depreciation expenses due to store investments, temporary labor costs for the dollar tree department to support multi-price initiatives, an increase in utilities expenses, and a decrease in leverage due to single-digit growth in same-store sales.

At Dollar Tree, we have already seen meaningful sales increases at the 1,600 stores that have transitioned to the latest in-line multi-price format. There are still thousands of stores yet to be converted, and we believe we are still in the early stages of this initiative.

During this quarter, Dollar Tree opened 127 stores and Family Dollar opened 28 stores.

Looking ahead, Dollar Tree (DLTR) expects revenue for the third quarter to be between $7.4 billion and $7.6 billion (with a midpoint of $7.5 billion), compared to the consensus estimate of $7.6 billion. EPS is expected to be between $1.05 and $1.15 (with a midpoint of $1.10), compared to the consensus estimate of $1.32. The outlook for FQ3 EPS reflects adjustments to the revenue outlook, an increase of approximately $0.07 in expenses related to leasing and reopening of acquired 99 Cents Only Stores, and an increase of approximately $0.06 in depreciation expenses due to project costs and timing. Additionally, the full-year outlook has been revised to levels below consensus estimates.

After a decrease of more than 10% last week, the share price of Dollar Tree (DLTR) further declined by 11.97% in pre-market trading on Wednesday. Dollar General (DG) declined by an additional 2.10%, while Five Below (FIVE) declined by 1.05%. Ollie's Bargain Outlet Stores (OLLI) was down 1.66%.