Dollar Tree, Inc. (NASDAQ:DLTR) shares are trading lower after the company reported worse-than-expected second-quarter financial results and cut the outlook.

The discount variety stores chain reported an adjusted EPS of $0.67, missing the consensus of $1.04, and down 26.4% year over year.

Goldman Sachs analyst Kate McShane reiterated the Buy rating on the stock, with a price forecast of $145.

Following the results, the analyst has expressed doubts regarding several aspects: the comparative performance at Family Dollar, the details behind the decline in ticket size during the quarter, and current trends for the quarter-to-date.

In the quarter under review, the adjusted gross margin increase of 88 bps was driven by lower freight costs, partially offset by an unfavorable sales mix and higher occupancy costs.

The adjusted EBIT margin of 3.0% fell short of the GS/consensus estimates of 4.5%/4.4%.

McShane is also inquisitive about the firm's performance across various categories, market share details, inflation and pricing dynamics, and the impact of promotional activities and competitive pressures.

Additionally, there's uncertainty about the effects of shrinkage and product mix, as well as the outlook for freight costs.

Telsey Advisory Group analyst Joseph Feldman reiterated the Outperform rating on Dollar Tree with a price forecast of $120.

The analyst expressed disappointment with the weak second-quarter results and the substantial reduction in 2024 guidance.

Similar to Dollar General Corporation (NYSE:DG), the company pointed out macroeconomic difficulties, particularly affecting middle and upper-income consumers.

These challenges, coupled with issues related to its transformation efforts, have put pressure on its performance, Feldman writes.

The macroeconomic commentary mirrors that of Dollar General, and Dollar Tree is contending with an ongoing long-term business transformation, the analyst writes.

Price Action: DLTR shares are trading lower by 24.5% to $61.64 at last check Wednesday.