Dollar Tree posts higher profit, outlook below view

CHICAGO Wed Aug 27, 2008 9:48am EDT

CHICAGO (Reuters) - Dollar Tree Inc (DLTR.O) reported a higher profit on Wednesday but gave a forecast for the full year that fell short of Wall Street expectations, sending the retailer's shares down more than 6 percent.

Dollar Tree, which sells most of its merchandise for $1, said net income rose 15.3 percent to $37.6 million, or 42 cents per share, for its fiscal second quarter, compared with $32.6 million, or 33 cents per share, a year earlier.

Analysts had expected a profit of 41 cents a share, according to Reuters Estimates. Dollar Tree had forecast a profit in the range of 33 cents to 36 cents.

Dollar Tree's shares fell 6.28 percent, or $2.46, to $36.74 in early trading on the Nasdaq.

Dollar Tree operates more than 3,500 stores that sell everything from food to party supplies, catering to lower-income shoppers who have been hit hard by rising food and fuel costs.

It has said the tough U.S. economic environment was bringing more shoppers into its stores as consumers look for ways to stretch limited budgets.

Sales rose 12.5 percent from last year to $1.09 billion, above the $1.05 billion analysts had expected. The company had forecast sales of $1.05 billion to $1.08 billion.

But Dollar Tree has also cautioned that its margins would be pressured this year as sharply higher diesel prices increase its transportation costs and gasoline prices strain shoppers' wallets.

For the year, the company now expects earnings of $2.33 to $2.43 a share, up from its prior view in May of $2.23 to $2.39 a share. However, the mid-point of the forecast at $2.38 per share was below the $2.44 per share Wall Street was expecting.

For the third-quarter, Dollar Tree expects earnings in the range of 40 to 43 cents a share.

(Reporting by Ben Klayman; Editing by Maureen Bavdek)

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