Discount store operator Dollar Tree reported disappointing holiday quarter results, hurt by lower-than-expected sales at both Dollar Tree and Family Dollar stores, and issued a full-year profit outlook that was well below estimates.
The company's shares sank 13 percent in premarket trading on Wednesday.
Analysts had expected Dollar Tree to get a bump in sales from its core customer base, who earn lower wages and were expected to benefit on pay hikes resulting from sweeping changes to the U.S. tax code.
Several retailers have recorded huge windfalls from the changes and plan to invest the extra money in their businesses and employees.
Dollar Tree said it would invest $100 million of the benefit it received from new tax law to raise wages of hourly-workers, give them more work hours and offer paid maternity leave for some employees.
The company's results come a week after biggest rival Walmart Inc reported a sharp drop in profit and online sales growth during the holiday period. While Walmart added more holiday merchandise like electronics, toys and gifts, it did not stock enough everyday items, which hurt sales.