Dollar Tree Inc (DLTR)

Interest coverage

		Feb 3, 2024	Jan 28, 2023	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	-881,800	2,236,300	1,811,400	1,887,900	1,262,200
Interest expense	US$ in thousands	5,900	3,800	1,100	3,200	2,400
Interest coverage		-149.46	588.50	1,646.73	589.97	525.92

February 3, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $-881,800K ÷ $5,900K
= -149.46

Looking at Dollar Tree Inc's interest coverage ratio over the past five years, we observe significant fluctuations. The interest coverage ratio was notably negative at -149.46x on Feb 3, 2024, indicating the company's operating income was insufficient to cover its interest expenses. This negative ratio raises concerns about Dollar Tree's ability to meet its interest obligations.

In contrast, the interest coverage ratio was relatively strong in the previous years, particularly on Jan 29, 2022, where it stood at a robust 1,646.73x. This suggests that the company's earnings before interest and taxes were substantially higher than the interest expenses, providing a comfortable cushion for servicing its debt obligations.

However, the interest coverage ratio dropped to 589.97x on Jan 30, 2021, and 525.92x on Feb 1, 2020. While still solid, these ratios indicate a slight decrease in the company's ability to cover its interest expenses compared to the peak in 2022.

Overall, Dollar Tree Inc's interest coverage has been volatile over the past five years, with the most recent reading showing a worrisome negative trend. Investors and creditors should closely monitor this ratio to assess the company's ability to manage its debt and interest payments effectively.