Dollar Tree Inc (DLTR)
Interest coverage
Jan 31, 2025 | Feb 3, 2024 | Jan 31, 2024 | Jan 31, 2023 | Jan 28, 2023 | ||
---|---|---|---|---|---|---|
Earnings before interest and tax (EBIT) | US$ in thousands | 1,491,100 | -881,800 | -881,900 | 2,235,900 | 2,236,300 |
Interest expense | US$ in thousands | 107,500 | 5,900 | 106,800 | 125,300 | 3,800 |
Interest coverage | 13.87 | -149.46 | -8.26 | 17.84 | 588.50 |
January 31, 2025 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,491,100K ÷ $107,500K
= 13.87
Interest coverage is a financial ratio that indicates a company's ability to pay interest expenses on its outstanding debt. A higher interest coverage ratio suggests that the company is more capable of meeting its interest payment obligations.
Analyzing Dollar Tree Inc's interest coverage over the given periods, we observe the following:
- As of January 28, 2023, Dollar Tree Inc had a robust interest coverage ratio of 588.50, indicating a strong ability to cover its interest expenses.
- By January 31, 2023, the interest coverage ratio decreased to 17.84, still indicating the company's ability to meet its interest obligations, albeit at a lower level.
- The interest coverage ratio turned negative in the subsequent periods, with ratios of -8.26, -149.46, and 13.87 for January 31, 2024, February 3, 2024, and January 31, 2025, respectively.
- Negative interest coverage ratios signify that Dollar Tree Inc's earnings were insufficient to cover its interest payments during those periods, raising concerns about its financial health and ability to service its debt.
Overall, while Dollar Tree Inc initially demonstrated a strong ability to cover its interest expenses, the subsequent negative interest coverage ratios highlight potential challenges in meeting its interest payment obligations in certain periods. It is crucial for the company to closely monitor its financial position and take necessary actions to improve its interest coverage ratio to ensure financial stability and sustainability.
Peer comparison
Jan 31, 2025