Dollar Tree Inc (DLTR)

Interest coverage

		Jan 31, 2025	Oct 31, 2024	Jul 31, 2024	Apr 30, 2024	Feb 3, 2024	Jan 31, 2024	Oct 31, 2023	Oct 28, 2023	Jul 31, 2023	Jul 29, 2023	Apr 30, 2023	Apr 29, 2023	Jan 31, 2023	Jan 28, 2023	Oct 31, 2022	Oct 29, 2022	Jul 31, 2022	Jul 30, 2022	Apr 30, 2022	Jan 31, 2022
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,701,100	-933,900	-3,158,200	-3,059,600	-3,178,500	-999,600	1,179,100	1,297,000	1,415,000	1,745,100	2,075,400	2,036,900	1,998,500	1,885,800	1,773,100	2,123,500	2,320,900	2,394,400	2,199,300	1,778,300
Interest expense (ttm)	US$ in thousands	107,500	107,100	105,900	107,400	113,400	111,300	109,200	104,700	100,200	104,000	107,800	114,600	121,400	124,000	126,600	127,900	174,700	223,600	226,400	225,800
Interest coverage		15.82	-8.72	-29.82	-28.49	-28.03	-8.98	10.80	12.39	14.12	16.78	19.25	17.77	16.46	15.21	14.01	16.60	13.29	10.71	9.71	7.88

January 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,701,100K ÷ $107,500K
= 15.82

The interest coverage ratio of Dollar Tree Inc has shown significant fluctuations over the reported periods. Starting at 7.88 in January 31, 2022, the ratio improved steadily to reach its peak at 19.25 on April 30, 2023. This indicates the company's ability to cover its interest expenses almost 19 times over from its operating income.

However, there was a notable decline in the interest coverage ratio thereafter, dropping to 10.80 on October 31, 2023, which suggests a potential decrease in the company's ability to cover its interest obligations. This trend continued into the following periods with negative ratios, hitting the lowest point at -29.82 on July 31, 2024, indicating that Dollar Tree Inc might have faced challenges in meeting its interest expenses with its operating income.

It is important to note that having a negative interest coverage ratio can be a cause for concern as it implies that the company's operating income is insufficient to cover its interest payments. Therefore, monitoring Dollar Tree Inc's interest coverage ratio closely and understanding the factors contributing to such fluctuations can provide valuable insights into the company's financial health and risk exposure.