Aug 24 Reuters Dollar Tree forecast annual profit largely below estimates on Thursday owing to higher costs and a shift in spending towards lowermargin consumables, dragging its shares down more than 10.

Consumers, especially from low and middleincome groups, remain under pressure from stillhigh inflation and are moving away from discretionary goods, typically more profitable than perishables like snacks and cookies.

Regarding the industrywide shift in consumer purchasing behaviors to consumables, we believe this is reflective of the current macroeconomic environment, CEO Richard Dreiling said on a conference call.

Last week, retail bellwether Walmart raised its fullyear forecasts, citing strong demand for its lowpriced groceries and health and wellness products.

Gross margins for Chesapeake, Virginiabased Dollar Tree declined by 290 basis points in the quarter over the previous year.

The headwinds we39;re having in shrink are muting our margins, CFO Jeffrey Davis said.

Dollar Tree, like retailers Target and Macy39;s, has seen its margins weighed by a rise in retail shrink, where inventory is lost, damaged, or stolen.

The dollar store chain39;s profit outlook was also impacted by unfavorable shrink trends, rising utilities costs from unseasonably high temperatures and labor costs, Davis said.

Analysts said the company39;s results were mixed. Oppenheimer Co analyst Rupesh Parikh said the lowered profit forecast represented a disappointment versus expectations…