10-KPeriod: FY2009

DOLLAR TREE, INC. Annual Report, Year Ended Jan 31, 2009

Filed March 26, 2009For Securities:DLTR

Summary

Dollar Tree, Inc. (DLTR) in its 2009 10-K filing highlights a period of robust growth and strategic expansion, evidenced by a significant increase in store count and selling square footage. The company emphasizes its core strategy of offering a wide variety of quality merchandise at a fixed $1.00 price point, differentiating itself from competitors. During the fiscal year ended January 31, 2009, DLTR operated 3,591 stores, a substantial increase from 2,735 stores in 2005, reflecting a compound annual growth rate of 10.4% in net sales over the preceding five years. The company's business model relies on a balanced mix of consumable, variety, and seasonal merchandise, with an increasing focus on consumables, supported by the installation of freezers and coolers in many stores to drive higher transaction sizes. Despite a challenging economic environment, DLTR demonstrated resilience, with comparable store net sales increasing by 4.1% in fiscal 2008, driven by a higher number of transactions and a modest increase in average transaction size. The company also highlighted efforts to manage costs and improve operational efficiency through technology and supply chain optimization.

Financial Highlights

29 data points
Beta

Revenue

$4.64B

34.3% Gross Margin

Net Income

$229.50M

4.9% Net Margin

EPS (Diluted)

$0.84

Cash & Equivalents

$364.40M

Free Cash Flow

$271.80M

Financial Statements
Beta
Revenue$4.64B
Cost of Revenue$3.05B
Gross Profit$1.59B
SG&A Expenses$1.23B
Operating Income$365.80M
Net Income$229.50M
EPS (Basic)$0.84
EPS (Diluted)$0.84
Shares Outstanding (Basic)270.80M
Shares Outstanding (Diluted)272.20M

Key Highlights

  • 1Robust store network expansion: Operated 3,591 stores across 48 states by January 31, 2009, with selling square footage growing to 30.3 million.
  • 2Consistent sales growth: Achieved a 10.4% compound annual growth rate in net sales over the preceding five years.
  • 3Strategic merchandise mix: Balanced consumable, variety, and seasonal goods, with increasing emphasis on consumables supported by in-store refrigeration.
  • 4Resilient sales performance: Reported a 4.1% increase in comparable store net sales for fiscal 2008, defying a challenging economic climate.
  • 5Operational efficiency focus: Leveraged technology for inventory management and supply chain optimization, leading to increased inventory turns.
  • 6Strong cash flow generation: Historically, operating cash flows have exceeded capital expenditures, allowing for self-funding of growth initiatives.
  • 7Financial strength: Maintained a solid financial position with growing equity and manageable debt levels.

Frequently Asked Questions

Dollar Tree's primary strategy revolves around offering a wide variety of quality merchandise at a fixed price point of $1.00 (or less in most stores), differentiating itself through value and product selection. The company also focuses on expanding its store footprint, optimizing its merchandise mix (increasing consumables), and maintaining cost control through efficient operations and supply chain management.

Despite the broader economic downturn, Dollar Tree demonstrated resilience. Net sales increased by 9.5% to $4.64 billion. Comparable store net sales grew by 4.1%, driven by a 3.7% increase in transactions and a 0.4% increase in average transaction size. The company attributed this performance in part to initiatives like expanding payment methods and adding freezers/coolers, which increased traffic and average transaction size, and a shift towards more basic, consumable merchandise which resonated with consumers.

Key risks include the impact of a continued economic downturn on consumer spending, vulnerability to cost increases (merchandise, wages, shipping, fuel) which cannot be easily passed on due to the fixed price model, potential disruptions in the supply chain (especially for imported goods), increased competition, and legal proceedings, particularly class-action lawsuits related to employee classification and pay.

Dollar Tree's growth strategy is primarily driven by opening new stores and expanding existing ones. The company targets optimal store sizes of 8,000-10,000 square feet and focuses on opening locations in strip shopping centers. They also utilize mergers and acquisitions, such as the Deal$ acquisition, to test new concepts and expand their reach. The company expects future sales growth to continue to come primarily from square footage growth.