01—Abstract
Summary
Summary of the 10-K filed March 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Dollar Tree, Inc.'s 2017 10-K filing details a company undergoing significant transformation following the acquisition of Family Dollar in July 2015.
This acquisition created the largest discount retailer in North America by store count, operating under two distinct banners: Dollar Tree (a fixed $1.00a price point model) and Family Dollar (a multi-price point neighborhood variety store model). The company is focused on integrating Family Dollar, aiming to achieve substantial cost synergies of $300 million annually by July 2018, while also navigating the complexities of operating two different business models. Strategic priorities include growing both banners, expanding store footprints, optimizing merchandising and distribution, and controlling costs.
The financial highlights for the year ended January 28, 2017, show increased net sales driven by the full year of Family Dollar operations, though the company faced challenges related to the integration, including one-time costs. The report also highlights ongoing investments in store improvements, such as the rollout of freezers and coolers, and technology. Key risks include rising costs, competition, the success of the Family Dollar integration, and potential impacts from trade and labor regulations.
02—Key points
Key Highlights
- The acquisition of Family Dollar in July 2015 created the largest discount retailer in North America by store count, operating under two distinct banners: Dollar Tree ($1.00 fixed price) and Family Dollar (neighborhood variety).
- The company is targeting approximately $300 million in annual run-rate cost synergies from the Family Dollar integration, with an expected $300 million in one-time costs to achieve them.
- Net sales increased significantly to $20.7 billion for the year ended January 28, 2017, primarily due to the inclusion of Family Dollar's full year of operations, compared to $15.5 billion in the prior year.
- Comparable store net sales for the Dollar Tree segment increased by 1.8%, driven by an increase in transactions and average ticket, with initiatives like expanded frozen/refrigerated offerings and SNAP acceptance contributing positively.
- The company operated 14,334 stores as of January 28, 2017, with plans to grow both the Dollar Tree and Family Dollar store footprints significantly in the long term.
- Significant debt was incurred to finance the Family Dollar acquisition, with total debt standing at $6.4 billion as of January 28, 2017, impacting interest expense.
- The company faces risks related to cost increases (merchandise, wages, fuel), potential disruptions in its supply chain for imported goods, and the successful integration of Family Dollar's operations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Dollar Tree, Inc. kept $0.04.
- Revenue$20.72B100.0%
- Cost of revenue−$14.32B69.1%
- Gross profit$6.39B30.9%
- Operating costs−$4.69B22.6%
- Operating income$1.70B8.2%
- Interest, other & tax−$808.6M3.9%
- Net income$896.2M4.3%
Where FY2017 revenue went
$20.72B- Cost of revenue: $14.32B, 69% of revenue
- SG&A: $4.69B, 23% of revenue
- Net income: $896.2M, 4.3% of revenue
- Interest, other & tax: $808.6M, 3.9% of revenue
Kept 4.3% as net incomeNet income $896.2M · 4.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 28, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $20.72B$15.50B | +33.7% |
| Cost of Revenue | $14.32B$10.84B | +32.1% |
| Gross Profit | $6.39B$4.66B | +37.3% |
| SG&A Expenses | $4.69B$3.61B | +30.0% |
| Operating Income | $1.70B$1.05B | +62.4% |
| Net Income | $896.20M$282.40M | +217.4% |
| EPS (Basic) | $3.80$1.27 | +199.2% |
| EPS (Diluted) | $3.78$1.26 | +200.0% |
| Shares Outstanding (Basic) | 235.70M222.50M | +5.9% |
| Shares Outstanding (Diluted) | 236.80M223.50M | +6.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Dollar Tree's financial performance in fiscal year 2016?
The primary driver of Dollar Tree's financial performance in fiscal year 2016 was the full-year inclusion of the Family Dollar acquisition, which significantly increased net sales. This acquisition, completed in July 2015, combined the operations of the two distinct discount retail banners.
What is Dollar Tree's strategy for realizing synergies from the Family Dollar acquisition?
Dollar Tree aims to achieve approximately $300 million in annual run-rate cost synergies by the end of fiscal year 2018. These synergies are expected to come from various sources including savings in sourcing and procurement, overhead reductions, optimization of distribution and logistics, and rebannering efforts to optimize store formats.
What are the key risks and challenges facing Dollar Tree as highlighted in the filing?
Key risks include increased costs (merchandise, wages, fuel, freight), intense competition in the discount retail sector, potential disruptions to the supply chain for imported goods due to trade policies, the complexity and cost of integrating Family Dollar's operations, and the ability to profitably expand store square footage while managing existing store performance.
How did the Dollar Tree segment perform on a comparable store sales basis?
The Dollar Tree segment reported a comparable store net sales increase of 1.8% for the year ended January 28, 2017. This increase was attributed to a 0.7% rise in the number of transactions and a 1.1% increase in average ticket, supported by initiatives like the expansion of frozen/refrigerated merchandise and increased SNAP acceptance.
06—Continue