10-KPeriod: FY2017

DOLLAR TREE, INC. Annual Report, Year Ended Jan 28, 2017

Filed March 28, 2017For Securities:DLTR

Summary

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 $1.00 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.

Financial Highlights

47 data points
Beta

Revenue

$20.72B

30.9% Gross Margin

Net Income

$896.20M

4.3% Net Margin

EPS (Diluted)

$3.78

Total Assets

$15.70B

Cash & Equivalents

$866.40M

Free Cash Flow

$1.11B

Financial Statements
Beta
Revenue$20.72B
Cost of Revenue$14.32B
Gross Profit$6.39B
SG&A Expenses$4.69B
Operating Income$1.70B
Net Income$896.20M
EPS (Basic)$3.80
EPS (Diluted)$3.78
Shares Outstanding (Basic)235.70M
Shares Outstanding (Diluted)236.80M

Key Highlights

  • 1The 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).
  • 2The 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.
  • 3Net 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.
  • 4Comparable 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.
  • 5The 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.
  • 6Significant 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.
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.