10-KPeriod: FY2018

DOLLAR TREE, INC. Annual Report, Year Ended Feb 3, 2018

Filed March 16, 2018For Securities:DLTR

Summary

Dollar Tree, Inc. reported its fiscal year 2017 results, marked by the ongoing integration of the Family Dollar acquisition. The company operates two distinct segments: Dollar Tree, a fixed-price $1.00 variety store, and Family Dollar, a multi-price point neighborhood discount store. The combined entity boasts a vast store count across North America. Fiscal year 2017 saw revenue growth driven by new store openings, expanded selling square footage, and positive comparable store net sales increases in both segments, with the Dollar Tree banner showing stronger growth. The company is actively executing a store renovation initiative at Family Dollar stores to improve the shopping experience and is implementing a $300 million cost synergy plan related to the Family Dollar integration, expected to be completed by July 2018. Key financial and operational highlights include continued store expansion, with a focus on optimizing store sizes and locations for both banners. The company also benefited from the Tax Cuts and Jobs Act, which significantly reduced its tax provision. Management is focused on reinvesting a portion of these tax savings into store hours, associate wages, and benefits, signaling a commitment to both operational improvements and employee investment. Despite challenges such as potential cost increases and integration complexities, Dollar Tree appears to be making progress in consolidating its position as a leading discount retailer.

Financial Highlights

49 data points
Beta

Revenue

$22.25B

31.6% Gross Margin

Net Income

$1.71B

7.7% Net Margin

EPS (Diluted)

$7.21

Total Assets

$16.33B

Cash & Equivalents

$1.10B

Free Cash Flow

$878.00M

Financial Statements
Beta
Revenue$22.25B
Cost of Revenue$15.22B
Gross Profit$7.02B
SG&A Expenses$5.00B
Operating Income$2.00B
Net Income$1.71B
EPS (Basic)$7.24
EPS (Diluted)$7.21
Shares Outstanding (Basic)236.80M
Shares Outstanding (Diluted)237.70M

Key Highlights

  • 1The company operated 14,835 discount variety retail stores across North America under the Dollar Tree and Family Dollar banners as of February 3, 2018.
  • 2Net sales increased by 7.4% in fiscal year 2017 compared to 2016, driven by new store openings, expanded selling square footage, and a 53rd week, with comparable store net sales increasing by 1.9%.
  • 3The Dollar Tree segment reported a comparable store net sales increase of 3.4% on a constant currency basis, while the Family Dollar segment saw a 0.4% increase.
  • 4Dollar Tree is undertaking a store renovation initiative at its Family Dollar locations to enhance the customer experience.
  • 5The company is on track to achieve approximately $300 million in annual cost savings synergies from the Family Dollar acquisition by July 2018.
  • 6The Tax Cuts and Jobs Act enacted in December 2017 resulted in a significant benefit, reducing the company's effective tax rate and increasing net income.
  • 7The company plans to reinvest approximately $100 million of its tax savings into store operations, employee wages, and benefits.

Frequently Asked Questions

The Dollar Tree segment operates as a fixed-price, $1.00 discount variety store, focusing on value and a wide assortment of merchandise. The Family Dollar segment is a neighborhood discount store offering a broader range of products at prices generally between $1.00 and $10.00, catering to customers primarily in urban and rural locations seeking everyday necessities and seasonal items.

Dollar Tree is executing a store renovation initiative to improve the shopping experience at Family Dollar stores, focusing on store layout, product assortment, and visual merchandising. The company is also working to achieve significant cost synergies from the Family Dollar acquisition, aiming for $300 million in annual run-rate cost savings by July 2018 through improved sourcing, overhead reductions, and logistics optimization.

The acquisition of Family Dollar significantly increased Dollar Tree's scale and store count, contributing to revenue growth. However, it also substantially increased the company's total debt, which stood at $5,732.7 million as of February 3, 2018. The company is managing this debt through various financing arrangements and prepayments, while working to realize cost synergies.

Dollar Tree plans to continue expanding its store footprint for both banners, believing there is significant 'white space' opportunity in the market. The strategy involves opening new stores in underserved markets and strategically increasing presence in existing markets, with a focus on optimal store sizes of 8,000-10,000 sq ft for Dollar Tree and 6,000-8,000 sq ft for Family Dollar. They believe the market can ultimately support over 10,000 Dollar Tree stores and 15,000 Family Dollar stores.