01—Abstract
Summary
Summary of the 10-K filed March 27, 2019. Cited figures are marked; the original filing is the authoritative source.
Dollar Tree, Inc. operates a significant discount retail business with two primary segments: Dollar Tree, a fixed-$1.00a price point chain, and Family Dollar, a multi-price point neighborhood variety store.
The company experienced a challenging fiscal year 2018, largely due to a substantial $2.73 billionb non-cash goodwill impairment charge related to the Family Dollar segment. This impairment was driven by integration challenges and underperformance relative to initial acquisition expectations. Despite the impairment, the company is implementing strategic initiatives to revitalize Family Dollar, including the H2 store model, renovations, and store closures.
The Dollar Tree segment continues to show resilience with positive comparable store sales growth. The company is also focused on expanding its store base and optimizing its supply chain. Investors should monitor the success of the Family Dollar turnaround plan, cost management, and the impact of the company's significant debt load.
02—Key points
Key Highlights
- Significant goodwill impairment of $2.73 billion recorded for the Family Dollar segment due to operational challenges and integration issues.
- Dollar Tree segment demonstrated resilience with positive comparable store net sales growth (3.3% on a constant currency basis) driven by initiatives like frozen/refrigerated merchandise and the 'Snack Zone' layout.
- Family Dollar segment is undergoing a significant turnaround effort, including the rollout of the 'H2' store model to at least 1,000 stores, closing up to 390 underperforming locations, and re-bannering approximately 200 stores to the Dollar Tree brand.
- The company operated 15,237 stores across the US and Canada as of February 2, 2019, with plans for continued store expansion for both brands.
- Net sales for fiscal year 2018 increased by 2.6% to $22.8 billion, though the company reported a net loss of $1.59 billion primarily due to the goodwill impairment.
- The company has a substantial debt load of $4.3 billion as of February 2, 2019, and is prioritizing cash flow for debt repayment and business development over dividends or share repurchases in the near term.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Dollar Tree, Inc. lost $0.07.
- Revenue$22.82B100.0%
- Cost of revenue−$15.88B69.6%
- Gross profit$6.95B30.4%
- Operating costs−$7.89B34.6%
- Operating income−$939.5M4.1%
- Interest, other & tax−$651.3M2.9%
- Net income−$1.59B7.0%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 27, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $22.82B$22.25B | +2.6% |
| Cost of Revenue | $15.88B$15.22B | +4.3% |
| Gross Profit | $6.95B$7.02B | −1.1% |
| SG&A Expenses | $5.16B$5.00B | +3.1% |
| Operating Income | -$939.50M$2.00B | −147.0% |
| Net Income | -$1.59B$1.71B | −192.8% |
| EPS (Basic) | $-6.69$7.24 | −192.4% |
| EPS (Diluted) | $-6.69$7.21 | −192.8% |
| Shares Outstanding (Basic) | 237.90M236.80M | +0.5% |
| Shares Outstanding (Diluted) | 237.90M237.70M | +0.1% |
05—Questions
Frequently Asked Questions
What was the main driver of the significant net loss in fiscal year 2018?
The primary driver of the net loss in fiscal year 2018 was a $2.73 billion non-cash goodwill impairment charge related to the Family Dollar segment. This charge reflects the reassessment of the Family Dollar business's carrying value against its projected future performance and integration challenges.
What initiatives is Dollar Tree implementing to improve the performance of the Family Dollar segment?
Dollar Tree is undertaking a multi-pronged strategy for Family Dollar, including rolling out the new 'H2' store model (featuring improved merchandise, $1.00 sections, and expanded freezer/cooler doors) to at least 1,000 stores, closing up to 390 underperforming stores, re-bannering approximately 200 underperforming Family Dollar stores to the Dollar Tree brand, and introducing adult beverages and expanding refrigeration in select locations.
How did the Dollar Tree segment perform, and what are its key growth drivers?
The Dollar Tree segment demonstrated stable performance with comparable store net sales increasing by 3.3% on a constant currency basis in fiscal year 2018. Key growth drivers include the continued rollout of frozen and refrigerated merchandise, the 'Snack Zone' store layout to highlight impulse snack purchases, and ongoing efforts to expand its store footprint.
What is the company's stance on dividends and share repurchases given its financial situation?
The company stated that it anticipates retaining substantially all of its cash flow from operations for business development and expansion, and debt repayment. Management does not anticipate paying dividends on its common stock in the foreseeable future. While the company has a significant share repurchase authorization remaining, it did not repurchase any shares in fiscal year 2018.
06—Continue