10-KPeriod: FY2020

DOLLAR TREE, INC. Annual Report, Year Ended Feb 1, 2020

Filed March 20, 2020For Securities:DLTR

Summary

Dollar Tree, Inc. operates a vast discount retail network, encompassing both the Dollar Tree brand (fixed $1.00 price point) and the Family Dollar brand (multi-price point, largely under $10.00). As of February 1, 2020, the company operated 15,288 stores across the United States and Canada. The company's strategy centers on leveraging the complementary nature of its brands to serve a broad customer base, focusing on value, convenience, and a compelling merchandise assortment. Key to its business is the ongoing integration and optimization of the Family Dollar segment, which has seen significant investment in store remodels (H2 format) and operational efficiencies. The company is also focused on expanding its store footprint and enhancing its supply chain infrastructure. While the company faces competition and potential cost pressures, its diversified business model and strategic initiatives aim to drive continued growth and profitability. Investors should note the significant goodwill impairment charges related to Family Dollar in prior years, the ongoing integration efforts, and the company's cautious approach to capital allocation, prioritizing reinvestment in the business.

Financial Highlights

44 data points
Beta

Revenue

$23.61B

29.8% Gross Margin

Net Income

$827.00M

3.5% Net Margin

EPS (Diluted)

$3.47

Total Assets

$19.57B

Cash & Equivalents

$539.20M

Free Cash Flow

$1.87B

Financial Statements
Beta
Revenue$23.61B
Cost of Revenue$16.57B
Gross Profit$7.04B
SG&A Expenses$5.47B
Operating Income$1.26B
Net Income$827.00M
EPS (Basic)$3.49
EPS (Diluted)$3.47
Shares Outstanding (Basic)237.20M
Shares Outstanding (Diluted)238.30M

Key Highlights

  • 1Operates 15,288 discount variety stores under the Dollar Tree and Family Dollar brands as of February 1, 2020.
  • 2The Dollar Tree segment maintains a fixed $1.00 price point, while Family Dollar offers a multi-price point assortment generally under $10.00.
  • 3Significant focus on the H2 store format initiative for Family Dollar, which has shown improved sales performance post-renovation.
  • 4Investments in supply chain infrastructure include new distribution centers to support growth and efficiency.
  • 5The company faces ongoing integration challenges and cost pressures, including potential impacts from tariffs and supply chain disruptions.
  • 6Prior years' financial statements show significant goodwill impairment charges related to the Family Dollar acquisition, highlighting past integration difficulties.
  • 7The company prioritizes reinvestment of cash flow into business development and expansion over dividends or significant share repurchases in the near term.

Frequently Asked Questions

Dollar Tree is focused on expanding its fixed-$1.00 price point model, including testing 'Dollar Tree Plus!' for items up to $5.00, and enhancing customer experience with initiatives like the 'Snack Zone' and expanded frozen/refrigerated offerings. Family Dollar is undergoing a significant transformation with the H2 store remodel program, aiming to improve merchandise offerings and drive traffic. Both segments benefit from leveraging the combined company's sourcing expertise and expanding their geographic footprint.

The company faces several risks, including increasing merchandise and operating costs (wages, freight, fuel), intense competition in the discount retail sector, potential supply chain disruptions (including those related to global events like the COVID-19 pandemic and tariffs), and the ongoing integration of the Family Dollar business, which has historically incurred significant goodwill impairment charges. Economic downturns and changes in consumer spending habits also pose risks.

Significant progress has been made in integrating Family Dollar, including consolidating headquarters and implementing operational initiatives like the H2 store format. However, the integration process has been costly, marked by substantial goodwill impairment charges in prior years ($2.73 billion in FY2018 and $313 million in FY2019) reflecting difficulties in achieving original growth estimates. The H2 program is showing positive comparable store sales lifts, indicating potential for improved performance.

Dollar Tree's strategy prioritizes reinvesting cash flow from operations into business development, new store openings, and renovation initiatives. The company has substantial long-term debt, partly due to the Family Dollar acquisition, and focuses on managing its debt obligations. While a share repurchase authorization exists, the primary focus is on funding growth and operational improvements. The company does not anticipate paying dividends in the foreseeable future.