01—Abstract
Summary
Summary of the 10-K filed March 20, 2020. Cited figures are marked; the original filing is the authoritative source.
Dollar Tree, Inc. operates a vast discount retail network, encompassing both the Dollar Tree brand (fixed $1.00a 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.
02—Key points
Key Highlights
- Operates 15,288 discount variety stores under the Dollar Tree and Family Dollar brands as of February 1, 2020.
- The Dollar Tree segment maintains a fixed $1.00 price point, while Family Dollar offers a multi-price point assortment generally under $10.00.
- Significant focus on the H2 store format initiative for Family Dollar, which has shown improved sales performance post-renovation.
- Investments in supply chain infrastructure include new distribution centers to support growth and efficiency.
- The company faces ongoing integration challenges and cost pressures, including potential impacts from tariffs and supply chain disruptions.
- Prior years' financial statements show significant goodwill impairment charges related to the Family Dollar acquisition, highlighting past integration difficulties.
- The company prioritizes reinvestment of cash flow into business development and expansion over dividends or significant share repurchases in the near term.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Dollar Tree, Inc. kept $0.04.
- Revenue$23.61B100.0%
- Cost of revenue−$16.57B70.2%
- Gross profit$7.04B29.8%
- Operating costs−$5.78B24.5%
- Operating income$1.26B5.3%
- Interest, other & tax−$435.2M1.8%
- Net income$827.0M3.5%
Where FY2020 revenue went
$23.61B- Cost of revenue: $16.57B, 70% of revenue
- SG&A: $5.47B, 23% of revenue
- Net income: $827.0M, 3.5% of revenue
- Other operating costs: $313.0M, 1.3% of revenue
- Interest, other & tax: $435.2M, 1.8% of revenue
Kept 3.5% as net incomeNet income $827.0M · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 20, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $23.61B$22.82B | +3.5% |
| Cost of Revenue | $16.57B$15.88B | +4.4% |
| Gross Profit | $7.04B$6.95B | +1.3% |
| SG&A Expenses | $5.47B$5.16B | +5.9% |
| Operating Income | $1.26B-$939.50M | +234.3% |
| Net Income | $827.00M-$1.59B | +152.0% |
| EPS (Basic) | $3.49$-6.69 | +152.2% |
| EPS (Diluted) | $3.47$-6.69 | +151.9% |
| Shares Outstanding (Basic) | 237.20M237.90M | −0.3% |
| Shares Outstanding (Diluted) | 238.30M237.90M | +0.2% |
05—Questions
Frequently Asked Questions
What are the key strategic initiatives for Dollar Tree and Family Dollar?
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.
What are the major risks and challenges facing the company?
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.
How is the integration of Family Dollar progressing, and what is its financial impact?
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.
What is the company's approach to capital allocation and financial health?
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.
06—Continue