10-QPeriod: Q2 FY2010

DOLLAR TREE, INC. Quarterly Report for Q3 Ended Aug 1, 2009

Filed August 26, 2009For Securities:DLTR

Summary

Dollar Tree, Inc. reported strong performance for the second quarter and the first half of fiscal year 2009, with significant year-over-year growth in net sales and operating income. Net sales increased by 11.9% for the 13-week period and 13.0% for the 26-week period, driven by a healthy increase in comparable store sales (6.8% and 8.0%, respectively) and the opening of new stores. This growth was achieved despite a challenging economic environment, suggesting the company's value proposition resonated well with consumers. The company demonstrated improved profitability, with gross profit margins increasing due to lower merchandise and freight costs, partially offset by a shift in product mix towards more consumables. Selling, general, and administrative expenses also decreased as a percentage of sales, contributing to a substantial rise in operating income. Net income per diluted share grew to $0.63 for the quarter and $1.29 for the first half, up from $0.42 and $0.90 in the prior year periods. The company also continued its share repurchase program, returning value to shareholders.

Financial Highlights

5 data points
Beta

Revenue

$1.20B

34.6% Gross Margin

Net Income

$60.40M

5.0% Net Margin

EPS (Diluted)

$0.22

Financial Statements
Beta
Revenue$1.20B
Gross Profit$415.40M
Operating Income$97.60M
Net Income$60.40M
EPS (Diluted)$0.22

Key Highlights

  • 1Net sales increased by 11.9% to $1,222.8 million for the 13 weeks ended August 1, 2009, and by 13.0% to $2,423.9 million for the 26 weeks ended August 1, 2009.
  • 2Comparable store net sales showed robust growth, up 6.8% for the quarter and 8.0% for the first half, indicating strong customer traffic and demand.
  • 3Gross profit margin improved to 34.5% for both the 13-week and 26-week periods, driven by lower merchandise costs, reduced freight expenses, and favorable occupancy costs.
  • 4Operating income surged by 44.8% for the quarter and 42.6% for the first half, reflecting improved gross profit and leverage of SG&A expenses.
  • 5Net income per diluted share increased significantly to $0.63 for the quarter and $1.29 for the first half, compared to $0.42 and $0.90 in the prior year periods.
  • 6The company actively repurchased shares, spending $85.3 million in the first half of the year and had $368.4 million remaining under its repurchase authorization.
  • 7Expansion continued with 139 new stores opened and 41 stores expanded in the first half of fiscal 2009.

Frequently Asked Questions

Dollar Tree experienced strong sales growth, with net sales increasing by 11.9% to $1.22 billion for the 13-week period and 13.0% to $2.42 billion for the 26-week period ended August 1, 2009. This growth was primarily driven by an increase in comparable store sales (6.8% and 8.0%, respectively) and the addition of new stores.

Profitability improved due to an expansion in gross profit margin to 34.5%, driven by lower merchandise costs (including inbound freight), reduced outbound freight costs, and better leverage of occupancy and distribution costs. Additionally, selling, general, and administrative expenses decreased as a percentage of sales, leading to a significant increase in operating income.

The company generated $134.0 million in net cash from operating activities in the first half of fiscal 2009, an increase from the prior year. Investing activities used $72.1 million, primarily for capital expenditures. Financing activities used $68.1 million, mainly due to share repurchases. Dollar Tree maintains a strong liquidity position with $300 million available on its revolving credit facility.

Dollar Tree is involved in several class and collective action lawsuits related to employment matters, including wage and hour claims and alleged pay disparities. While the company is vigorously defending these matters and does not believe they will materially adversely affect its financial condition individually or in aggregate, it acknowledges that resolution could impact its results of operations in a given period.