10-QPeriod: Q3 FY2012

DOLLAR TREE, INC. Quarterly Report for Q3 Ended Oct 29, 2011

Filed November 17, 2011For Securities:DLTR

Summary

Dollar Tree, Inc. reported a strong third quarter for fiscal year 2011, demonstrating robust top-line growth and improved profitability. Net sales increased by 11.9% year-over-year for the thirteen weeks ended October 29, 2011, driven by both new store openings and a 4.8% increase in comparable store net sales. This growth was supported by strategic initiatives, including the expansion of frozen and refrigerated merchandise and increased SNAP acceptance. The company also saw a positive impact from a shift in merchandise mix towards more consumable products. Operationally, Dollar Tree achieved an improved operating income margin, benefiting from lower selling, general, and administrative (SG&A) expenses as a percentage of sales, despite a slight decrease in gross profit margin primarily due to higher occupancy and distribution costs in Canada and higher fuel prices. The company continued its aggressive share repurchase program, returning significant capital to shareholders. While facing ongoing litigation, the company maintains a confident outlook that these matters will not have a material adverse effect on its financial condition.

Financial Highlights

42 data points
Beta

Revenue

$1.60B

35.1% Gross Margin

Net Income

$104.50M

6.5% Net Margin

EPS (Diluted)

$0.43

Total Assets

$2.43B

Cash & Equivalents

$280.20M

Free Cash Flow

-$16.00M

Financial Statements
Beta
Revenue$1.60B
Cost of Revenue$1.04B
Gross Profit$560.60M
SG&A Expenses$395.70M
Operating Income$164.90M
Net Income$104.50M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)239.60M
Shares Outstanding (Diluted)241.50M

Key Highlights

  • 1Net sales increased by 11.9% to $1,596.6 million for the 13 weeks ended October 29, 2011, compared to $1,426.6 million in the prior year period.
  • 2Comparable store net sales increased by 4.8% for the 13 weeks ended October 29, 2011, reflecting continued positive customer traffic and increased average ticket.
  • 3Operating income grew to $164.9 million for the 13 weeks ended October 29, 2011, up from $140.9 million in the prior year period, resulting in an improved operating margin of 10.3%.
  • 4Diluted earnings per share (EPS) rose to $0.87 for the 13 weeks ended October 29, 2011, from $0.73 in the comparable prior year period.
  • 5The company opened 257 new stores and expanded 88 stores during the first 39 weeks of fiscal year 2011, expanding its total store count to 4,237.
  • 6Dollar Tree repurchased approximately $345.9 million of its common stock during the 39 weeks ended October 29, 2011, underscoring a commitment to returning capital to shareholders.
  • 7Merchandise inventories increased to $1,005.4 million as of October 29, 2011, up from $934.9 million at the end of the prior fiscal year, indicating investment in stock to meet demand.

Frequently Asked Questions

Dollar Tree's net sales increased by 11.9%, or $170.0 million, for the thirteen weeks ended October 29, 2011, compared to the same period in the prior year. This growth was driven by both new store openings and a 4.8% increase in comparable store net sales.

Operating income for the thirteen weeks ended October 29, 2011, increased to $164.9 million from $140.9 million in the prior year period. This resulted in an improved operating income margin of 10.3% of net sales, primarily due to decreased selling, general, and administrative expenses as a percentage of sales.

Dollar Tree continued its aggressive share repurchase activities. During the 39 weeks ended October 29, 2011, the company repurchased approximately $345.9 million of its common stock, including an Accelerated Share Repurchase (ASR) agreement of $200.0 million. Additionally, in October 2011, the Board authorized an additional $1.5 billion for repurchases, indicating a strong focus on returning capital to shareholders.

Dollar Tree is involved in several ongoing legal proceedings, including class and collective action lawsuits related to employment matters and alleged discrimination. While the company is vigorously defending itself and does not believe these matters will, individually or in the aggregate, have a material adverse effect on its financial condition, it cautions that the resolution of one or more lawsuits could materially affect its results of operations in the period they are resolved. Specific estimates of potential loss ranges cannot be provided at this time.