10-QPeriod: Q1 FY2013

DOLLAR TREE, INC. Quarterly Report for Q1 Ended Apr 28, 2012

Filed May 17, 2012For Securities:DLTR

Summary

Dollar Tree, Inc. reported solid first-quarter 2012 results, demonstrating continued growth and operational efficiency. Net sales increased by 11.5% year-over-year to $1.72 billion, driven by a 5.6% increase in comparable store net sales, attributed to higher customer traffic and strategic initiatives like the expansion of frozen and refrigerated merchandise. The company also saw a healthy expansion in its store base, opening 110 new stores during the quarter. Profitability improved as operating income grew by 16.7% to $188 million. While gross profit margin remained stable, the company effectively managed its expenses, with selling, general, and administrative (SG&A) expenses decreasing as a percentage of net sales. This improved operational leverage, coupled with robust sales growth, led to a 14.9% increase in net income to $116.1 million, or $1.00 per diluted share, up from $0.82 in the prior year's quarter. The company also maintained a strong balance sheet with substantial cash and cash equivalents, and significant availability under its credit facilities.

Financial Highlights

43 data points
Beta

Revenue

$1.72B

35.0% Gross Margin

Net Income

$116.10M

6.7% Net Margin

EPS (Diluted)

$0.50

Total Assets

$2.45B

Cash & Equivalents

$382.30M

Free Cash Flow

$69.10M

Financial Statements
Beta
Revenue$1.72B
Cost of Revenue$1.12B
Gross Profit$602.70M
SG&A Expenses$414.70M
Operating Income$188.00M
Net Income$116.10M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)231.50M
Shares Outstanding (Diluted)232.80M

Key Highlights

  • 1Net sales increased 11.5% to $1.72 billion for the 13 weeks ended April 28, 2012.
  • 2Comparable store net sales grew by 5.6%, indicating strong performance in existing locations.
  • 3Net income rose 14.9% to $116.1 million, with diluted EPS increasing to $1.00 from $0.82.
  • 4The company opened 110 new stores during the quarter, expanding its retail footprint.
  • 5Gross profit margin remained steady at 35.0%, while SG&A expenses as a percentage of sales decreased to 24.1%.
  • 6Cash provided by operating activities was $134.5 million, though lower than the prior year.
  • 7The company has $1.2 billion remaining under its Board authorization for share repurchases.

Frequently Asked Questions

Sales growth was primarily driven by the opening of new stores and a 5.6% increase in comparable store net sales. The comparable store sales increase was attributed to higher customer traffic, the continued roll-out of frozen and refrigerated merchandise to more stores, and an increased acceptance of basic, consumable products.

Despite an increase in merchandise costs due to a shift in product mix, Dollar Tree effectively managed its selling, general, and administrative (SG&A) expenses. SG&A expenses decreased as a percentage of net sales due to leverage from higher comparable store sales, lower utility costs, and reduced debit and credit fees. This improved operational leverage contributed to a higher operating income margin.

The company reported a strong liquidity position with $382.3 million in cash and cash equivalents. They also had $300.0 million available under their revolving credit facility. Borrowings were $265.5 million, which was down from $250 million in long-term debt in the prior year period, indicating a manageable debt level.

Dollar Tree is involved in several class and collective action lawsuits, primarily related to employment matters (wage and hour claims, discrimination) and lease disputes. While the company states it does not believe these will have a material adverse effect on its business or financial condition individually or in aggregate, they cannot assure that one or more might not materially affect results of operations in the period they are resolved.