Summary
Dollar Tree, Inc. reported mixed results for the third quarter and first nine months of fiscal year 2019. While net sales showed growth, driven by both new stores and comparable store sales increases across both the Dollar Tree and Family Dollar segments, profitability was impacted by rising costs. Specifically, gross profit margins declined due to higher merchandise costs (including freight), increased shrink, and distribution expenses. Selling, general, and administrative expenses also rose, primarily due to costs associated with store support center consolidation and store closure initiatives. Operationally, the company is actively pursuing a store optimization program for Family Dollar, which includes the roll-out of the H2 store model, planned store closures, and re-bannering of some Family Dollar stores to the Dollar Tree brand. The Dollar Tree segment continues to benefit from initiatives like the expansion of frozen and refrigerated merchandise and the 'Snack Zone' layout. Despite increased operating expenses and reduced profitability margins, the company maintained positive operating income, albeit lower than the prior year period, and continues to invest in store growth and optimization strategies.
Financial Highlights
40 data points| Revenue | $5.74B |
| Cost of Revenue | $4.09B |
| Gross Profit | $1.65B |
| SG&A Expenses | $1.38B |
| Operating Income | $268.90M |
| Net Income | $180.30M |
| EPS (Basic) | $0.76 |
| EPS (Diluted) | $0.76 |
| Shares Outstanding (Basic) | 237.60M |
| Shares Outstanding (Diluted) | 238.30M |
Key Highlights
- 1Net sales increased by 3.7% to $5.75 billion for the 13 weeks ended November 2, 2019, compared to the prior year, with comparable store net sales up 2.5% on a constant currency basis.
- 2Gross profit increased by $32.6 million to $1.70 billion, but gross profit margin decreased to 29.7% from 30.2% year-over-year due to higher merchandise and distribution costs, and increased shrink.
- 3Operating income decreased by 7.6% to $358.4 million, with operating margin contracting to 6.2% from 7.0% due to increased SG&A expenses outpacing net sales growth.
- 4Family Dollar segment continues to be a drag on profitability, with a significant decline in operating income margin to 2.0% for the quarter, despite a slight increase in net sales.
- 5The company is executing a significant store optimization program for Family Dollar, including closing approximately 420 underperforming stores and re-bannering up to 200 stores to the Dollar Tree brand in 2019.
- 6Capital expenditures increased to $782.3 million for the 39 weeks ended November 2, 2019, primarily driven by investments in the Family Dollar store optimization program.
- 7The company repurchased $200.0 million of its common stock during the first nine months of fiscal 2019, with $800.0 million remaining on its authorized repurchase program as of November 2, 2019.