10-QPeriod: Q3 FY2023

DOLLAR TREE, INC. Quarterly Report for Q3 Ended Oct 29, 2022

Filed November 22, 2022For Securities:DLTR

Summary

Dollar Tree, Inc. reported solid revenue growth driven by both its Dollar Tree and Family Dollar segments for the third quarter and year-to-date periods ending October 29, 2022. Net sales increased by 8.1% for the 13-week period and 7.1% for the 39-week period. The Dollar Tree segment demonstrated particularly strong performance with a 9.9% increase in net sales for the quarter, driven by an 8.6% rise in comparable store net sales and the successful implementation of the $1.25 price point initiative. The Family Dollar segment also saw a 6.1% increase in quarterly net sales, supported by a 4.1% comparable store net sales growth, despite facing some headwinds. Profitability saw a significant improvement, with diluted EPS rising to $1.20 from $0.96 in the prior year's comparable quarter. Operating income grew by 22.8% for the quarter and 31.3% year-to-date, with operating income margins expanding to 5.5% and 7.9%, respectively. This improvement was largely attributed to enhanced gross profit margins, especially within the Dollar Tree segment, which benefited from higher initial mark-ons and improved freight costs, though offset by rising shrink and markdown costs. The company continues to invest in strategic initiatives such as store renovations (H2 and Combo Stores) and product assortment enhancements across both banners, while also managing increased operating expenses including wages and inflationary pressures.

Financial Highlights

41 data points
Beta

Revenue

$6.94B

29.9% Gross Margin

Net Income

$266.90M

3.8% Net Margin

EPS (Diluted)

$1.20

Total Assets

$22.91B

Cash & Equivalents

$439.00M

Free Cash Flow

$213.50M

Financial Statements
Beta
Revenue$6.94B
Cost of Revenue$4.87B
Gross Profit$2.07B
SG&A Expenses$1.69B
Operating Income$381.30M
Net Income$266.90M
EPS (Basic)$1.20
EPS (Diluted)$1.20
Shares Outstanding (Basic)222.20M
Shares Outstanding (Diluted)223.00M

Key Highlights

  • 1Total revenue increased 8.1% to $6.94 billion for the 13 weeks ended October 29, 2022, and 7.1% to $20.60 billion for the 39 weeks ended October 29, 2022.
  • 2Diluted earnings per share (EPS) rose to $1.20 for the 13 weeks ended October 29, 2022, up from $0.96 in the prior year's period.
  • 3The Dollar Tree segment showed robust growth, with comparable store net sales increasing by 8.6% (constant currency) for the quarter, driven by a 14.6% increase in average ticket.
  • 4The Family Dollar segment's comparable store net sales increased by 4.1% (constant currency) for the quarter, with a 0.1% increase in customer traffic.
  • 5Gross profit margin improved significantly to 29.9% for the 13 weeks ended October 29, 2022, compared to 27.5% in the prior year, driven by merchandise cost efficiencies and leverage from sales growth.
  • 6The company repurchased $647.5 million of its common stock during the first 39 weeks of the fiscal year, with $1.85 billion remaining under its repurchase authorization.
  • 7Despite overall positive performance, the company noted increased selling, general, and administrative expenses, particularly in areas like legal fees, repairs and maintenance, and payroll due to wage increases.

Frequently Asked Questions

For the 13 weeks ended October 29, 2022, Dollar Tree reported net sales of $6.94 billion, an increase of 8.1% compared to $6.42 billion in the same period last year. This growth was driven by both new store sales and a 6.5% increase in comparable store net sales on a constant currency basis across the enterprise.

Profitability showed a strong upward trend. Diluted earnings per share increased to $1.20 for the 13-week period, up from $0.96 in the prior year. This improvement was primarily due to a higher gross profit margin (29.9% vs. 27.5%) resulting from better merchandise costs and operational leverage, which more than offset an increase in selling, general, and administrative expenses.

The Dollar Tree segment outperformed, with net sales up 9.9% and comparable store net sales growing 8.6% (constant currency). This segment benefited from its $1.25 price point initiative and higher average ticket. The Family Dollar segment also saw positive performance, with net sales up 6.1% and comparable store net sales increasing 4.1% (constant currency), although its gross profit margin saw a slight decrease.

The company highlighted ongoing challenges including inflationary pressures impacting merchandise, freight, and wage costs, supply chain disruptions affecting product availability and costs, and increased selling, general, and administrative expenses such as higher legal fees and store maintenance costs. The West Memphis distribution center issues and related recalls also presented significant costs and operational challenges.