8-KOther Events

DOLLAR TREE, INC. 8-K Report (Jun 2, 2003)

Filed June 2, 2003For Securities:DLTR

Summary

Dollar Tree Stores, Inc. (DLTR) reported its first quarter 2003 earnings results on May 29, 2003, showcasing robust top-line growth and strategic expansion initiatives. Net sales surged by 20.8% year-over-year, fueled by strong comparable store sales (2.2%) and successful performance from newer, larger store formats. The company also provided positive outlooks for the second quarter and the full fiscal year 2003, anticipating continued sales increases. Investments in supply chain and technology are beginning to yield productivity improvements. A significant development is the pending acquisition of Greenbacks, Inc., which is expected to close in late June 2003. This acquisition is projected to be accretive to earnings per share in the current fiscal year and beyond, significantly contributing to overall square footage growth. DLTR is also strategically expanding its distribution network with new facilities planned or under construction to support its growth trajectory and achieve logistics efficiencies.

Key Highlights

  • 1Net sales for Q1 2003 increased by 20.8% over the prior year, driven by 2.2% comparable store net sales growth.
  • 2The company expects Q2 2003 net sales to range between $575-$590 million, with full-year 2003 net sales expected to increase by at least 15% (excluding Greenbacks).
  • 3Gross margin slightly decreased to 35.4% in Q1 2003 from 36.2% in Q1 2002, primarily due to supply chain adjustments and adoption of FIN 46.
  • 4Selling, general, and administrative expenses improved to 26.5% of net sales, reflecting better personnel cost management and leverage from strong sales.
  • 5Dollar Tree is on track to have point-of-sale (POS) systems in 1,700 stores by year-end 2003, representing a significant technological rollout.
  • 6The acquisition of Greenbacks, Inc. is anticipated to close in late June 2003 and is expected to be accretive to EPS by 2-3 cents in fiscal year 2003.
  • 7The company is expanding its distribution network with new facilities in Oklahoma, Washington, and Illinois to support growth and improve logistics.

Frequently Asked Questions

The 20.8% increase in net sales was primarily driven by a 2.2% rise in comparable store net sales, stronger-than-expected sales during the Easter season, and robust performance from newly opened stores, particularly those in the 10,000-15,000 square foot range.

Dollar Tree expects the acquisition of Greenbacks, Inc. to be accretive to earnings per share (EPS) by 2-3 cents in the current fiscal year, assuming a late June closing. For fiscal year 2004, the company anticipates at least 7 cents of EPS accretion.

The decrease in gross margin to 35.4% from 36.2% in the prior year's quarter was mainly due to two factors: a $2.0 million benefit from shrink adjustments in the prior year's quarter related to supply chain implementation, and approximately $1.0 million in additional non-cash expense this year associated with the adoption of FIN 46, which consolidated four distribution centers previously accounted for as operating leases.

Key growth initiatives include achieving 22% selling square footage growth (excluding Greenbacks), expanding its distribution network with new facilities in Oklahoma, Washington, and Illinois, and rolling out point-of-sale systems to 1,700 stores by year-end. The acquisition of Greenbacks will also significantly contribute to square footage growth, potentially reaching 28%-30% for the year.