8-KOther Events

DOLLAR TREE, INC. 8-K Report (Jul 7, 2003)

Filed July 7, 2003For Securities:DLTR

Summary

Dollar Tree Stores, Inc. (DLTR) filed an 8-K on July 7, 2003, providing a business update for the second quarter of fiscal 2003. The company announced that sales through July 4 were exceeding internal plans. A significant development reported is the closure of the acquisition of Greenbacks, a Salt Lake City-based dollar store chain, on June 29, 2003, with its sales and earnings to be incorporated into Dollar Tree's results starting June 30. As a result of these positive sales trends and the Greenbacks acquisition, Dollar Tree is raising its second-quarter sales guidance to a range of $600 million to $615 million, an increase from the prior range of $575 million to $590 million. The new guidance includes approximately $10 million in sales from Greenbacks. While the acquisition is expected to contribute to overall sales and EPS growth (adding 2-3 cents to fiscal year EPS), it will also negatively impact the reported gross margin in the short term due to Greenbacks' lower margins and the need for merchandise assortment transition over the next 12-18 months. The company anticipates its Q2 gross margin to be approximately 50 basis points lower than the prior year's 35.7%, but maintains its full-year gross margin guidance at approximately 36% including Greenbacks.

Key Highlights

  • 1Dollar Tree is raising its Q2 fiscal 2003 sales guidance to $600-$615 million, up from $575-$590 million.
  • 2The company's sales through July 4, 2003, are performing above plan.
  • 3The acquisition of Greenbacks, a dollar store chain, closed on June 29, 2003, and its results will be consolidated from June 30.
  • 4The Greenbacks acquisition is expected to add approximately $10 million in sales for Q2 and 2-3 cents to full-year EPS.
  • 5Reported Q2 gross margin is expected to decrease by ~50 basis points year-over-year to around 35.2% due to Greenbacks' lower margins and increased sales of lower-margin consumables.
  • 6Dollar Tree maintains its full-year gross margin guidance of approximately 36%, including Greenbacks.
  • 7Total store count, including Greenbacks, reached 2,447 stores in 47 states as of June 30, 2003, up from 2,105 stores in 37 states a year prior.

Frequently Asked Questions

The primary reasons for the raised sales guidance are above-plan sales performance through July 4th and the inclusion of sales from the recently acquired Greenbacks chain, which closed on June 29, 2003.

While Greenbacks will contribute to overall sales and EPS growth, its lower gross margins are expected to decrease Dollar Tree's reported gross margin by approximately 50 basis points in the second quarter. This impact is also compounded by higher sales of lower-margin consumable products in May and June.

Investors can expect the official quarterly sales release, which will include detailed financial results, on Thursday, August 7, 2003, before market open. This current update is a preliminary business update.

Dollar Tree continues to plan for sales and earnings growth to increase by at least 15% for the full fiscal year compared to the previous year, with the Greenbacks acquisition adding an additional 2-3 cents to the earnings per share (EPS).