- Enterprise Operating Margin Improved 80 Basis Points to 7.9%
- Diluted Earnings per Share Increased 36.1% to $0.98 vs. $0.72
- Enterprise Same-Store Sales Increased 2.4%
- Same-Store Sales by Segment: Dollar Tree +3.9%, Family Dollar +1.0%
CHESAPEAKE, Va., 2017-Aug-28 — /EPR Retail News/ — Dollar Tree, Inc. (NASDAQ: DLTR), North America’s leading operator of discount variety stores, today (August 24, 2017) reported results for its second fiscal quarter ended July 29, 2017.
“I am extremely pleased with the quarter,” stated Bob Sasser, Chief Executive Officer. “Both Dollar Tree and Family Dollar produced positive same-store sales, our enterprise operating margin improved 80 basis points and earnings per share exceeded the high end of our guidance range. Consumers continue to view Dollar Tree and Family Dollar as stores that provide great value and convenience.”
Second Quarter Results
Consolidated net sales increased 5.7% to $5.28 billion from $5.00 billion in the prior year’s second quarter. Enterprise same-store sales increased 2.4%. The same-store sales growth was driven by increases in comparable transaction count and average ticket. Same-store sales for the Dollar Tree banner increased 3.9%. Same-store sales for the Family Dollar banner increased 1.0%.
Gross profit increased 7.6% to $1.63 billion compared to $1.51 billion in the prior year’s second quarter. As a percent of sales, gross margin increased to 30.8% compared to 30.3% in the prior year. The 50 basis point improvement was driven primarily by lower merchandise and freight costs and lower markdowns in the current quarter, partially offset by higher distribution and occupancy costs.
Selling, general and administrative expenses were 22.9% of sales compared to 23.1% of sales in the prior year’s second quarter. The 20 basis point improvement, as a percent of sales, was driven primarily by lower depreciation costs, lower payroll costs and workers’ compensation expenses and lower utility costs as a percent of sales, partially offset by higher operating and corporate expenses resulting from increased advertising costs and legal fees.
During the quarter, the Company recorded $2.6 million, or $0.01 per diluted share, of impairment charges related to its receivable from Dollar Express, which acquired the stores that the FTC required the Company to divest. The impairment charges, from the first and second quarters of 2017, totaling $53.5 million, are recorded as “Receivable impairment” in the accompanying condensed consolidated income statements.
Operating income increased 17.4% to $419.5 million compared with $357.2 million in the same period last year and operating income margin increased to 7.9% of sales in the current quarter from 7.1% in last year’s quarter.
The Company’s effective tax rate for the quarter was 32.0% compared to 36.9% in the prior year period. The lower tax rate included a tax benefit of $9.9 million, or $0.04 per diluted share, related to a state reduction in corporate tax rate.
Net income compared to the prior year’s second quarter increased $63.6 million to $233.8 million and diluted earnings per share increased 36.1% to $0.98 compared to $0.72 in the prior year’s quarter.
During the quarter, the Company opened 133 stores, expanded or relocated 31 stores, and closed 34 stores. Retail selling square footage at quarter-end was approximately 114.5 million square feet.
First Six Months Results
Consolidated net sales increased 4.8% to $10.57 billion from $10.08 billion in the same period last year. Enterprise same-store sales increased 1.2%. The same-store sales growth was driven by increases in comparable transaction count and average ticket. Same-store sales for the Dollar Tree banner increased 2.9%. Same-store sales for the Family Dollar banner decreased 0.2%.
Gross profit increased 6.1% to $3.25 billion from $3.07 billion in the first six months of 2016. As a percent of sales, gross margin increased 40 basis points to 30.8% from 30.4% in the prior year period.
As a percent of sales, selling, general and administrative expenses increased to 23.2% from 22.7% in the same period last year. The increase is the result of the $53.5 million receivable impairment. Excluding the receivable impairment, selling, general and administrative expenses improved to 22.6% of sales.
Net income increased 7.8% to $434.3 million from $402.8 million in the first six months of 2016, and diluted earnings per share increased 7.6% to $1.83, compared to $1.70 in the prior year’s period. Excluding the $53.5 million receivable impairment, adjusted diluted earnings per share increased 15.9% to $1.97.
The Company estimates consolidated net sales for the third quarter of 2017 to range from $5.20 billion to $5.29 billion, based on a low single-digit increase in same-store sales for the combined enterprise. Diluted earnings per share are estimated to be in the range of $0.83 to $0.90.
Consolidated net sales for full-year fiscal 2017 are now expected to range from $22.07 billion to $22.28 billion compared to the Company’s previously expected range of $21.95 billion to $22.25 billion. This estimate is based on a low single-digit increase in same-store sales and 3.9% square footage growth. The Company now anticipates net income per diluted share for full-year fiscal 2017 will range between $4.44 and $4.60, compared to its previous guidance of $4.17 to $4.43. This estimate includes $53.5 million, or $0.14 per diluted share, of receivable impairment charges incurred in the first half of 2017. Fiscal 2017 includes a 53rd week. The extra week, in the fourth quarter, is expected to add $400 million to $430 million to sales and $0.19 to $0.22 to diluted earnings per share, both of which are included in the guidance.
Sasser added, “I am incredibly proud of our people. Our merchants, store operators, supply chain and support teams have truly embraced this opportunity to improve and grow our combined business. As always, our focus is on the customer and how we can best meet their evolving needs. We have a proven business model, an experienced leadership team, momentum in our business and a transformational opportunity. We are confident that we are well-positioned for the back half of 2017 and look to deliver value to our long-term shareholders in the years ahead.”
Conference Call Information
On Thursday, August 24, 2017, the Company will host a conference call to discuss its earnings results at 9:00 a.m. Eastern Time. The telephone number for the call is 877-604-9665. A recorded version of the call will be available until midnight Wednesday, August 30, 2017 and may be accessed by dialing 888-203-1112. The access code is 2174184. A webcast of the call is accessible through Dollar Tree’s website and will remain online through Wednesday, August 30, 2017.
Dollar Tree, a Fortune 200 Company, operated 14,581 stores across 48 states and five Canadian provinces as of July 29, 2017. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada. To learn more about the Company, visit www.DollarTree.com.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS:
Our press release contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, plan, forecast, or estimate. For example, our forward-looking statements include statements regarding third quarter 2017 and full-year 2017 net sales and same-store sales, third quarter 2017 and full-year 2017 diluted earnings per share, square footage growth, the benefits, results, and effects of the merger with Family Dollar, including integration plans and synergies, the collection of the receivable from Dollar Express and the related litigation, and future financial and operating results and shareholder value, the combined company’s plans, objectives, expectations (financial and otherwise) and intentions. These statements are subject to risks and uncertainties, including that we may be unable to successfully recover any amount from Dollar Express or others. For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in our Annual Report on Form 10-K filed March 28, 2017 and other filings with the Securities and Exchange Commission. We are not obligated to release publicly any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this report and you should not expect us to do so.
Vice President, Investor Relations
Source: Dollar Tree, Inc.