Dollar Tree nearly matched a first analyst consensus estimate in the first quarter, with earnings slightly above. While announcing its financial results, the company stated it was conducting a strategic review of its Family Dollar operation.
Net income was $300.1 million, or $1.38 per diluted share, versus $299 million, or $1.35 per diluted share, in the year-before quarter. Adjusted net income was $311.5 million, or $1.43 per diluted share, versus $325.1 million, or $1.47 per diluted share versus the year-previous period.
Analysts polled by Yahoo Finance, on average, expected earnings per adjusted diluted share to come in at $1.42 and revenues to come in at $7.63 billion.
Comparable sales were up 1%, the company reported, with the Dollar Tree banner gaining 1.7% and the Family Dollar banner increasing 0.1%. A traffic increase of 2.8% drove Dollar Tree comps, partially offsetting a 1.1% decline in average ticket. A traffic increase of 0.9% drove Family Dollar comps, partially offset by a 0.8% decline in average ticket.
Net revenue was $7.63 billion versus $7.32 billion in the year-earlier quarter. Operating income was $420.6 million versus $419.7 million in the year-prior quarter, while adjusted operating income was $435.6 million versus $449.7 million, Dollar Tree reported.
Among the quarter’s highlights, as identified by the company, Dollar Tree opened 116 namesake and 41 new Family Dollar stores. It also converted 926 Dollar Tree locations to its in-line multi-priced store format.
In its first quarter conference call presentation, Dollar Tree pointed out that its namesake stores’ consumable mix increased to 50.2% of sales from 44.6% of sales while discretionary product sales slipped to 49.8% of sales from 55.4% in the period. Family Dollar consumables sales increased to 80.8% from 79.5%, while discretionary product sales fell to 19.2% of revenues from 20.5% as compared to the year-past quarter.
“We are pleased to deliver first-quarter adjusted EPS results that are towards the high end of our outlook range,” said Rick Dreiling, Dollar Tree chairman and CEO in announcing the financial results. “At Dollar Tree, we remain focused on rapidly rolling out our next generation of multi-price stores, and at Family Dollar, we are taking the steps necessary to position the business for long-term success.”
Dollar Tree CFO Jeff Davis added, “Our operating performance was solid despite a soft Easter season for Dollar Tree. The results reflect our operating discipline and careful expense management throughout the quarter.”
As to the internal review, Dreiling noted that Dollar Tree had announced last year that it was conducting a comprehensive Family Dollar review and planned to close about 970 of its underperforming stores to focus on enhanced investments in remaining locations that presented favorable opportunities for long-term growth, unit improvements and more attractive returns on capital.
Circumstances have warranted another look at Family Dollar, according to Dreiling.
“We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner,” Dreling said. “At the same time, we continue to aggressively grow the Dollar Tree banner through compelling initiatives like our expanded multi-price offerings, significant planned new store openings across the United States and accretive transactions like our recent successful bid to acquire up to 170 stores from 99 Cents Only. The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – led us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business. Our goal is to position both the Dollar Tree and Family Dollar banners to progress further and faster and to determine whether the exclusive attention of a dedicated team will benefit both while creating value for Dollar Tree shareholders and other stakeholders.”
