At a time when it is shaking up its basic proposition to consumers, Dollar Tree reported in announcing its third-quarter results that it is making progress on key initiatives, including the addition of $1.25 pricepoints in all core Dollar Tree-bannered stores as it deals with supply-chain issues.
Net income was $216.8 million, or 96 cents per diluted share in the third quarter versus $330 million or $1.39 per share in the prior-year quarter.
Dollar Tree matched a Yahoo Finance-published analyst consensus diluted per share estimate for the quarter and edged out a revenue estimate of $6.41 billion.
Company comparable sales gained 1.6% with comps at Dollar Tree stores up 0.6%, or 0.8% when adjusted to reflect Canadian currency fluctuations, and comps at Family Dollar stores ahead 2.7%.
Net sales and revenues were $6.42 billion versus $6.18 billion in the year-previous quarter. Operating income was $310.5 million versus $465.5 million in the year-before quarter.
Dollar Tree has tested and now is launching a $1.25 pricepoint in all its Dollar Tree stores.
In a conference call, Michael Witynski, Dollar Tree president and CEO said that while freight costs had hit results, performance of the business still pushed the company’s earnings per share to the upper end of earlier guidance.
“Freight and supply chain disruptions, of course, continue to be our greatest challenge in the near term by far, and the impact will continue for a while, but this challenge is transitory,” Witynski said. “As we detailed last quarter, our team continues to take robust action to mitigate the impact of freight costs and supply chain disruptions. We believe that based on the steps we have taken, we will benefit meaningfully when these challenges abate. The Dollar Tree segment delivered a comp sales increase of 60 basis points against its toughest quarterly compare in nearly three years. On a two-year, comp-stack basis, this was a sequential improvement of 170 basis points from the prior quarter.”
Dollar Tree discretionary product comps gained 3.2% while consumables sagged due to assortment constraints among other factors, Witynski said. At Family Dollar, consumables enjoyed a better performance. The $3 and $5 price point merchandise available in the Dollar Tree Plus format assortments did well with customers, he said, with Halloween and fall decor particularly strong. Dollar Tree will continue to roll out Plus assortments to its stores throughout the year.
An increase in average ticket droves comps at both banners.
The test launch of the $1.25 pricepoint at Dollar Tree stores has generated enough positive customer feedback to prompt a general rollout, Witynski said. He added it will allow Dollar Tree to expand merchandise assortment and return certain items that had been discontinued because of cost increases.
Witynski said, “We experienced a strong finish to the quarter, as shoppers are increasingly focused on value in this inflationary environment. Our Dollar Tree pricing tests have demonstrated broad consumer acceptance of the new pricepoint and excitement about the additional offerings and extreme value we will be able to provide. Accordingly, we have begun rolling out the $1.25 pricepoint at all Dollar Tree stores nationwide. The continuing expansion of our key strategic initiatives, including Dollar Tree Plus, Combo Stores and the H2 format, are all going well and on, or ahead of, plan.”
