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Dollar Tree, Inc. (NASDAQ: DLTR) has reported its financial results for the first quarter of fiscal 2024, which ended on May 4, 2024. The company achieved a consolidated net sales increase of 4.2% year-over-year, reaching $7.63 billion. However, the company’s diluted earnings per share (EPS) was $1.38, slightly below the adjusted diluted EPS of $1.43. The same-store net sales for Dollar Tree increased by 1.7%, while Family Dollar saw a marginal increase of 0.1%, leading to an enterprise-wide same-store net sales growth of 1.0%.
Rick Dreiling, Chairman and CEO of Dollar Tree, expressed satisfaction with the adjusted EPS results, which were toward the high end of the company’s outlook range. CFO Jeff Davis highlighted that the operating performance remained solid despite a soft Easter season, attributing the results to disciplined operations and careful expense management. The company opened 116 new Dollar Tree stores and 41 new Family Dollar stores while converting 926 Dollar Tree stores to a multi-price format.
The gross profit increased by 5.3% to $2.35 billion, with a gross margin expansion of 30 basis points to 30.8%. This expansion was primarily driven by reduced freight costs, partially offset by a higher mix of lower-margin consumables and increased shrink. Selling, general, and administrative expenses rose to 25.3% of total revenue, up from 24.8% the previous year, driven by temporary labor costs, higher depreciation, and severance costs related to store closures.
Dollar Tree Reports $1.43 Adjusted EPS, $7.63 Billion in Q1 Revenue
The first quarter results showed that Dollar Tree, Inc. fell slightly short of Wall Street’s expectations. Analysts had anticipated an EPS of $1.43 and revenue of $7.65 billion. The company’s reported EPS of $1.38 was below the expected figure, although the adjusted diluted EPS matched the expectations at $1.43. The company’s revenue of $7.63 billion was marginally lower than the anticipated $7.65 billion.
Despite these slight misses, the company demonstrated resilience in several key areas. The increase in gross profit and gross margin indicates effective cost management, especially in reducing freight costs. However, the higher selling, general, and administrative expenses reflect the challenges faced in operational adjustments, including the multi-price rollout and store closures. These factors contributed to the operating income margin decline from 5.7% to 5.5%, and the adjusted operating income margin from 6.1% to 5.7%.
The same-store sales growth, particularly the 1.7% increase in Dollar Tree stores, was a positive indicator, driven by a 2.8% increase in traffic. Conversely, Family Dollar’s same-store sales growth of 0.1% was less impressive, driven by a modest 0.9% increase in traffic. These mixed results underscore the need for ongoing strategic adjustments, particularly in the Family Dollar segment.
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Dollar Tree Reiterates Full Year Outlook, Expects $31B to $32B in Net Sales
Looking ahead, Dollar Tree, Inc. has reiterated its full-year fiscal 2024 consolidated net sales outlook range of $31.0 billion to $32.0 billion. The company expects comparable net sales growth in the low-to-mid-single digits for the enterprise, mid-single digits for the Dollar Tree segment, and low-single digits for the Family Dollar segment. Adjusted diluted EPS for the fiscal year is projected to range from $6.50 to $7.00.
The company’s guidance reflects incremental transportation and other expenses related to the loss of its Marietta distribution center, estimated to impact EPS by $0.20 to $0.30 for the full year. For the second quarter, Dollar Tree anticipates consolidated net sales between $7.3 billion and $7.6 billion, with adjusted diluted EPS ranging from $1.00 to $1.10. This outlook includes an estimated $0.10 impact from the Marietta distribution center loss.
Dollar Tree’s strategic initiatives, including the rapid rollout of multi-price stores and the optimization of its store portfolio, remain on track. The company plans to close additional stores as part of its portfolio optimization, having already closed approximately 550 stores in the first quarter. These closures are expected to enhance long-term operational efficiency and profitability.
Dollar Tree Announces Formal Review of Strategic Alternatives for Family Dollar Business Segment
Dollar Tree announced a formal review of strategic alternatives for its Family Dollar business segment in a significant strategic move. This review could result in a potential sale, spin-off, or other disposition of the business. The company has not set a definitive timetable for the completion of this review, and there is no assurance that it will result in any specific transaction or outcome.
Additionally, the company faced a significant challenge when a tornado destroyed its distribution center in Marietta, Oklahoma, on April 28, 2024. The facility and its inventory were deemed unsalvageable, resulting in losses totaling $117.0 million. However, Dollar Tree expects these losses to be fully offset by insurance recoveries, though the exact amount and timing of these recoveries remain uncertain.
Dollar Tree’s proactive approach to addressing these challenges, including the strategic review of Family Dollar and the rapid response to the tornado damage, reflects its commitment to maintaining operational resilience and pursuing long-term growth opportunities.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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