Dollar Tree reported Q4 sales that missed Street estimates and said it is ramping up its store growth and remodeling, with a push for a new format that combines both its banners.
The discounter plans to open 600 stores and renovate 1,250 Family Dollar locations this year, with the openings consisting of 400 Dollar Tree stores and 200 Family Dollar stores. The new Family Dollar stores will be comprised of combination stores and “H2” stores. (The H2 stores feature improved merchandise offerings, including a Dollar Tree $1 section, and more freezer and cooler doors.)
First piloted in 2019, the combination store format combines the Dollar Tree and Family Dollar brands under one roof. It is designed to serve small towns and rural communities with populations of 3,000 to 4,000 — markets where the company would traditionally not open a Dollar Tree store alone. To watch a short video on the combination stores format click here.
Compared to other Family Dollar stores in small markets, the combination stores are delivering a same-store sales lift of greater than 20% on average, the company noted. The stores also deliver higher gross margins and are better leveraging store expenses.
“We are extremely pleased with our customers’ response to the new combination store concept,” stated Michael Witynski, president and CEO, Family Dollar. “As I have said in the past, we will continue to refine our strategic store formats so that we are able to better serve customers, while improving store productivity, margins and returns. We want formats that leverage the best of the Dollar Tree and Family Dollar brands to serve customers in all types of geographic markets. We believe we can continue to change, evolve and improve.”
Dollar Tree said that the combination store concept and H2 format will be part its new store and renovation strategy moving forward.
Dollar Tree’s net income totaled $502.8 million, or $2.13 per share, for the quarter ended Jan. 30, up from $123.0 million, or $0.52 per share, in the year-ago period. Analysts had expected earnings per share of $2.12.
Net sales increased 7.2% to $6.77 billion, missing estimates of $6.804 billion. Same-store sales rose 5%. Total same-store sales increased 4.9%. Same-store sales rose 8.1% at Family Dollar and 2.4% at Dollar Tree.
“I am very pleased with the team’s operating performance for the fourth quarter, highlighted by a solid same-store sales increase, improved gross margin and expense leverage,” stated Witynski. “As we look ahead, we believe our proven strategic store formats, accelerated store growth plan, 1,250 planned store renovations for the year, several key sales- and traffic-driving initiatives, and a robust balance sheet will enable us to deliver long-term value for each of our stakeholders – customers, associates, suppliers, and shareholders.”
For the full year, Dollar Tree’s net sales increased 8.0% to $25.51 billion. Enterprise same-store sales increased 6.1%. Same-store sales for Family Dollar increased 10.5%. Dollar Tree same-store sales increased 2.2%.
Dollar Tree operated 15,685 stores across 48 states and five Canadian provinces as of January 30, 2021. Stores operate under the brands of Dollar Tree, Family Dollar and Dollar Tree Canada.