Dollar Tree profit jumps 43.2%; details new investments

Dollar Tree got off to a strong start in its first quarter, with record quarterly earnings and solid sales.

The discounter, which is on track to open 590 stores this year, opened 112 new stores, expanded or relocated 33 stores, and closed 30 stores during the quarter. It also expanded its multi-price Plus offering into an additional 790 Dollar Tree locations and completed 118 Family Dollar store renovations.

During the quarter, Dollar Tree also completed its conversion to the $1.25 price point, contributing to both sales and margin improvements, the company said.

“Shoppers are responding favorably as the new, greater value products hit our shelves,” stated Michael Witynski, president and CEO. “Importantly, other key strategic initiatives, including the expansion of the $3 and $5 Plus assortment in Dollar Tree stores, as well as our Combo Stores and H2 Renovations at Family Dollar are working.”

Dollar Tree’s net income increased 43.2% to $536.4 million, with a first-quarter company record of $2.37 per share, for the quarter ended April 30, from $374.5 million, or $1.60 a share, in the year-ago period.  Analysts had expected earnings of $2 a share.

Net sales rose 6.5% to $6.9 billion, topping estimates of $6.76 billion. Enterprise same-store sales increased 4.4%. Comparable store sales for Dollar Tree increased 11.2% and decreased 2.8% at Family Dollar as it cycled the significant stimulus dollars released in the prior year’s quarter.

For portions of the quarter, approximately 400 Family Dollar stores were temporarily closed due to a product-related recall, which negatively impacted Family Dollar’s quarterly comparable-store sales by an estimated 200 basis points.

“The team delivered a solid start to the year – with a 6.5% top-line sales expansion, a 19.2% lift to gross profit, and a 48.1% increase to earnings per share,” stated Witynski. “Our initiatives are working and providing increased profits and cash flow. We believe now is the ideal time to accelerate investments focused on driving growth through improved associate and shopper experience, while propelling greater efficiencies.”

Looking ahead, Witynski said he anticipates the company’s multi-year investments will be focused around its associates, distribution network and supply chain, pricing and value proposition and technology.

The company’s strategic investments are expected to include:

• Investing in Associates: The company’s investment in its store and distribution center associates and field leadership will be focused on competitive wages, improved store and DC operating standards and enhanced safety.  

• Investing in Distribution Center Network and Supply Chain: The company is committed to improving the capabilities and efficiency of its supply chain to enhance store productivity through better in-stock positions. The focus will be on delivering improved safety, conditions and operational standards across its network through use of data, analytics, process improvements and automation.

• Investing in Product through Pricing and Value Proposition: The company will invest to ensure it exceeds customer expectations for value, with its product offering being clearly and competitively priced every day.

“These investments should position Family Dollar for improved performance and long-term success,” the company said.

• Investing in Technology: The company has begun a detailed review of its vision for systems infrastructure plans for 2023 and beyond. Among the information technology systems under review are merchandising, supply chain, data analytics and store systems.

Dollar Tree expects second-quarter sales of $6.65 billion to $6.78 billion and earnings of $1.45 a share to $1.55 a share, including costs of 24 cents a share for items. Analysts expect sales of $6.76 billion and earnings of $1.71 a share.  Dollar Tree now expects 2022 earnings of $7.80 to $8.20 a share, compared to analysts’ estimate of $7.93 a share.

Dollar Tree operated 16,162 stores across 48 states and five Canadian provinces as of April 30, 2022. Stores operate under the banners of Dollar Tree, Family Dollar, and Dollar Tree Canada.