Dollar Tree Q1 sales rise, fueled by Family Dollar; to open 500 stores

Dollar Tree on Thursday posted better than expected first-quarter earnings and sales as consumers stocked up on essentials. It also said it is seeing strong momentum in its business in the early fiscal second quarter.

The parent company of Dollar Tree and Family Dollar said it now expects to open 500 new stores in fiscal 2020 (325 Dollar Tree stores and 175 Family Dollar stores), compared to its original plan of 550 new stores (350 Dollar Tree stores and 200 Family Dollar stores). The timing for completion of new store openings is likely to be deferred. It also expects to complete 750 Family Dollar renovations in fiscal 2020 compared with its initial guidance of 1,250 renovations.

The discount retailer reported that its net income totaled $247.6 million, with adjusted earnings per share of $1.04, for the quarter ended May 2, down from $267.9, $1.12 per share, in the year-ago period. Analysts had expected earnings per share of $0.85. Dollar Tree had $73.2 million in operating costs for the COVID-19 pandemic amid expenses for supplies, wage premiums and other items.

Consolidated net sales increased 8.2% to $6.29 billion. Analysts had expected sales of $6.14 billion. 

Total same-store sales increased 7.0%. Same-store sales for Family Dollar increased 15.5%. Dollar Tree same-store sales decreased 0.9%. The most negatively impacted categories - party, candy, and Easter - affected Dollar Tree’s overall comp for the quarter by approximately 490 basis points, said Mike Witynski, enterprise president. 

“Following a volatile sales environment in the first quarter, I am extremely pleased with the momentum we are seeing in our business early in the second quarter,” stated CEO Gary Philbin. “At Family Dollar, we are seeing continued sales strength with improvements in our discretionary categories. For Dollar Tree, we have seen a rebound on the discretionary side of the business following the Easter holiday, especially in crafts, graduation, stationery, Mother’s Day seasonal and balloons.”

The company ended the quarter with $1.76 billion in cash on its balance sheet, including $750 million drawn on its revolving line of credit.

As of May 2, Dollar Tree operated 15,370 stores across 48 states and five Canadian provinces under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.