Dollar Tree withdraws outlook as same-store sales start to moderate
Dollar Tree withdrew its fiscal first-quarter and full-year outlook as it heads into peak Easter selling season amid moderating same-store sales.
The discounter, which said it is reassessing its full-year fiscal 2020 plans and initiatives given “the current state of uncertainty, has suspended all Family Dollar renovations and Dollar Tree snack zone installations at least through April 27, 2020.
The discounter said same-store sales surged through March 29, rising 7.1% at Dollar Tree and 14.4% at Family Dollar. But the company advised that sales “materially moderated” as it enters the peak of the Easter shopping season, with Dollar Tree’s same-store sales down 19.4% in the seven days ending March 29, and Family Dollar same-store sales up 8.8%. Sales of household consumables and food remain strong in both banners.
“Sales for the remainder of the first quarter could be impacted by uncertainties related to the company’s ability to secure and re-stock certain products in high demand; consumer shopping patterns, especially in states and communities with shelter-in-place mandates; weaker-than-expected sales and related markdowns for certain discretionary products, and COVID-19 related impact to the Easter holiday selling season,” the company stated.
Dollar Tree said it expects to see merchandise mix pressure to gross margin rates in both business segments in the quarter. Additionally, certain first-quarter costs are expected to be higher than previously anticipated, including investments in pay and benefits, the distribution and transportation related to the material demand volume increase in consumables, and the additional hours dedicated to enhanced cleaning protocol in stores, distribution centers, and its store support center.
The retailer emphasized that it has a strong balance sheet with significant liquidity and a resilient business model. It has a $1.25 billion revolving line of credit. As of March 30, Dollar Tree had approximately $1.9 billion of cash and investments, including $750 million drawn on its revolver.
“Over time, Dollar Tree has demonstrated its ability to perform well through ever-changing economies,” said CEO Gary Philbin. “The focus on value and convenience may be greater in the months ahead than ever before. Our strong balance sheet and financial flexibility, the experience and alignment of our leadership teams and the commitment from more than 190,000 associates across North America prepares us to be part of the solution for millions of customers through these challenging times.”