Dollar stores escape the retail blues

The nation’s top two extreme-value discounters aren’t feeling the retail malaise that affected department stores and many specialty retailers in the first quarter.



Rivals Dollar Tree and Dollar General Corp. on Thursday both reported better-than-expected first quarter profits amid increases in traffic, higher spending and lower costs. Summing up a sentiment widely voiced by industry experts and analysts, Dollar Tree CEO Bob Sasser said his company is “part of what I consider, in this economic environment, the most attractive sector in retail."



Dollar Tree

Dollar Tree posted first quarter net income of $232.7 million, up from $69.5 million in the year-ago period. (Dollar Tree completed its $9.1 billion purchase of Family Dollar last July.) Excluding a one-time tax benefit and acquisition-related costs, Dollar Tree earnings for the quarter totaled 89 cents a share, beating Wall Street estimates by 8 cents.



The company hiked its full-year earnings per share forecast to between $3.58 and $3.80, from $3.35 to $3.65.



Dollar Tree’s consolidated net sales in the quarter, ended April 30, increased 133.6% to $5.09 billion from $2.18 billion last year, helped by its Family Dollar acquisition. Sales fell short of Wall Street analysts.



Same-store sales rose 2.3%, driven by increases in both customer transactions and average ticket.



“I am very pleased with the company’s performance in the first quarter,” Sasser said. “Through what continues to be a challenging economic environment, we delivered sales (at) the mid-point of our guidance range, and earnings that exceeded the high end of our guidance range.”



The CEO said the chain has gotten off to a successful start to 2016.



“We remain on schedule with our integration of Family Dollar; we are on track to achieve our stated synergy targets; and we are part of what I consider, in this economic environment, the most attractive sector in retail,” he stated. “Looking ahead, we are committed to growing and improving our Dollar Tree and Family Dollar businesses to better serve more customers, while delivering long-term value to our shareholders."



During the quarter, Dollar Tree opened 171 stores, expanded or relocated 66 stores, and closed 19 stores.



Additionally, as part of its re-banner initiative, the company opened three former Family Dollar store locations as new Dollar Tree stores, converted 126 Deals stores to Dollar Tree stores and converted nine Deals stores to Family Dollar stores.



Dollar Tree operated 13,997 stores in North America as of April 30.



Dollar General

Dollar General Corp. reported net income of $295 million, or $1.03 a share, in the first quarter, up from $253 million, or 84 cents a share, last year.



Sales rose 7% to $5.27 billion from $4.92 billion, short of analysts’ estimates of $5.28 billion.



Same-store sales rose 2.2%.



"We remained keenly focused on ensuring the effectiveness and efficiency of every aspect of our business as we delivered both gross margin expansion and selling, general and administrative expense leverage," said CEO Todd Vasos. "This balanced performance contributed to operating profit improvement of 12% and diluted earnings per share growth of 23%. We are confident in our opportunities for growth and remain committed to creating sustainable long-term shareholder value."



As of April 29, Dollar General operated 12,719 stores in 43 states.