Dollar Tree’s Q2 sales beat Street; ups Family Dollar store renovations

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Dollar Tree’s Q2 sales beat Street; ups Family Dollar store renovations

By Marianne Wilson - 08/29/2019
Dollar Tree Inc. reported revenue and comp-sales that beat analysts’ estimates as the turnaround of its Family Dollar business continued to gain momentum.

The discounter reported net income of $190.3 million, or $0.76 a share, in the quarter ended August 3, down from $273.9 million, or $1.15 a share, in the year-ago period. Analysts had estimated earnings per share of $0.81.

Sales rose 3.9% to $5.74 billion, beating Street estimates of $5.72 billion. Consolidated same-store sales increased 2.4%, more than expected. Dollar Tree and Family Dollar both reported comp increases of 2.4%.

“Family Dollar’s same-store sales increase of 2.4% was the third consecutive quarter of sequential acceleration and represented a 160 basis point improvement in the two-year stacked comp,” stated Gary Philbin, president and CEO. “And, despite sales headwinds created by the global helium shortage, the Dollar Tree segment delivered a same-store sales increase of 2.4%, while cycling a strong 3.7% increase from the prior year’s quarter.”

During the quarter, the company opened 150 new stores; expanded or relocated 19 stores; opened 106 Dollar Tree stores that were re-bannered from Family Dollar; and, as planned closed 296 Family Dollar stores as part of its store optimization efforts. Additionally, it completed 542 Family Dollar renovations into its updated format (“H2”), which includes a $1.00 Dollar Tree merchandise section.

The retailer said it is increasing its planned Family Dollar renovations to its H2 format (“H2) for fiscal 2019 by 150 stores, most of which will occur in the third quarter. It now expects a total of 1,150 Family Dollar H2 renovations to occur in fiscal 2019.

“I am very pleased with the traction and momentum we are seeing in the Family Dollar business,” Philbin said. “The team’s efforts to improve the consistency of execution across the store base and our acceleration of initiatives to optimize the real estate portfolio are paying off.”

Dollar Tree changed its full-year sales outlook to $23.57 billion to $23.79 billion. It previously expected a wider revenue range of $23.51 billion to $23.83 billion. Earnings per share are predicted to range from $4.90 and $5.11, up from a range of $4.77 to $5.07.

The retailer said its updated outlook does not include the recently announced U.S. tariff increases on China-made goods "as the company is currently working to mitigate these costs."