Dollar Tree Offers Mixed Third Quarter Results, Lowers Top End of Full-Year Guidance Ranges

Dollar Tree (DLTR) reported mixed results for the third quarter, with sales shy of estimates and earnings ahead of views while the outlook for the full year was lowered on the top end of its estimate ranges.

Net income rose to $1.18 per share from $1.01 a year earlier, topping the consensus on Capital IQ for $1.14 a share. Consolidated net sales rose 4.2% to $5.54 billion, but that was just below the consensus for $5.55 billion. Same-store sales rose 1%, and were up 2.3% for Dollar Tree on a constant currency basis. But comparable sales for the Family Dollar brand were down by 0.4%.

“We delivered earnings within the range of our expectations despite continued cost pressures related to domestic freight and our investment in store wages,” said Gary Philbin, the company’s chief executive officer.

The Chesapeake, Virginia-based company’s shares were up almost 4% in Thursday morning trading.

The gross margin, a measure of profitability, decreased to 30.2% from 31.3% a year ago, driven by “higher domestic freight, shrink, markdowns, distribution, and occupancy costs, partially offset by lower merchandise costs,” Dollar Tree said.

Selling, general and administration expenses dipped to 23.2% of sales from 23.3% in the same period of 2017, after lower operating, corporate and depreciation costs, though that was still offset by higher hourly payroll expenses.

During the quarter, 30 Dollar Tree stores that were rebranded from Family Dollar were opened, and Philbin said the company is “pleased with the performance” of the locations.

“While there is more to be done, the company believes that Family Dollar will demonstrate its potential as the store optimization program and integration initiatives are implemented and gain traction throughout 2019,” Dollar Tree said. It’s projecting renovations on at least 1,000 Family Dollar stores next year.

For the fourth quarter, the company sees sales between $6.1 billion and $6.21 billion with a low single-digit increase in same-store sales. Per-share earnings are projected in a range of $1.86 to $1.95. For the year, Dollar Tree sees sales between $22.72 billion to $22.83 billion, slightly lower than the previously expected range of $22.75 billion to $22.97 billion. The retailer sees income of $4.86 and $4.95 per share, compared with $4.85 to $5.05 projected previously.

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