Dollar Tree Earnings, Guidance Fall Just Short

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Dollar Tree Inc. (NASDAQ: DLTR) reported fourth-quarter and full-year fiscal 2014 results before markets opened Wednesday. The discount retailer posted diluted earnings per share (EPS) of $1.02 on revenues of $2.23 billion. In the same period a year ago, the retailer reported EPS of $1.01 on revenues of $2.25 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.05 and $2.28 billion in revenue.

Same-store sales rose 1.2% in the quarter, lower than the 1.6% growth estimated by research firm Retail Metrics.

For the full year, Dollar Tree reported EPS of $2.72 on revenues of $7.84 billion compared with EPS of $2.68 on revenues of $7.39 billion. The consensus estimates called for EPS of $2.76 on revenues of $7.89 billion. Same-store sales rose 2.4% over 2012, on top of a 3.4% increase in 2012 over 2011.

Dollar Tree estimated first-quarter sales in the range of $1.98 to $2.04 billion and EPS in the range of $0.63 to $0.68. Consensus estimates call for EPS of $0.69 on revenues of $2.03 billion. For the full year, the company estimates revenues at $8.35 to $8.58 billion and EPS of $2.91 to $3.13. The consensus estimates call for EPS of $3.25 on revenues of $8.6 billion.

The company’s CEO said:

Dollar Tree delivered record earnings and our comparable-store sales grew, despite severe weather, a shorter Holiday selling period and a challenging economic environment.

Last week we commented on a report from an analyst explaining why Wal-Mart Stores Inc. (NYSE: WMT) should acquire Dollar Tree. While there may be good arguments for such a move, we don’t think it is going to happen.

Dollar Tree’s outlook has the same downtrodden look as its fourth-quarter and full-year results. Close to expectations, but not quite there. If same-store sales are improving, then why are revenues down? Operating margins were lower in the first quarter, down from 16.2% in the year-ago quarter to 15.6%. That is not a good sign going forward either.

Shares are down about 2.7% in premarket trading, at $51.25 in a 52-week range of $43.50 to $60.19. Thomson Reuters had a consensus analyst price target of around $60.80 before the results were announced.