Is the Good Economy Pulling People Out of Dollar Stores?

Dollar Tree Inc. (NASDAQ: DLTR) released its fiscal second-quarter financial results before the markets opened on Thursday. The company said that it had $1.15 in earnings per share (EPS) and $5.53 billion in revenue, which compares with consensus estimates of $1.16 in EPS on revenue of $5.53 billion. In the same period of last year, the company said it had EPS of $0.99 and $5.28 billion in revenue.

During the latest quarter, Enterprise same-store sales increased 1.8% on a constant currency basis (or 1.9% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for the Dollar Tree banner increased 3.7% on a constant currency basis (or 3.8% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for the Family Dollar banner were flat.

In terms of its segments, the company reported as follows:

• Dollar Tree net sales increased 7.0% year over year to $2.77 billion.
• Family Dollar net sales increased 2.3% to $2.76 billion.

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Looking ahead to the fiscal third quarter, the company expects to see EPS in the range of $1.11 to $1.18 and revenue between $5.53 billion and $5.64 billion. Consensus estimates call for $1.16 in EPS and $5.57 billion in revenue for the quarter.

Gary Philbin, president and CEO, commented:

I am proud of our team’s accomplishments in the second quarter. In addition to posting earnings near the top end of our guidance range, our Dollar Tree banner delivered increases in both traffic and ticket, and our Family Dollar banner’s same-store sales were flat compared to last year’s 1% increase. Importantly, Family Dollar’s consumables business was positive for the seventh consecutive quarter. Dollar Tree’s 3.7% comp was on top of last year’s 3.9% increase; and represented the fifth consecutive quarter of same-store sales growth exceeding 3.5%. We also celebrated the grand opening of our 15,000th store, and the opening of our 23rd U.S. distribution center. Both of these milestones call out the continued opportunities for growth across North America for our Dollar Tree and Family Dollar banners.

Shares of Dollar Tree were last seen down 12% at $83.11, with a consensus analyst price target of $105.35 and a 52-week trading range of $78.32 to $116.65.

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