Dollar Tree Achieves Strongest Quarterly Same Store Sales Since 2017
Dollar Tree reported strong results for its first fiscal quarter, which ended May 21. The discount retailer revealed that consolidated net sales rose 3.0% to $ 6.48 billion, from $ 6.29 billion in the first quarter of the previous year.
Dollar Tree’s comparable store sales increased 4.7%. Comparable store sales of its Family Dollar division were down 2.8%, compared to a strong increase of 15.5% in the first quarter of the previous year. The banner’s first-quarter same-store sales increase on a two-year cumulative basis was 12.7% as the Family Dollar brand continued to gain market share.
Gross margin increased 9.4% to $ 1.96 billion in the quarter from the first quarter of a year earlier. As a percentage of net sales, the gross margin was 30.3%, compared to 28.5% in the same period a year ago. The 180 basis point improvement was attributable to a favorable sales mix, improved withdrawal results and reduced markdowns, partially offset by higher freight costs.
Operating profit for the quarter improved 42.1% to $ 519.9 million, compared to $ 365.9 million in the same period last year, and the margin of the operating profit was 8.0%, compared to 5.8% in the prior year quarter. The first quarter of 2021 included total additional operating costs of $ 7.4 million for expenses related to COVID-19, compared to $ 73.2 million in the first quarter of 2020.
First quarter net income increased 51.3% to $ 374.5 million, and diluted earnings per share increased 53.8% to $ 1.60, compared to $ 1.04 in the quarter of the previous fiscal year.
“Our record performance in the first quarter reflects the progress we continue to make on many initiatives aimed at providing even more value and convenience to our buyers. Dollar Tree achieved its strongest quarterly same-store sales since 2017, while improving its operating margin by 290 basis points. Family Dollar effectively recorded a 15.5% increase in sales over the previous year, generating its best quarterly operating profit after the merger, ”said Michael Witynski, President and CEO. “Together, our business achieved positive comparable sales over a difficult comparison, and a 220 basis point improvement in operating margin, driven by improved gross margins and better spend leverage.”
The company attributes its success in the first quarter to its many business initiatives that contribute to long-term profitable growth.
“Over the past 18 months, we have moved to an aggressive approach under the direction of an aligned management team, devoting our major efforts to customer-facing initiatives with clarity, focus and speed,” said Witynski. Examples include the development of omnichannel and e-commerce offers, using FamilyDollar.com as a sales site, partnering with Instacart for same day delivery, and testing fresh produce and frozen meats.
Among its other initiatives, the launch of its media network, called Chesapeake Media Group, to enable brands to engage with their customers in a personalized and ultra-targeted digital experience.
The company is also focusing Dollar Tree Plus! multi-price assortment, which it integrated into an additional 128 Dollar Tree stores in 2021, bringing the total to more than 240 stores. The company has expanded Dollar Tree Plus! in select Colorado stores, as well as in Southeastern states such as Georgia, Alabama, Louisiana and the Carolinas. Dollar Tree is committed to developing this key program during fiscal 2022.
Then there are the Dollar Tree pandemic store formats.. The company plans to open hundreds of new “combo stores” as part of its drive to continue to be a one-stop-shop for consumers looking to purchase essentials in the event of a pandemic. The new concept, a store with both Dollar Tree and Family Dollar banners, offers a “transformative opportunity to serve more customers in all types of markets,” according to the company.
For fiscal 2021, Dollar Tree reiterates its intention to open 600 new stores and renovate 1,250 Family Dollar stores. The new locations are expected to include 400 Dollar Tree stores and 200 Family Dollar stores. Family Dollar stores will include H2 and Combo Store formats, depending on market locations.
“Looking ahead, I am very excited about the growth of Dollar Tree Plus! and our strategic store formats, to which shoppers are responding positively, as evidenced by market share gains and improved customer satisfaction scores. These offerings, along with other key sales and traffic promotion initiatives and a strong balance sheet, give us confidence that we have increased the long-term profit potential for both banners, ”added Witynski.
Based in Chesapeake, Virginia Dollar tree, which operates 15,685 stores in 48 states and five Canadian provinces, is ranked 30th on PG 2021, Progressive Grocer’s 2021 list leading food and consumable retailers in North America.