Dollar Tree: Fiscal 1Q Earnings Snapshot

Fredrick Soto
June 3, 2019

Dollar Tree's acquisition of Family Dollar locations hasn't had the desired impact, resulting in disappointing sales.

Dollar Tree's Q1 earnings per share were $1.14, equalling the predictions of financial experts. He noted, though, that the company's "Dollar Tree Plus!", which is testing new price points, could give the retailer flexibility. This consisted of same-store sales growth in the Dollar Tree segment of 2.5% and 1.9% in the Family Dollar segment.

They anticipate closing as many as 390 stores.

The two operate as a combined company, but have under-performed since joining forces in 2015. However, it said in its earnings release that while it may be experimenting with multi-price points, it "is not raising retail on its current assortment of items priced at $1".

Further, Dollar Tree revealed plans to add adult beverages in about 1,000 Family Dollar stores and expand freezers and coolers in approximately 400 of the banner's stores in fiscal 2019. The Dollar Tree segment offers merchandise at the fixed price of $1.00. The company opened 240 new stores in the first quarter and is on track to open 975 new stores in fiscal 2019.

The discount retailer posted revenue of $5.81 billion in the period, topping Street forecasts.

The company expects full-year earnings to be $4.77 to $5.07 per share, with revenue ranging from $23.51 billion to $23.83 billion. Diluted EPS are slated to fall between $0.64 and $0.73, which will represent a significant decline against the $1.15 EPS booked in the second quarter of fiscal 2018. Thus, Dollar Tree will sacrifice some profit next quarter as an investment in a more profitable future.

Several retailers including Walmart Inc, Best Buy, Macy's and Ralph Lauren have also said that rising tariffs could impact their results this year.

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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