~ Consolidated Net Sales Increased
3.7% to $5.75 Billion ~ ~ Earnings per Diluted Share of $1.08 vs.
Guidance Range of $1.07 to $1.16 ~ ~ Enterprise Same-Store Sales
Increased 2.5% ~ ~ Same-Store Sales by Segment: Dollar Tree +2.8%,
Family Dollar +2.3% ~ ~ Planning for 1,000+ Fiscal 2020 Family
Dollar H2 Renovation Projects ~
Dollar Tree, Inc. (NASDAQ: DLTR), North America's leading
operator of discount variety stores, today reported financial
results for the quarter ended November 2, 2019.
“The third quarter represented another period of solid sales
performance for both brands, Dollar Tree and Family Dollar. Our
store optimization efforts and sales driving initiatives are
working. The teams have completed more than 1,150 Family Dollar H2
renovations, nearly 200 Dollar Tree re-banners, more than 1,000
Dollar Tree Snack Zones and launched our Dollar Tree Plus! test
already this year,” stated Gary Philbin, President and Chief
Executive Officer. “Fiscal 2019 has been a unique year as the
result of several factors: the material acceleration in our Family
Dollar store optimization initiatives, the consolidation of our two
store support centers into southeast Virginia, the global helium
shortage, and the continued uncertainty regarding trade and the
related tariffs. I am proud of our team’s efforts and the sales
execution through this environment.”
Third Quarter Results
Consolidated net sales increased 3.7% to $5.75 billion from
$5.54 billion in the prior year’s third quarter. Enterprise
same-store sales increased 2.5%. Same-store sales for the Dollar
Tree segment increased 2.8%. Same-store sales for the Family Dollar
segment increased 2.3%. The comparable store sales results at both
segments were driven by increases in both average ticket and
transaction count.
Gross profit increased by $32.6 million to $1.70 billion in the
quarter compared to the prior year’s third quarter. As a percentage
of net sales, gross margin was 29.7% compared to 30.2% in the prior
year. The decrease in gross profit margin was driven by higher
freight and distribution costs, higher sales of lower margin
consumable merchandise primarily in the Family Dollar segment, and
shrink.
Selling, general and administrative expenses were 23.5% of net
sales compared to 23.2% of net sales in the prior year's third
quarter. The increase was driven primarily by operating and
corporate expenses related to the consolidation of the Company’s
store support centers, costs related to asset disposals for closed
stores, and slightly higher depreciation expense, partially offset
by lower payroll and benefits expenses.
Operating income for the quarter was $358.4 million compared
with $387.8 million in the same period last year and operating
income margin was 6.2% of net sales in the third quarter compared
to 7.0% of net sales in last year’s quarter.
Net income was $255.8 million in the third quarter and diluted
earnings per share for the quarter were $1.08 compared to $1.18 in
the prior year’s quarter.
The Company repurchased 125,048 shares during the quarter for
$11.6 million. The Company has $800 million remaining on its share
repurchase authorization.
During the quarter, the Company opened 165 new stores, expanded
or relocated 15 stores, and closed 42 stores. Additionally, the
Company opened 39 Dollar Tree stores that were re-bannered from
Family Dollar and completed 247 renovations to the Family Dollar H2
format. Retail selling square footage at quarter end was
approximately 121.0 million square feet.
First Nine Months
Results
Consolidated net sales increased 4.1% to $17.30 billion from
$16.62 billion in the same period last year. Enterprise same-store
sales increased 2.4% on a constant currency basis (or 2.3% when
adjusted to include the impact of Canadian currency fluctuations).
Same-store sales for the Dollar Tree segment increased 2.6% (or
2.5% when adjusted to include the impact of Canadian currency
fluctuations). Same-store sales for Family Dollar increased
2.1%.
Gross profit for the first nine months increased $44.8 million
to $5.08 billion. As a percentage of net sales, gross margin was
29.4%, compared to 30.3% in the prior year period.
Selling, general and administrative expenses were 23.5% of net
sales compared to 23.0% of net sales for the first nine months of
2018.
Operating income for the period was $1.01 billion. As a
percentage of net sales, operating income margin decreased to 5.9%
in the current year period from 7.3% in the prior year.
Net income compared to the prior year's period decreased 1.7% to
$704.0 million and diluted earnings per share decreased 1.7% to
$2.95 compared to $3.00 in the prior year’s period.
Company Outlook
Just prior to the Company’s previous quarterly earnings
announcement on August 29, 2019, the United States Trade
Representative (USTR) announced that tariffs on List 1, 2, and 3
products would increase from 25% to 30% on October 1, 2019, tariffs
on List 4A products would increase from 10% to 15% on September 1,
2019, and tariffs on List 4B products would increase from 10% to
15% on December 15, 2019. As noted in its August 29, 2019 earnings
announcement, the outlook provided at that time did not include any
impact related to these changes.
The Company now estimates that Section 301 tariffs will increase
its cost of goods sold by approximately $19 million, or $0.06 per
diluted share, in the fourth quarter of 2019 if tariffs are fully
implemented.
The Company estimates consolidated net sales for the fourth
quarter of 2019 will range from $6.33 billion to $6.44 billion,
based on a low single-digit increase in same-store sales for the
enterprise. Diluted earnings per share for the quarter, including
tariff costs, are estimated to be in the range of $1.70 to
$1.80.
The decrease from prior implied fourth quarter guidance
represents the expected effects of: Section 301 tariffs; additional
pressure on merchandise margin based on lower-margin consumables
growing faster than originally forecasted; payroll cost pressure in
distribution centers; and increased run rates for repairs and
maintenance, utilities and depreciation.
Consolidated net sales for full-year fiscal 2019 are now
expected to range from $23.62 billion to $23.74 billion compared to
the Company’s previously expected range of $23.57 billion to $23.79
billion. This estimate is based on a low single-digit increase in
same-store sales and 1.1% selling square footage growth. The
Company now anticipates diluted earnings per share for full-year
fiscal 2019 will range between $4.66 and $4.76. This includes
discrete costs of approximately $85 million, or $0.28 per diluted
share, approximately $15 million, or $0.05 per diluted share, in
store closure related costs, and approximately $19 million, or
$0.06 per diluted share, from tariffs.
“The value and convenience offered by Dollar Tree and Family
Dollar continue to resonate with our shoppers, as demonstrated by
the Company’s sales performance in the first three quarters of
fiscal 2019,” Philbin added. “With several critical initiatives now
behind us, including the acceleration in store optimization
initiatives and the consolidation of our store support centers, we
are planning for more than 1,000 Family Dollar H2 renovations for
fiscal 2020 and are increasing our focus on operating margin
performance. Our teams are well prepared for the holiday season and
closing out an important year for our Company. We believe we have
built a strong foundation to enhance our ability to grow and
improve our business to deliver long-term value to our
shareholders.”
Conference Call
Information
On Tuesday, November 26, 2019, the Company will host a
conference call to discuss its earnings results at 9:00 a.m.
Eastern Time. The telephone number for the call is 866-575-6539. A
recorded version of the call will be available until midnight
Monday, December 2, 2019, and may be accessed by dialing
888-203-1112. The access code is 8107336. A webcast of the call is
accessible through Dollar Tree's website and will remain online
through Monday, December 2, 2019.
Dollar Tree, a Fortune 200 Company, operated 15,262 stores
across 48 states and five Canadian provinces as of November 2,
2019. Stores operate under the brands of Dollar Tree, Family
Dollar, and Dollar Tree Canada. To learn more about the Company,
visit www.DollarTree.com.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release
contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by the fact that they address future
events, developments or results and do not relate strictly to
historical facts. Any statements contained in this press release
that are not statements of historical fact may be deemed to be
forward-looking statements. Forward-looking statements include,
without limitation, statements preceded by, followed by or
including words such as “believe,” “anticipate,” “expect,”
“intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,”
“should,” “predict,” “possible,” “potential,” “continue,”
“strategy,” and similar expressions. For example, our
forward-looking statements include statements regarding fourth
quarter 2019 and full-year fiscal 2019 results of operations,
including consolidated net sales, same-store sales and diluted
earnings per share; our expected square footage growth in fiscal
2019; our expectations regarding operating and merchandise margin
performance; the continued uncertainty and impact relating to trade
and related tariffs and the global helium shortage; distribution
costs; the increased run rates for certain costs; our preparations
for the holiday season and fourth quarter 2019; expectations
concerning fiscal 2020 Family Dollar H2 renovations; and our other
plans, objectives, expectations (financial and otherwise) and
intentions. These statements are subject to risks and
uncertainties. For a discussion of the risks, uncertainties and
assumptions that could affect our future events, developments or
results, you should carefully review the "Risk Factors," "Business"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" sections in our Annual Report on Form
10-K filed March 27, 2019, and other filings with the Securities
and Exchange Commission. We are not obligated to release publicly
any revisions to any forward-looking statements contained in this
press release to reflect events or circumstances occurring after
the date of this report and you should not expect us to do so.
DOLLAR TREE, INC. Condensed Consolidated Income
Statements (In millions, except per share data)
(Unaudited)
13 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
November 2, 2019
November 3, 2018
Net sales
$
5,746.2
$
5,538.8
$
17,295.5
$
16,618.1
Cost of sales
4,041.7
3,866.9
12,215.3
11,582.7
Gross profit
1,704.5
1,671.9
5,080.2
5,035.4
29.7
%
30.2
%
29.4
%
30.3
%
Selling, general and administrative expenses
1,346.1
1,284.1
4,067.4
3,827.5
23.5
%
23.2
%
23.5
%
23.0
%
Operating income
358.4
387.8
1,012.8
1,207.9
6.2
%
7.0
%
5.9
%
7.3
%
Interest expense, net
41.4
47.6
122.9
323.7
Other expense (income), net
0.1
0.2
0.7
(0.9
)
Income before income taxes
316.9
340.0
889.2
885.1
5.5
%
6.1
%
5.1
%
5.3
%
Provision for income taxes
61.1
58.2
185.2
168.9
Income tax rate
19.3
%
17.1
%
20.8
%
19.1
%
Net income
$
255.8
$
281.8
$
704.0
$
716.2
4.5
%
5.1
%
4.1
%
4.3
%
Net earnings per share: Basic
$
1.08
$
1.18
$
2.97
$
3.01
Weighted average number of shares
236.7
237.9
237.4
237.8
Diluted
$
1.08
$
1.18
$
2.95
$
3.00
Weighted average number of shares
237.5
238.7
238.3
238.6
DOLLAR TREE, INC. Reconciliation of Non-GAAP
Financial Measures (In millions, except per share data)
(Unaudited) From time-to-time, the Company's
financial results include certain financial measures not derived in
accordance with generally accepted accounting principles ("GAAP").
Non-GAAP financial measures should not be used as a substitute for
GAAP financial measures, or considered in isolation, for the
purposes of analyzing operating performance, financial position or
cash flows. However, the Company believes providing additional
information in the form of non-GAAP measures that exclude the
unusual, non-recurring expenses outlined below is beneficial to the
users of its financial statements in evaluating the Company's
current operating results in relation to past periods. In addition,
the Company's debt covenants exclude the impact of certain unusual,
non-recurring expenses. The Company has included a reconciliation
of this information to the most comparable GAAP measures in the
following tables. On February 3, 2019, the Company adopted
Financial Accounting Standards Board Accounting Standards Update
No. 2016-2, "Leases (Topic 842)" and subsequent amendments ("ASC
842") which requires lessees to recognize right-of-use assets on
the balance sheet. The Company did not elect the hindsight
practical expedient; therefore, the adoption also resulted in the
recognition of an estimate of the embedded impairment of
right-of-use assets as a reduction to Retained earnings. In March
2019, the Company announced a store optimization program which
includes the closing of up to 390 under-performing stores in 2019.
Under ASC 842, the right-of-use assets must be amortized over the
remaining operating terms which resulted in the acceleration of
rent expense for the stores that the Company plans to close. The
accelerated rent expense net of the rent foregone as a result of
the embedded lease impairment was $6.7 million and this amount will
be excluded in calculating the Company's compliance with its debt
covenants, which requires reporting in accordance with GAAP as of
the date of the Credit Agreement. In the first quarter of
2018, the Company entered into a new Credit Agreement that provided
a $1.25 billion revolving credit facility and a $782.0 million term
loan facility. The Company also announced the registered offering
of $750.0 million aggregate principal amount of Senior Floating
Rate Notes due 2020, $1.0 billion of 3.7% Senior Notes due 2023,
$1.0 billion of 4.0% Senior Notes due 2025 and $1.25 billion of
4.2% Senior Notes due 2028. In connection with entry into the new
Credit Agreement, the Company terminated the existing Credit
Agreement and paid a redemption premium of $6.5 million for the
early payment of the Term Loan B-2 Loans. In connection with the
offering of the new Senior Notes, the Company redeemed the 5.75%
Senior Notes due 2023 and paid a redemption premium of $107.8
million. In connection with the termination of the old Credit
Agreement and the payment of Term Loan B-2 and the 5.75% Senior
Notes due 2023, the Company accelerated the expense of
approximately $41.2 million of amortizable non-cash deferred
financing costs and expensed approximately $0.4 million in
non-capitalizable transaction costs. Interest on the new debt was
approximately $7.9 million in the first quarter of 2018 and the
interest foregone on the redemption of Term Loan A-1 and Term Loan
B-2 was approximately $3.3 million.
Reconciliation of
Adjusted Net Income:
39 Weeks Ended
November 2, 2019
November 3, 2018
Net income (GAAP)
$
704.0
$
716.2
Cost of sales adjustment: Accelerated rent expense
6.7
-
Interest expense adjustment: Redemption premium on 2023 Senior
Notes
-
107.8
Redemption premium on Term Loan B-2
-
6.5
Deferred financing costs acceleration and non-capitalizable
transaction costs
-
41.6
Interest expense new Senior Notes
-
7.9
Interest expense foregone on redemption of Term Loan A-1 and Term
Loan B-2
-
(3.3
)
Provision for income taxes on adjustment
(1.5
)
(36.9
)
Adjusted Net income (Non-GAAP)
$
709.2
$
839.8
Reconciliation of Adjusted EPS:
39 Weeks Ended
November 2, 2019
November 3, 2018
Diluted earnings per share (GAAP)
$
2.95
$
3.00
Adjustment, net of tax
0.03
0.52
Adjusted EPS (Non-GAAP)
$
2.98
$
3.52
DOLLAR TREE, INC. Segment Information (In
millions, except store count) (Unaudited)
13 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
November 2, 2019
November 3, 2018
Net sales: Dollar Tree
$
3,074.3
$
2,853.8
$
8,991.4
$
8,407.0
Family Dollar
2,671.9
2,685.0
8,304.1
8,211.1
Total net sales
$
5,746.2
$
5,538.8
$
17,295.5
$
16,618.1
Gross profit: Dollar Tree
$
1,050.5
34.2
%
$
993.7
34.8
%
$
3,070.8
34.2
%
$
2,909.8
34.6
%
Family Dollar
654.0
24.5
%
678.2
25.3
%
2,009.4
24.2
%
2,125.6
25.9
%
Total gross profit
$
1,704.5
29.7
%
$
1,671.9
30.2
%
$
5,080.2
29.4
%
$
5,035.4
30.3
%
Operating income (loss): Dollar Tree
$
371.7
12.1
%
$
366.4
12.8
%
$
1,096.7
12.2
%
$
1,069.9
12.7
%
Family Dollar
53.8
2.0
%
83.7
3.1
%
159.5
1.9
%
341.2
4.2
%
Corporate and support
(67.1
)
(1.2
%)
(62.3
)
(1.1
%)
(243.4
)
(1.4
%)
(203.2
)
(1.2
%)
Total operating income
$
358.4
6.2
%
$
387.8
7.0
%
$
1,012.8
5.9
%
$
1,207.9
7.3
%
13 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
November 2, 2019
November 3, 2018
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Dollar
Tree
Family
Dollar
Total
Store Count: Beginning
7,306
7,809
15,115
6,812
8,261
15,073
7,001
8,236
15,237
6,650
8,185
14,835
New stores
114
51
165
87
40
127
286
120
406
237
166
403
Re-bannered stores (a)
39
(15
)
24
30
(25
)
5
190
(199
)
(9
)
47
(49
)
(2
)
Closings
(12
)
(30
)
(42
)
(6
)
(12
)
(18
)
(30
)
(342
)
(372
)
(11
)
(38
)
(49
)
Ending
7,447
7,815
15,262
6,923
8,264
15,187
7,447
7,815
15,262
6,923
8,264
15,187
Selling Square Footage (in millions)
64.1
56.9
121.0
59.6
59.9
119.5
64.1
56.9
121.0
59.6
59.9
119.5
Growth Rate (Square Footage)
7.6
%
(5.0
%)
1.3
%
4.7
%
1.7
%
3.2
%
7.6
%
(5.0
%)
1.3
%
4.7
%
1.7
%
3.2
%
(a) Stores are included as re-banners when they close or
open, respectively.
DOLLAR TREE, INC. Condensed
Consolidated Balance Sheets (In millions)
(Unaudited)
November 2,
February 2,
November 3,
2019
2019
2018
Cash and cash equivalents
$
433.7
$
422.1
$
708.3
Merchandise inventories
3,882.9
3,536.0
3,715.6
Other current assets
255.7
335.2
325.6
Total current assets
4,572.3
4,293.3
4,749.5
Property, plant and equipment, net
3,810.7
3,445.3
3,406.2
Restricted cash
46.6
24.6
-
Operating lease right-of-use assets
5,864.6
-
-
Goodwill
2,296.5
2,296.6
5,023.6
Favorable lease rights, net
-
288.7
314.6
Trade name intangible asset
3,100.0
3,100.0
3,100.0
Other assets
51.4
52.7
55.4
Total assets
$
19,742.1
$
13,501.2
$
16,649.3
Current portion of long-term debt
$
750.0
$
-
$
-
Current portion of operating lease liabilities
1,202.6
-
-
Accounts payable
1,473.1
1,416.4
1,365.1
Income taxes payable
-
60.0
0.7
Other current liabilities
754.0
619.3
769.9
Total current liabilities
4,179.7
2,095.7
2,135.7
Long-term debt, net, excluding current portion
3,520.2
4,265.3
5,043.8
Operating lease liabilities, long-term
4,636.0
-
-
Unfavorable lease rights, net
-
78.8
84.0
Deferred income taxes, net
1,001.5
973.2
999.2
Income taxes payable, long-term
29.7
35.4
33.0
Other liabilities
253.7
409.9
410.5
Total liabilities
13,620.8
7,858.3
8,706.2
Shareholders' equity
6,121.3
5,642.9
7,943.1
Total liabilities and shareholders' equity
$
19,742.1
$
13,501.2
$
16,649.3
The February 2, 2019 information
was derived from the audited consolidated financial statements as
of that date.
DOLLAR TREE, INC. Condensed Consolidated
Statements of Cash Flows (In millions)
(Unaudited)
39 Weeks Ended
November 2,
November 3,
2019
2018
Cash flows from operating activities: Net income
$
704.0
$
716.2
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
466.3
454.4
Provision for deferred income taxes
50.3
13.8
Amortization of debt discount and debt-issuance costs
4.9
53.7
Other non-cash adjustments to net income
76.7
63.3
Loss on debt extinguishment
-
114.7
Changes in operating assets and liabilities
(287.7
)
(365.2
)
Total adjustments
310.5
334.7
Net cash provided by operating activities
1,014.5
1,050.9
Cash flows from investing activities: Capital expenditures
(782.3
)
(622.7
)
Proceeds from governmental grant
16.5
-
Proceeds from (payments for) fixed asset disposition
(2.9
)
3.3
Net cash used in investing activities
(768.7
)
(619.4
)
Cash flows from financing activities: Proceeds from
long-term debt, net of discount
-
4,775.8
Principal payments for long-term debt
-
(5,432.7
)
Debt-issuance and debt extinguishment costs
-
(155.3
)
Proceeds from revolving credit facility
-
50.0
Repayments of revolving credit facility
-
(50.0
)
Proceeds from stock issued pursuant to stock-based compensation
plans
12.3
14.2
Cash paid for taxes on exercises/vesting of stock-based
compensation
(24.3
)
(22.6
)
Payments for repurchase of stock
(200.0
)
-
Net cash used in financing activities
(212.0
)
(820.6
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(0.2
)
(0.4
)
Net increase (decrease) in cash, cash equivalents and restricted
cash
33.6
(389.5
)
Cash, cash equivalents and restricted cash at beginning of period
446.7
1,097.8
Cash, cash equivalents and restricted cash at end of period
$
480.3
$
708.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191126005248/en/
Dollar Tree, Inc. Randy Guiler, 757-321-5284 Vice President,
Investor Relations www.DollarTree.com DLTR-E
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