~ Diluted Earnings per Share Increased 28.7%
to $1.39 vs. $1.08 ~
~ Consolidated Net Sales Increased 7.5% to
$6.18 Billion ~
~ Same-Store Sales: Enterprise +5.1%; Family
Dollar +6.4%; Dollar Tree +4.0% ~
~ Dollar Tree Segment Operating Margin
Improved 50 bps to 12.7% ~
~ Expanding Dollar Tree Plus! Offering to
Approximately 500 Stores Beginning Spring 2021 ~
Dollar Tree, Inc. (NASDAQ: DLTR) today reported financial
results for its third quarter ended October 31, 2020.
“I am incredibly proud of our team’s efforts to continue serving
customers effectively, while driving operational improvements in
both banners through this dynamic retail environment,” stated Mike
Witynski, President and Chief Executive Officer. “Dollar Tree
delivered its strongest same-store sales performance in the past
ten quarters, along with a 50 basis point improvement in operating
margin. At Family Dollar, the improvement continues as the team
delivered a 6.4% comparable store sales increase, a 230 basis point
improvement in gross profit margin and a 250 basis point
improvement in operating margin.”
Third Quarter Results
Consolidated net sales increased 7.5% to $6.18 billion from
$5.75 billion in the prior year’s third quarter. Enterprise
same-store sales increased 5.1%. Same-store sales for Family Dollar
increased 6.4%. Dollar Tree same-store sales increased 4.0%.
Gross profit increased 12.9% to $1.92 billion in the quarter
compared to the prior year’s third quarter. Gross margin increased
150 basis points to 31.2%, compared to 29.7% in the prior year’s
quarter. The increase in gross margin was driven by improved
merchandise costs including freight, leverage on occupancy costs
from stronger same-store sales, improved shrink results and reduced
markdowns, partially offset by higher distribution costs, which
included $10.9 million in COVID-19-related payroll costs.
Selling, general and administrative expenses were 23.7% of net
sales, compared to 23.5% of net sales in the prior year's third
quarter. The increase was driven by COVID-19 costs of $35.3
million, or 57 basis points, related to frontline associate wage
premiums, field management bonuses and store cleaning/PPE
supplies.
Operating income for the quarter improved 29.9% to $465.5
million, compared with $358.4 million in the same period last year
and operating income margin was 7.5% in the current quarter,
compared to 6.2% in last year’s quarter. The third quarter of 2020
included total incremental operating costs of $46.3 million, or
$0.15 per diluted share, for COVID-19-related expenses. These
incremental costs by segment were $28.6 million for Dollar Tree,
$17.4 million for Family Dollar and $0.3 million for Corporate,
Support and Other.
Net income was $330.0 million in the third quarter and diluted
earnings per share for the quarter increased 28.7% to $1.39,
compared to $1.08 per share in the prior year’s quarter.
The Company repurchased 2,154,304 shares during the quarter for
$200 million. The Company has $600 million remaining on its share
repurchase authorization.
The Company opened 143 new stores, expanded or relocated 34
stores, and closed 16 stores. Additionally, the Company completed
371 renovations to the Family Dollar H2 format. Retail selling
square footage at quarter end was approximately 124.3 million
square feet.
First Nine Months
Results
Consolidated net sales increased 8.4% to $18.74 billion from
$17.30 billion in the same period last year. Enterprise same-store
sales increased 6.5% on a constant currency basis (or 6.4% when
adjusted to include the impact of Canadian currency fluctuations.),
when compared to the prior year period. Same-store sales for Family
Dollar increased 11.2%. Dollar Tree same-store sales increased
2.1%.
Gross profit for the first nine months increased 10.9% to $5.64
billion. As a percentage of net sales, gross margin improved 70
basis points to 30.1%, compared to 29.4% in the prior year period.
The current year includes $28.7 million, or 0.2% of net sales, in
COVID-19 costs.
Selling, general and administrative expenses were 23.7% of net
sales, compared to 23.5% of net sales in the first nine months of
2019. The current year includes $225.6 million, or 1.2% of net
sales, in COVID-19 costs.
Operating income for the period improved 19.1% to $1.21 billion.
Operating income margin increased 50 basis points to 6.4% of net
sales in the current year period from 5.9% of net sales in the
prior year. The first nine months of 2020 included incremental
operating costs of $254.3 million, or $0.82 per diluted share, for
COVID-19-related expenses, which included wage premiums paid to
hourly store and distribution center associates, and safety and
sanitization supplies. These incremental costs by segment were
$147.4 million for Dollar Tree, $104.9 million for Family Dollar
and $2.0 million for Corporate, Support and Other.
Net income compared to the prior year period improved 19.2% to
$839.1 million and diluted earnings per share increased 19.7% to
$3.53 compared to $2.95 in the prior year period.
Leveraging the Power of Both
Brands
The combination of Dollar Tree and Family Dollar provides the
Company more opportunities to better serve more customers in more
ways, and in more locations across the country.
In recent years, the Company has made significant progress in
optimizing its portfolio of stores through new store openings,
renovations, re-banners and closings. The H2 renovation program at
Family Dollar continues to be a key component of the momentum in
the turnaround. The H2 stores, on average, continue to comp at a
10%+ lift vs. non-renovated stores in their first year. Customers
are responding favorably to the new categories and new price
points. Sell through on seasonal items has been exceptional. There
is continued opportunity to renovate older Family Dollar stores. As
of October 31, 2020, the Company has approximately 2,240 Family
Dollar stores in the H2 format. The Company currently plans to
renovate approximately 1,250 Family Dollar stores in 2021.
Additionally, for more than a year, Dollar Tree has tested a
multi-price initiative referred to as Dollar Tree Plus! In
mid-2019, the Company began testing multi-price assortments in more
than 100 stores in southwestern markets. Major modifications, based
on learnings, have included: transitioning the offering from
consumable products to primarily discretionary items; reengineering
the display elements and signage to drive awareness and excitement
in stores; focusing on the $1, $3 and $5 price points; and
increasing the offerings above the $1 price point. The Company will
be expanding this initiative into a total of approximately 500
stores beginning in the spring of 2021.
Since acquiring Family Dollar, the Company has produced strong
cash flow from operations, paid down debt aggressively, repurchased
$400 million in shares, mitigated the majority of impacts from
tariffs proactively, consolidated its two store support centers and
realigned leadership under one executive team. These actions
enhance the Company’s ability and flexibility to better leverage
the two powerful brands to drive improved productivity,
efficiencies and returns.
“The team has accomplished a great deal to get us to this stage.
With one consolidated store support center; a strong balance sheet;
an aligned, energized and focused leadership team; and a full staff
of talented retailers, we believe we have the ability to better
serve customers across North America,” Witynski added. “We have a
unique and transformational opportunity to leverage the power of
our two brands, through flexible store formats designed to drive
improved operational performance.”
Update on Company Outlook, Initiatives
and Liquidity
Due to continued volatility and uncertainty related to the
COVID-19 pandemic, as well as a lack of visibility into government
stimulus initiatives, the Company is not providing updated guidance
at this time.
The Company now expects the completion of approximately 480 new
store openings and 750 Family Dollar H2 store renovations in fiscal
2020.
Capital expenditures for fiscal 2020 are expected to be
approximately $1.0 billion.
The Company ended the quarter with $1.12 billion in cash on its
balance sheet. The Company paid down the remaining $500 million on
its revolving line of credit during the third quarter.
Additionally, the Company plans to pay off a $300 million legacy
Family Dollar note due in February 2021.
“It’s an exciting time at Dollar Tree. We are just over three
weeks into our important fourth quarter and we are off to a very
good start, with same-store sales at both banners currently
tracking above reported third quarter levels. Our focus will
continue to be on opening new stores, refining our store formats
and upgrading our assortments to drive improved store productivity,
increasing operating efficiencies, generating free cash flow and
buying back shares,” Witynski concluded. “These efforts are
designed to deliver continued value to our long-term
shareholders.”
Conference Call
Information
On Tuesday, November 24, 2020, 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 855-710-4184. A
recorded version of the call will be available until midnight
Monday, November 30, 2020, and may be accessed by dialing
888-203-1112. The access code is 2631833. A webcast of the call is
accessible through Dollar Tree's website and will remain online
through Monday, November 30, 2020.
Dollar Tree, a Fortune 200 Company, operated 15,606 stores
across 48 states and five Canadian provinces as of October 31,
2020. 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 our
expectations regarding new store openings and capital expenditures
for fiscal 2020; our plans and expectations concerning various
store format initiatives, including Family Dollar H2 renovations;
the expansion of our Dollar Tree Plus! initiative; our plan to pay
off certain legacy Family Dollar debt; 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
20, 2020, our Form 10-Q for the most recently ended fiscal quarter
and other filings we make from time to time 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.
DLTR-E
DOLLAR TREE, INC. Condensed Consolidated Income
Statements (In millions, except per share data)
(Unaudited) 13 Weeks Ended 39 Weeks
Ended October 31, 2020 November 2, 2019
October 31, 2020 November 2, 2019 Net sales
$ 6,177.0
$ 5,746.2
$ 18,741.4
$ 17,295.5
Cost of sales
4,252.6
4,041.7
13,105.9
12,215.3
Gross profit
1,924.4
1,704.5
5,635.5
5,080.2
31.2%
29.7%
30.1%
29.4%
Selling, general and administrative expenses
1,458.9
1,346.1
4,429.2
4,067.4
23.7%
23.5%
23.7%
23.5%
Operating income
465.5
358.4
1,206.3
1,012.8
7.5%
6.2%
6.4%
5.9%
Interest expense, net
38.1
41.4
113.1
122.9
Other expense, net
0.1
0.1
0.8
0.7
Income before income taxes
427.3
316.9
1,092.4
889.2
6.9%
5.5%
5.8%
5.1%
Provision for income taxes
97.3
61.1
253.3
185.2
Income tax rate
22.8%
19.3%
23.2%
20.8%
Net income
$ 330.0
$ 255.8
$ 839.1
$ 704.0
5.3%
4.5%
4.5%
4.1%
Net earnings per share: Basic
$ 1.39
$ 1.08
$ 3.54
$ 2.97
Weighted average number of shares
236.8
236.7
237.0
237.4
Diluted
$ 1.39
$ 1.08
$ 3.53
$ 2.95
Weighted average number of shares
237.9
237.5
237.8
238.3
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. 2016-02, "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 included 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 closed in 2019. 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.
Reconciliation of Adjusted Net Income: 39 Weeks
Ended October 31, 2020 November 2, 2019 Net
income (GAAP)
$ 839.1
$ 704.0
Accelerated rent expense
-
6.7
Provision for income taxes on adjustment
-
(1.5)
Adjusted Net income (Non-GAAP)
$ 839.1
$ 709.2
Reconciliation of Adjusted EPS: 39 Weeks
Ended October 31, 2020 November 2, 2019 Diluted
earnings per share (GAAP)
$ 3.53
$ 2.95
Adjustment, net of tax
-
0.03
Adjusted EPS (Non-GAAP)
$ 3.53
$ 2.98
DOLLAR TREE, INC. Segment Information (In
millions, except store count) (Unaudited) 13
Weeks Ended 39 Weeks Ended October 31, 2020
November 2, 2019 October 31, 2020 November 2,
2019 Net sales: Dollar Tree
$ 3,303.2
$ 3,074.3
$ 9,557.6
$ 8,991.4
Family Dollar
2,873.5
2,671.9
9,183.5
8,304.1
Corporate, support and Other (a)
0.3
-
0.3
-
Total net sales
$ 6,177.0
$ 5,746.2
$ 18,741.4
$ 17,295.5
Gross profit: Dollar Tree
$ 1,154.2
34.9%
$ 1,050.5
34.2%
$ 3,206.8
33.6%
$ 3,070.8
34.2%
Family Dollar
769.9
26.8%
654.0
24.5%
2,428.4
26.4%
2,009.4
24.2%
Corporate, support and Other (a)
0.3
100.0%
-
0.0%
0.3
100.0%
-
0.0%
Total gross profit
$ 1,924.4
31.2%
$ 1,704.5
29.7%
$ 5,635.5
30.1%
$ 5,080.2
29.4%
Operating income (loss): Dollar Tree
$ 417.9
12.7%
$ 374.6
12.2%
$ 1,006.5
10.5%
$ 1,105.9
12.3%
Family Dollar
131.4
4.6%
55.2
2.1%
472.0
5.1%
163.9
2.0%
Corporate, support and Other (a)
(83.8)
(1.4%)
(71.4)
(1.2%)
(272.2)
(1.5%)
(257.0)
(1.5%)
Total operating income
$ 465.5
7.5%
$ 358.4
6.2%
$ 1,206.3
6.4%
$ 1,012.8
5.9%
(a) Corporate, support and Other revenue consists of rental
income from our Summit Pointe property.
13 Weeks Ended 39
Weeks Ended October 31, 2020 November 2, 2019
October 31, 2020 November 2, 2019 DollarTree
FamilyDollar Total DollarTree
FamilyDollar Total DollarTree
FamilyDollar Total DollarTree
FamilyDollar Total Store Count: Beginning
7,652
7,827
15,479
7,306
7,809
15,115
7,505
7,783
15,288
7,001
8,236
15,237
New stores
95
48
143
114
51
165
262
111
373
286
120
406
Re-bannered stores (b)
-
-
-
39
(15)
24
(3)
4
1
190
(199)
(9)
Closings
(6)
(10)
(16)
(12)
(30)
(42)
(23)
(33)
(56)
(30)
(342)
(372)
Ending
7,741
7,865
15,606
7,447
7,815
15,262
7,741
7,865
15,606
7,447
7,815
15,262
Selling Square Footage (in millions)
66.7
57.6
124.3
64.1
56.9
121.0
66.7
57.6
124.3
64.1
56.9
121.0
Growth Rate (Square Footage)
4.1%
1.2%
2.7%
7.6%
(5.0%)
1.3%
4.1%
1.2%
2.7%
7.6%
(5.0%)
1.3%
(b) Stores are included as re-banners when they close or
open, respectively.
DOLLAR TREE, INC. Condensed
Consolidated Balance Sheets (In millions)
(Unaudited) October 31, February 1,
November 2,
2020
2020
2019
Cash and cash equivalents
$ 1,118.3
$ 539.2
$ 433.7
Merchandise inventories
3,792.3
3,522.0
3,882.9
Other current assets
260.4
208.2
255.7
Total current assets
5,171.0
4,269.4
4,572.3
Property, plant and equipment, net
4,095.6
3,881.8
3,810.7
Restricted cash
46.9
46.8
46.6
Operating lease right-of-use assets
6,185.1
6,225.0
5,864.6
Goodwill
1,983.1
1,983.3
2,296.5
Trade name intangible asset
3,100.0
3,100.0
3,100.0
Deferred tax asset
23.3
24.4
-
Other assets
47.2
43.9
51.4
Total assets
$ 20,652.2
$ 19,574.6
$ 19,742.1
Current portion of long-term debt
$ 300.0
$ 250.0
$ 750.0
Current portion of operating lease liabilities
1,296.5
1,279.3
1,202.6
Accounts payable
1,587.2
1,336.5
1,473.1
Income taxes payable
-
62.7
-
Other current liabilities
858.6
618.0
754.0
Total current liabilities
4,042.3
3,546.5
4,179.7
Long-term debt, net, excluding current portion
3,225.3
3,522.2
3,520.2
Operating lease liabilities, long-term
4,962.1
4,979.5
4,636.0
Deferred income taxes, net
1,043.1
984.7
1,001.5
Income taxes payable, long-term
31.0
28.9
29.7
Other liabilities
387.3
258.0
253.7
Total liabilities
13,691.1
13,319.8
13,620.8
Shareholders' equity
6,961.1
6,254.8
6,121.3
Total liabilities and shareholders' equity
$ 20,652.2
$ 19,574.6
$ 19,742.1
The February 1, 2020 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 October 31,
November 2,
2020
2019
Cash flows from operating activities: Net income
$ 839.1
$ 704.0
Adjustments to reconcile net income to net cash provided
byoperating activities: Depreciation and amortization
503.7
466.3
Provision for deferred income taxes
59.4
50.3
Stock-based compensation expense
70.5
52.5
Amortization of debt discount and debt-issuance costs
3.1
4.9
Other non-cash adjustments to net income
7.4
24.2
Changes in operating assets and liabilities
250.5
(287.7)
Total adjustments
894.6
310.5
Net cash provided by operating activities
1,733.7
1,014.5
Cash flows from investing activities: Capital expenditures
(707.0)
(782.3)
Proceeds from governmental grant
-
16.5
Payments for fixed asset disposition
(0.5)
(2.9)
Net cash used in investing activities
(707.5)
(768.7)
Cash flows from financing activities: Principal payments for
long-term debt
(250.0)
-
Proceeds from revolving credit facility
750.0
-
Repayments of revolving credit facility
(750.0)
-
Proceeds from stock issued pursuant to stock-based compensation
plans
14.3
12.3
Cash paid for taxes on exercises/vesting of stock-based
compensation
(16.8)
(24.3)
Payments for repurchase of stock
(194.2)
(200.0)
Net cash used in financing activities
(446.7)
(212.0)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(0.3)
(0.2)
Net increase in cash, cash equivalents and restricted cash
579.2
33.6
Cash, cash equivalents and restricted cash at beginning of period
586.0
446.7
Cash, cash equivalents and restricted cash at end of period
$ 1,165.2
$ 480.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201124005567/en/
Dollar Tree, Inc. Randy Guiler, 757-321-5284 Vice President,
Investor Relations www.DollarTree.com
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