- Same-Store Sales: Dollar Tree +7.8%; Family Dollar +5.8%;
Enterprise +6.9%
- Comparable Transaction Count: Dollar Tree +9.6%; Family
Dollar +3.4%
- Diluted Earnings per Share (EPS) $0.91
- Increasing Fiscal 2023 Sales Outlook Range to $30.6 Billion
to $30.9 Billion
- Tightening Fiscal 2023 Diluted EPS Outlook Range to $5.78 to
$6.08, Including $0.12 per Share Legal Reserve from Q1
2023
Dollar Tree, Inc. (NASDAQ: DLTR) today reported financial
results for its second quarter ended July 29, 2023.
“At our June Investor Conference we shared the details of our
strategy to transform the company and unlock the true value of our
business, and our second quarter results show us making solid
progress against these objectives. Both the Dollar Tree and Family
Dollar segments reported strong same-store sales trends, driven by
increased traffic and accelerated market share gains,” said Rick
Dreiling, Chairman and Chief Executive Officer. “We are delivering
on our strategy through the dedication of our 200,000+ associates
who are focused on providing an exceptional experience for our
customers.”
“In the second quarter we continued to generate strong top-line
results across both segments. While factors like sales mix and
elevated shrink continue to pressure margins, we generated a
year-over-year increase in gross profit dollars. We are pleased
with the progress of our transformation to date and remain
confident in our ability to deliver our growth objective of $10 or
more of diluted EPS by 2026,” stated Jeff Davis, Chief Financial
Officer.
Additional Business
Highlights
- Opened 118 new stores
- Expanded multi-price Plus offering to 715 additional Dollar
Tree stores
- Added $3, $4, and $5 frozen and refrigerated items to 1,645
additional Dollar Tree stores
- Completed 276 Family Dollar store renovation projects
- Established $1.5 billion commercial paper program
- Net cash provided by operating activities increased $189.7
million compared to Q2 2022
- Improved free cash flow by $40.5 million compared to Q2
2022
Second Quarter 2023 Key
Operating Results
(Compared to same period fiscal 2022)
Q2
Fiscal 2023
Change
YTD
Fiscal 2023
Change
Consolidated Net Sales
$7.32B
8.2%
$14.64B
7.1%
Same-Store Sales Growth:
Dollar Tree Segment
7.8%
30 bps
5.6%
-380 bps
Family Dollar Segment
5.8%
380 bps
6.2%
660 bps
Enterprise
6.9%
200 bps
5.9%
120 bps
Operating Income
$287.8M
(43.1%)
$707.5M
(42.8%)
Diluted EPS
$0.91
(43.1%)
$2.26
(43.1%)
Adjusted Operating Income1
$287.8M
(43.1%)
$737.5M
(40.4%)
Adjusted Diluted EPS1
$0.91
(43.1%)
$2.38
(40.1%)
1
Adjustment is due to a $30 million accrual
in Q1 FY 2023 related to previously disclosed legal proceedings
associated with our West Memphis, Arkansas distribution center. See
“Use of Non-GAAP Financial Measures” below.
Second Quarter Results
Unless otherwise noted, all comparisons are between the 13 weeks
ended July 29, 2023, and the 13 weeks ended July 30, 2022.
Consolidated net sales increased 8.2% to $7.32 billion.
Enterprise same-store sales increased 6.9%. Dollar Tree same-store
sales increased 7.8%, driven by a 9.6% increase in traffic,
partially offset by a 1.6% decline in average ticket. Family
Dollar’s 5.8% same-store sales increase was comprised of a 3.4%
increase in traffic along with a 2.3% increase in average
ticket.
Gross profit increased 0.5% to $2.13 billion and gross margin
declined 220 basis points to 29.2%. The prior year’s quarter
included an outsized margin benefit from the initial transition to
the $1.25 price point at Dollar Tree. The gross margin decline was
driven by lower initial mark-on, unfavorable sales mix, elevated
shrink, and wage investments in distribution center payroll,
partially offset by lower freight costs.
Selling, general and administrative expenses were 25.3% of total
revenue, compared to 24.0%. The increase was primarily due to wage
investments in store and field payroll, higher incentive
compensation, investments in repairs and maintenance to improve
store standards, higher professional fees, elevated general
liability insurance claims, and higher utilities expenses related
to unseasonably high temperatures throughout much of the country,
partially offset by sales leverage.
Operating income was $287.8 million and operating margin was
3.9%.
The Company’s effective tax rate was 24.0%, compared to
24.2%.
Net income was $200.4 million and diluted EPS was $0.91.
The Company repurchased 703,713 shares for $99.9 million,
including applicable excise tax.
Year-to-Date Results
Unless otherwise noted, all comparisons are between the 26 weeks
ended July 29, 2023, and the 26 weeks ended July 30, 2022.
Consolidated net sales increased 7.1% to $14.64 billion.
Enterprise same-store sales increased 5.9%. Dollar Tree same-store
sales increased 5.6%, driven by a 7.7% increase in traffic,
partially offset by a 1.9% decline in average ticket. Family
Dollar’s 6.2% same-store sales increase was comprised of a 3.9%
increase in traffic along with a 2.3% increase in average
ticket.
Gross profit decreased 2.2% to $4.37 billion and gross margin
declined 290 basis points to 29.8%.
Selling, general and administrative expenses were 25.0% of total
revenue, compared to 23.7%.
Operating income was $707.5 million and operating income margin
was 4.8%.
The Company’s effective tax rate was 24.0% compared to
23.5%.
Net income was $499.4 million and diluted EPS was $2.26.
The Company repurchased 1,728,713 shares for $252.0 million,
including applicable excise tax.
Updated Fiscal 2023
Outlook
“We are bringing in the high and low end of our outlook range
for diluted EPS to better reflect the balance of opportunities and
risks we see in the current operating environment. Our outlook
takes into consideration several factors including shifting sales
mix, unfavorable shrink trends, higher diesel fuel prices,
incremental savings on ocean freight, and our improved sales
performance,” Davis added.
Fiscal 2023 Outlook
Consolidated net sales for full-year fiscal 2023 are now
expected to range from $30.6 billion to $30.9 billion. The Company
expects to deliver a mid-single-digit comparable store sales
increase for the year, comprised of a mid-single-digit increase in
the Dollar Tree segment and a mid-single-digit increase in the
Family Dollar segment. Selling square footage is expected to grow
by 3.0% to 3.5% for the year, with new store growth back-end
weighted. Diluted EPS is expected to range from $5.78 to $6.08,
including the $0.12 charge for the legal reserve taken in the first
quarter and the impact of the 53rd week in fiscal 2023.
Third Quarter 2023 Outlook
The Company expects consolidated net sales for the third quarter
will range from $7.3 billion to $7.5 billion, based on a
mid-single-digit increase in same-store sales for the enterprise,
and for the Dollar Tree and Family Dollar segments. Diluted EPS for
the quarter is estimated to be in the range of $0.94 to $1.04.
While share repurchases are not included in the outlook, the
Company had $1.6 billion remaining under its share repurchase
authorization as of July 29, 2023.
Conference Call
Information
On Thursday, August 24, 2023, the Company will host a conference
call to discuss its earnings results at 8:00 a.m. Eastern Time. The
telephone number for the call is 877-407-3943. A recorded version
of the call will be available until midnight Wednesday, September
30, 2023, and may be accessed by dialing 877-660-6853. The access
code is 13740375. A webcast of the call is accessible through
Dollar Tree's website and will remain online through Thursday,
August 31, 2024.
Supplemental financial information for the second quarter is
available on the Investor Relations portion of the Company’s
website, at www.Corporate.DollarTree.com/Investors.
Dollar Tree, a Fortune 200 Company, operated 16,476 stores
across 48 states and five Canadian provinces as of July 29, 2023.
Stores operate under the brands of Dollar Tree, Family Dollar, and
Dollar Tree Canada. To learn more about the Company, visit
www.DollarTree.com.
Use of Non-GAAP Financial
Measures
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP”). From time-to-time, the Company supplements the reporting
of its financial information determined under GAAP with certain
non-GAAP financial information. The non-GAAP financial measures
included in this press release are adjusted operating income,
adjusted diluted earnings per share (EPS), adjusted net income, and
adjusted operating income (Family Dollar segment), each of which
excludes the impact of a $30 million accrual related to previously
disclosed legal proceedings associated with our West Memphis,
Arkansas distribution center, and free cash flow.
A reconciliation of the non-GAAP financial measures to the
corresponding amounts prepared in accordance with GAAP appears in
the table “Reconciliation of Non-GAAP Financial Measures” below.
The table provides additional information regarding the adjusted
measures.
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 relating to our
business and financial outlook for fiscal 2023, including without
limitation our expectations regarding net sales, comparable store
sales and diluted earnings per share for the third fiscal quarter
and full fiscal year 2023, and various factors that are expected to
impact our quarterly and annual results of operations for fiscal
2023; our selling square footage and new store growth; our plans
and expectations regarding our business, including the impact of
various initiatives and investments on the company’s performance
and prospects for long-term growth; our earnings per share
objective for fiscal 2026; 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 10, 2023, 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. In addition, we can provide no assurances that we will
not be required to accrue additional amounts in future periods with
respect to legal proceedings related to our West Memphis, Arkansas
distribution center. 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 26 Weeks
Ended July 29, 2023 July 30, 2022 July 29,
2023 July 30, 2022 Revenues Net sales
$
7,320.1
$
6,765.3
$
14,639.6
$
13,665.4
Other revenue
5.2
3.2
9.5
5.7
Total revenue
7,325.3
6,768.5
14,649.1
13,671.1
Expenses Cost of sales
5,185.4
4,640.9
10,274.5
9,200.5
Selling, general and administrative expenses
1,852.1
1,622.2
3,667.1
3,233.7
Operating income
287.8
505.4
707.5
1,236.9
Interest expense, net
24.2
30.6
50.1
64.6
Other (income) expense, net
(0.1
)
0.1
-
0.1
Income before income taxes
263.7
474.7
657.4
1,172.2
Provision for income taxes
63.3
114.8
158.0
275.9
Net income
$
200.4
$
359.9
$
499.4
$
896.3
Net earnings per share: Basic
$
0.91
$
1.61
$
2.26
$
3.99
Weighted average number of shares
220.1
224.2
220.6
224.7
Diluted
$
0.91
$
1.60
$
2.26
$
3.97
Weighted average number of shares
220.5
225.0
221.1
225.7
SG&A expenses as percentage of total revenue
25.3
%
24.0
%
25.0
%
23.7
%
Operating income margin
3.9
%
7.5
%
4.8
%
9.0
%
Income before income taxes as percentage of total revenue
3.6
%
7.0
%
4.5
%
8.6
%
Income tax rate
24.0
%
24.2
%
24.0
%
23.5
%
Net income margin
2.7
%
5.3
%
3.4
%
6.6
%
DOLLAR TREE, INC. Segment Information (In
millions, except store count) (Unaudited) 13
Weeks Ended 26 Weeks Ended July 29, 2023 July
30, 2022 July 29, 2023 July 30, 2022 Net
sales: Dollar Tree
$
3,873.4
$
3,571.1
$
7,805.1
$
7,352.9
Family Dollar
3,446.7
3,194.2
6,834.5
6,312.5
Total net sales
$
7,320.1
$
6,765.3
$
14,639.6
$
13,665.4
Gross profit: Dollar Tree
$
1,293.3
33.4
%
$
1,334.9
37.4
%
$
2,681.9
34.4
%
$
2,869.6
39.0
%
Family Dollar
841.4
24.4
%
789.5
24.7
%
1,683.2
24.6
%
1,595.3
25.3
%
Total gross profit
$
2,134.7
29.2
%
$
2,124.4
31.4
%
$
4,365.1
29.8
%
$
4,464.9
32.7
%
Operating income (loss): Dollar Tree
$
397.8
10.3
%
$
550.8
15.4
%
$
933.5
12.0
%
$
1,315.0
17.9
%
Family Dollar
11.8
0.3
%
55.0
1.7
%
20.6
0.3
%
144.5
2.3
%
Corporate, support and Other
(121.8
)
(1.7
%)
(100.4
)
(1.5
%)
(246.6
)
(1.7
%)
(222.6
)
(1.6
%)
Total operating income
$
287.8
3.9
%
$
505.4
7.5
%
$
707.5
4.8
%
$
1,236.9
9.0
%
DOLLAR TREE, INC. Condensed Consolidated Balance
Sheets (In millions) (Unaudited)
July 29, 2023 January 28, 2023 July 30, 2022
ASSETS Current Assets: Cash and cash equivalents
$
512.7
$
642.8
$
688.9
Merchandise inventories
5,329.4
5,449.3
5,422.2
Other current assets
315.3
275.0
266.2
Total current assets
6,157.4
6,367.1
6,377.3
Property, plant and equipment, net
5,359.2
4,972.2
4,652.9
Restricted cash
70.1
68.5
53.5
Operating lease right-of-use assets
6,670.9
6,458.0
6,433.6
Goodwill
1,983.3
1,983.1
1,984.3
Trade name intangible asset
3,100.0
3,100.0
3,100.0
Deferred tax asset
13.1
15.0
17.7
Other assets
74.0
58.2
57.0
Total assets
$
23,428.0
$
23,022.1
$
22,676.3
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Current portion of operating lease liabilities
$
1,478.6
$
1,449.6
$
1,428.3
Accounts payable
1,776.4
1,899.8
2,011.3
Income taxes payable
10.0
58.1
27.4
Other current liabilities
885.3
817.7
913.5
Total current liabilities
4,150.3
4,225.2
4,380.5
Long-term debt, net
3,423.9
3,421.6
3,419.3
Operating lease liabilities, long-term
5,447.8
5,255.3
5,139.5
Deferred income taxes, net
1,107.6
1,105.7
1,063.6
Income taxes payable, long-term
18.1
17.4
20.7
Other liabilities
249.3
245.4
256.2
Total liabilities
14,397.0
14,270.6
14,279.8
Shareholders' equity
9,031.0
8,751.5
8,396.5
Total liabilities and shareholders' equity
$
23,428.0
$
23,022.1
$
22,676.3
The January 28, 2023 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) 26 Weeks
Ended July 29, 2023 July 30, 2022 Cash flows from
operating activities: Net income
$
499.4
$
896.3
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
399.0
382.4
Provision for deferred income taxes
3.8
78.8
Stock-based compensation expense
53.2
66.1
Amortization of debt discount and debt-issuance costs
2.3
2.3
Other non-cash adjustments to net income
37.6
18.8
Changes in operating assets and liabilities
(71.5
)
(924.1
)
Total adjustments
424.4
(375.7
)
Net cash provided by operating activities
923.8
520.6
Cash flows from investing activities: Capital expenditures
(775.8
)
(529.6
)
Payments for fixed asset disposition
(5.2
)
(3.8
)
Net cash used in investing activities
(781.0
)
(533.4
)
Cash flows from financing activities: Proceeds from stock
issued pursuant to stock-based compensation plans
5.5
4.8
Cash paid for taxes on exercises/vesting of stock-based
compensation
(27.7
)
(38.1
)
Payments for repurchase of stock
(250.0
)
(250.0
)
Net cash used in financing activities
(272.2
)
(283.3
)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
0.9
0.2
Net decrease in cash, cash equivalents and restricted cash
(128.5
)
(295.9
)
Cash, cash equivalents and restricted cash at beginning of period
711.3
1,038.3
Cash, cash equivalents and restricted cash at end of period
$
582.8
$
742.4
DOLLAR TREE, INC. Segment Information (In
millions, except store count) (Unaudited) 13
Weeks Ended July 29, 2023 July 30, 2022
Dollar Family Dollar Family Tree
Dollar Total Tree Dollar Total
Store Count: Beginning
8,153
8,266
16,419
8,088
8,074
16,162
New stores
48
70
118
32
95
127
Re-bannered stores (a)
2
-
2
(3
)
2
(1
)
Closings
(26
)
(37
)
(63
)
(14
)
(43
)
(57
)
Ending
8,177
8,299
16,476
8,103
8,128
16,231
Selling Square Footage (in millions)
70.9
62.8
133.7
70.2
60.5
130.7
Growth Rate (Square Footage)
1.0
%
3.8
%
2.3
%
2.5
%
3.8
%
3.1
%
26 Weeks Ended July 29, 2023 July
30, 2022 Dollar Family Dollar
Family Tree Dollar Total Tree
Dollar Total Store Count: Beginning
8,134
8,206
16,340
8,061
8,016
16,077
New stores
80
145
225
74
165
239
Re-bannered stores (a)
4
(1
)
3
(5
)
7
2
Closings
(41
)
(51
)
(92
)
(27
)
(60
)
(87
)
Ending
8,177
8,299
16,476
8,103
8,128
16,231
Selling Square Footage (in millions)
70.9
62.8
133.7
70.2
60.5
130.7
Growth Rate (Square Footage)
1.0
%
3.8
%
2.3
%
2.5
%
3.8
%
3.1
%
(a) Stores are included as re-banners when they close or open,
respectively.
52 Weeks Ended July 29, 2023
July 30, 2022 Dollar Family Dollar
Family Tree Dollar Total Tree
Dollar Total Sales per Square Foot (b)
$225
$218
$222
$212
$210
$211
(b) Sales per square foot is calculated based on total net sales
for the reporting period divided by the average selling square
footage during the period.
DOLLAR TREE, INC.
Reconciliation of Non-GAAP Financial Measures (In
millions, except per share data) (Unaudited) From
time-to-time, the Company discloses certain financial measures not
derived in accordance with GAAP. These 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, liquidity, or cash flows. The
non-GAAP financial measures we have disclosed include adjusted net
income, adjusted diluted earnings per share, adjusted operating
income, adjusted operating income – Family Dollar, and free cash
flow. The Company believes providing additional information in the
form of adjusted net income, adjusted diluted earnings per share,
adjusted operating income, adjusted operating income – Family
Dollar that exclude the unusual expenses described 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 expenses. The Company has included a
reconciliation of these non-GAAP financial measures to the most
comparable GAAP measures in the following tables. In the
first quarter of 2023, the Company recorded a $30.0 million charge
to its legal reserve for DC 202-related matters. In
addition, the Company discloses free cash flow, a non-GAAP
financial measure that we calculate as net cash provided by
operating activities less capital expenditures. The Company
believes free cash flow is an important indicator of our liquidity
as it measures the amount of cash we generate from our business
operations. Free cash flow may not represent the amount of cash
flow available for general discretionary use, because it excludes
non-discretionary expenditures, such as mandatory debt repayments
and required settlements of recorded and/or contingent liabilities
not reflected in cash flow from operations. The Company has
included a reconciliation of free cash flow to the most comparable
GAAP measures in the following tables.
Reconciliation of
Adjusted Net Income and Adjusted Diluted Earnings per Share
(EPS) 13 Weeks Ended 26 Weeks Ended July 29,
2023 July 30, 2022 July 29, 2023 July 30,
2022 Net income (GAAP)
$
200.4
$
359.9
$
499.4
$
896.3
SG&A adjustments: Legal reserve
-
-
30.0
-
Total adjustments
-
-
30.0
-
Provision for income taxes on adjustments
-
-
(3.9
)
-
Adjusted Net income (Non-GAAP)
$
200.4
$
359.9
$
525.5
$
896.3
Diluted earnings per share (GAAP)
$
0.91
$
1.60
$
2.26
$
3.97
Adjustments, net of tax
-
-
0.12
-
Adjusted Diluted EPS (Non-GAAP)
$
0.91
$
1.60
$
2.38
$
3.97
Reconciliation of Adjusted Operating Income 13
Weeks Ended 26 Weeks Ended July 29, 2023 July
30, 2022 July 29, 2023 July 30, 2022 Operating
income (GAAP)
$
287.8
$
505.4
$
707.5
$
1,236.9
SG&A adjustments: Legal reserve
-
-
30.0
-
Total adjustments
-
-
30.0
-
Adjusted Operating income (Non-GAAP)
$
287.8
$
505.4
$
737.5
$
1,236.9
Reconciliation of Adjusted Operating Income - Family
Dollar Segment 13 Weeks Ended 26 Weeks Ended
July 29, 2023 July 30, 2022 July 29, 2023
July 30, 2022 Operating income (GAAP)
$
11.8
$
55.0
$
20.6
$
144.5
SG&A adjustments: Legal reserve
-
-
30.0
-
Total adjustments
-
-
30.0
-
Adjusted Operating income (Non-GAAP)
$
11.8
$
55.0
$
50.6
$
144.5
Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow 13 Weeks Ended 26 Weeks
Ended July 29, 2023 July 30, 2022 July 29,
2023 July 30, 2022 Net cash provided by operating
activities
$
171.8
$
(17.9
)
$
923.8
$
520.6
Deduct: Capital expenditures
(425.4
)
(276.2
)
(775.8
)
(529.6
)
Free Cash Flow
$
(253.6
)
$
(294.1
)
$
148.0
$
(9.0
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230824709851/en/
Dollar Tree, Inc. Robert A. LaFleur, 757-991-5645 Senior Vice
President, Investor Relations www.DollarTree.com DLTR-E
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