Chesapeake, Va.-based Dollar Tree “delivered a solid start to the year,” President and CEO Michael Witynski said, after it saw a 6.5% increase in consolidated net sales, a 19.2% lift in gross profit and a 48.1% increase in earnings per share during its first-quarter fiscal 2022.
The quarter, which ended April 30, also include Dollar Tree’s conversion from a $1 price point to $1.25, which Witynski said contributed to both sales and margin improvements. “Shoppers are responding favorably as the new, greater value products hit our shelves,” he said.
Consolidated net sales (for the whole company, which includes Dollar Tree and Family Dollar banners) increased to $6.90 billion from $6.48 billion in the prior year’s first quarter. Meanwhile, enterprise same-store sales increased 4.4%. By banner, comparable-store sales for Dollar Tree increased 11.2%, while Family Dollar saw same-store sales fall 2.8.% as “it cycled the significant stimulus dollars released in the prior year’s quarter,” Dollar Tree said in a release. Another contributing factor: About 400 Family Dollar stores were temporarily closed for portions of the quarter due to a product-related recall, which negatively impacted quarterly same-store sales by about 200 basis points, Dollar Tree added.
Gross profit increased to $2.34 billion from $1.96 billion in the prior year’s first quarter, and gross margin improved 360 basis points to 33.9%, compared to 30.3% in the prior year’s quarter. This improvement, Dollar Tree said, was “driven by improved initial mark-on, favorable product mix in the Dollar Tree segment, and leverage on distribution and occupancy costs, partially offset by higher freight costs, unfavorable product mix in the Family Dollar segment, markdowns, and shrink.”
Net income for the first quarter increased 43.2% to $536.4 million, and diluted earnings per share increased 48.1% to a first-quarter company record of $2.37, compared to $1.60 in the prior year’s quarter.
In the quarter, the company opened 112 new stores (42 Dollar Trees and 70 Family Dollars), expanded or relocated 33 stores, and closed 30 stores (13 Dollar Trees and 17 Family Dollars). The company also expanded its $3 and $5 Plus assortment into an additional 790 Dollar Tree stores and completed 118 Family Dollar store renovations.
‘Propelling Greater Efficiencies’
Dollar Tree also outlined multiyear investments it will make around its associates, distribution network/supply chain, pricing and value proposition, and technology. “We believe now is the ideal time to accelerate investments focused on driving growth through improved associate and shopper experience, while propelling greater efficiencies,” Witynski said.
The company’s strategic investments will include:
Investing in Associates: Recognizing the competitive environment for talent, Dollar Tree said it will focus on competitive wages and improving store and distribution-center operating standards and enhancing safety.
Investing in Its Distribution-Center Network and Supply Chain: The focus here, Dollar Tree said, will be on delivering improved safety, conditions and operational standards across its network through use of data, analytics, process improvements and automation.
Investing in Product through Pricing and Value Proposition: On the Family Dollar side of the business, Dollar Tree said it will invest to ensure it exceeds customer expectations for value, with its product offering being clearly and competitively priced every day. “These investments should position Family Dollar for improved performance and long-term success,” the company said in a release.
Investing in Technology: The company has recently begun assessing its vision for systems infrastructure plans for 2023 and beyond. The systems under review include merchandising, supply chain, data analytics and store systems.
The company revised its outlook for the year, boosting its expectations for diluted earnings per share and consolidated net sales.
Dollar Tree revised its diluted earnings per share for full-year fiscal 2022 from an initial range of $7.60-$8 to $7.80-$8.20. As for consolidated net sales, the company is now expecting a range of $27.76 billion to $28.14 billion vs. the previously expected range of $27.22 billion to $27.85 billion.
On the same-stores sales front, the company expects to deliver a mid-single-digit increase for the year, comprised of a high single-digit increase in the Dollar Tree segment and more or less flat same-store sales in the Family Dollar segment.
“Value and convenience are more important than ever to our shoppers and the communities we serve. We have a robust balance sheet and expect to continue generating a significant amount of cash flow in our business,” Witynski said. “Our management team and board are strategically aligned and believe our Company is very well-positioned to deliver long-term, profitable growth.”