Dollar Tree Inc. (DLTR, Financial) released its first-quarter results before the market opened on May 28. Both earnings and revenue surpassed analysts’ projections. While earnings plunged on a year-over-year basis, revenue increased.
Snapshot of the quarter
The discount retailer recorded earnings per share of $1.04, which was lower than the $1.14 reported in the year-ago period. Revenue of $6.29 billion surged 8.2% on a year-over-year basis. Analysts had anticipated earnings of $0.89 per share on $6.11 billion in revenue.
Comparable store sales improved 7% in the reported quarter thanks to strong sales performance of Family Dollar stores (up 15.5%). This was only partly negated by 0.9% sales decline in Dollar Tree stores.
SG&A expenses fell to 22.7% of sales compared to 23.1% of sales in the year-ago quarter. This was driven by improvement in operating and corporate expenses, occupancy costs and advertising, only partially offset by a rise in payroll.
Operating income of $365.9 million was down 5.1% driven by coronavirus-related expenses of $73.2 million.
CEO Gary Philbin had the following to say:
“We have a resilient business model that has been demonstrated to work in varying economic climates. With more than 38 million Americans filing unemployment claims in the past nine weeks, we believe that Dollar Tree and Family Dollar are part of the solution to help millions of families stretch their budgets to help make ends meet. Our focus is on meeting customer needs, while growing and improving our business to deliver long-term value to shareholders.”
Store count
During the quarter, the company launched 99 new outlets, modernized or repositioned 21 stores and closed 14 stores. It looks forward to opening 500 stores in fiscal 2020, which includes 325 Dollar Tree and 175 Family Dollar stores. At quarter's end, the retailer operated 15,370 stores located in 48 states and five Canadian provinces.
Financials
The discount retailer had cash and cash equivalents of $1.76 billion as of May 2, 2020. This included the $750 million borrowed under its revolving credit facility. Net long-term debt (barring current maturities) stood at $3.22 billion.
The company has temporarily halted its stock buyback program.
Guidance
Dollar Tree did not provide a full-year fiscal 2020 financial outlook, citing the global uncertainty caused by the coronavirus pandemic. However, the company did estimate that capital spending would be $1 billion, which is less than its previous forecast of $1.2 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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