Dollar Tree Inc. (DLTR, Financial) released its second-quarter results before the market opened on Aug. 27. Both earnings and revenue surpassed analysts' projections and rose year-over-year.
Snapshot of the quarter
The Chesapeake, Virginia-based company recorded earnings per share of $1.10, which was more than the $0.76 reported in the year-ago period. Revenue of $6.28 billion surged 9.4% on a year-over-year basis. Analysts had anticipated EPS of $0.89 on $6.23 billion in revenue.
Comparable store sales improved 7.2% in the reported quarter thanks to strong sales performance of Family Dollar stores (up 11.6%) and Dollar Tree stores (up 3.1%).
SG&A expenses rose to 24.5% of sales compared to 24% of sales in the year-ago quarter. This was driven by coronavirus-related expenses of $123.5 million, which was associated with frontline worker wage premiums as well as field management bonuses. By contrast, operating income of $374.9 million was up 39.4%.
President and CEO Mike Witynski had the following to say:
"Consumer shopping patterns are evolving. Customers are shopping with a purpose, while looking to minimize risk and exposure. As a result, we are seeing material increases in average ticket, while seeing a decline in average visits. At Dollar Tree, we were pleased to see a nice bounce back in the higher margin discretionary side of the business following Easter; and the expanded Crafter's Square assortment continues to perform very well. At Family Dollar, we continue to gain traction as we had a material improvement in the discretionary side of the business, another quarter of double-digit same-store sales, a 390 basis point improvement in gross margin and a 470 basis point increase in operating profit margin."
Store count
During the quarter, the company launched 131 new outlets, modernized or repositioned 22 stores and closed 26 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 15,479 stores located in 48 U.S. states and five Canadian provinces.
Financials
The discount retailer had cash and cash equivalents of $1.75 billion as of Aug. 1, 2020. This included the $500 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 full-year fiscal 2020 financial outlook. However, the company did estimate that capital spending would be $1 billion, which is in line with its previous forecast.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- Hormel Foods' 3rd-Quarter Results: Key Takeaways for Investors
- Best Buy Tops 2nd-Quarter Earnings and Revenue Projections
- What Investors Should Know About JM Smucker's 1st-Quarter Results
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
