Dollar Tree Inc. (DLTR, Financial) released its fourth-quarter results before the market opened on March 3. While earnings surpassed analysts' projections, revenue fell slightly short of expectations. Both the metrics rose year over year.
Snapshot of the quarter
The Chesapeake, Virginia-based company recorded earnings per share of $2.13, which was more than the $1.79 reported in the year-ago period. Revenue of $6.77 billion surged 7.1% on a year-over-year basis. Analysts had anticipated EPS of $2.11 on $6.87 billion in revenue.
Comparable store sales improved 4.9% in the reported quarter thanks to strong performance at both Family Dollar (up 8.1%) and Dollar Tree stores (up 2.4%).
Selling, general and administrative expenses were 21.7% of sales compared to 27.1% of sales in the year-ago quarter. This was driven by expense leverage courtesy of robust same-store sales, which was partially negated by Coronavirus-related expenses of $17.2 million associated with frontline worker wage premiums as well as field management bonuses. By contrast, operating income of $681.6 million was up 173%.
Store count
During the quarter, Dollar Tree launched 124 new outlets, modernized or repositioned 11 stores and closed 45 locations. The company also rejuvenated 106 Family Dollar stores in the H2 format. It also plans to open 600 stores in fiscal 2021 and complete 1,250 Family Dollar H2 store renovations. At quarter's end, the retailer operated 15,685 stores located in 48 U.S. states and five Canadian provinces.
President and CEO Mike Witynski had the following to say:
"As we look ahead, we believe our proven strategic store formats, accelerated store growth plan, 1,250 planned store renovations for the year, several key sales- and traffic-driving initiatives, and a robust balance sheet will enable us to deliver long-term value for each of our stakeholders – customers, associates, suppliers, and shareholders."
Financials
The discount retailer had cash and cash equivalents of $1.4 billion as of Jan. 30. It paid down the $300 million legacy Family Dollar note, which was due in February. Net long-term debt (barring current maturities) stood at $3.25 billion.
During the quarter, the company repurchased 1.83 million shares at a total cost of $2 billion. The discount retailer now has $2.4 billion left on the share buyback authorization.
Looking forward
The company is off to a very strong start in the first quarter, given that the same-store sales at both Family Dollar and Dollar Tree are above reported fourth-quarter levels. Looking ahead, Witynski said that the company will continue to launch new stores, upgrade its store formats and refine its assortments in order to enhance its store productivity, improve its operational efficiencies and generate free cash flow.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- Robust Online Shopping Pushes Target's Earnings Past Projections
- Salesforce Posts 4th-Quarter Earnings and Revenue Beat
- Best Buy Posts 4th-Quarter Earnings Beat, But Recorded a Slowdown in Sales
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
