Dollar Tree delivered its strongest quarterly same-store sales since 2017 while improving its operating margin by 290 basis points.
Dollar Tree has reported strong results for its fiscal first quarter, ended May 21. The discount retailer revealed that consolidated net sales increased 3.0% to $6.48 billion, from $6.29 billion in the prior year’s first quarter.
Same-store sales for Dollar Tree increased 4.7%. Its Family Dollar division's same-store sales decreased 2.8%, compared with a strong 15.5% increase in the prior year’s first quarter. The banner’s first-quarter same-store sales increase, on a two-year stacked basis, was a strong 12.7% as the Family Dollar brand continues to gain market share.
Gross profit increased 9.4% to $1.96 billion in the quarter, compared with the prior year’s first quarter. As a percentage of net sales, gross margin was 30.3%, compared with 28.5% in the same period a year ago. The 180-basis-point improvement was driven by a favorable sales mix, improved shrink results and reduced markdowns, partly offset by higher freight costs.
Operating income for the quarter improved 42.1% to $519.9 million, compared with $365.9 million in the same period last year, and operating income margin was 8.0%, compared with 5.8% in the prior year’s quarter. The first quarter of 2021 included total incremental operating costs of $7.4 million for COVID-19-related expenses, compared with $73.2 million in the first quarter of 2020.
Net income in the first quarter increased 51.3% to $374.5 million, and diluted earnings per share increased 53.8% to $1.60, compared with $1.04 in the prior year’s quarter.
“Our record first-quarter performance reflects the progress we continue to make on numerous initiatives to provide even greater value and convenience to our shoppers. Dollar Tree delivered its strongest quarterly same-store sales since 2017, while improving its operating margin by 290 basis points. Family Dollar effectively cycled a 15.5% comp-sales increase from the prior year by driving its best post-merger quarterly operating profit,” said Michael Witynski, president and CEO. “Combined, our enterprise produced positive same-store sales against a tough comparison, and a 220-basis-point improvement in operating margin, driven by improved gross margins and better expense leverage.”
The company credits its Q1 success to its numerous company initiatives that are helping drive long-term profitable growth.
“In the past 18 months, we have transitioned to an aggressive approach under one aligned leadership team, dedicating our major efforts toward customer-facing initiatives with clarity, focus and speed,” said Witynski. Examples include developing omnichannel and e-commerce offerings, using FamilyDollar.com as a selling site, partnering with Instacart for same-day delivery, and testing fresh produce and frozen meats.
Among its other initiatives is launching its media network, called Chesapeake Media Group, to allow brands to engage with their customers in a personalized and ultra-targeted digital experience.
The company is also focusing Dollar Tree Plus! multi-price assortment, which it has incorporated into an additional 128 Dollar Tree stores in 2021, bringing the total to more than 240 store locations. The company has expanded Dollar Tree Plus! into select stores in Colorado, as well as such Southeast states as Georgia, Alabama, Louisiana and the Carolinas. Dollar Tree is committed to growing this key program in fiscal year 2022.
Then there's Dollar Tree's pandemic-store formats. The company plans to open hundreds of new "combination stores" as part of its push to continue to be a one-stop shop for consumers looking to buy pandemic essentials. The new concept, a store with both the Dollar Tree and Family Dollar banners, affords a "transformational opportunity to serve more customers in all types of markets," according to the company.
For fiscal 2021, Dollar Tree is reiterating its plan to open 600 new stores and to renovate 1,250 Family Dollar stores. The new locations are expected to consist of 400 Dollar Tree stores and 200 Family Dollar stores. The Family Dollar stores will comprise H2 and Combo Store formats, based upon market locations.
“Looking forward, I am most excited about the growth of Dollar Tree Plus! and our strategic store formats, which shoppers are responding to favorably, as evidenced by market share gains and improved customer satisfaction scores. These offerings, along with other key sales- and traffic-driving initiatives and a robust balance sheet, give us confidence that we have increased the long-term earnings potential for both banners,” Witynski added.