Dollar Tree Reports Rocky Q1 Amid Business Transformation Plan

Company opened 107 new stores, completed 252 Family Dollar renovations during period
Emily Crowe, Progressive Grocer
Dollar Tree is in the midst of a business transformation plan to set itself up for long-term growth.

As it continues to follow through on its plan to transform and improve the operating performance of Dollar Tree and Family Dollar, Dollar Tree Inc. is sharing its financial results for its first quarter of fiscal 2023, ended April 29. While the company saw same-store sales across its enterprise increase 4.8% year over year, gross profit decreased 4.7% to $2.23 billion.

Gross margin declined 340 basis points to 30.5%, which the company said was driven by lower initial mark-on, an unfavorable sales mix and shrink, and was partially offset by lower freight costs. 

[Read more: "Are Dollar Stores a Threat to Traditional Supermarkets?"]

Same-store sales for the Dollar Tree segment were up 3.4% year over year, and comparable transaction count increased 5.5%. Dollar Tree also saw a 5.5% increase in traffic, partially offset by a 2.1% decline in average ticket.

As for Family Dollar, same-store sales were up 6.6% year over year and comparable transaction count increased 4.3%. That side of the business experienced a 4.3% year-over-year increase in traffic along with a 2.2% increase in average ticket.

“Our initiatives to drive customer traffic and increase store productivity are having the desired impact. The Dollar Tree segment delivered a 3.4% comp, successfully cycling the 11.2% comp from the prior year’s quarter,” said chairman and CEO Rick Dreiling. “Family Dollar continued its sales momentum with a 6.6% same-store sales increase. Importantly, both segments experienced a mid-single digit percent step-up in comp traffic. We are clearly gaining market share across the entire enterprise."

Continued Dreiling: “While we are seeing early results from our initiatives, we are not immune to the external pressures affecting all of retail, notably, the margin impact of elevated shrink and the product mix shift to consumables.”

Also during the quarter, Dollar Tree opened 107 new stores, relocated 33 stores and closed 29 stores. The company expanded its multi-price Plus offering to an additional 408 Dollar Tree stores, and also completed 252 Family Dollar store renovation projects.

As for the remainder of FY2023, Dollar Tree is tightening its sales outlook range to between $30.0 billion and $30.5 billion.

“While we are maintaining our full-year 2023 sales outlook, we are adjusting our EPS outlook as we expect the elevated shrink and unfavorable sales mix to persist through the balance of the year,” said Dreiling. “We still expect earnings to be more back-end loaded this year as the benefits of lower ocean freight rates flow through. We are eager to share more details on the current operating environment and our longer-term strategic growth plans at our upcoming investor conference on June 21st.”

According to Dreiling, Dollar Tree is rapidly executing on a multi-faceted plan to transform and improve the long-term operating performance of both of its segments. He is encouraged by early progress, and believes both Dollar Tree and Family Dollar have a clear path to accelerated sales growth and margin expansion over the next three to five years.

Earlier this month, Dollar Tree added to its executive leadership team with the hire of former Dollar General executive Mike Kindy as chief supply chain officer. Kindy has more than 34 years of management experience in retail logistics and operating distribution centers.

Dollar Tree will host an investor conference in Norfolk, Va., on June 21. Dreiling and CFO Jeff Davis will be joined by members of the company’s executive management team to provide an in-depth overview of the company and business segments, including growth strategies, capital allocation priorities and financial objectives, as well as the company’s multiyear outlook.

Chesapeake, Va.-based Dollar Tree operated 16,340 stores across 48 states and five Canadian provinces as of Jan. 28. The company is No. 21 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.

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