Dollar Tree ramping up store growth as momentum continues

Marianne Wilson
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dollar tree
Dollar Tree opened 464 new stores. (Photo via Shutterstock)

Dollar Tree reported earnings and sales that topped analysts’ estimates but offered full-year guidance that fell short.

The extreme-discount retailer entered its new fiscal year under the leadership of a new CEO: Executive chairman Rick Dreiling expanded his role to take over as CEO, effective January 29. In a presentation in conjunction with the earnings release, Dollar Tree's fiscal 2023 outlook called for new store growth of 600 to 650 stores, with 43% of the growth occurring in the first half of the year. (By comparison, Dollar Tree opened 464 new stores, relocated 120 stores and closed 205 locations in 2022. It also completed 796 Family Dollar store renovations.)

Dollar Tree reported that its net income totaled $452.2 million, or $2.04 a share, for the quarter ended Jan. 28, compared with net income of $454.2 million, or $2.01 a share, in the year-age period. Analysts had expected earnings per share of $2.02.

Revenue rose to $7.72 billion from $7.08 billion, topping estimates of $7.61 billion. Total same-store sales rose 7.4%.

 Same-store sales rose 8.7% at Dollar Tree, driven by a 10.0% increase in average ticket which was partially offset by a 1.1% decline in traffic. (The company  completed the rollout of a $1.25 price point to all of its U.S. Dollar Tree stores about a year ago.)

Dollar Tree said it is cycling the outsized margin benefit related to its initial transition to a primary price of $1.25. For the first half of 2022, Dollar Tree produced a 39.0% gross margin, higher than its normalized gross margin as it was evolving its assortment for the new price point.

Same-store sales rose 5.8% at Family Dollar, with a 5.3% increase in average ticket and a 0.5% increase in traffic as the company said it continues to drive strong trends in performance following its price investment and initial accelerated investments in labor and store conditions.

“Our sales performance shows that our third quarter sales momentum continued into the fourth quarter,” stated Dreiling. “We are committed to driving further store productivity as we focus on developing our people, tools and technology to fuel our accelerated growth, while simplifying our operations, improving our supply chain and innovating our merchandising strategy to better support our associates and to better serve our shoppers.”

For the current fiscal year, Dollar Tree is expecting earnings per share from $6.30 to $6.80. Analysts were looking for $7.58 a share. The company expects sales to range from $29.9 billion to $30.5 billion. Analysts were expecting $29.8 billion.

“We are confident that the accelerated investments outlined will transform our company, will enable and propel us through years of accelerated growth and margin improvement, and will enhance the company’s ability to achieve substantially higher long-term earnings power,” stated Dreiling.

Dollar Tree operated 16,340 stores across 48 states and five Canadian provinces as of January 28, 2023.