On September 4, 2024, Dollar Tree Inc (DLTR, Financial) released its 8-K filing for the second quarter of fiscal 2024, revealing a mixed performance with notable challenges and achievements.
Company Overview
Dollar Tree Inc (DLTR, Financial) operates discount stores across the United States and Canada, with over 8,500 shops under its namesake banner and nearly 7,900 under Family Dollar. About 47% of Dollar Tree's sales in fiscal 2023 were composed of consumables (including food, health and beauty, and cleaning products), around 45% from variety items (including toys and homewares), and over 5% from seasonal items. The Dollar Tree banner sells most of its merchandise at the $1.25 price point and positions its stores in well-populated suburban markets. Conversely, Family Dollar primarily sells consumable merchandise (80% of the banner's sales) at prices below $10. About two-thirds of Family Dollar's stores are located in urban and suburban markets, with the remaining one-third located in rural areas.
Performance and Challenges
Dollar Tree Inc (DLTR, Financial) reported diluted earnings per share (EPS) of $0.62 and adjusted diluted EPS of $0.67 for the second quarter, falling short of the analyst estimate of $1.08. The company attributed $0.30 of the adjusted EPS to costs related to general liability claims. Consolidated net sales increased by 0.7% to $7.37 billion, slightly below the estimated revenue of $7.49 billion.
Same-store net sales showed a mixed performance with Dollar Tree segment increasing by 1.3%, while Family Dollar segment saw a slight decline of 0.1%. The enterprise same-store net sales grew by 0.7%, driven by a 1.1% increase in traffic, offset by a 0.5% decrease in average ticket.
Financial Achievements
Despite the challenges, Dollar Tree Inc (DLTR, Financial) achieved several financial milestones. Gross profit increased by 3.7% to $2.21 billion, and gross margin expanded by 80 basis points to 30.0%, primarily driven by lower freight costs. However, selling, general, and administrative expenses rose to 27.3% of total revenue, compared to 25.3% in the previous year, due to unfavorable development of general liability claims and higher depreciation expenses.
Key Financial Metrics
| Metric | Q2 Fiscal 2024 | Change |
|---|---|---|
| Consolidated Net Sales | $7.37B | 0.7% |
| Operating Income | $203.1M | -29.4% |
| Diluted EPS | $0.62 | -31.9% |
| Adjusted Diluted EPS | $0.67 | -26.4% |
Analysis and Outlook
The company's performance highlights the ongoing pressures from a challenging macro environment. Chief Financial Officer Jeff Davis noted, “Our adjusted EPS of $0.67 was $0.38 below the midpoint of our previous outlook range. While the vast majority of this variance was attributable to an adjustment of our general liability accrual, a portion was attributable to a comp shortfall which reflected the increasing effect of macro pressures on the purchasing behavior of Dollar Tree’s middle- and higher-income customers.”
Looking ahead, Dollar Tree Inc (DLTR, Financial) has revised its fiscal 2024 net sales outlook to a range of $30.6 billion to $30.9 billion and adjusted diluted EPS outlook to a range of $5.20 to $5.60. The company expects to deliver comparable store net sales growth in the low-single-digits for both the Dollar Tree and Family Dollar segments.
For more detailed financial information, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Dollar Tree Inc for further details.
