Dollar Tree Posts Better Q3 Sales, Misses Expectations and Disappoints on Guidance

Andrew Klips |

Discount retailer Dollar Tree, Inc. (DLTR) is looking like it will open lower Thursday after delivering third-quarter results that fell short of analyst predictions on both top and bottom lines, although sales and adjusted profits were better than last year.

For the quarter ended November 2, the Chesapeake, Virginia-based company reported revenue of $1.88 billion, up 9.5 percent from $1.72 billion in the third quarter of 2012.  Earnings totaled $125.4 million, or 58 cents per share, compared to $155.4 million, or 68 cents per share, in the year prior quarter.  Profits in last year’s quarter benefited 17 cents per share related to Dollar Tree selling its interest in Ollie’s Holdings, Inc.  Sans that gain, profits in the latest quarter would have improved 13.7 percent.

That aside, Wall Street was still expecting profits of 60 cents per share on revenue of $1.91 billion.

Same-store sales, a key growth metric that compares revenue from stores open more than one year, improved 3.1 percent.

During the quarter, Dollar Tree opened 117 stores, expanded or relocated 19 stores and closed six locations.  The moves increased the company’s retail selling square footage to 42.9 million square feet, 7 percent more than the same time last year.

“During a very cautious consumer environment, comparable-store sales increased as the result of growth in both consumer basics and growth in seasonal and variety merchandise, with our higher margin variety categories growing at a faster pace,” said Bob Sasser, chief executive at Dollar Tree, in a statement this morning.  He added, “Our stores executed a quick transition from Halloween and are set with fresh, high-value merchandise for Thanksgiving and the Holiday season.”

During the third quarter, the company authorized an aggressive $1 billion share buy-back plan, which is scheduled to be completed by the end of June 2014.

Looking ahead, the company sees fourth-quarter sales in the range of $2.25 billion to $2.31 billion and low-single digit gains in same-store sales.  Profits are targeted between $1.01 and $1.07 per share.  The guidance was below analyst predictions of $1.10 per share in earnings on revenue of $2.32 billion.

For the full year, Dollar Tree estimates revenue in the range of $7.86 billion to $7.92 billion. Earnings per share are expected to be $2.72 to $2.78.  This assumes that the company doesn’t repurchase any shares as part of its newly authorized buy-back plan.

Dollar Tree stock has had a strong 2013, rising about 50 percent through Wednesday’s close at $58.92.  Thursday’s report failed to impress, though, with shares sliding more than 5 percent in pre-market activity to the area of $55.60.

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Companies

Symbol Name Price Change % Volume
DLTR Dollar Tree Inc. 87.76 1.19 1.37 2,110,560
GMELF Gome Elec App Hldg Ord 0.12 0.00 0.00 0

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