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Dollar Tree Posts Record First Quarter, Leads Nasdaq Gainers

Stock soared 22% Thursday.

Dollar Tree ( DLTR ) reported record first quarter earnings Thursday, posting net income of $536.4 million, up 43.2% over the same quarter last year, or $2.37 per diluted share, up 48.1%. The street was looking for $2.00 per share.

Revenues rose 6.5% in the quarter to $6.90 billion, ahead of the street's $6.76 billion estimate, while same store sales increased 4.4%.

The discount retailer, which operates 16,077 stores under the Dollar Tree and Family Dollar brands across the US and Canada, raised full year earnings guidance to a range of $7.80 to $8.20 per share.

The company opened 112 new stores, expanded or relocated 33 stores and closed 30 stores during the quarter, increasing net retail selling square footage by 3.1% from the prior year’s quarter to 129.8 million square feet.

On the earnings conference call, CEO Mike Witynski said, "During the quarter, the Dollar Tree team successfully completed its conversion to the $1.25 price point, contributing to both sales and margin improvements. Shoppers are responding favorably as the new greater value products hit our shelves."

"Importantly, other key strategic initiatives, including the expansion of the $3 and $5 Plus assortment in our Dollar Tree stores, as well as our Combo Stores and renovations at Family Dollar are all working."

Investment thesis

  • Dollar Tree stock led all Nasdaq gainers Thursday, soaring 21.9% to close at $162.80.
  • The company's earnings stood in stark contrast to those of Walmart and Target last week, which both severely disappointed investors.
  • While we'd expect Dollar Tree stock to give back some of the sharp gains in the short term, we think this may be among the best retailers to own in a year when consumers are dramatically shifting their buying habits amid steep inflation.
  • The company revamped its board of directors in March 2022:
  • New executive chair, vice chair and lead director
  • Total of seven new directors.
  • New board committees for finance and sustainability.
  • We like the hire earlier this month of John Flanigan as Chief Supply Chain Officer. Flanigan has 30 years of experience in retail logistics, most recently as head of global supply chain for Dollar General (DG).
  • While a focus on supply chain is important for any retailer, it will be doubly important during what is clearly an inflationary period that exacerbates existing chains. 
  • Dollar Tree is committed to making strategic investments over the next several years across the company "to position the company for improved operating performance and long-term sustainable growth," as Witynski said on the earnings conference call.
  • Rick Dreiling, the recently appointed executive chair of the board, also said on the call, "We are fully committed to transform Dollar Tree from a good company today to a great company tomorrow. We have this unique opportunity to become a growth engine that delivers profitable growth with attractive returns on capital for many years to come."


Source: Equities News

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