Dollar Tree Delivers Solid Q3 Sales, Tariffs Impact Outlook

Dollar Tree delivered a solid sales performance across both its namesake banner and the Family Dollar chain, although the retailer cautioned that the continuing effect of tariffs could impact its fourth quarter and fiscal year outlook.

Consolidated net sales increased 3.7% in the third quarter ended November 2 to $5.75 billion from $5.54 billion in the prior year’s third quarter. Enterprise same-store sales increased 2.5%. Same-store sales for the Dollar Tree segment increased 2.8%. Same-store sales for the Family Dollar segment increased 2.3%. The comparable store sales results at both segments were driven by increases in both average ticket and transaction count.

Net income was $255.8 million in the third quarter and diluted earnings per share for the quarter were $1.08 compared to $1.18 in the prior year’s quarter. Operating income for the quarter was $358.4 million compared with $387.8 million in the same period last year.

“The third quarter represented another period of solid sales performance for both brands, Dollar Tree and Family Dollar. Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree re-banners, more than 1,000 Dollar Tree Snack Zones and launched our Dollar Tree Plus! test already this year,” said Gary Philbin, president and CEO, Dollar Tree. “Fiscal 2019 has been a unique year as the result of several factors: the material acceleration in our Family Dollar store optimization initiatives, the consolidation of our two store support centers into southeast Virginia, the global helium shortage, and the continued uncertainty regarding trade and the related tariffs.”

In terms of its guidance, the company now estimates that tariffs will increase its cost of goods sold by approximately $19 million, or $0.06 per diluted share, in the fourth quarter of 2019 if tariffs are fully implemented. The company estimates consolidated net sales for the fourth quarter of 2019 will range from $6.33 billion to $6.44 billion, based on a low single-digit increase in same-store sales for the company. Diluted earnings per share for the quarter, including tariff costs, are estimated to be in the range of $1.70 to $1.80.