Dollar Tree Inc.
(
DLTR
) reported robust results for the second quarter of fiscal 2012.
The company's quarterly earnings of 51 cents per share came in
ahead of the Zacks Consensus Estimate of 47 cents. Moreover, it
outperformed the year-ago earnings of 39 cents per share,
registering an upside of 30.8% year over year. Higher sales and
improved margins enabled Dollar Tree to post solid second-quarter
results.
Quarterly Details
Dollar Tree's total revenue grew 10.5% in the quarter to
$1,704.6 million from $1,542.4 million in the prior-year quarter.
Higher sales were primarily driven by an improvement of 4.5% in
comparable store sales over the prior-year period comps of 4.7%.
However, total revenue was slightly below the Zacks Consensus
Estimate of $1,711 million.
The company's quarterly gross profit climbed 10.5% year over
year to $599.6 million, while gross margin remained flat at 35.2%.
Operating income for the quarter grew 20.1% to $184.4 million.
Operating margin came in at 10.8%, up 80 basis points from the
year-ago period, primarily benefiting from a contraction in
selling, general and administrative expenses as a percentage of
sales.
Balance Sheet
Dollar Tree ended the second quarter with cash and cash
equivalents of $379.8 million compared with cash balance of $421.6
million at the end of the prior-year quarter. The company had an
outstanding long-term obligation of $250 million as of July 28,
2012. Merchandise inventories were up 9.6% year over year to $891.7
million. During the first six months of fiscal 2012, the company
spent $140.1 million on capital expenditure.
Share Repurchase
During the quarter, the company bought back 1.6 million shares
for about $80.9 million. At the quarter end, Dollar Tree had shares
worth $1.1 billion remaining under its share buyback program.
Store Update
In the quarter under review, the company further expanded its
stores network by opening about 77 stores, shutting down 5 stores
and relocated 21 stores. This brings the company's total store
count to 4,523 in 48 states and 5 Canadian Provinces.
Looking Ahead
For the third quarter of fiscal 2012, Dollar Tree expects total
sales in the range of $1.71 billion to $1.75 billion on the back of
low to mid-single-digit same-store sales growth. Further, the
company anticipates earnings in the range of 47 cents - 51 cents a
share in the next/coming quarter.
For fiscal 2012, the company now anticipates sales to reach
$7.36 billion - $7.45 billion range, driven by a low to
mid-single-digit growth in same-store sales. The company projects
earnings in the range of $2.45 - $2.54 per share for fiscal
2012.
Our Take
Dollar Tree is considered as one of the best-positioned dollar
store concepts, especially with its evolving multi-price point
chain. We believe that the company is doing a commendable job
internally by managing controllable inputs, including reducing stem
miles, while increasing back-haul opportunities.
The company continues to generate robust same-store sales
growth, indicating its focus on low-priced wants and needs
commodities. The rise in comparable sales is attributable to
increased traffic, reflecting continued top-line growth.
Additionally, the company's strong free cash flow generation
signals an enhanced share buyback program, as the company, apart
from stores growth, uses majority of the free cash flow to buyback
shares.
Dollar Tree operates as a discount retailer of general
merchandise in the southern, southwestern, midwestern, and eastern
United States. The company is in direct competition with
Dollar General Corporation
(
DG
) and
Family Dollar Stores Inc.
(
FDO
).
Currently, Dollar Tree has a Zacks #3 Rank, implying a
short-term Hold rating on the stock. Moreover, the company retains
a long-term 'Neutral' recommendation.
DOLLAR GENERAL (DG): Free Stock Analysis Report
DOLLAR TREE INC (DLTR): Free Stock Analysis
Report
FAMILY DOLLAR (FDO): Free Stock Analysis Report
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