Dollar Tree Inc.
) reported third-quarter fiscal 2013 earnings of 58 cents per
share, which came below the Zacks Consensus Estimate of 60 cents.
However, it increased 13.7% year over year from 51 cents earned
in third-quarter 2012.
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The company posted revenue growth of 9.5% on a year-over-year
basis in the quarter to $1,884.7 million but fell short of the
Zacks Consensus Estimate of $1,906.0 million. During the quarter,
sales benefited from a 3.1% increase in comparable store sales
(comps) over the prior-year period.
Dollar Tree's quarterly gross profit climbed nearly 10.1% year
over year to $659.9 million, while gross margin improved 10 basis
points (bps) to 35.0%. On the other hand, selling, general and
administrative (SG&A) expenses crept up 9.7% to $455.6
million. However, as a percentage of revenues, it remained flat
Consequently, operating income for the quarter rose 10.9% to
$204.3 million. Operating margin came in at 10.8%, up 10 bps from
the year-ago period.
Balance Sheet and Capex
Dollar Tree ended third-quarter fiscal 2013 with cash and cash
equivalents of $147.1 million compared with cash balance of
$399.9 million at the end of third-quarter fiscal 2012.
Merchandise inventories were $1,237.4 million compared with
$971.7 million as of Feb 2, 2012. During the quarter, the company
spent $84.5 million on capital expenditure as against $96.6
million spent in the prior-year quarter.
During the quarter, the company authorized an Accelerated Share
Repurchase program worth $1.0 billion, which is expected to be
completed on or before Jun 2014. Per the program, the company
bought back 15 million shares in the third quarter. Additionally,
Dollar Tree has authorization worth $1.0 billion remaining under
its share buyback program.
In the quarter, the company further expanded its store network by
opening 117 stores, expanding or relocating 19 stores and
shutting down 6 stores. This brings the company's total store
count to 4,953 in 48 states and 5 Canadian provinces as of Nov 2,
Retail selling square footage grew 7.0% year over year to 42.9
million square feet.
For the fourth quarter of fiscal 2013, Dollar Tree expects total
sales in the range of $2.25-$2.31 billion on the back of low
single-digit comps growth while the company expects square
footage growth of 7.0%. Further, the company anticipates earnings
in the range of $1.01-$1.07 per share in the upcoming quarter,
representing an increase of 8.6% - 17.2% from the year-ago
quarter. Tax rate for the fourth quarter and full year is
expected to be 37.7%.
For fiscal 2013, the company anticipates sales to reach the
$7.86-$7.92 billion range based on low single-digit positive
comps while the company expects square footage growth of 7.0%.
Dollar Tree projects earnings for fiscal 2013 to increase 11.5% -
13.9% year over year, coming in the range of $2.72-$2.78 per
share, excluding any impact from share repurchases.
The company expects capital expenditures of nearly $340 million
for fiscal 2013. Depreciation and amortization expenses are
projected to range from $190 million to $192 million for the full
The company remains on track to open 340 new stores, relocate 75
stores and expand nearly 413 projects in the U.S. and Canada for
Dollar Tree is considered among 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
in managing controllable inputs, including reducing stem miles,
while increasing back-haul opportunities at the same time.
Dollar Tree currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the retail space include
CST Brands Inc.
Big Lots Inc.
). Of these, CST Brands has a Zacks Rank #1 (Strong Buy), while
Big Lots and PriceSmart carry a Zacks Rank #2 (Buy).