Dollar Tree, Inc. (DLTR)

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Dollar Tree, Inc. (DLTR)

F3Q08 Earnings Call

November 25, 2008 9:00 am ET


Tim Reid - Vice President, Investor Relations

Bob Sasser - President and Chief Executive Officer

Kathleen E. Mallas - Vice President and Controller


Meredith Adler - Barclays Capital

Mitchell Kaiser - Piper Jaffray

Charles Grom - JP Morgan

Karen Short - Friedman, Billings, Ramsey & Co.

John Zolidis - Buckingham Research

David Mann - Johnson Rice & Co.

Steve Weiner - Deutsche Bank Securities

Joe Selzman – [Celce] Advisory Group

Patrick McKeever - MKM Partners



Good day and welcome to the Dollar Tree, Inc. third quarter 2008 earnings release. (Operator Instructions) At this time I would like to turn the call over to Tim Reid, Vice President of Investor Relations.

Tim Reid

Good morning and welcome to the Dollar Tree conference call for the third quarter of fiscal 2008. My name is Time Reid. I am Vice President of Investor Relations.

Our call today will be led by Bob Sasser, our President and Chief Executive Officer, who will provide insights on our performance in the quarter and recent developments in our business. Katy Mallas, our Vice President and Controller, will provide a more detailed review of our third quarter financial performance and provide our guidance for the remainder of fiscal year 2008.

Before we begin I would like to remind everyone that various remarks that we will make about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors included in our most recent press release, our most recent current report on Form 8-K, Quarterly Report on Form 10-Q, and Annual Report on Form 10-K, all of which are on file with the SEC. We have no obligation to update our forward-looking statements and you should not expect us to do so.

At the end of our planned remarks we will open the call to your questions, which we ask that you limit to one question and one follow-up question, if necessary.

Now I'd like to turn the call over to Bob Sasser.

Bob Sasser

Good morning everyone. Happy turkey week. I hope everybody can find things to be thankful for this week, and as for us, it’s a good time to be at Dollar Tree.

This morning we announced earnings for $0.47 per diluted share. This represents a 23.7% increase over last year’s $0.38 per diluted share. As previously announced, total sales for the quarter were $1.114 billion, an increase of 11.6% over the third quarter of fiscal 2007.

And comp store sales increased 6.2% for the quarter. Our comp store sales increase was the result of more than a 5% increase in traffic and about a 1% increase in transaction size. We are very proud of those metrics.

Year-to-date 2008 compared with last year, total sales are up 10.7%, comp store sales are up 4.9%, and our operating income as a percent of sales is 6.2%. This is an increase of $25.0 million, or 20 basis points over last year’s operating income of 6%.

For the year, net income has risen almost 17% and earnings per share have increased 25.7% to $1.37 per share.

You always ask me about the cadence of the sales in the quarter and I thought I would just share that with you, that sales were strong throughout the third quarter and consistent with the comp sales trend that began really earlier this year.

I view this as evidence that Dollar Tree is increasingly relevant to the consumer. With all of the economic uncertainty, high fuel and energy prices, and pressure in general on the household budget, consumers have to save somewhere. Customers know they can find great value at Dollar Tree for just $1.00 and a convenient, positive shopping experience. More and more our customers rely on us to deliver on this promise and new customers are finding us all the time.

One of the keys to our success is our expanded merchandise mix. Now we really have it all; both things that people need and things that people want. While still small and convenient, our store size has grown over the past several years in order to accommodate the more needs-based consumer product to our heretofore high-value discretionary product mix.

These needs-based products are lower margin but faster turning and drive footsteps into our stores on a more frequent basis. Part of this strategy is the continued expansion of frozen and refrigerated products in more of our stores and we remain on track with our goal this year to add freezers and coolers to 150 more Dollar Tree stores.

During the quarter we added freezers and coolers to 10 Dollar Tree stores, bringing our total to 127 additional stores so far this year. And at the end of the third quarter we had freezers and coolers in 1,101 Dollar Tree stores compared to 931 Dollar Tree stores the same time last year.

While adding new products and categories, we continue to use retail technology to improve the in-stock position on these basic consumer products. Gasoline is still expensive so when our customers come to shop, we want to make sure to have what they need.

Using point-of-sale data by item, by store, we are making smarter allocations and as we sell the product our auto-replenishment system is keeping the stores better in stock on more than 1,200 basic items.

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