DLTR

Dollar Tree, Inc. (DLTR)

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Exchange: NASDAQ
Industry: Consumer Services
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Dollar Tree, Inc. (DLTR)

F4Q08 Earnings Call

February 25, 2009 9:00 am ET

Executives

Timothy J. Reid – Vice President of Investor Relations

Bob Sasser – President & Chief Executive Officer

Kevin Wampler – Chief Financial Officer

Analysts

Adrianne Shapira - Goldman Sachs

Meredith Adler - Barclays Capital

Charles Grom - J.P. Morgan

Michael Baker - Deutsche Bank Securities

Dan Wewer - Raymond James

David Mann - Johnson Rice & Company

Patrick McKeever - MKM Partners LLC

[Peter Keefe] - Piper Jaffray

Karen Short - Friedman, Billings, Ramsey & Co.

Joe Feldman - Telsey Advisory

Presentation

Operator

Good day and welcome to the Dollar Tree Store, Incorporated fourth quarter 2008 earnings release. As a reminder today’s call is being recorded.

At this time I would like to turn the call over to Mr. Tim Reid, Vice President of Investor Relations. Please go ahead.

Timothy J. Reid

Thank you [Katie]. Good morning and welcome to the Dollar Tree conference call for the fourth quarter of fiscal 2008. My name is Tim Reid. I’m 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. Kevin Wampler, our Chief Financial Officer will provide a more detailed review of our fourth quarter financial performance and provide our guidance for 2009.

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 provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ material from those indicated by these forward-looking statements as a result of various important factors included in our most recent press release, our most current report on Form 8-K, our quarterly report on Form 10-Q, and the 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. Bob.

Bob Sasser

Thanks Tim and good morning everyone. Thank you for joining our call. This morning we announced our earnings for the fourth quarter at $1.15 per diluted share. This is an increase of 10.6% over last year’s reported $1.04 per diluted share. As previously reported, total sales for the quarter were $1.39 billion. That is an increase of 6.8% over the fourth quarter of fiscal 2007 and comp store sales increased 2.2% in the quarter.

For the full year and fiscal 2008, earnings per share were $2.53, an increase of 21% over last year’s reported $2.09. Total sales were $4.64 billion, an increase of 9.5% over fiscal 2007 and comp store sales increased 4.1%. Operating margin increased to 7.9% compared to 7.8% in fiscal 2007 and net income rose 14%.

We’re very proud of these results. I am particularly proud of this year’s record performance given the backdrop of the worldwide economic crisis and unfavorable retail calendar and record high fuel and energy prices that we all faced. Even in the negative impact of severe winter storms that started in the Pacific Northwest and tracked across the northern section of the country the last ten shopping days before Christmas was largely offset by the strength of our business. And our warm weather stores, and as the storms passed sales in the affected areas rebounded, revealing the underlying sales strength of our stores.

Even with all of these headwinds, sales results for both the fourth quarter and for the full year ended comfortably within our range of guidance, and our earnings results were at the very top end of guidance. I view this as further evidence of Dollar Tree’s relevance to the consumer.

Our business continues to be strong and we’re off to a good start in 2009. We made a very smooth transition in January from Christmas to big game promotions and Valentine’s, and our Valentine’s results were the best in years. Dollar Tree’s exceptional values and convenient, friendly shopping experience are more important now than ever before.

Our movement over the last several years to larger stores with a capacity to expand our consumable products offering, that is more of the things that people need every day, along with the power of the $1 price point has been validated by our results. Customers know that they can save money and stretch their household budgets at Dollar Tree and they continue to respond in record numbers.

We intend to continue to offer customers what they need and what they want. That includes the continued expansion of frozen and refrigerated product to more stores. During fiscal 2008 we added freezers and coolers to 135 Dollar Tree stores and at the end of the year we had frozen and refrigerated food in 1,107 Dollar Tree stores compared to 972 Dollar Tree stores at the end of last year. For fiscal 2009 we plan to continue expansion to at least 150 more stores and we now have the supply arrangements to add this product to most any geography across the country.

In addition to our merchandise initiatives, the expansion of our payment type acceptance contributed positively to fourth quarter results. Our debit card penetration continued to increase in the fourth quarter. It was up about 3% over fourth quarter last year. Credit card penetration also increased in the fourth quarter, up a little less than 1% and we expect the penetration of Visa Credit to continue increasing throughout 2009.

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