DLTR

Dollar Tree, Inc. (DLTR)

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Dollar Tree, Inc. (DLTR)

Q2 2009 Earnings Call

August 26, 2009 9:00 am ET

Executives

Timothy J. Reid – Vice President of Investor Relations

Bob Sasser - President and Chief Executive Officer

Kevin Wampler – Chief Financial Officer

Analysts

Adrianne Shapira - Goldman Sachs

Mitchell Kaiser - Piper Jaffray

Charles Grom - JP Morgan

[Joseph Partel] - Morgan Stanley

Meredith Adler - Barclays Capital

Dan Wewer - Raymond James

Alan Rifkin - Banc of America

David Mann - Johnson Rice & Company

Patrick McKeever - MKM Partners LLC

Presentation

Operator

Good day and welcome to the Dollar Tree, Inc. second quarter 2009 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.

Timothy J. Reid

Thank you, Brandy. Good morning and welcome to the Dollar Tree conference call for the second quarter of fiscal 2009. My name is Tim Reid and 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 then provide a more detailed review of our second quarter financial performance and provide our guidance for the remainder of 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 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, our most recent 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

Thanks, Tim. Good morning everyone and thank you for your interest in Dollar Tree. This morning we announced earnings for the second quarter of $0.63 per diluted share that represents a 50% increase over last year’s $0.42 per share.

Operating margin for the quarter was 7.3%, an increase of 170 basis points over the second quarter of last year. Operating income was $89 million, an increase of nearly $28 million or 45% over a strong second quarter performance last year.

Net income rose 51% to nearly $57 million. As previously announced, total sales for the quarter were $1 billion $223 million, an increase of 11.9% over the second quarter of fiscal 2008 and comp store sales increased 6.8% for the quarter. This is on top of a 6.5% increase last year and a 4.4% increase the year before.

For the first half of 2009 compared with last year, sales were $2.4 billion, an increase of 13%. Gross margin was 34.5%, an increase of 100 basis points. SG&A as a percentage of sales was 26.8%, an improvement of 60 basis points.

Operating income increased by $56 million to 7.7% of sales, an increase of 160 basis points. Net income rose 44% to $117 million in the first six months and earnings per share increased 43% to $1.29 per share. This is on top of a 27% gain in earnings per share in the first half last year.

I’m very pleased with our results for the second quarter and I’m especially pleased in light of the comparisons to what was a very strong second quarter last year. Our stores and our concept are more relevant than ever. Through good times and tough times, customers know they can save money at Dollar Tree and they are responding in record numbers.

Our long time customers are shopping us more frequently and new customers are finding us all the time. Our success is driven by the value of our merchandise and the quality of our shopping experience and the second quarter customers continue to rely on Dollar Tree’s expanded assortment of basic products.

Some of our top performing categories included health and beauty care basics, household basics, and food. But that’s not all. In addition to the growth in consumer basics, things people need every day, our discretionary business is also growing. Party supplies, books, floral, and lawn and garden supplies, delivered strong growth and our seasonal businesses continue to drive sales, energy, and merchandise excitement.

None of this happened by accident. We make a coordinated effort to wile the customer every time they visit our stores. We have an extremely hard working and diligent staff of merchants who travel the world to provide an exciting assortment of high value merchandise. Our store teams do their part to consistently provide customers with a clean, bright, and fun place to shop.

Seasonal transitions are well executed with fresh and timely displays of merchandise for every season. In the second quarter that translated into strong seasonal performance for Mother’s Day, Father’s Day, and graduation through summer and early back to school with excellent results. Sales were consistently strong throughout the quarter.

Our inventory productivity has been increasing. By leveraging our investments and logistics and technology, our store teams and our planning allocation and replenishment organization have been highly effective in flexing our inventory to meet increasing customer demand and improving our in stock of basics, developing smaller allocation of seasonal product consistent with sales trends, and consistently increasing our inventory turns over the past four years, a trend which continued with another increase in inventory turns in the second quarter.

In our ongoing effort to provide more of what customers want, we continue to expand our offering of frozen and refrigerated product to more stores. During the second quarter we added freezers and coolers to 39 more Dollar Tree stores. That brings our total to 1235 Dollar Trees compared with 1089 stores at the same time last year. We’re now on track to add freezers and coolers to an additional 160 stores by year end for the year. That’s 10 more than our original plan.

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