Dollar Tree (DLTR) Falls on Q4 Earnings Miss, Guides for '18

Dollar Tree Inc.DLTR posted fourth-quarter fiscal 2017 results, wherein both earnings and sales missed the Zacks Consensus Estimate. However, results improved year over year. Also, management issued guidance for first-quarter and fiscal 2018.

Following the quarterly results, shares of the company declined 13.4% in pre-market trading . However, the stock has gained 26% in the past six months compared with the industry 's growth of 23.2%.

Quarter in Detail

Dollar Tree's quarterly adjusted earnings of $1.89 per share missed the Zacks Consensus Estimate by a penny. However, the metric rose substantially by $1.39 in the prior-year quarter. Additionally, it came at the higher end of the company's guided range. The year-over-year improvement can be attributed to higher sales, rise in comparable store sales (comps) and higher margins.

On a GAAP basis, earnings per share came in at $4.37 compared with $1.36 in the year-ago quarter.

Consolidated net sales were up 12.9% to $6,360.6 million in the quarter, missing the Zacks Consensus Estimate of $6,401 million.

Comps in the quarter increased 2.4% in constant currency, driven by improved customer count and average ticket. Including the impact of Canadian currency fluctuations, the metric improved 2.5%. While Dollar Tree banner posted comps growth of 3.8% (in constant-currency), comps at the Family Dollar banner rose 1%.

The company's quarterly gross profit advanced 16.3% year over year to $2,101 million, with the gross margin expanding 90 basis points (bps) to 33%. The margin expansion was backed by reduced merchandise costs, lower markdowns and occupancy expenses, as a percentage of sales. The increase was somewhat compensated with higher freight charges.

Adjusted selling, general and administrative expenses dropped 40 bps to 21.3% of sales, thanks to reduced depreciation, lower repair and maintenance costs, as a percentage of sales. This was somewhat offset by increased hourly payroll and incentive compensation expenses as well as higher advertising expenses.

Further, operating income rose 30.5% to $765.6 million in the reported quarter. Adjusted operating margin came in at 11.7%.

Balance Sheet

Dollar Tree ended the fiscal year with cash and cash equivalents of $1,097.8 million, net merchandise inventories of $3,169.3 million, net long-term debt excluding current maturities of $4,762.1 million and shareholders' equity of $7,182.3 million. Further, it redeemed the entire $750 million of its outstanding 2020 Notes on Mar 1.

Store Update

Dollar Tree, which carries a Zacks Rank #2 (Buy) opened 137 outlets, expanded or relocated eight outlets and shuttered 46 outlets in the reported quarter.


Management issued guidance for first-quarter and fiscal 2018. It forecasts consolidated net sales for the first quarter in the band of $5.53-$5.63 billion, with low single-digits comps growth. Earnings are envisioned in the range of $1.18-$1.25 per share.

For fiscal 2018, it projects consolidated net sales in the range of $22.70-$23.12 billion, with low single-digit comps increase and a 3.7% rise in square footage. Additionally, earnings per share for the same time period are envisioned in the $5.25-$5.60 range.

The Zacks Consensus Estimate for first-quarter and fiscal 2018 earnings is pegged at $1.32 and $5.85, respectively.

Want More of Retail? Here Are Three Picks You Can't Miss

Big Lots, Inc. BIG with a long-term earnings growth rate of 13.5% has delivered an average positive earnings surprise of 11.1% in the trailing four quarters. It carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Burlington Stores, Inc. BURL , also a Zacks Rank #2 stock, has a long-term earnings growth rate of 18.6%.

Ross Stores, Inc. ROST has a long-term earnings growth rate of 10% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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