~ Diluted Earnings per Share Increased 40.3%
to $1.01 vs. $0.72 ~
~ Enterprise Operating Margin Improved 120
Basis Points to 8.0% ~
~ Consolidated Sales Increased 6.3% to $5.32
Billion ~
~ Enterprise Same-Store Sales Increased 3.2%
~
~ Same-Store Sales by Segment: Dollar Tree
+5.0%, Family Dollar +1.5% ~
Dollar Tree, Inc. (NASDAQ: DLTR), North America's leading
operator of discount variety stores, today reported results for its
third fiscal quarter ended October 28, 2017.
“Our team delivered terrific results in the third quarter,”
stated Gary Philbin, President and Chief Executive Officer.
“Same-store sales accelerated in both the Dollar Tree and Family
Dollar banners; we delivered a 120 basis point improvement in
enterprise operating margin; and earnings per share grew more than
40% from the prior year. Our third quarter results demonstrate our
continuing progress in delivering value and convenience, serving
more customers in more markets across North America, through our
diversified business model."
Third Quarter Results
Consolidated net sales increased 6.3% to $5.32 billion from
$5.00 billion in the prior year’s third quarter. Enterprise
same-store sales increased 3.2% on a constant currency basis.
Adjusted to include the impact of Canadian currency fluctuations,
the enterprise same-store sales increase was 3.3%. The same-store
sales growth was driven by increases in average ticket and
comparable transaction count. Same-store sales for the Dollar Tree
banner increased 5.0% on a constant currency basis (or 5.2% when
adjusted to include the impact of Canadian currency fluctuations).
Same-store sales for the Family Dollar banner increased 1.5%.
Gross profit increased 9.6% to $1.67 billion compared to $1.52
billion in the prior year’s third quarter. As a percentage of
sales, gross margin increased to 31.3% compared to 30.4% in the
prior year. The 90 basis point improvement was the result of lower
merchandise costs, markdowns and occupancy costs as a percentage of
sales.
Selling, general and administrative expenses were 23.3% of sales
compared to 23.6% of sales in the prior year's third quarter. The
30 basis point improvement, as a percentage of sales, was driven
primarily by lower depreciation costs, lower healthcare costs and
lower store operating costs resulting primarily from lower utility
costs as a percentage of sales, partially offset by higher hourly
payroll costs and incentive compensation as well as higher
operating and corporate expenses resulting from higher advertising
and store supplies costs and increased legal fees.
Operating income increased 24.2% to $425.2 million compared with
$342.4 million in the same period last year and operating income
margin increased to 8.0% of sales in the current quarter from 6.8%
in last year’s quarter.
The Company's effective tax rate for the quarter was 32.4%
compared to 25.5% in the prior year period. The prior year’s third
quarter included a one-time tax benefit of $21.4 million, or $0.09
per share, related to a 1% decrease in North Carolina’s state tax
rate which decreased the deferred tax liability related to the
trade name intangible asset.
Net income compared to the prior year's third quarter increased
$68.3 million to $239.9 million and diluted earnings per share
increased 40.3% to $1.01 compared to $0.72 in the prior year’s
quarter.
During the quarter, the Company opened 169 stores, expanded or
relocated 23 stores, and closed six stores. Retail selling square
footage at quarter end was approximately 115.8 million square
feet.
First Nine Months
Results
Consolidated net sales increased 5.3% to $15.88 billion from
$15.08 billion in the same period last year. Enterprise same-store
sales increased 1.8% on a constant currency basis and were also
1.8% when adjusted to include the impact of Canadian currency
fluctuations. The same-store sales growth was driven by increases
in comparable transaction count and average ticket. Same-store
sales for the Dollar Tree banner increased 3.5%. Same-store sales
for the Family Dollar banner increased 0.3%.
Gross profit increased 7.3% to $4.92 billion from $4.59 billion
in the first nine months of 2016. As a percentage of sales, gross
margin increased 60 basis points to 31.0% from 30.4% in the prior
year period.
As a percentage of sales, selling, general and administrative
expenses increased to 23.2% from 23.0% in the same period last
year. The increase is the result of the $53.5 million Dollar
Express and Sycamore Partners receivable impairment. The impairment
charges are recorded as “Receivable impairment” in the accompanying
condensed consolidated income statements. Excluding the receivable
impairment, selling, general and administrative expenses improved
to 22.9% of sales.
Net income increased 17.4% to $674.2 million from $574.4 million
in the first nine months of 2016, and diluted earnings per share
increased 16.9% to $2.84, compared to $2.43 in the prior year’s
period. Excluding the $53.5 million receivable impairment, adjusted
diluted earnings per share increased 22.6% to $2.98.
Company Outlook
The Company estimates consolidated net sales for the fourth
quarter of 2017 to range from $6.32 billion to $6.43 billion, based
on a low single-digit increase in same-store sales for the combined
enterprise. Diluted earnings per share are estimated to be in the
range of $1.80 to $1.89.
Consolidated net sales for full-year fiscal 2017 are now
expected to range from $22.20 billion to $22.31 billion compared to
the Company’s previously expected range of $22.07 billion to $22.28
billion. This estimate is based on a low single-digit increase in
same-store sales and 3.7% square footage growth. The Company now
anticipates net income per diluted share for full-year fiscal 2017
will range between $4.64 and $4.73, compared to its previous
guidance of $4.44 to $4.60. This estimate includes $53.5 million,
or $0.14 per diluted share, of receivable impairment charges
incurred in 2017. Fiscal 2017 includes a 53rd week. The extra week,
in the fourth quarter, is expected to add $400 million to $430
million to sales and $0.19 to $0.22 to diluted earnings per share,
both of which are included in the guidance.
Philbin added, "Our stores and teams are well-prepared and
energized as we enter the fourth and final quarter of 2017. We are
confident in our ability to continue driving positive same-store
sales, through meeting our customers’ needs and wants; improving
enterprise operating margin; and delivering year-over-year earnings
per share growth. We believe we are well-positioned in the most
attractive sector in retail and will remain intensely focused on
delivering great value and convenience to our growing customer
base. Both banners are ready for the holiday season, and we have an
experienced leadership team, momentum in our business and a
continued focus on this transformational opportunity.”
Conference Call
Information
On Tuesday, November 21, 2017, the Company will host a
conference call to discuss its earnings results at 9:00 a.m.
Eastern Time. The telephone number for the call is 888-208-1814. A
recorded version of the call will be available until midnight
Tuesday, November 28, 2017 and may be accessed by dialing
888-203-1112. The access code is 4704612. A webcast of the call is
accessible through Dollar Tree's website and will remain online
through Monday, November 27, 2017.
Dollar Tree, a Fortune 200 Company, operated 14,744 stores
across 48 states and five Canadian provinces as of October 28,
2017. Stores operate under the brands of Dollar Tree, Family
Dollar, and Dollar Tree Canada. To learn more about the Company,
visit www.DollarTree.com.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release
contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements address future events, developments or results and
typically use words such as believe, anticipate, expect, intend,
plan, forecast, or estimate. For example, our forward-looking
statements include statements regarding fourth quarter 2017 and
full-year 2017 net sales, same-store sales, diluted earnings per
share, square footage growth, customer base, the impact of the
extra week in the current fiscal year, the benefits, results, and
effects of the merger with Family Dollar, including integration
plans and synergies, the collection of the receivable from Dollar
Express and Sycamore Partners and the related litigation, and
future financial and operating results and shareholder value, the
combined company’s plans, objectives, expectations (financial and
otherwise) and intentions for the 2017 holiday season and beyond.
These statements are subject to risks and uncertainties. For a
discussion of the risks, uncertainties and assumptions that could
affect our future events, developments or results, you should
carefully review the "Risk Factors," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" sections in our Annual Report on Form 10-K filed March
28, 2017, the quarterly report on Form 10-Q filed November 21,
2017, and other filings with the Securities and Exchange
Commission. We are not obligated to release publicly any revisions
to any forward-looking statements contained in this press release
to reflect events or circumstances occurring after the date of this
report and you should not expect us to do so.
DOLLAR TREE, INC.
Condensed Consolidated Income Statements (In millions,
except per share data) (Unaudited) 13 Weeks
Ended 39 Weeks Ended October 28, 2017 October
29, 2016 October 28, 2017 October 29, 2016
Net sales $ 5,316.6 $ 5,001.6 $ 15,884.9 $ 15,083.7 Cost of
sales 3,650.6 3,481.1 10,964.0 10,496.3 Gross profit 1,666.0
1,520.5 4,920.9 4,587.4 31.3 % 30.4 % 31.0 % 30.4 %
Selling, general & administrative
expenses, excluding Receivable impairment
1,240.8 1,178.1 3,633.9 3,469.1 23.3 % 23.6 % 22.9 % 23.0 %
Receivable impairment - - 53.5 - 0.0 % 0.0 % 0.3 % 0.0 %
Selling, general & administrative expenses 1,240.8 1,178.1
3,687.4 3,469.1 23.3 % 23.6 % 23.2 % 23.0 % Operating income
425.2 342.4 1,233.5 1,118.3 8.0 % 6.8 % 7.8 % 7.4 % Interest
expense, net 69.7 112.1 220.2 286.7 Other (income) expense, net 0.4
0.1 0.8 (0.1 ) Income before income taxes 355.1 230.2
1,012.5 831.7 6.7 % 4.6 % 6.4 % 5.5 % Income tax expense
115.2 58.6 338.3 257.3 Income tax rate 32.4 % 25.5 % 33.4 % 30.9 %
Net income (1) $ 239.9 $ 171.6 $ 674.2 $ 574.4 4.5 % 3.4 %
4.2 % 3.8 % Net earnings per share: Basic $ 1.01 $ 0.73 $
2.85 $ 2.44 Weighted average number of shares 236.9 235.8 236.7
235.6 Diluted (1) $ 1.01 $ 0.72 $ 2.84 $ 2.43 Weighted
average number of shares 237.8 236.9 237.5 236.7 (1)
Excluding the $53.5 million receivable impairment in the 39 weeks
ended October 28, 2017, Net income and Diluted earnings per share
for the 39 weeks ended October 28, 2017 were $707.4 million and
$2.98, respectively.
DOLLAR TREE, INC.
Segment Information (In millions, except store count)
(Unaudited)
13 Weeks
Ended 39 Weeks Ended October 28, 2017 October
29, 2016 October 28, 2017 October 29, 2016
Net sales: Dollar Tree $ 2,685.0 $ 2,466.9 $ 7,843.6 $
7,238.9 Family Dollar
2,631.6
2,534.7 8,041.3
7,844.8 Total net sales
$
5,316.6 $ 5,001.6
$ 15,884.9 $
15,083.7 Gross profit: Dollar
Tree $ 942.6 35.1 % $ 857.3 34.8 % $ 2,735.0 34.9 % $ 2,496.2 34.5
% Family Dollar
723.4 27.5
% 663.2 26.2
% 2,185.9 27.2
% 2,091.2 26.7
% Total gross profit
$
1,666.0 31.3 %
$ 1,520.5 30.4
% $ 4,920.9
31.0 % $
4,587.4 30.4 %
Operating income: Dollar Tree $ 317.3 11.8 % $ 286.0 11.6 %
$ 921.9 11.8 % $ 829.2 11.5 % Family Dollar
107.9 4.1 %
56.4 2.2 %
311.6 3.9 %
289.1 3.7 % Total
operating income
$ 425.2
8.0 % $ 342.4
6.8 % $
1,233.5 7.8 %
$ 1,118.3 7.4
%
13 Weeks Ended 39 Weeks Ended
October 28, 2017 October 29, 2016 October 28,
2017 October 29, 2016
DollarTree
Family
Dollar
Total
DollarTree
Family
Dollar
Total
DollarTree
Family
Dollar
Total
DollarTree
FamilyDollar
Total Store Count: Beginning 6,506 8,075
14,581 6,184 7,945 14,129 6,360 7,974 14,334 5,954 7,897 13,851 New
99 70 169 101 52 153 264 202 466 312 168 480 Rebanner (a) - - - 42
(30 ) 12 - - - 83 (84 ) (1 ) Closings
(1
) (5 )
(6 ) (7 )
(3 ) (10
) (20 )
(36 ) (56 )
(29 ) (17
) (46 ) Ending
6,604 8,140
14,744 6,320
7,964 14,284
6,604 8,140
14,744 6,320
7,964 14,284 Selling Square
Footage (in millions)
56.9
58.9 115.8
54.4 57.6
112.0 56.9
58.9 115.8 54.4
57.6 112.0
Growth Rate (Square Footage)
4.6 %
2.3 % 3.4 %
8.2 % -2.9
% 2.2 % 4.6
% 2.3 %
3.4 % 8.2 %
-2.9 % 2.2
%
(a) Stores are
included as rebanners when they close or open, respectively.
DOLLAR TREE, INC. Condensed Consolidated Balance
Sheets (In millions) (Unaudited)
October 28, January 28, October 29,
2017 2017 2016 Cash and cash
equivalents $ 400.1 $ 866.4 $ 733.8 Short-term investments - 4.0
4.0 Merchandise inventories, net 3,397.8 2,865.8 3,273.9 Other
current assets 174.7 201.8 330.7 Total current
assets 3,972.6 3,938.0 4,342.4 Property, plant and
equipment, net 3,178.9 3,115.8 3,176.3 Assets available for sale
8.6 9.0 11.6 Goodwill 5,024.3 5,023.5 5,022.9 Favorable lease
rights, net 398.0 468.6 493.8 Tradename intangible asset 3,100.0
3,100.0 3,100.0 Other intangible assets, net 4.9 5.1 5.2 Other
assets 42.9 41.6 42.8 Total assets $
15,730.2 $ 15,701.6 $ 16,195.0 Current portion of
long-term debt $ 165.9 $ 152.1 $ 145.8 Accounts payable 1,181.3
1,119.6 1,266.4 Other current liabilities 692.7 744.2 722.0 Income
taxes payable - 90.0 - Total current
liabilities 2,039.9 2,105.9 2,134.2 Long-term debt, net,
excluding current portion 5,557.0 6,169.7 6,938.0 Unfavorable lease
rights, net 105.7 124.0 130.2 Deferred tax liabilities, net 1,472.4
1,458.9 1,495.5 Income taxes payable, long-term 45.1 71.2 72.3
Other liabilities 393.6 382.4 377.1
Total liabilities 9,613.7 10,312.1 11,147.3
Shareholders' equity 6,116.5 5,389.5
5,047.7 Total liabilities and shareholders' equity $
15,730.2 $ 15,701.6 $ 16,195.0 The January 28, 2017
information was derived from the audited consolidated financial
statements as of that date.
DOLLAR TREE, INC.
Condensed Consolidated Statements of Cash Flows (In
millions) (Unaudited) 39 Weeks Ended October
28, October 29, 2017
2016 Cash flows from operating
activities: Net income $ 674.2 $ 574.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 454.6 481.8 Provision for deferred
taxes 15.8 (91.1 ) Amortization of debt discount and debt-issuance
costs 12.0 39.5 Receivable impairment 53.5 - Other non-cash
adjustments to net income 61.6 58.6 Changes in operating assets and
liabilities (679.1 ) (407.9 ) Total adjustments
(81.6 ) 80.9 Net cash provided by operating
activities 592.6 655.3 Cash
flows from investing activities: Capital expenditures (449.4 )
(451.5 ) Purchase of restricted investments - (36.1 ) Proceeds from
sale of restricted and unrestricted investments 4.0 118.1 Proceeds
from (payments for) fixed asset disposition (0.1 )
1.2 Net cash used in investing activities (445.5 )
(368.3 ) Cash flows from financing activities:
Principal payments for long-term debt (610.8 ) (3,258.5 ) Proceeds
from long-term debt, net of discount - 2,962.5 Debt-issuance costs
- (6.1 ) Repayments of revolving credit facility - (140.0 )
Proceeds from revolving credit facility - 140.0 Proceeds from stock
issued pursuant to stock-based compensation plans 24.4 33.3 Cash
paid for taxes on exercises/vesting of stock-based compensation
(27.2 ) (21.2 ) Net cash used in financing activities
(613.6 ) (290.0 ) Effect of exchange rate changes on
cash and cash equivalents 0.2 0.7 Net
decrease in cash and cash equivalents (466.3 ) (2.3 ) Cash and cash
equivalents at beginning of period 866.4 736.1
Cash and cash equivalents at end of period $ 400.1 $
733.8
DOLLAR TREE, INC. Reconciliation of
Non-GAAP Financial Measures (In millions, except per share
data) (Unaudited) From time-to-time, the
Company's financial results include certain financial measures not
derived in accordance with generally accepted accounting principles
("GAAP"). Non-GAAP financial measures should not be used as a
substitute for GAAP financial measures, or considered in isolation,
for the purposes of analyzing operating performance, financial
position or cash flows. However, the Company believes providing
additional information in the form of non-GAAP measures that
exclude the unusual, non-recurring expense outlined below is
beneficial to the users of its financial statements in evaluating
the Company's current operating results in relation to past
periods. The Company has included a reconciliation of this
information to the most comparable GAAP measures in the following
tables.
In the first quarter of 2017, the Company
evaluated the collectability of its divestiture-related receivable
from Dollar Express, which acquired the stores that the FTC
required the Company to divest. Based on a number of factors, the
Company determined the outstanding balance of $50.9 million was not
recoverable and recorded an impairment charge to write down the
receivable to zero.
During the second quarter of 2017, Dollar
Express completed the liquidation of its stores and continued to be
in default of its obligations to the Company, including its
obligation to pay the receivable. An additional $2.6 million was
recorded as a receivable and impaired in the second quarter of
2017. The $53.5 million total impairment charges for the 39 weeks
ended October 28, 2017, are recorded as “Receivable impairment” in
the accompanying condensed consolidated income statements.
Reconciliation of Adjusted Net Income: 39 Weeks
Ended October 28, 2017 Net income (GAAP) $ 674.2
SG&A adjustment: Receivable impairment 53.5 Provision for
income taxes on adjustment (20.3 ) Adjusted Net income
(Non-GAAP) $ 707.4
Reconciliation of
Adjusted EPS: 39 Weeks Ended October 28, 2017
Diluted earnings per share (GAAP) $ 2.84 Adjustment, net of tax
0.14 Adjusted EPS (Non-GAAP) $ 2.98
Reconciliation of Adjusted Operating Income: 39
Weeks Ended October 28, 2017 Operating income (GAAP) $
1,233.5 SG&A adjustment: Receivable impairment 53.5
Adjusted Operating income (Non-GAAP) $ 1,287.0
Reconciliation of Adjusted Operating Income - Family
Dollar segment: 39 Weeks Ended October 28, 2017
Operating income (GAAP) $ 311.6 SG&A adjustment: Receivable
impairment 53.5 Adjusted Operating income (Non-GAAP)
$ 365.1
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171121005481/en/
Dollar Tree, Inc.Randy Guiler, 757-321-5284Vice President,
Investor Relationswww.DollarTree.comDLTR-E
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