DLTR Dollar Tree Inc

By Sarah Nassauer 

Dollar-store chains Dollar General Corp. and Dollar Tree Inc. said Thursday sales rose during the most recent quarter and that executives are working to manage the cost of new tariffs on Chinese goods.

Comparable sales at Dollar General, which has over 15,800 stores mostly outside of big cities, rose 4% during the quarter ended Aug. 2. At Dollar Tree, which owns both the Dollar Tree and Family Dollar chains, comparable sales rose 2.4% during the quarter ended Aug. 3.

Executives at both chains said their core low- and middle-income shoppers continue to spend amid low unemployment and rising wages.

But Dollar Tree reported lower profits as expenses rose, flattening its shares as rival Dollar General share's rose over 10% in morning trading. Some investors also noted Dollar General's higher sales lift, leading some analysts to say the more-rural-focused chain is gaining ground on Dollar Tree.

There are signs "that Dollar Tree is treading water rather than proactively taking market share in the same way as its rival is doing," said Neil Saunders, managing director of GlobalData Retail.

Dollar Tree has worked to turn around its Family Dollar chain after purchasing the then-struggling dollar retailer for nearly $9 billion in cash-and-stock four years ago. It has closed hundreds of Family Dollars and invested heavily to improve others. Those efforts are starting to bear fruit, though they have added to expenses, Dollar Tree executives said on a call with analysts Thursday.

Executives blamed a global helium shortage for some sales weakness at the Dollar Tree chain. Lost balloon sales during Valentine's Day, Mother's Day and Father's Day, along with gradations reduced comparable sales by 0.4%, said Gary Philbin, chief executive at Dollar Tree, on a call with analysts.

Dollar Tree reported a profit of $180.3 million, or 76 cents a share, down from $273.9 million, or $1.15 a share, in the comparable quarter last year.

Goodlettsville, Tenn.-based Dollar General reported a profit of $426.6 million, or $1.65 a share, up from $407.2 million, or $1.52 a share, in the comparable quarter last year.

Each chain raised profit estimates for the full year and said they are working to mitigate Chinese tariff-related cost increases. Dollar Tree said it expects net income per share to fall between $4.90 and $5.11 for the full fiscal year, up from a previous estimate of $4.77 to $5.07. Dollar General said annual earnings per share will fall in the range of $6.36 to $6.51, up from a previous estimate of $6.30 to $6.50.

"We've negotiated price concessions, canceled orders, modified specs, evolved product mix and diversified vendors. We are now taking actions to mitigate the recently announced tariff increases and will continue to assess the future impact of these tariffs," said Dollar Tree's Mr. Philbin.

Overall, both chains -- which are focused on value and often sell smaller amounts of products at lower dollar amounts than big-box competitors -- have fared well as shoppers search out value and convenience even as more shopping shifts online. In recent weeks Walmart Inc., Target Corp. and T.J. Maxx parent TJX Cos. have reported strong sales growth, while Macy's Inc., Nordstrom Inc. and other middle-market mall-based retailers continue to struggle.

Dollar Tree and Family Dollar were among the three dollar-store chains that reached a collective $1.2 million settlement on Monday with the New York attorney general's office after undercover investigators found expired over-the-counter drugs and obsolete motor oil on store shelves in the state. The two chains settled for $100,000.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

August 29, 2019 14:03 ET (18:03 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.