Dollar Tree (DLTR) vs. Dollar General (DG): How the discount retailers fared in Q2

Discount retailers Dollar Tree Inc. (NASDAQ: DLTR) and Dollar General Corporation (NYSE: DG) have fared relatively well in this challenging economic environment. Amid high levels of inflation, customers have turned to these discount store chains in search of better value. Here’s a look at the performance of these two retailers during their most recent quarter:

Revenues

In the second quarter of 2022, Dollar Tree’s net sales increased 6.7% year-over-year to $6.77 billion while its same-store sales rose 4.9%. Comparable store sales at its Dollar Tree segment rose 7.5%, helped by a 14.2% increase in average ticket. Comp sales at the Family Dollar segment increased 2% with a 3.3% increase in average ticket.

Dollar General’s sales in Q2 2022 increased 9% to $9.4 billion while same-store sales increased 4.6%. Same-store sales growth was driven by increases in average transaction amount and customer traffic.

Both Dollar Tree and Dollar General saw strong performance within the consumables category as customers spent more on essential items amid the ongoing inflation. The discretionary or non-consumables category took a back seat in general but Dollar Tree managed to post a 6.7% comps growth in discretionary in its namesake banner. Dollar Tree’s Family Dollar banner saw a 4.1% decline in discretionary comps while Dollar General witnessed a decline in its combined non-consumables category.

Profits and margins

Dollar Tree’s net income increased 27% to nearly $360 million while EPS gained 30% to $1.60 in Q2 versus last year. Gross profit rose 14.2% to $2.12 billion while gross margin improved 200 basis points to 31.4%. Operating income increased 25.7% to $505.4 million while operating margin improved 120 basis points to 7.5%.

Dollar General’s net income increased 6.4% YoY to $678 million while EPS increased 10.8% to $2.98 in Q2. Operating profit increased 7.5% to $913.4 million. Gross margin improved by 69 basis points to 32.3%. Both discount retailers expect to see pressure on margins as a higher portion of sales come from the low-margin consumables category.

Cash position

Dollar Tree had cash, cash equivalents and restricted cash of $742.4 million at the end of the first half of 2022. Operating cash flow amounted to $520.6 million. Dollar General had $326.2 million in cash and cash equivalents at the end of the first half of 2022. Operating cash flow amounted to $948 million.

Outlook

For the full year of 2022, Dollar Tree expects consolidated net sales to range between $27.85-28.10 billion and EPS to range between $7.10-7.40. Comparable store sales are expected to increase in the mid-single digits for the year. Dollar General expects net sales to grow 11% and same-store sales to grow 4-4.5% in FY2022. EPS is expected to grow 12-14% for the year.

Shares of Dollar Tree have gained 56% over the past 12 months while Dollar General’s stock has gained 11% over the same period.

Click here to read the full transcripts of Dollar Tree and Dollar General’s Q2 2022 earnings conference calls