Dollar Tree Inc. (NASDAQ: DLTR) reported a 9% dip in earnings for the third quarter of 2019 due to higher costs and expenses despite a 4% rise in the net sales. The bottom line missed analysts’ expectations while the top line exceeded consensus estimates.
Net income fell by 9% to $255.8 million or $1.08 per share. The results were hurt by operating and corporate expenses related to the consolidation of store support centers and costs related to asset disposals for closed stores.
Net sales rose by 4% to $5.75 billion. The same-store sales at enterprise increased by 2.5%. Same-store sales for the Dollar Tree segment increased by 2.8%. Same-store sales for the Family Dollar segment rose 2.3%. The comps results at both segments were driven by increases in both average ticket and transaction count.
Looking ahead into the fourth quarter, the company expects net sales in the range of $6.33 billion to $6.44 billion, based on a low single-digit increase in same-store sales for the enterprise. The earnings including tariff costs are anticipated to be in the range of $1.70 to $1.80 per share.
The fourth-quarter forecast represents the expected effects of section 301 tariffs, additional pressure on merchandise margin based on lower-margin consumables, payroll cost pressure in distribution centers, and increased run rates for repairs and maintenance, utilities and depreciation.
For the full year 2019, the company tightened its net sales outlook to the range of $23.62-23.74 billion from the prior range of $23.57-23.79 billion. This estimate is based on a low single-digit increase in same-store sales and 1.1% selling square footage growth. The earnings guidance is lowered to the range of $4.66-4.76 from the previous range of $4.90-5.11.
During the third quarter, the company opened 165 new stores, expanded or relocated 15 stores, and closed 42 stores. Also, the company opened 39 Dollar Tree stores that were re-bannered from Family Dollar and completed 247 renovations to the Family Dollar H2 format. Retail selling square footage at quarter-end was about 121 million square feet.
The company plans for more than 1,000 Family Dollar H2 renovations for fiscal 2020 and is increasing its focus on operating margin performance with several critical initiatives now behind it, including the acceleration in-store optimization initiatives and the consolidation of its store support centers.
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