Categories Analysis, Retail

Main takeaways from Dollar Tree’s (DLTR) Q1 2024 earnings report

Adjusted EPS is expected to be $6.50-7.00 in FY2024

Shares of Dollar Tree, Inc. (NASDAQ: DLTR) fell over 5% on Wednesday after the company delivered mixed results for the first quarter of 2024 and announced that it is considering the sale of its Family Dollar business. The stock has dropped 19% year-to-date. Here are the main takeaways from the Q1 earnings report:

Earnings beat, sales in-line

In Q1 2024, Dollar Tree’s consolidated net sales increased 4.2% year-over-year to $7.63 billion, matching consensus estimates. Enterprise same-store sales rose 1%. GAAP EPS grew 2.2% to $1.38. Adjusted EPS fell 2.7% to $1.43 but surpassed projections of $1.42.

Segment performance

The company’s Dollar Tree segment recorded net sales of $4.2 billion in the first quarter, which was up 5% year-over-year. Same-store sales increased 1.7%, driven by a 2.8% rise in traffic, partly offset by a 1.1% drop in average ticket. Family Dollar sales rose 2% to $3.5 billion. Same-store sales inched up 0.1%, helped by a 0.9% rise in traffic, offset by a 0.8% fall in average ticket.

As stated on the quarterly conference call, the declines in average ticket reflected weak discretionary demand. An early Easter and harsh weather negatively impacted discretionary demand during the quarter. Discretionary comps decreased 3.2% for the Dollar Tree banner and 4.7% for the Family Dollar banner in Q1.

Family Dollar review

The biggest highlight of the report was Dollar Tree’s announcement that it was exploring strategic alternatives for its Family Dollar division, which could include a sale or spin-off. Last year, the company had started a review of the Family Dollar portfolio in order to close down underperforming stores and invest in transforming the remaining stores to drive growth.

At the same time, the discount store chain has been working on driving growth in its Dollar Tree segment through multi-price offerings, new store openings, and accretive transactions. The unique transformation and growth acceleration needs of both the banners led to the decision to explore strategic alternatives for Family Dollar.

Dollar Tree plans to close around 600 Family Dollar stores in the first half of 2024, with an additional 370 to be closed over the next several years at the end of their lease terms.

Marietta distribution center loss

At the end of April, Dollar Tree sustained significant damage to its distribution center in Marietta, Oklahoma from a tornado, rendering the facility and inventory non-salvageable. It estimates the total loss from this incident to be $117 million, with $70 million related to inventory and $47 million related to property and equipment.

Outlook

For the second quarter of 2024, Dollar Tree expects consolidated net sales of $7.3-7.6 billion. Comparable sales growth for the enterprise is expected in the low single digits. Same-store sales are expected to grow 2-4% for the Dollar Tree segment and remain approx. flat for the Family Dollar segment. Adjusted EPS is expected to be $1.00-1.10. The Q2 outlook includes approx. $0.10 of costs related to the Marietta center loss.

For the full year of 2024, consolidated sales are expected to be $31-32 billion. The company expects enterprise comparable sales growth in the low to mid-single digits, with mid-single digits growth in the Dollar Tree segment and low-single digits growth in the Family Dollar segment. Adjusted EPS is expected to be $6.50-7.00. The full-year outlook reflects approx. $0.20-0.30 of costs related to Marietta.

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