Bullish View
In what could be a move to retain the current sales momentum beyond the COVID era, the management will be expanding the Dollar Tree Plus offering to about 500 stores this year. In the early part of the second half, the company opened 127 net new stores, encouraged by the steady uptick in sales. The other growth strategies include initiatives to create awareness and transition the business from consumer goods to higher-priced discretionary items.
Unique Model
Being a discount retailer, the company often beats operational headwinds by leveraging the flexibility offered by the combination of Dollar Tree and Family Dollar — its fixed-price and variable-price business segments respectively. Recent efforts to optimize the store network, as part of a portfolio restructuring program, paid off when market conditions turned hostile soon after the virus outbreak. Plans are afoot to renovate around 1,250 Family Dollar stores this year, after remodeling several stores to the H2 format.
Walmart sees fresh wave of panic buying as COVID curbs return
We are seeing greater sales of seasonal product as it hits our stores. Customers are buying ahead and not waiting until the last minute. This is resulting in better sell-through and reduced markdown exposure. We will continue to develop new strategic store formats, so we are able to better serve our customers while improving store productivity, margins, and returns. We want formats that utilize the best of both brands to serve customers in all types of geographic markets. This will be a story of evolution, change, and improvement.
Mike Witynski, chief executive officer of Dollar Tree
Q3 Numbers Beat
In the October-quarter, adjusted earnings advanced 29% from the year-ago period to $1.39 per share. Driving the bottom-line growth, total sales rose by 7% to $6.2 billion, reflecting strong comparable sales that grew at the fastest pace in more than two years. Margins got a boost from bigger prices and improved cost structure, which were partially offset by higher distribution costs including COVID-related payroll costs.
Read manage met/analysts’ comments on Dollar Tree’s Q3 results
Shares of the company this week traded close to the record highs seen more than a year ago, continuing the recovery from last year’s COVID-induced slump. They have gained about 7% in the past six months and traded slightly above $107 on Tuesday. However, the stock lost some momentum last week and underperformed the market since then.