Discount retailer Dollar Tree's 1st-quarter net income up 15 per cent on higher sales, margins

RICHMOND, Va. – Discount retailer Dollar Tree Inc. said Thursday that its net income increased 15 per cent in the first quarter as consumers spent more at its stores, which sell goods for $1 or less.

The results beat Wall Street expectations, and its shares rose almost 5 per cent in morning trading.

Dollar stores offer a wide variety of products, from beach toys to vitamins. They have done well throughout the recession and its aftermath, attracting budget-conscious customers with low prices. They’ve also promoted themselves as easy to navigate and get to, because they’re much smaller than big-box stores like Wal-Mart and Target, and often have more locations in cities.

CEO Bob Sasser said he believes Dollar Tree is “more relevant than ever” as consumers’ economic concerns persist and they are burdened with higher taxes, high unemployment and stubborn gas prices.

The Chesapeake, Va.-based retailer reported earnings of $133.5 million, or 59 cents per share, for the period ended May 4, up from $116.1 million, or 50 cents per share, a year ago.

Analysts surveyed by FactSet expected lower earnings of 57 cents per share. Its shares rose $2.39, or 4.9 per cent, to $50.76 in morning trading.

Dollar Tree says revenue increased 8 per cent to $1.87 billion, matching analyst expectations. The top-performing categories during the quarter included stationary, candy, party supplies and health care products, in addition to its Valentine’s Day and Easter holiday offerings. The company’s gross margin — the amount of each dollar in revenue it keeps — increased to 35.2 per cent from 35 per cent a year earlier.

Revenue at stores open at least one year rose 2 per cent. That comparison is a key gauge of a retailer’s health because it excludes stores that recently opened or closed.

The company opened 94 stores, closed two, and expanded or relocated 16 during the quarter. It operates more than 4,760 stores in the U.S. and Canada.

Dollar Tree said it expects profit of 52 cents to 57 cents per share on revenue between $1.81 billion and $1.86 billion in the second quarter. Analysts expect 57 cents per share on revenue of $1.86 billion.

The company also raised its full-year earnings forecast to a range of $2.61 to $2.77 per share. Analysts expect $2.78 per share.


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