Dollar Tree Posts 9.2% Comps

MARK HAMSTRA

CHESAPEAKE, Va. — Dollar Tree here saw its stock reach a 52-week high last week after the dollar-store chain posted a 38.5% increase in first-quarter net income, a 9.2% comparable-store sales gain and issued a positive outlook for the rest of the year.

The dollar-store chain said profits totaled $60.4 million on a sales increase of 14.2%, to $1.2 billion. It increased its sales projection for the year to $5.05 billion to $5.15 billion, up from a previous range of $4.96 billion to $5.09 billion.

The company said operating margin rose 150 basis points for the quarter to 8.1%, driven by a 70 basis-point gain in gross margin and an 80 basis-point reduction in selling, general and administrative expenses.

Karen Short, an analyst with Friedman, Billings, Ramsey & Co., New York, noted that the comp-store number was driven by increases in traffic, as the average ticket was down for the quarter.

“Lower gas prices could be contributing to the strong traffic as consumers increase shopping frequency,” she said.

She also noted that gross margin gains from lower diesel costs and shrink containment were partially offset by the higher mix of consumables — up 220 basis points as a percentage of sales over last year.

Dollar Tree is continuing to rapidly roll out freezers and coolers, with 1,203 of its 3,667 stores now fitted with refrigeration units and another 54 slated by year-end. It also plans to open 210 new Dollar Tree stores and 25 Deal$ stores this year.