Dollar Tree rebounds in Q2

Dollar Tree saw increased same-store sales gains, as well as increased store traffic in its second quarter — wins which the company attributes to a new strategy. 

That new strategy, which the company has labeled “Next Level,” focuses on expanded value assortment, operations improvements, and new developments in the supply chain and information technology. 

Consolidated net sales increased by 8.2% year-over-year to $7.32 billion, enterprise same-store sales were up 6.9%, with Dollar Tree same-store sales coming in at a 7.8% improvement vs. the second quarter 2022, and traffic was up 9.6%. Family Dollar registered a 5.8% same-store increase year-over-year.

Gross profit in the second quarter was up slightly, 0.5% at $2.13 billion, and net income was $200.4 million.

The company also opened 118 new stores, expanded multi-price Plus offering to 715 Dollar Tree stores, and added $3, $4, and $5 frozen and refrigerated items to 1,645 Dollar Trees during the three-month span. Renovation projects were completed at 276 Family Dollar stores.

“In the second quarter we continued to generate strong top-line results across both segments,” said Jeff Davis, chief financial officer with Dollar Tree. “While factors like sales mix and elevated shrink continue to pressure margins, we generated a year-over-year increase in gross profit dollars.”

Related:Dollar Tree looking to expand $3-$5 offerings

It was a nice pivot from a first quarter that produced mixed financial results. Dollar Tree reported Q1 net income of $299 million, which was far below Q1 2022’s mark of $536 million. Total revenue was projected to be $7.28 billion, and the actual results were just $7.3 billion.

The soft quarter, however, has not dampened Dollar Tree’s outlook for the year. Through the first 26 weeks, consolidated net sales have increased 7.1% year-over-year to $14.64 billion, enterprise same sales are up 5.9%, and Dollar Tree same-store sales are 5.6% better than the first 26 weeks of 2022. Family Dollar same-store sales have gone up 6.2%.

The company has upped its projection for consolidated net sales for FY 2023, which could be as high as $30.9 billion. Comparable store sales are expected to be in the mid-single digits.

“We are bringing in the high and low end of our outlook range for diluted EPS to better reflect the balance of opportunities and risks we see in the current operating environment,” said Davis. “Our outlook takes into consideration several factors including shifting sales mix, unfavorable shrink trends, higher diesel fuel prices, incremental savings on ocean freight, and our improved sales performance.”