Dollar Tree’s CFO is resigning

After a string of poor-performing quarters, Chesapeake, Va.-based Dollar Tree released promising results in the third quarter on Wednesday, beating market expectations in both sales and profit despite losing CEO Rick Dreiling in November. However, another high-ranking official announced his departure during the earnings call—CFO Jeff Davis.

Consolidated net sales increased by 3.5% year over year to $7.56 billion. Enterprise same-store net sales rose 1.8%, driven by a 1.6% increase in traffic and a 0.2% increase in the average ticket. Dollar Tree’s same-store net sales also increased by 1.8% year over year, thanks to a 1.5% rise in traffic and a 0.3% increase in the average ticket. Family Dollar’s same-store net sales improved by 1.9%, with a 1.8% boost in traffic and a flat average ticket.

Gross profit grew by 7.6% year over year to $2.34 billion, and gross margin expanded by 120 basis points to 30.9%.

Same-store sales of food and beverages rose 6.2% during the period, on top of more than 11% growth during the year-ago period. The sales mix has shifted toward consumables by more than 200 basis points in each of the last four quarters, the retailer reported. Snacks, beverages, and candy were the best-performing categories.

“This is clearly a step in the right direction,” said interim CEO Michael Creedon during the call. “Dollar Tree’s comp [comparable sales] improved sequentially over Q2, driven by market share gains and positive trends in both traffic and ticket. Family Dollar’s comp also improved sequentially, marking its first positive discretionary comp since 2022.”

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This was also Dollar Tree’s first positive ticket comp since Q4 of 2022, according to Creedon.

Dollar Tree’s stock price was up over 2.51% at midday on Wednesday.

Creedon announced during the call that CFO Jeff Davis was stepping down. Dollar Tree has not revealed Davis’ replacement. 

“I’m proud of what we’ve accomplished together, and I’m confident in this management team and the business strategies that are in place,” Davis said during the earnings call. “I remain energized about the future possibilities for both Dollar Tree and Family Dollar.”

Dollar Tree’s multi-price rollout has been the main focus in 2024. Creedon mentioned that another 720 stores were converted to the 3.0 format in the third quarter, bringing the total number of converted stores to about 2,300. Notably, the converted stores accounted for approximately 30% of Dollar Tree’s total net sales in Q3.

Dollar Tree expects to convert an additional 300 to 400 stores to the 3.0 format by the end of Q4. The 3.0 format is the retailer’s multi-price strategy, featuring over 300 items priced from $1.50 to $7.

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Including new store openings, such as 567 in the third quarter, Dollar Tree will have around 3,000 multi-price 3.0 stores open and operating by year-end, including most of the former 99 Cents Only stores purchased earlier in the year.

Family Dollar’s renovation and store conversion program is also generating positive results. Since it began in 2022, over 1,500 projects have been completed. The new formats feature customized product assortments, additional coolers, and expanded seasonal offerings to meet the needs of a diverse customer base.

Dollar Tree is continuing its formal review of strategic alternatives for the Family Dollar brand. Creedon stated during the call that, while “good progress” has been made, no set deadline or definitive timeline for completion exists.

The start of the fourth quarter, however, has been sluggish for the discount retailer. With Thanksgiving falling in the fourth week of November, customers did not start their Thanksgiving shopping until later in the month, according to Creedon. There are also five fewer shopping days between Thanksgiving and Christmas this year. However, with Christmas falling on a Wednesday rather than a Monday in 2023, Creedon believes it will help extend the selling season.

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“All of this was factored into our plans, and we feel good about our position leading into the Christmas home stretch,” said Creedon.

Dollar Tree sees customers buying for need and buying closer to need. Creedon used foil pan purchases during Thanksgiving as an example. Foil pan sales spiked during the week of Thanksgiving, showing shoppers were buying closer to need.

For the fourth quarter, Dollar Tree expects consolidated net sales to range from $8.1 billion to $8.3 billion, based on comparable store net sales growth in the low single digits.

For the full fiscal year, the discount retailer updated its consolidated net sales outlook range to $30.7 billion to $30.9 billion and expects to deliver comparable store net sales growth in the low single digits.