Dollar Tree sales momentum continues with solid Q4 results

In the midst of a transformation that will take the retailer to possible new heights in 2024, Dollar Tree reported solid fourth quarter results in 2022. The company reported same-store sales growth of 8.7% at Dollar Tree and 5.8% at Family Dollar.

Dollar Tree is currently upgrading its network. During FY 2022, 464 stores were opened (vs. 205 that were closed) and 796 units were renovated while retail selling square footage jumped 2.5% to about 132.1 million square feet. Dollar Tree’s Plus offering was expanded to another 1,805 stores. In the fourth quarter, 123 new stores were put into action and 112 renovations were completed.

“Our sales performance shows that our third-quarter sales momentum continued into the fourth quarter,” Dollar Tree Chairman and CEO Rick Dreiling said. “We are committed to driving further store productivity as we focus on developing our people, tools and technology to fuel our accelerated growth, while simplifying our operations, improving our supply chain and innovating our merchandising strategy to better support our associates and to better serve our shoppers.”

The Dollar Tree outlook is not all rosy, though. The company is expecting gross and operating margins to decline during the first half of 2023, and Dreiling said, “our fiscal 2023 outlook assumes only minimal benefit from our investments.” However, 2024 looks strong.

Related:Dollar Tree sees inflation cut both ways

News of positive fourth quarter growth follows a third quarter that was equally impressive. Third quarter comparable-store consumables sales were up 9.3% at Dollar Tree and 4.7% at Family Dollar. At the time of the third quarter financial reveal, Dollar Tree officials said the focus was on improving square footage service. More coolers were installed, private label assortments were expanded and the company was rethinking the product mix in several categories.

Gross profit increased 11.6% to $2.39 billion in the fourth quarter and gross margin improved 70 basis points to 30.9%. The product mix shift to lower-margin consumable products was partially behind the profit boost, as was higher initial mark-on and lower freight costs.

Dollar Tree’s "break the buck" movement, where the average price of goods increased to $1.25, also produced interesting results in quarter four. Stores that fully lapped the rollout of "break the buck" produced just a 3% same-store sales increase, while those stores that had not lapped the price increase saw same-store sales increase 11.6%

“We are on an accelerating journey of change,” Dreiling claimed. “We have undergone a significant amount of change in less than one year, and I believe we have the team in place to capture the opportunity ahead of us.

Related:Dollar Tree ‘break the buck’ pricing to go chainwide

“We are confident that the accelerated investments outlined will transform our company, will enable and propel us through years of accelerated growth and margin improvement, and will enhance the company’s ability to achieve substantially higher long-term earnings power. Dollar Tree has a bright future and I am energized to be a part of this transformational journey.”