Dollar Tree rights the ship in Q1

After announcing it would close 1,000 stores during its last earnings call, Dollar Tree has since stabilized and produced a promising first quarter for 2024.

Consolidated net sales increased 4.2% year over year to $7.63 billion despite a soft Easter season at the retailer. Enterprise same-store net sales increased 1.0%, driven by a 2.1% increase in traffic while offset by a 1.1% decrease in average tickets. Same-store net sales were up 1.7% compared to Q1 2023.

Family Dollar's same-store net sales increased 0.1% year over year. Dollar Tree said during the call it has initiated a formal review of strategic alternatives for the Family Dollar business segment, which could include a potential sale, spin-off, or other disposition of the business.

The stock market, however, has not been responding favorably, as Dollar Tree’s stock price was down over 5% in the early afternoon.

“We are pleased to deliver first-quarter adjusted EPS results that are towards the high end of our outlook range,” said Rick Dreiling, chairman and CEO of Dollar Tree, during the earnings call. “We remained focused on rapidly rolling out our next generation of multi-price stores and at Family Dollar we are taking the steps necessary to position the business for long-term success.”

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In quarter one, Dollar Tree converted 926 stores to the in-line multi-price format mentioned by Dreiling. The retailer also opened 116 new Dollar Tree stores and 41 new Family Dollar stores.

Gross profit went up 5.3% year over year to $2.35 billion and gross margin expanded 30 basis points to 30.8%. Gross margin expansion was driven primarily by a decrease in freight costs.

During its fourth-quarter earnings call, the company also announced that it would offer products that cost as much as $7. In 2023, Dollar Tree made the move to elevate prices to $3 and $5 while still offering items at $1.25.

Dollar Tree also provided an update on its Marietta, Okla., distribution center, which was destroyed by a tornado on April 28. The inventory and facility were completely lost, and the company incurred losses of $117 million — $70 million in damaged inventory and $47 million in property and equipment damage. Dollar Tree believes the losses will be fully offset by insurance recoveries.

During the fourth quarter of 2023 Dollar Tree announced it had initiated a comprehensive store portfolio optimization review which involved identifying stores for closure, relocation, or re-bannering based on an evaluation of current market conditions and individual store performance, etc. The retailer has already closed 550 stores by the end of the first quarter and expects to shutter another 150 locations by the end of the fiscal year.

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As for projections for FY 2024, Dollar Tree is holding firm on its expectations. Full-year consolidated net sales growth should be in the low to mid-single digits, and consolidated net sales should fall in the $31 billion to $32 billion range.

For the second quarter, consolidated net sales are projected to be between $7.3 billion and $7.6 billion based on comparable net sales growth in the low single digits.

Last week, Dollar Tree said it would be eliminating 54 corporate workers. The company reported a net loss of $1.71 billion for the 14-week fourth quarter and a net loss of $998.4 million for fiscal year 2023.

At the same time it broke the news of the layoffs, Dollar Tree acquired the designation rights for 170 leases of 99 Cents Only Stores. The locations are in Arizona, California, Nevada, and Texas. 99 Cents Only Stores filed for bankruptcy in early April and set a goal of closing all its 371 stores by May 31.