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Key Takeaways from Dollar Tree’s (DLTR) First Quarter 2024 Earnings Report

Shares of Dollar Tree, Inc. (NASDAQ: DLTR) shares fell more than 5% on Wednesday after the company reported mixed results for the first quarter of 2024 and announced it is considering the sale of its Family Dollar business. The stock is down 19% this year. These are the key takeaways from the first quarter earnings report:

Profit is correct, turnover in line

In the first quarter of 2024, Dollar Tree’s consolidated net sales rose 4.2% year over year to $7.63 billion, matching consensus estimates. Same-store sales at companies increased by 1%. GAAP earnings per share grew 2.2% to $1.38. Adjusted earnings per share fell 2.7% to $1.43, but beat expectations of $1.42.

Segment performance

The company’s Dollar Tree segment posted net sales of $4.2 billion in the first quarter, up 5% year over year. Same-store sales increased 1.7%, driven by a 2.8% increase in traffic, partially offset by a 1.1% decline in average ticket volumes. Family Dollar sales rose 2% to $3.5 billion. Same-store sales rose 0.1%, helped by a 0.9% increase in traffic, offset by a 0.8% decline in average ticket counts.

As mentioned on the quarterly conference call, the decline in average ticket reflected weak discretionary demand. An early Easter and harsh weather conditions negatively impacted discretionary demand during the quarter. Discretionary shares fell 3.2% for the Dollar Tree banner and 4.7% for the Family Dollar banner in the first quarter.

Family Dollar Review

The biggest highlight of the report was Dollar Tree’s announcement that it was exploring strategic alternatives for its Family Dollar division, including a sale or spinoff. Last year, the company had begun a review of the Family Dollar portfolio to close underperforming stores and invest in transforming the remaining stores to drive growth.

At the same time, the discount store chain has worked to drive growth in the Dollar Tree segment through multi-price promotions, new store openings and profitable transactions. The unique transformation and growth acceleration needs of both banners led to the decision to explore strategic alternatives to Family Dollar.

Dollar Tree plans to close approximately 600 Family Dollar stores in the first half of 2024, with an additional 370 closing at lease end over the next few years.

Loss of Marietta distribution center

In late April, Dollar Tree suffered significant damage to its distribution center in Marietta, Oklahoma from a tornado, rendering the facility and inventory unsalvageable. It estimates the total loss from this incident at $117 million, of which $70 million is related to inventory and $47 million is related to property and equipment.

Outlook

For the second quarter of 2024, Dollar Tree expects consolidated net sales of $7.3-7.6 billion. Comparable sales growth for the company is expected in the low single digits. Same-store sales are expected to grow 2-4% for the Dollar Tree segment and remain at around 2%. just before the Family Dollar segment. Adjusted earnings per share are expected to be $1.00-1.10. The second quarter guidance includes approximately $0.10 in costs related to the loss of the Marietta center.

For the full year 2024, consolidated sales are expected to be $31 billion to $32 billion. The company expects comparable sales growth for businesses in the low to mid single digits, with mid single digit growth in the Dollar Tree segment and low single digit growth in the Family Dollar segment. Adjusted earnings per share are expected to be $6.50-7.00. The full year outlook reflects approximately $0.20-0.30 in costs related to Marietta.