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Dollar Store Merchandise was Last modified: July 12, 2017;
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Dollar Tree profit beats estimates

NEW YORK (Reuters) - Dollar Tree Inc (DLTR.O) said on Wednesday its quarterly profit rose more than 14 percent, beating Wall Street estimates, as shoppers headed to its stores in search of low prices on food and health care items.

The retailer, which sells most of its merchandise for $1, said that customers are "trading down" from other retailers and coming to its stores for bargains on cleaning supplies or beauty supplies to offset soaring gasoline prices.

But Dollar Tree cautioned that its margins will be under pressure this year as sharply higher diesel prices increase its transportation costs and gasoline prices strain shoppers' wallets.

"We still face an uncertain economy with many pressures on the consumer," said Kathleen Mallas, its controller, on a conference call. "Fuel and energy are at an all-time high and rising. We anticipate this will impact our freight and utility costs, and may also dampen customer activity in future periods."

Dollar Tree reported net income of $43.6 million, or 48 cents per share, for the first quarter ended May 3, up from $38.1 million, or 38 cents per share, a year earlier.

Analysts, on average, had expected 42 cents per share, according to Reuters Estimates.

Earlier this month, Dollar Tree said quarterly sales rose almost 8 percent to $1.05 billion. That was above its own forecast range of $1.01 billion to $1.04 billion.

Dollar Tree, which operates 3,474 stores that sell everything from food to party supplies, caters to lower-income shoppers, who have been hit hard by rising food and fuel costs and the slumping U.S. housing market.

Its sales at stores open at least a year, a key retail metric known as same-store sales, rose 2.1 percent in the quarter, boosted by a 2 percent rise in store traffic.

"Record high fuel prices, declining home values and tighter credit are putting pressure on family budgets at all levels," said Chief Executive Bob Sasser, adding that the tough environment is bringing more shoppers into its stores.

TAX REBATE BOOST

Goldman Sachs analyst Adrianne Shapira said Dollar Tree has "outperformed the broader retail group as its value offering has become a destination in today's challenging macro backdrop." She said the retailer could get a boost from the tax rebate checks being sent to U.S. consumers as part of the government's 2008 $152 billion economic stimulus plan.

"We could see a near-term lift from fiscal stimulus checks -- it's hitting target Dollar Tree customers and Dollar Tree is aggressively marketing to gain critical share of spend over the next few months," she wrote in a research note.

For the second quarter, Dollar Tree expects sales of $1.05 billion to $1.08 billion, with sales at stores open at least a year rising at a low single-digit percentage rate. Analysts, on average, had forecast sales of $1.04 billion.

The company forecast second-quarter earnings per share at 33 cents to 36 cents. Analysts on average were expecting 36 cents.

Dollar Tree shares were up $2.10, or 6.2 percent, at $35.88 in afternoon Nasdaq trading.

 
 

 

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Last modified: July 12, 2017