Dollar Tree (NASDAQ:DLTR) Posts Q1 Sales In Line With Estimates

Kayode Omotosho /
2024/06/05 6:40 am EDT

Discount treasure-hunt retailer Dollar Tree (NASDAQ:DLTR) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 4.2% year on year to $7.63 billion. On the other hand, next quarter's revenue guidance of $7.45 billion was less impressive, coming in 2% below analysts' estimates. It made a GAAP profit of $1.38 per share, improving from its profit of $1.35 per share in the same quarter last year.

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Dollar Tree (DLTR) Q1 CY2024 Highlights:

  • Announced it is seeking to divest its Family Dollar brand through a potential sale or spin-off
  • Revenue: $7.63 billion vs analyst estimates of $7.67 billion (small miss)
  • EPS (non-GAAP): $1.43 vs analyst expectations of $1.43 (in line)
  • Revenue Guidance for Q2 CY2024 is $7.45 billion at the midpoint, below analyst estimates of $7.60 billion
  • The company reconfirmed its revenue guidance for the full year of $31.5 billion at the midpoint
  • EPS (non-GAAP) Guidance for Q2 CY2024 is $1.05 at the midpoint, below analyst estimates of $1.20
  • Gross Margin (GAAP): 30.8%, up from 30.5% in the same quarter last year
  • Free Cash Flow of $223.5 million, down 44.3% from the same quarter last year
  • Locations: 16,397 at quarter end, in line with the same quarter last year
  • Same-Store Sales rose 1% year on year
  • (4.8% in the same quarter last year)
  • Market Capitalization: $26.25 billion

“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 Chief Executive Officer.

A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.

Discount Grocery Store

Traditional grocery stores are go-tos for many families, but discount grocers serve those who may not have a traditional grocery store nearby or who may have different spending thresholds. Certain rural or lower-income areas simply don’t have a grocery store. Additionally, some lower-income families would prefer to buy in smaller quantities than available at most stores (think one or two paper towel rolls at a time). While online competition threatens all of retail, grocery is one of the least penetrated because of the nature of buying food. Furthermore, those buying small quantities for immediate need are even less likely to leverage e-commerce for these purposes.

Sales Growth

Dollar Tree is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.

As you can see below, the company's annualized revenue growth rate of 6% over the last five years was sluggish as its store footprint remained relatively unchanged, implying that growth was driven by more sales at existing, established stores.

Dollar Tree Total Revenue

This quarter, Dollar Tree's revenue grew 4.2% year on year to $7.63 billion, falling short of Wall Street's estimates. The company is guiding for revenue to rise 1.7% year on year to $7.45 billion next quarter, slowing from the 8.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 2.8% over the next 12 months, a deceleration from this quarter.

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Same-Store Sales

Dollar Tree's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 4.8% year on year. Given its flat store count over the same period, this performance stems from increased foot traffic at existing stores or higher e-commerce sales as the company shifts demand from in-store to online.

Dollar Tree Year On Year Same Store Sales Growth

In the latest quarter, Dollar Tree's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 4.8% year-on-year increase it posted 12 months ago. We'll be watching Dollar Tree closely to see if it can reaccelerate growth.

Key Takeaways from Dollar Tree's Q1 Results

We struggled to find many strong positives in these results. This quarter's print was roughly in line with estimates while its revenue and EPS guidance for next quarter was underwhelming. It also announced it is seeking to divest its Family Dollar brand; it's unclear if this will help or hurt the company. On one hand, it will help Dollar Tree focus on its core business, but on the other hand, it could dampen its scale advantages. Overall, this was a mediocre quarter for Dollar Tree. The company is down 1.6% on the results and currently trades at $118.33 per share.

Dollar Tree may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.