CHESAPEAKE, Va. — Dollar Tree Inc. reported sales and net income gains for its second quarter ended July 31.
“I am proud of our team’s continuing efforts, especially in our stores and distribution centers, to adapt and react in this dynamic environment to serve customers and deliver improvements in both operating margin and earnings,” Dollar Tree president and CEO Michael Witynski said. “Our EPS of $1.23 represented increases of 12% from the prior year’s quarter and 62% compared to the second quarter of 2019. We continued to see strong performance on the discretionary side of the business, and our key initiatives, including H2, Dollar Tree Plus and the new Combo Stores, are delivering compelling results. All three concepts have performed very well and we are significantly accelerating these initiatives in 2022 and beyond.”
Consolidated net sales increased 1.0% to $6.34 billion from $6.28 billion in the prior year’s second quarter. Enterprise same-store sales decreased 1.2% on a constant currency basis (or 1.1% when adjusted to include the impact of Canadian currency fluctuations), and increased 6% on a two-year stacked basis. Dollar Tree same-store sales decreased 0.2% on a constant currency basis (or were flat when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for Family Dollar decreased 2.1%, cycling the strong 11.6% increase in the prior year’s quarter.
Net income was $282.4 million in the second quarter and diluted earnings per share for the quarter increased 11.8% to $1.23, compared to $1.10 per share in the prior year’s quarter.
The company renovated 435 stores in the second quarter, bringing the total number of H2 stores to 3,300. Following a variety of tests of different store formats, the Company also plans to accelerate the Dollar Tree Plus initiative and the rollout of its Combo Store format to better serve customer needs and drive long-term sustainable value creation.
The Dollar Tree Plus initiative adds a multi-price assortment to the retailer’s traditional everything-is-one-dollar format. The company currently has the multi-price assortment in approximately 340 stores and expects to hit its fiscal 2021 target of 500 stores by year-end.
“Our merchandising team has worked tirelessly to refine and improve the Dollar Tree Plus program,” Witynski said. “Despite stronger than anticipated sell-through and global supply chain challenges, I am pleased we are on schedule to have the multi-price assortment in 500 stores by year-end. Due to its continued success, we are planning to add Dollar Tree Plus to an additional 1,500 stores in fiscal 2022, and aim to have at least 5,000 Dollar Tree Plus stores by the end of 2024. Many of our new stores will be opened as Dollar Tree Plus stores.”
The company is also expanding its Combo Store concept, announced in March, that leverages the strength of both the Dollar Tree and Family Dollar banners. The company currently has 105 Combo Stores and plans to add more in the coming year.
“Our shoppers love the Combo Stores,” Witynski said. “We are seeing materially increased sales and margin dollars, better returns and improved paybacks with this format. The performance of Combo Stores continues to exceed our expectations. We believe there is an opportunity for up to 3,000 Combo Stores in rural markets alone. Demonstrating our great confidence in Combo Stores as a key strategic format, more than 85% of our new Family Dollar stores will be Combo Stores in fiscal 2022. We anticipate 400 new, renovated, or relocated Combo Stores next year. Additionally, we are in the process of validating this concept in other demographic markets.”
New Combo Stores, which average 12,300 gross square feet, are delivering, on average, 23% more sales, 31% more gross margin dollars and approximately 120% more cash contribution dollars when compared to Family Dollar stores, which average 9,500 gross square feet, according to the company. New Combo Stores compared to similarly-sized Family Dollar stores are showing a sales increase of over 17%, and renovated or relocated Combo Stores are showing a sales increase of over 40% when compared to Family Dollar stores that have not been renovated or relocated.
The company estimates consolidated net sales for the third quarter of 2021 will range from $6.40 billion to $6.52 billion, based on a low single-digit increase in same-store sales for the combined enterprise. Diluted earnings per share are estimated to be in the range of $0.88 to $0.98.