Comparable-store sales increased 2.5%

CHESAPEAKE, Va. — Dollar Tree on Tuesday reported net sales rose 3.7% to $5.75 billion in the third quarter and comparable-store sales increased 2.5%.

But the retailer said higher costs associated with the U.S.-China trade war will add $19 million in costs in the current quarter, when per-share earnings are projected to miss Wall Street estimates and come in between $1.70 a share and $1.80 a share. The tariffs have pressured retailers with large amounts of imports from China. New U.S. tariffs on Chinese merchandise are scheduled to take effect December 15 unless negotiators from the two sides reach a compromise.

“The third quarter represented another period of solid sales performance for both brands, Dollar Tree and Family Dollar,” said Gary Philbin, Dollar Tree’s president and chief executive officer. “Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree re-banners, more than 1,000 Dollar Tree Snack Zones and launched our Dollar Tree Plus! test already this year. Fiscal 2019 has been a unique year as the result of several factors — the material acceleration in our Family Dollar store optimization initiatives, the consolidation of our two store support centers into southeast Virginia, the global helium shortage, and the continued uncertainty regarding trade and the related tariffs.”

Dollar Tree said gross profit in the quarter ended November 2 increased $32.6 million to $1.70 billion. As a percentage of net sales, gross margin was 29.7% compared to 30.2% a year earlier. The decline in gross profit margin was driven by higher freight and distribution costs as well as shrink and increased sales of lower-margin consumable merchandise, primarily in the Family Dollar segment.

Same-store sales at its Family Dollar segment increased 2.3%, while the Dollar Tree segment turned in comps of 2.8%. The comparable store sales results at both segments were driven by increases in both average ticket and transaction count

The company opened 165 new stores in the quarter, expanded or relocated 15 stores, and closed 42 stores. It also opened 39 Dollar Tree stores that were re-bannered from Family Dollar and completed 247 renovations to the Family Dollar H2 format.