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Dollar Tree sales up 8.1% in third quarter

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Conversion to $1.25 price point pays off

CHESAPEAKE, Va.— Dollar Tree executives said the retailer’s new pricing strategy lifted operating income nearly 23% to $381 million in the third quarter ended October 29. Top-line sales rose 8.1% to $6.94 billion.

Comparable-store sales at its Dollar Tree stores increased 8.6% from a year earlier, while comps at its Family Dollar stores were up 4.1%.

The company last year converted to a $1.25 price point across all Dollar Tree stores in the United States, a move made to significantly enhance the company’s ability to diversify its product offerings and provide customers with more of their daily essentials. Dollar Tree

Virtually all of the same-store sales growth in the third quarter was attributed to the price increases. Store traffic declined at Dollar Tree stores and was up just 0.1% at the Family Dollar unit, where traffic increased for the first time in 12 quarters. Overall, traffic has declined for five consecutive quarters.

“Our third quarter sales performance reflects the timely execution of merchandising initiatives to drive our consumables business in this uncertain and inflationary environment,” Mike Witynski, Dollar Tree’s president and chief executive officer, said in announcing the third-quarter financial results. “Shoppers are responding to our new value proposition at Family Dollar and Dollar Tree as we focus on driving both traffic and store productivity.”

The company raised its sales outlook for the end of the year. Witynski said recent additions to the executive team are expected to lead the company to the next evolution of growth.

In March, Dollar Tree announced a shake-up of its board of directors, with former Dollar General Corp. CEO Richard Dreiling assuming the role of executive chairman, the board’s top post. Also added to the board were Paul Hilal, CEO of private equity firm Mantle Ridge LP, as vice chair, along with five other new directors. Former chairman and CEO Bob Sasser and five other directors retired from the board.

The company subsequently brought in new executives to fill the roles of chief operating officer, chief financial officer and chief information officer.

Another new slate of officers was introduced earlier this month, following new hires to spearhead the company’s operations in compliance, diversity, sustainability, and communications.

“We are committed to transforming our culture, meeting our shoppers’ and associates’ needs, improving store productivity and efficiencies, and delivering improved long-term operating results,” Witynski said.

For the first nine months of fiscal 2022, Dollar Tree reported consolidated net sales of $20.6 billion, an increase of 7.1% from the prior-year period. Enterprise same-store sales increased 5.4%. Dollar Tree same-store sales rose 9.2%, driven by a double-digit increase in average ticket. Family Dollar same-store sales increased 1.2%, as an increase in average ticket was partially offset by a decline in traffic.

Gross profit in the nine months increased 17% to $6.54 billion. Gross margin improved 260 basis points to 31.7%. This improvement was driven by improved initial mark-on and leverage on occupancy and distribution costs, partially offset by a product mix shift, inflationary cost pressures, higher freight, markdowns and shrink.


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