Introduces combination store concept for small towns

CHESAPEAKE, Va. — Dollar Tree Inc. said Wednesday that its net sales and comp store sales increased in the fourth quarter, and suggested that various strategic initiatives are gaining traction, including a new format for small towns that combines the Dollar Tree and Family Dollar brands.

Consolidated net sales totaled $6.77 billion for the fiscal fourth quarter ended January 30, up 7.2% compared to the prior year period. Enterprise same-store sales increased 4.9% on a constant currency basis (or 5.0% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for Family Dollar increased 8.1%. Dollar Tree same-store sales increased 2.4%.

“I am very pleased with the team’s operating performance for the fourth quarter, highlighted by a solid same-store sales increase, improved gross margin and expense leverage,” Dollar Tree president and chief executive officer Michael Witynski said. “Furthermore, Dollar Tree has completed the rollout of the expanded Crafter’s Square assortment to all U.S. stores and has begun the expansion of our Dollar Tree Plus! initiative to a total of 500 stores, as announced last quarter. At Family Dollar, we have partnered nationally with Instacart, are continuing to see strong results from our H2 stores, and we are thrilled to introduce a new Combination Store format that performed extremely well in nearly 50 small towns and rural communities during fiscal 2020.”

The company sees the combination of the Dollar Tree and Family Dollar brands as representing a transformational opportunity to serve more customers in all types of markets by bringing together Family Dollar’s value and assortment with Dollar Tree’s “thrill of the hunt” and fixed price-point – creating a new strategic store format targeted for small towns and rural communities with populations of 3,000 to 4,000. These are markets where the company would traditionally not open a standalone Dollar Tree store, although it does operate Family Dollar stores in those markets.

The company opened its first combination store in late 2019, followed by two additional test stores in early 2020. After analyzing the store’s performance and customer feedback, Dollar Tree refined the concept further, and opened an additional 32 such stores in the second half of 2020. It currently operates nearly 50 Combination Stores.

Compared to other Family Dollar stores located in small markets, the combination stores are delivering a same-store sales lift of greater than 20% on average. The combination stores are more productive, delivering higher gross margins, and are better leveraging store expenses. H2 stores and Combination Stores will both be part of the Family Dollar new store and renovation strategy moving forward.

Dollar Tree also reported that its net income in the fourth quarter was $502.8 million and diluted earnings per share increased 310% to $2.13, compared to $0.52 in the prior year’s quarter. The fourth quarter of fiscal 2019 included several discrete charges outlined in the Reconciliation of Non-GAAP Financial Measures within the tables of this earnings release. Excluding the discrete charges, diluted earnings per share increased 19.0%, compared to the adjusted $1.79.

The company repurchased 1,828,174 shares during the quarter for $200 million. Following a $2.0 billion increase in its share repurchase authorization, combined with $400 million remaining on its prior authorization, the Company now has a $2.4 billion share repurchase authorization.

During the quarter, the Company opened 124 new stores, expanded or relocated 11 stores, and closed 45 stores. Additionally, the Company completed 106 Family Dollar store renovations. Retail selling square footage at year-end was approximately 125.1 million square feet.