Family Dollar sales contributed to gain

CHESAPEAKE, Va. — Dollar Tree Inc. on Tuesday reported net income of $229 million in the fourth quarter, an increase of $22.4 million from a year earlier.

Gross profit was $1.6 billion, up from $918.1 million a year ago. The company attributed the increase primarily to $673.7 million in gross profit for its Family Dollar stores as well as higher sales at Dollar Tree stores.

Consolidated net sales were $5.37 billion in the fourth quarter compared to $2.48 billion last year. The increase was the result of $2.68 billion in sales from the Family Dollar segment and a same-store sales increase of 1.7% on a constant currency basis for the Dollar Tree segment. In comparison, same-store sales on a constant currency basis increased 5.6% in the prior-year period for the Dollar Tree segment. Adjusted for the impact of Canadian currency fluctuations, the same-store sales increase was 1.3%. The positive same-store sales were driven by increases in customer count and average ticket, the company noted in a statement.

Dollar Tree opened 128 stores during the fourth quarter. It expanded or relocated 53 stores, closed 28 stores and divested 325 Family Dollar stores. As part of its rebanner initiative, it opened 58 former Family Dollar store locations as new Dollar Tree stores, and in January it converted 52 Deals stores to Dollar Tree stores.

For the 12 months ended January 30, Dollar Tree posted consolidated net sales of $15.50 billion, up from $8.60 billion in the prior year. Family Dollar sales represented nearly $6.16 billion of the increase. Same-store sales for the Dollar Tree segment increased 2.5% on a constant currency basis compared to a 4.4% increase in the prior-year period, the company said. Adjusted for the impact of Canadian currency fluctuations, the same-store sales increase was 2.1%.

Gross profit rose to $4.66 billion from $3.03 billion a year earlier. As a percent of sales, gross margin decreased by 520 basis points to 30.1%.

Primary contributors to the decrease were $73 million in markdown expense for Family Dollar related to SKU rationalization and planned liquidations, $70.3 million for Family Dollar related to the amortization of the stepped-up inventory basis and the impact of the overall lower-margin product mix for the Family Dollar business, Dollar Tree said.

“I am proud of the company’s performance in the fourth quarter and full year 2015,” chief executive officer Bob Sasser commented. “Through a challenging economic environment, we delivered sales of $5.37 billion, which was the midpoint of our fourth quarter guidance range, and our 32^nd consecutive quarter of positive same-store sales. This was against a strong 5.6% comp from the prior year’s fourth quarter. Additionally, while not included in our comp calculation, for the second consecutive quarter, our Family Dollar banner delivered positive same-store sales increases each month during the quarter.”

Sasser continued, “2015 was a very successful year for Dollar Tree. I would like to thank all of our associates for their commitment and hard work throughout the year. We continued to serve our loyal customer base by providing terrific values every day; we successfully completed the acquisition of Family Dollar; we initiated, and remain on schedule with, the integration of our companies; and we are on track to achieve our stated synergy targets. Looking ahead, we are committed to growing and improving our Dollar Tree and Family Dollar businesses to better serve more customers, while delivering long-term value to our shareholders.”

For the current quarter, Dollar Tree estimates consolidated net sales of between nearly $5.05 billion and $5.12 billion, based on a low single-digit increase in same-store sales and year-over-year selling square footage growth of 132%. Diluted earnings per share are expected to range from $0.75 to $0.83.

For fiscal 2016, the company estimates consolidated net sales of between $20.76 billion to $21.11 billion. This estimate is based on a low-single-digit increase in same-store sales, and a 4% increase in square footage.

Fiscal year 2016 diluted earnings per share are expected to range from $3.35 to $3.65.