Dollar Tree has reported stronger sales growth for the second quarter following the sale of its underperforming Family Dollar business.
The discount chain saw net sales increase 12.3 per cent year-on-year to $4.6 billion for the quarter ended August 2, compared to the 11.3 per cent uplift in the first quarter. Same-store sales were up 6.5 per cent, driven by a 3 per cent increase in traffic and a 3.4 per cent increase in average ticket.
The company noted that second-quarter results excluded Family Dollar after it sold the segment to private equity for $1 billion.
“Now that Dollar Tree is completely shot of the rotten apple that was Family Dollar, it can fully focus its capital and time on a proposition that both works and has potential,” commented GlobalData MD Neil Saunders. “This can be seen in the latest numbers, which represent a very strong advance for the chain.”
While the growth comes off the back of a weak prior year, it has also been driven by various solid management strategies, Saunders continued.
According to the analyst, solid new customer acquisition, including from higher-income consumers, partly helped power results. The diminution of Temu across the quarter was also marginally helpful, especially for seasonal lines.
“While Temu has not disappeared from the scene completely, we see it as posing far less of a threat to Dollar Tree over the balance of this year – something that will continue to help Dollar Tree’s more discretionary categories. That said, there are other threats emerging, including from the push of Amazon’s rapid delivery service into more rural areas,” Saunders said.
On the tariff front, he said the company has implemented several strategies, including respecifying products leaning heavier on suppliers and changing the place of manufacture, which should help it offset most of the impact.
The multi-price point strategy also aids this effort as it gives the company much more flexibility over passing some costs through to consumers if needed, he added.
On the bottom line, operating income increased 7 per cent to $231 million and net income rose 42 per cent to $188 million.
The company expects its full-year net sales from continuing operations to be in the range of $19.3 billion to $19.5 billion, with comparable store sales growth in the range of 4-6 per cent.
