Discount store Dollar Tree’s third-quarter net sales grew on the back of higher sales across all three divisions.
The company booked net sales of $7.31 billion in the three months ended October 28, up 5.4 per cent from the year-ago period. This comes as same-store net sales of the Dollar Tree, Family Dollar, and Enterprise segments grew 5.4 per cent, 2.0 per cent, and 3.9 per cent, respectively.
“Our third-quarter results were within our expectations thanks to continued execution across all aspects of our business transformation,” said Rick Dreiling, chairman and CEO at Dollar Tree.
“In a challenging environment, our performance was among the best in retail as we continue to grow traffic, unit, and sales per square foot.”
GlobalData MD Neil Saunders described the 5.4 per cent uplift in total revenue as “very respectable” albeit with a “shabby” bottom line.
“[The sales growth] puts Dollar Tree firmly into the solid performers category. Some of the decompression in growth is simply a function of Dollar Tree lapping a tougher prior year comparative of 8.1 per cent growth in 2022. However, we also detect a modest pullback in spending among core customers as the cost-of-living crisis continues to bite into disposable income.”
During the quarter, the company opened 197 new stores and expanded its multi-price Plus offering to 870 additional Dollar Tree stores. Meanwhile, its net income fell 20.6 per cent to $212.0 million.
For FY23, the company estimates net sales to range from $30.5 billion to $30.7 billion as it expects to deliver a mid-single-digit comparable store net sales increase.
Saunders said Dollar Tree’s bottom line performance reflected pressures from several directions including a more unfavorable sales mix biased towards lower-margin essentials, product recall costs, and continued investments in wages. “While input inflation has come down, Dollar Tree is still facing some headwinds on this front and is absorbing some of its own higher product costs to keep prices competitive.”
He concluded that Dollar Tree is in a good position overall with the business in a better state than it was a few years back.
“The forward challenges include improving profitability, which will likely have to come from efficiency and productivity gains and from focusing investment on areas where it will generate a strong return.”
