Dollar-Store Chains Post Stronger Sales, But Tariffs Cloud Outlook
May 30 2019 - 10:46AM
Dow Jones News
By Aisha Al-Muslim and Sarah Nassauer
Sales at Dollar General Corp. and Dollar Tree Inc. rose in the
latest quarter, but both discount retailers said the prospect of
tariffs being imposed on more products imported from China cast
uncertainty on their businesses.
Dollar Tree on Thursday cut its earnings forecast for the year
as it works to trim its store count and deals with
higher-than-expected import-freight costs. Dollar General
maintained its financial guidance and store-growth outlook.
Both companies said their outlooks include current tariffs on
certain Chinese imports, which the chains have been trying to
mitigate. However, neither company adjusted its forecasts for a
potential next round of tariffs on nearly all remaining goods from
China, which could include many consumer goods such as additional
apparel categories and toys.
If a further round of tariffs are implemented, "we expect that
it will be impactful to both our business, and especially to
consumers in general," said Gary Philbin, chief executive of Dollar
Tree, which also owns the Family Dollar chain. However, thus far,
company merchants have mitigated the cost of most tariffs to date,
he said on a call with analysts. In January the company moved about
$100 million of seasonal purchases out of China, he said.
Dollar Tree, of Chesapeake, Va., now expects earnings per share
for the fiscal year to be $4.77 to $5.07, down from its previous
range of $4.85 to $5.25.
Shares of Dollar General rose 6.1% to $125.82 in morning trading
Thursday, while Dollar Tree's stock was up 4.6% to $99.76.
Many other retailers are formulating plans to manage the impact
of higher tariffs on merchandise imported from China due to the
continuing U.S.-China trade war.
Earlier this month, the Trump administration imposed a 25%
tariff on $200 billion of Chinese goods, up from a 10% duty put in
place in October.
In the first quarter ended May 3, Dollar General said its sales
growth was helped by opening new stores and sales rising at
existing locations. Net sales rose 8.3% to $6.62 billion and
same-store sales grew 3.8%, both above analysts' expectations.
Profit for Dollar General, of Goodlettsville, Tenn., rose to
$385 million, from $364.9 million a year earlier.
Dollar General has been expanding its store footprint and
working to become a bigger seller of food and home goods to grab
more shoppers. During the quarter, Dollar General opened 240 new
stores, remodeled 330 stores and relocated 27 stores.
Dollar Tree said its sales increased in the first quarter ended
May 4 as the performance at its Family Dollar stores began to turn
around.
Net sales rose 4.6% to $5.81 billion and same-store sales grew
2.2%, both above analysts' expectations. Same-store sales rose 2.5%
at Dollar Tree, while sales at stores open at least a year under
the Family Dollar banner rose 1.9%. Although the average amount
spent rose at Family Dollar, boosting sales, the number of shoppers
fell in the quarter.
Dollar Tree has worked to turn around Family Dollar after
purchasing the struggling budget retailer in 2015. However, the
Family Dollar chain has lagged behind competitors, which led
activist investor Starboard Value LP to take a stake in the parent
company, advocate for a sale of Family Dollar, and nominate a slate
of new board directors.
Dollar Tree said earlier this year that it would close hundreds
of Family Dollar stores and marked down the value of the chain
while testing higher price points at Dollar Tree. Starboard
withdrew its director nominations in April, saying the company
showed improvement.
In the quarter, the company closed 16 Family Dollar stores and
opened 45 Dollar Tree stores that had previously been Family Dollar
locations.
"Our Family Dollar turnaround is gaining traction," Mr. Philbin
said. Dollar Tree started testing a new line of products that cost
more than $1 earlier this month [May], he said, and would add the
test to 100 stores initially.
Dollar Tree reported profit of $267.9 million, up from $160.5
million a year earlier.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com and Sarah
Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
May 30, 2019 11:31 ET (15:31 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Dollar Tree (NASDAQ:DLTR)
Historical Stock Chart
From Apr 2024 to May 2024
Dollar Tree (NASDAQ:DLTR)
Historical Stock Chart
From May 2023 to May 2024