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It has been about a month since the last earnings report for Dollar Tree (DLTR). Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dollar Tree due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dollar Tree Beats on Q3 Earnings & Sales Estimates
Dollar Tree has reported strong third-quarter fiscal 2024 results, with both earnings and sales surpassing the Zacks Consensus Estimate and improving year over year. Dollar Tree’s adjusted earnings per share (EPS) grew 15.5% year over year to $1.12 and surpassed the Zacks Consensus Estimate of $1.07.
Consolidated net sales improved 3.5% year over year to $7.56 billion and beat the Zacks Consensus Estimate of $7.45 billion. Enterprise same-store sales (comps) grew 1.8% year over year. The company’s comps benefited from a 1.6% rise in traffic and a 0.2% increase in the average ticket.
Comps improved 1.8% for the Dollar Tree banner and 1.9% for the Family Dollar banner. The Dollar Tree segment benefited from a 1.5% rise in traffic and a 0.3% improvement in the average ticket. Comps at Family Dollar were aided by a 1.8% increase in traffic and a flat average ticket.
Our model predicted year-over-year enterprise comps growth of 2.4% for the fiscal third quarter, with a 2.7% increase in the Dollar Tree banner and a 1.9% increase in Family Dollar.
The gross profit rose 7.6% year over year to $2.34 billion, whereas the gross margin expanded 120 basis points (bps) to 30.9%. Lower freight costs and improved shrink mainly aided the gross margin. This was partly negated by higher distribution costs. The gross margin expanded 60 bps to 35.4% at the Dollar Tree banner and 130 bps to 24.9% at the Family Dollar segment.
We estimated a year-over-year rise of 5.2% in adjusted gross profit and a 90-bps expansion in gross margin.
Adjusted selling, general and administrative expenses were 26.5% of total revenues, up 80 bps from 25.7% in the year-earlier quarter. The increase was driven primarily by increased depreciation expenses from store investments, temporary labor in the Dollar Tree unit to aid multi-price rollout, elevated utility costs and loss of leverage from comps increase.
Adjusted operating income rose 13.8% year over year to $343.2 million. The operating margin expanded 40 bps to 4.5%.
DLTR’s Financial Health
Dollar Tree ended the fiscal third quarter with cash and cash equivalents of $697.6 million. As of Nov. 2, 2024, net merchandise inventories were $5.54 billion, up 0.4% year over year. It had a net long-term debt, excluding the current portion, of $2.43 billion and shareholders’ equity of $7.64 billion as of the same date.