Dollar Tree Q3 Earnings: Higher Customer Spending and Traffic

Large cap dollar store stock Dollar Tree, Inc (NASDAQ: DLTR), abarometer for the spending behavior of low-income consumers, reported Q3 2017 earnings before the market opened on Monday with comparable store sales beating expectations onhigher customer traffic and spending.

Consolidated net sales increased 6.3% to $5.32 billion as enterprise same-store sales increased 3.2% on a constant currency basis (adjusted to include the impact of Canadian currency fluctuations, the enterprise same-store sales increase was 3.3%). The same-store sales growth was driven by increases in average ticket and comparable transaction count. Same-store sales for the Dollar Tree banner increased 5.0% on a constant currency basis (or 5.2% when adjusted to include the impact of Canadian currency fluctuations) while same-store sales for the Family Dollar banner increased 1.5%. Net income increased $68.3 million to $239.9 million.

The Company estimates consolidated net sales for the fourth quarter of 2017 to range from $6.32 billion to $6.43 billion, based on a low single-digit increase in same-store sales for the combined enterprise.Consolidated net sales for full-year fiscal 2017 are now expected to range from $22.20 billion to $22.31 billion compared to the Company’s previously expected range of $22.07 billion to $22.28 billion. This estimate is based on a low single-digit increase in same-store sales and 3.7% square footage growth.

The CEO commented:

“Our team delivered terrific results in the third quarter. Same-store sales accelerated in both the Dollar Tree and Family Dollar banners; we delivered a 120 basis point improvement in enterprise operating margin; and earnings per share grew more than 40% from the prior year. Our third quarter results demonstrate our continuing progress in delivering value and convenience, serving more customers in more markets across North America, through our diversified business model.”

“Our stores and teams are well-prepared and energized as we enter the fourth and final quarter of 2017. We are confident in our ability to continue driving positive same-store sales, through meeting our customers’ needs and wants; improving enterprise operating margin; and delivering year-over-year earnings per share growth. We believe we are well-positioned in the most attractive sector in retail and will remain intensely focused on delivering great value and convenience to our growing customer base. Both banners are ready for the holiday season, and we have an experienced leadership team, momentum in our business and a continued focus on this transformational opportunity.”

A technical chart for Dollar Tree shows a strong uptrend despite a summer dip:

A long term performance chart shows shares of large cap dollar stores Dollar Tree and Dollar General Corp (NYSE: DG) both outperforming Wal-Mart Stores, Inc (NYSE: WMT) and largely given investors roughly the same return:

Finally, here is a quick recap of large cap Dollar Trees recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History10/30/20161/30/20174/29/20177/30/2017
EPS Est. 0.78 1.32 0.98 0.87
EPS Actual 0.72 1.36 0.98 0.99
Difference -0.06 0.04 0 0.12
Surprise % -7.70% 3.00% 0.00% 13.80%
EPS TrendCurrent Qtr. (Oct 2017)Next Qtr. (Jan 2018)Current Year (2018)Next Year (2019)
Current Estimate 0.9 1.79 4.69 5.16
7 Days Ago 0.9 1.79 4.68 5.16
30 Days Ago 0.9 1.79 4.68 5.15
60 Days Ago 0.9 1.79 4.66 5.14
90 Days Ago 0.87 1.73 4.46 5.04

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