Dollar Tree Sales Rise, Though Weakness Persists in Family Dollar Banner

By Sarah Nassauer and Kimberly Chin 

Dollar Tree Inc. said Thursday sales rose in the latest quarter, as the company works to convince investors that weakness at its Family Dollar chain won't last.

Sales at Dollar Tree, which owns both the Dollar Tree and Family Dollar chains, rose 4.2% to $5.54 billion in the quarter ended Nov. 3, but sales at existing Family Dollar Stores dragged down strong performance. Same-store sales rose 2.3% at Dollar Tree, but sales at existing stores under the Family Dollar banner fell 0.4%. Analysts polled by Refinitiv had expected $5.55 billion in sales in the third quarter.

It has become a familiar pattern at the company. More than three years ago, Dollar Tree beat out competitor Dollar General Corp. to buy Family Dollar for nearly $9 billion in cash and stock. Since then Family Dollar has proved hard to turn around, reporting weak sales each quarter since the acquisition.

Since the purchase the company has closed 195 Family Dollar Stores and converted 354 Family Dollar Stores to the Dollar Tree brand, in addition to completing renovations and opening new locations.

Shares of Dollar Tree, which have fallen 22% this year, fell 4.3% in premarket trading Thursday as the company also lowered its sales guidance for the current year. The company expects sales in the range of $22.72 billion to $22.83 billion, compared with its previous forecast between $22.75 billion and $22.97 billion. The range for earnings was narrowed to between $4.86 and $4.95 a share, compared with $4.85 to $5.05 a share as previously guided.

The company said Thursday it will renovate at least 1,000 Family Dollar stores in the coming fiscal year and open another 350 new Dollar Tree locations and 200 new Family Dollar stores.

In the third quarter profit, rose 5.1% to $281.8 million, or $1.18 a share, compared with analysts' expectations of $1.14 a share.

Many retailers have reported stronger sales in the most recent quarter, pointing to fairly robust consumer confidence and improving efforts to grow online, including Walmart Inc., Target Corp. and Macy's Inc. Dollar stores have generally fared well since the recession, benefiting as more shoppers flocked to inexpensive products. In recent years Family Dollar Stores haven't grow sales in line with competitors.

The large chains target slightly different customers. Dollar Tree stores are mostly in suburban locations and sell all items for $1. Dollar General has more rural locations and aims to attract low-income shoppers by selling frequently purchased products at different price points. Family Dollar aims to attract similar low-income shoppers, but nearly half its stores are in urban locations. Including Family Dollar outlets, Dollar Tree has about 15,000 U.S. stores, roughly equal with Dollar General.

Dollar General reports its quarterly earnings next week.

Write to Sarah Nassauer at [e-mail] and Kimberly Chin at [e-mail]

(END) Dow Jones Newswires

November 29, 2018 08:33 ET (13:33 GMT)

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