DLTR
$74.44
Dollar Tree
$.10
.13%
Earnings Details
1st Quarter April 2017
Thursday, May 25, 2017 7:31:00 AM
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Summary

Dollar Tree Misses

Dollar Tree (DLTR) reported 1st Quarter April 2017 earnings of $0.98 per share on revenue of $5.3 billion. The consensus earnings estimate was $0.99 per share on revenue of $5.3 billion. The Earnings Whisper number was $1.00 per share. Revenue grew 4.0% on a year-over-year basis.

The company said it expects second quarter earnings of $0.80 to $0.88 per share on revenue of $5.18 billion to $5.28 billion. The current consensus earnings estimate is $0.90 per share on revenue of $5.23 billion for the quarter ending July 31, 2017. The company also said it continues to expect fiscal year earnings of $4.20 to $4.56 per share, excluding charges of $0.13 per share, and expects revenue of $21.95 billion to $22.25 billion. The current consensus earnings estimate is $4.48 per share on revenue of $22.14 billion for the year ending January 31, 2018.

Dollar Tree Stores Inc is a operator of discount variety stores offering merchandise at the fixed price of $1.00. At January 31, 2015, the Company operated 5,367 discount variety retail stores.

Results
Reported Earnings
$0.98
Earnings Whisper
$1.00
Consensus Estimate
$0.99
Reported Revenue
$5.29 Bil
Revenue Estimate
$5.29 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Dollar Tree, Inc. Reports Results for the First Quarter Fiscal 2017

~ Diluted Earnings per Share of $0.85, Includes $0.13 Receivable Impairment Charge Related to the Dollar Express Divestiture ~

~ Diluted EPS, Excluding the Impairment Charge, of $0.98 Meets High End of Guidance Range ~

--~ Enterprise Same-Store Sales Increased 0.5% ~

--~ Same-Store Sales by Segment: Dollar Tree +2.5%, Family Dollar -1.2% ~

Dollar Tree, Inc. (DLTR), North America’s leading operator of discount variety stores, today reported results for its first fiscal quarter ended April 29, 2017.

"I am extremely pleased with the first quarter performance of our Dollar Tree banner and with the continued progress in re-building the Family Dollar business," stated Bob Sasser, Chief Executive Officer. "Same-store sales were positive and total sales were near the mid-point of our range of guidance. Gross margin and operating margin rates improved, SG&A expenses were well managed across both banners and our adjusted EPS of $0.98 per diluted share, excluding the impairment charge related to the divestiture to Dollar Express, met the high end of our range of guidance. The Dollar Tree banner continues to generate results that are strong, consistent and growing and we are enthusiastic about the opportunity to improve the Family Dollar business as we launch our renovation initiatives in the second quarter."

First Quarter Results

Consolidated net sales increased 4.0% to $5.29 billion from $5.09 billion in the prior year’s first quarter. Enterprise same-store sales increased 0.5%. 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 2.5%. Same-store sales for the Family Dollar banner decreased 1.2%.

Gross profit increased 4.7% to $1.63 billion in the quarter compared to $1.55 billion in the prior year’s first quarter. As a percent of sales, gross margin increased to 30.8% compared to 30.6% in the prior year. The improvement was driven primarily by lower merchandise and freight costs, partially offset by higher markdowns.

Selling, general and administrative expenses were 23.4% of sales compared to 22.3% of sales in the prior year’s first quarter. Excluding the receivable impairment charge described below, selling, general and administrative expenses were 22.5% of sales. The increase, as a percentage of sales, was driven primarily by higher payroll expenses and advertising expenses, partially offset by lower depreciation.

In the first quarter of 2017, the Company evaluated the collectability of its divestiture-related receivable from Dollar Express, which acquired the stores that the FTC required the Company to divest. Dollar Express is in the process of liquidating, is in default of its obligations to the Company including its obligation to pay the receivable, and is not cooperating. Based on a number of factors, the Company determined the outstanding balance of $50.9 million was not recoverable and recorded an impairment charge to write down the receivable to zero. The charge is recorded as "Receivable impairment" in the accompanying condensed consolidated income statements. The Company plans to take all appropriate actions, which we expect to include litigation against Dollar Express and others, to enforce the Company’s rights.

Operating income, including the receivable impairment charge, decreased 7.1% to $388.8 million, or 7.4% of sales, compared with $418.7 million, or 8.2% of sales, in the same period last year. Excluding the receivable impairment charge, adjusted operating income increased 5.0% to $439.7 million compared with $418.7 million in the same period last year. Adjusted operating income margin improved to 8.3% in the current quarter from 8.2% in last year’s quarter.

The Company’s effective tax rate for the quarter was 36.1% compared to 29.8% in the prior year period. The lower effective tax rate in the prior year’s quarter was primarily attributable to a one-time benefit related to state tax planning, which contributed $0.09 to earnings per share last year.

Net income, including the receivable impairment charge, compared to the prior year’s first quarter decreased $32.2 million to $200.5 million and diluted earnings per share was $0.85 compared to $0.98 in the prior year’s quarter. The prior year’s quarter included a one-time tax rate benefit of $0.09 per share related to state tax planning. Adjusting for the current quarter’s receivable impairment charge and the prior year quarter’s one-time tax benefit, diluted earnings per share improved 10.1% to an adjusted $0.98 compared to an adjusted $0.89 from the prior year quarter.

During the quarter, the Company opened 164 stores, expanded or relocated 51 stores, and closed 16 stores. Retail selling square footage at quarter-end was approximately 113.7 million square feet.

Company Outlook

The Company estimates consolidated net sales for the second quarter of 2017 to range from $5.18 billion to $5.28 billion, based on a slightly positive to low single-digit increase in same-store sales for the combined enterprise. Diluted earnings per share are estimated to be in the range of $0.80 to $0.88.

Consolidated net sales for full-year fiscal 2017 are now expected to range from $21.95 billion to $22.25 billion compared to the Company’s previously expected range of $21.94 billion to $22.33 billion. This estimate is based on a slightly positive to low single-digit increase in same-store sales and 3.9% square footage growth. Including the first quarter’s receivable impairment charge of $0.13 per diluted share, the Company now anticipates net income per diluted share for full-year fiscal 2017 will range between $4.17 and $4.43. Excluding the impairment charge, the top end of the guidance range is consistent with the Company’s prior guidance. Fiscal 2017 includes a 53rd week. The extra week, in the fourth quarter, is expected to add $400 million to $430 million to sales and $0.19 to $0.22 to diluted earnings per share, both of which are included in the guidance.

Sasser added, "I believe we are squarely positioned in the most attractive sector of retail. Value and convenience are important to our shoppers, and that is exactly what our Dollar Tree and Family Dollar businesses are focused on providing. We have a proven business model, an experienced leadership team, many years of store growth ahead of us, and tremendous opportunities to continue improving our businesses to deliver value to our long-term shareholders."

Conference Call Information

On Thursday, May 25, 2017, the Company will host a conference call to discuss its earnings results at 9:00 a.m. Eastern Time. The telephone number for the call is 800-310-1961. A recorded version of the call will be available until midnight Wednesday, May 31, 2017 and may be accessed by dialing 888-203-1112. The access code is 2488028. A webcast of the call is accessible through Dollar Tree’s website, and will remain online through Wednesday, May 31, 2017.

Dollar Tree, a Fortune 200 Company, operated 14,482 stores across 48 states and five Canadian provinces as of April 29, 2017. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada. To learn more about the Company, visit www.DollarTree.com.

A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release contains "forward-looking statements" as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, plan, forecast, or estimate. For example, our forward-looking statements include statements regarding second quarter 2017 and full-year 2017 net sales and same-store sales, second quarter 2017 and full-year 2017 diluted earnings per share, square footage growth, the benefits, results, and effects of the merger with Family Dollar, including integration plans and synergies, the impairment of the receivable from Dollar Express and possible actions related to the receivable, and future financial and operating results and shareholder value, the combined company’s plans, objectives, expectations (financial and otherwise) and intentions. These statements are subject to risks and uncertainties, including that we may be unable to successfully recover any amount from Dollar Express or others. For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the "Risk Factors," "Business" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections in our Annual Report on Form 10-K filed March 28, 2017 and other filings with the Securities and Exchange Commission. We are not obligated to release publicly any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this report and you should not expect us to do so.

DOLLAR TREE, INC.
Condensed Consolidated Income Statements
(In millions, except per share data)
(Unaudited)
13 Weeks Ended
April 29, 2017
April 30, 2016
Net sales
$ 5,287.1
$ 5,085.8
Cost of sales
3,660.0
3,531.2
Gross profit
1,627.1
1,554.6
30.8 %
30.6 %
Selling, general & administrative expenses, excluding Receivable
1,187.4
1,135.9
impairment
22.5 %
22.3 %
Receivable impairment
50.9
-
1.0 %
0.0 %
Selling, general & administrative expenses
1,238.3
1,135.9
23.4 %
22.3 %
Operating income
388.8
418.7
7.4 %
8.2 %
Interest expense, net
74.7
87.3
Other (income) expense, net
0.3
(0.2 )
Income before income taxes
313.8
331.6
5.9 %
6.5 %
Income tax expense
113.3
98.9
Income tax rate
36.1 %
29.8 %
Net income (1)
$
200.5
$
232.7
3.8 %
4.6 %
Net earnings per share:
Basic
$
0.85
$
0.99
Weighted average number of shares
236.3
235.3
Diluted (1)
$
0.85
$
0.98
Weighted average number of shares
237.3
236.4
(1) Excluding the $50.9 million receivable impairment in the 13
weeks ended April 29, 2017, Net income and Diluted earnings per
share for the 13 weeks ended April 29, 2017 were $232.1 million and
$0.98, respectively.
DOLLAR TREE, INC.
Segment Information
(In millions, except store count)
(Unaudited)
13 Weeks Ended
April 29, 2017
April 30, 2016
Net sales:
Dollar Tree
$ 2,571.7
$ 2,384.5
Family Dollar
2,715.4
2,701.3
Total net sales
$ 5,287.1
$ 5,085.8
Gross profit:
Dollar Tree
$
896.6
34.9 %
$
820.8
34.4 %
Family Dollar
730.5
26.9 %
733.8
27.2 %
Total gross profit
$ 1,627.1
30.8 %
$ 1,554.6
30.6 %
Operating income:
Dollar Tree
$
315.4
12.3 %
$
280.7
11.8 %
Family Dollar
73.4
2.7 %
138.0
5.1 %
Total operating income
$
388.8
7.4 %
$
418.7
8.2 %
13 Weeks Ended
April 29,
April 30,
2017
2016
Dollar
Family
Total
Dollar
Family
Total
Tree
Dollar
Tree
Dollar
Store Count:
Beginning
6,360
7,974
14,334
5,954
7,897
13,851
New
89
75
164
112
59
171
Rebanner (a)
-
-
-
(6 )
-
(6 )
Closings
(5 )
(11 )
(16 )
(11 )
(8 )
(19 )
Ending
6,444
8,038
14,482
6,049
7,948
13,997
Selling Square Footage (in millions)
55.5
58.2
113.7
52.1
57.5
109.6
Growth Rate (Square Footage)
6.5 %
1.2 %
3.7 %
10.4 %
100.0 %
132.2 %
(a) Stores are included as rebanners when they close or open,
respectively.
DOLLAR TREE, INC.
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
April 29,
January 28,
April 30,
2017
2017
2016
Cash and cash equivalents
$
1,154.9
$
866.4
$
929.7
Short-term investments
4.0
4.0
4.0
Merchandise inventories, net
2,878.4
2,865.8
2,929.5
Other current assets
240.8
201.8
308.9
Total current assets
4,278.1
3,938.0
4,172.1
Property, plant and equipment, net
3,093.9
3,115.8
3,153.2
Assets available for sale
10.6
9.0
11.7
Goodwill
5,022.4
5,023.5
5,024.9
Favorable lease rights, net
443.4
468.6
543.9
Tradename intangible asset
3,100.0
3,100.0
3,100.0
Other intangible assets, net
5.0
5.1
5.6
Other assets
41.3
41.6
49.5
Total assets
$ 15,994.7
$ 15,701.6
$
16,060.9
Current portion of long-term debt
$
165.9
$
152.1
$
120.5
Accounts payable
1,223.9
1,119.6
1,260.3
Other current liabilities
629.5
744.2
622.1
Income taxes payable
221.3
90.0
46.2
Total current liabilities
2,240.6
2,105.9
2,049.1
Long-term debt, net, excluding current portion
6,131.7
6,169.7
7,209.8
Unfavorable lease rights, net
117.6
124.0
142.9
Deferred tax liabilities, net
1,433.6
1,458.9
1,566.2
Income taxes payable, long-term
71.8
71.2
71.1
Other liabilities
390.4
382.4
352.2
Total liabilities
10,385.7
10,312.1
11,391.3
Shareholders’ equity
5,609.0
5,389.5
4,669.6
Total liabilities and shareholders’ equity
$ 15,994.7
$ 15,701.6
$
16,060.9
The January 28, 2017 information was derived from the audited
consolidated financial statements as of that date.
DOLLAR TREE, INC.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
13 Weeks Ended
April 29,
April 30,
2017
2016
Cash flows from operating activities:
Net income
$
200.5
$
232.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
153.9
162.3
Provision for deferred taxes
(23.0 )
(20.4 )
Amortization of debt discount and debt-issuance costs
3.6
4.7
Receivable impairment
50.9
-
Other non-cash adjustments to net income
32.9
27.7
Changes in operating assets and liabilities
11.9
(96.0 )
Total adjustments
230.2
78.3
Net cash provided by operating activities
430.7
311.0
Cash flows from investing activities:
Capital expenditures
(110.3 )
(175.9 )
Purchase of restricted investments
-
(36.1 )
Proceeds from sale of restricted investments
-
118.1
Proceeds from fixed asset disposition
2.2
1.1
Net cash used in investing activities
(108.1 )
(92.8 )
Cash flows from financing activities:
Principal payments for long-term debt
(27.8 )
(20.8 )
Proceeds from stock issued pursuant to stock-based compensation plans
11.8
14.4
Cash paid for taxes on exercises/vesting of stock-based compensation
(17.6 )
(18.4 )
Net cash used in financing activities
(33.6 )
(24.8 )
Effect of exchange rate changes on cash and cash equivalents
(0.5 )
0.2
Net increase in cash and cash equivalents
288.5
193.6
Cash and cash equivalents at beginning of period
866.4
736.1
Cash and cash equivalents at end of period
$ 1,154.9
$
929.7

DOLLAR TREE, INC. Reconciliation of Non-GAAP Financial Measures (In millions, except per share data) (Unaudited)

From time-to-time, the Company’s financial results include certain financial measures not derived in accordance with generally accepted accounting principles ("GAAP"). Non-GAAP financial measures should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purposes of analyzing operating performance, financial position or cash flows. However, the Company believes providing additional information in the form of non-GAAP measures that exclude the unusual, non-recurring expense outlined below is beneficial to the users of its financial statements in evaluating the Company’s current operating results in relation to past periods. The Company has included a reconciliation of this information to the most comparable GAAP measures in the following tables.

In the first quarter of 2017, the Company evaluated the collectability of its divestiture-related receivable from Dollar Express, which acquired the stores that the FTC required the Company to divest. Dollar Express is in the process of liquidating, is in default of its obligations to the Company, including its obligation to pay the receivable, and is not cooperating. Based on a number of factors, the Company determined the outstanding balance of $50.9 million was not recoverable and recorded an impairment charge to write down the receivable to zero. The charge is recorded as "Receivable impairment" in the accompanying condensed consolidated income statements. The Company plans to take all appropriate actions, which we expect to include litigation against Dollar Express and others, to enforce the Company’s rights.

Reconciliation of Adjusted Net Income:
13 Weeks Ended
April 29, 2017
Net income (GAAP)
$
200.5
SG&A adjustment:
50.9
Receivable impairment
Provision for income taxes on adjustment
(19.3 )
Adjusted Net income (Non-GAAP)
$
232.1
Reconciliation of Adjusted EPS:
13 Weeks Ended
April 29, 2017
Diluted earnings per share (GAAP)
$
0.85
Adjustment, net of tax
0.13
Adjusted EPS (Non-GAAP)
$
0.98
Reconciliation of Adjusted Operating Income:
13 Weeks Ended
April 29, 2017
Operating income (GAAP)
$
388.8
SG&A adjustment:
Receivable impairment
50.9
Adjusted Operating income (Non-GAAP)
$
439.7
Reconciliation of Adjusted Operating Income - Family Dollar
segment:
13 Weeks Ended
April 29, 2017
Operating income (GAAP)
$
73.4
SG&A adjustment:
Receivable impairment
50.9
Adjusted Operating income (Non-GAAP)
$
124.3

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SOURCE: Dollar Tree, Inc.

Dollar Tree, Inc.
Randy Guiler, 757-321-5284
Vice President, Investor Relations
www.DollarTree.com
DLTR-E