Dollar Tree, Inc. (NASDAQ:DLTR) Q3 2017 Earnings Conference Call Transcript

Nov 21, 2017 • 09:00 am ET

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Dollar Tree, Inc. (NASDAQ:DLTR) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to Dollar Tree, Inc.'s Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Randy Guiler, VP, IR. Please go ahead.

Executive
Randy Guiler

Thank you, Matt. Good morning, and welcome to our conference call to discuss Dollar Tree's performance for the third fiscal quarter of 2017. Participating on today's call will be our President and CEO, Gary Philbin; and our CFO, Kevin Wampler.

(Forward-Looking Cautionary Statements)

At the end of our prepared remarks, we will open the call to your questions. (Operator Instructions)

Now I will turn the call over to Gary Philbin, Dollar Tree's President and CEO.

Executive
Gary Philbin

Thank you, Randy, and good morning everyone. This morning, we announced our results for the third quarter of fiscal 2017. Sales increased 6.3% to $5.32 billion. Our same-store sales increased 3.2%. By segment, comp sales for the Dollar Tree banner increased 5%. And for the Family Dollar banner, comp sales increased 1.5%. Our gross margin rate improved 90 basis points to 31.3%. Operating income increased 24.2% to $425.2 million, and our operating margin rate improved 120 basis points to 8%. Earnings per share increased 40.3% to $1.01.

I'm really pleased with the terrific third quarter our team delivered with the performance of each of our business segments. The Dollar Tree banner delivered a 5% comp, its best quarterly comp since Q4 of 2014, along with a 20 basis point improvement in its sector-leading operating margin. The Family Dollar banner delivered positive same-store sales of 1.5% and a 190 basis point improvement in operating margin as we continue to gain traction in our -- in the business.

Our Dollar Tree Canada team delivered another solid quarter of strong sales coupled with improved margins and expense control. And our Dollar Tree Direct business, while a small portion of our business, delivered low double-digit comp increases in both sales and visits to the site.

Dollar Tree highlights for the quarter include: Our top-performing categories for the quarter were snacks and beverage, food, household products, health care and stationary. Sales performance was led by discretionary as we delivered one of our best seasonal quarters in years. Both consumables and discretionary comped at better than 4% for the quarter. All three months comped positively in the quarter. September was the strongest month in the quarter. And geographically, Dollar Tree same-store sales growth was strongest in the Southwest, Northeast and Midwest; and all of our zones delivered positive comps greater than 3%.

Elements of Dollar Tree's strong seasonal performance included Halloween as we delivered strong comp sales and improved seasonal inventory sell-through, greater than prior year's quarter; while harvest also delivered solid comps during the quarter; and inventory was well positioned as we entered the fourth quarter. Back-to-school was our best season in several years. And Christmas, while it represents a small portion of Q3 as we receive early inventory of our Christmas crafts and early decor items, our initial results were very encouraging.

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