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
Executive
Gary Philbin

Tree continues to be strong, consistent and growing. This represented our 39th consecutive quarter of positive same-store sales, and operating margin continues to lead the value sector. Our third quarter performance again validates the relevance of the Tree brand. Customers love our fixed-price concept and continue to shop for value and convenience. We are very pleased with the traffic and sales results, our merchandise assortment and flow of inventory. Our business model continues to focus on our customers' wants and needs. And it is a different shopping experience from the rest of retail.

For the Family Dollar segment, the highlights of the quarter include: Top-performing categories were snacks and beverage, refrigerated product, school and office supplies and bedding. Our comp performance was driven by consumables, and sales cadence for the quarter were relatively balanced. The quarter -- were balanced throughout the quarter with each month above 1% comp. September was the strongest comp of the quarter.

Geographically, Family Dollar's same-store sales growth for the quarter was strongest in our West, Mid-Atlantic and Northeast zones. Importantly, all eight major geographic zones delivered positive same-store sales for the quarter. We continue to make meaningful progress at Family Dollar around the key foundational elements that will drive enhanced performance: improving the store table stakes, focusing on merchandising value for the customer and consolidating of shared services. Evidence of our progress can be seen in our third quarter results: positive 1.5% same-store sales, a 130 basis point improvement in gross margin, a 60 basis point SG&A leverage and a total of 190 basis point increase in operating margin.

Feedback we're receiving from our Family Dollar shoppers indicate they are seeing cleaner stores, greater values on the items our customers buy most often, improving product assortments, more consistent in-stocks and better customer service in our stores. We want to be the neighborhood store of choice for the fill-in shopping needs of our Family Dollar customers that typically, live, work and shop near our stores.

During the third quarter, we completed another 191 Family Dollar store renovations as part of our renovation initiative. We continue to be very pleased with the initial results we are seeing in these stores, and especially about the feedback we're receiving from our customers and store teams. Our target for fiscal 2017 is 350 stores, and we will continue to renovate hundreds of older Family Dollar Stores as we improve the business. Elements of the improved store layout include: better adjacencies and more productive endcaps; expanded beverage and snack, including immediate consumption coolers near checkout; added assortment of food in coolers and freezers; updated hair care assortments; expanded adult beverage in some stores; our shopper-friendly power alley to promote Dollar well items; and a faster checkout process for our customers. Additionally, we continue to make progress as planned with elevating our private brand assortment in stores. These private brands are being developed to provide national brand comparable quality and terrific values to support the Compare and Save component of our Smart