Dollar Tree, Inc. (NASDAQ:DLTR) Q3 2018 Earnings Conference Call Transcript

Nov 29, 2018 • 09:00 am ET

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Dollar Tree, Inc. (NASDAQ:DLTR) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day and welcome to Dollar Tree's Third Quarter Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Randy Guiler, VP, IR. Please go ahead, sir.

Executive
Randy Goler

Thank you, Brandon. Good morning and welcome to our conference call to discuss Dollar Tree's performance for the third fiscal quarter of 2018. 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. Please limit your questions to one and one follow-up if necessary.

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. Today, we are going to discuss our third quarter performance as well as our plans to improve the consistency of execution across the Family Dollar store base and to optimize our real estate portfolio. This will include a meaningful acceleration of in store renovations and rebanners in 2019. This morning, we announced results for the third quarter. Sales increased 4.2% to 5.54 billion. Consolidated same store sales increased 1%. By segment, comp sales for the Dollar Tree banner increased 2.3%, the Family Dollar banner comps were down 40 bps compare to last year's Q3 increased of 1.5% on a two-year stack basis comps accelerated slightly. Our enterprise gross margin rate declined 110 basis points to 30.2.

Operating income was $387.8 million or 7% and diluted earnings per share increased 16.8% to a $1.18 at the high-end of our guidance range. We delivered earnings within the range of our expectations despite continued cost pressures related to domestic freight and our investment in store wages. Dollar Tree delivered its 43 consecutive quarter of same-store sales growth with increases in both customer transactions and average ticket. We are pleased with the performance of our newly renovated Family Dollar stores. Additionally, we have begun the important phase of consolidating our store support centers into our Chesapeake campus, which will improve our ability to support Family Dollar stores through enhanced collaboration, communication and teamwork.

Dollar Tree continues to have a most unique differentiated and defensible business model in US value retail. Customers love our dollar fixed price point as demonstrated by 43 consecutive quarters of positive comps, despite periodic cost challenges the company has continued to deliver a relatively consistent gross margin annually with sector leading operating margin. Our 2.3 comp this quarter was on top of a 5.0 comp in last year's third quarter, and the comp growth was driven by balanced increases in both transaction count and average tickets. In our Dollar Tree banner for the third quarter, top performing categories were snacks and beverage, candy, stationary, greeting cards and our Halloween seasonal assortment.

We are extremely pleased with the recent addition of the Hallmark brand to our product assortment at Dollar Tree, customers are thrilled with the values and the offering, and I'll touch