It has been about a month since the last earnings report for Dollar Tree (DLTR – Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dollar Tree due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dollar Tree Beats on Q3 Earnings & Sales Estimates
Dollar Tree has reported strong third-quarter fiscal 2024 results, with both earnings and sales surpassing the Zacks Consensus Estimate and improving year over year. Dollar Tree’s adjusted earnings per share (EPS) grew 15.5% year over year to $1.12 and surpassed the Zacks Consensus Estimate of $1.07.
Consolidated net sales improved 3.5% year over year to $7.56 billion and beat the Zacks Consensus Estimate of $7.45 billion. Enterprise same-store sales (comps) grew 1.8% year over year. The company’s comps benefited from a 1.6% rise in traffic and a 0.2% increase in the average ticket.
Comps improved 1.8% for the Dollar Tree banner and 1.9% for the Family Dollar banner. The Dollar Tree segment benefited from a 1.5% rise in traffic and a 0.3% improvement in the average ticket. Comps at Family Dollar were aided by a 1.8% increase in traffic and a flat average ticket.
Our model predicted year-over-year enterprise comps growth of 2.4% for the fiscal third quarter, with a 2.7% increase in the Dollar Tree banner and a 1.9% increase in Family Dollar.
The gross profit rose 7.6% year over year to $2.34 billion, whereas the gross margin expanded 120 basis points (bps) to 30.9%. Lower freight costs and improved shrink mainly aided the gross margin. This was partly negated by higher distribution costs. The gross margin expanded 60 bps to 35.4% at the Dollar Tree banner and 130 bps to 24.9% at the Family Dollar segment.
We estimated a year-over-year rise of 5.2% in adjusted gross profit and a 90-bps expansion in gross margin.
Adjusted selling, general and administrative expenses were 26.5% of total revenues, up 80 bps from 25.7% in the year-earlier quarter. The increase was driven primarily by increased depreciation expenses from store investments, temporary labor in the Dollar Tree unit to aid multi-price rollout, elevated utility costs and loss of leverage from comps increase.
Adjusted operating income rose 13.8% year over year to $343.2 million. The operating margin expanded 40 bps to 4.5%.
DLTR’s Financial Health
Dollar Tree ended the fiscal third quarter with cash and cash equivalents of $697.6 million. As of Nov. 2, 2024, net merchandise inventories were $5.54 billion, up 0.4% year over year. It had a net long-term debt, excluding the current portion, of $2.43 billion and shareholders’ equity of $7.64 billion as of the same date.
What to Expect From DLTR in Q4 & Fiscal 2024?
DLTR revised its fiscal 2024 view to reflect the robust third-quarter results. For fiscal 2024, consolidated net sales are projected to be $30.7-$30.9 billion compared with the prior view of $30.6-$30.9 billion. Comps growth is estimated to be in the low-single-digits for the enterprise and both the Dollar Tree and Family Dollar segments. It envisions adjusted EPS to be $5.31-$5.51, narrower from the earlier estimated range of $5.20-$5.60.
For the fiscal fourth quarter, management projects consolidated net sales to be $8.1-$8.3 billion and comps growth in the low-single-digits for the enterprise and both the Dollar Tree and Family Dollar segments. Adjusted EPS is likely to be $2.10-$2.30.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Dollar Tree has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Dollar Tree has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Dollar Tree belongs to the Zacks Retail – Discount Stores industry. Another stock from the same industry, Target (TGT – Free Report) , has gained 6.2% over the past month. More than a month has passed since the company reported results for the quarter ended October 2024.
Target reported revenues of $25.67 billion in the last reported quarter, representing a year-over-year change of +1.1%. EPS of $1.85 for the same period compares with $2.10 a year ago.
For the current quarter, Target is expected to post earnings of $2.14 per share, indicating a change of -28.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
Target has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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