~ Diluted Earnings per Share Increased 67.2% to
~ Adjusted EPS of
~ Consolidated Sales of
~ Same-Store Sales by Segment:
~ Company Repurchased
~ Initiated Testing of Dollar Tree Plus!
“I am proud of our team’s efforts throughout the first quarter,” stated
Philbin continued, “Dollar Tree continues to be a destination for
customers looking for great values and convenience, as demonstrated by
our 45th consecutive quarter of delivering an increase in
same-store sales. And, we are excited to kick off the initial
introduction of Dollar Tree Plus! multi-price point products into
select test stores. These products are designed to provide our shoppers
with More Choices, More Sizes, and More Savings. We are in the process
of expanding this test to more than 100
First Quarter Results
Consolidated net sales increased 4.6% to
Gross profit increased 1.6% to
Selling, general and administrative expenses were 23.1% of sales compared to 22.7% of sales in the prior year's first quarter. The increase was driven by operating and corporate expenses related to the consolidation of our store support centers, payroll costs related to our investment in store hourly payroll, and higher legal fees, partially offset by lower depreciation and amortization costs as a percentage of sales.
Operating income for the quarter was
The Company's effective tax rate for the quarter was 22.1% compared to 22.6% in the prior year’s first quarter.
Net income compared to the prior year’s quarter increased
The Company repurchased 960,683 shares during the quarter for
During the quarter, the Company opened 91 stores, expanded or relocated
11 stores, and closed 16 Family Dollar stores and nine
Family Dollar Update
Store Optimization Program Update
As announced in
-
The Company is rolling out a new model for both new and renovated
Family Dollar stores, referred to as H2. The Company tested the H2
model in 2018 with positive results. The H2 model has improved
merchandise offerings, including
Dollar Tree $1 merchandise sections, an expanded party assortment and an expanded number of freezer and cooler doors. H2 stores are delivering increased traffic with average comparable store sales increases of greater than 10%. H2 stores perform well in a variety of locations, and especially in locations where Family Dollar has been most challenged in the past. The Company entered fiscal 2019 with approximately 200 H2 stores and, as ofMay 4, 2019 , had approximately 550 H2 stores. The Company plans to renovate at least 1,000 stores in fiscal 2019. - The Company is taking action to close under-performing stores. The normal cadence of Family Dollar store closings on an annual basis is approximately 75 stores. In fiscal 2019, as previously announced, we expect to close as many as 390 stores, the majority of which will take place in the second quarter.
- The Company plans to re-banner approximately 200 Family Dollar stores to the Dollar Tree brand in fiscal 2019.
- Additionally, the Company plans to add adult beverage product in approximately 1,000 Family Dollar stores and expand freezers and coolers in approximately 400 Family Dollar stores in fiscal 2019. In the first quarter, adult beverage product was added to approximately 45 stores and freezers and coolers were expanded in approximately 55 stores.
Integration Update
The Company continues to be on track with the consolidation of its store
support centers. This represents an important final step in the
Company’s integration, which is scheduled to be completed in
Dollar Tree Plus! Multi-Price Point Test Update
As previously disclosed in the Company’s Fourth Quarter and Fiscal Year
2018 earnings announcement, the Company has recently initiated a test of
multi-price points, currently referred to as Dollar Tree Plus!,
at an expanding number of
The Company conducted extensive planning during the first quarter 2019,
including store selection and merchandising for the test. In mid-May,
the Company introduced Dollar Tree Plus! merchandise into the
first stores. The initial test phase is planned to be expanded to more
than 100 urban, suburban and rural
As the Company tests lifting the restriction on the
Philbin continued, “With its ‘Everything’s a Dollar’ model,
Company Outlook
The Company estimates consolidated net sales for the second quarter of
2019 to range from
For fiscal 2019, our guidance includes the expectation that Section 301 tariffs will be 25% on List 1, 2, and 3 goods. However, our guidance does not include potential tariffs on List 4 goods.
The Company estimates consolidated net sales for full-year fiscal 2019
will range from
Philbin concluded, “Our merchandising teams have done a tremendous job of mitigating the effects of 25% tariffs imposed under Section 301 for Chinese goods included on Lists 1, 2, and 3. We are uncertain as to whether, or when, tariffs will be applied to the List 4 products currently being considered by the United States Trade Representative. If tariffs on List 4 products are implemented, we expect that it will be impactful to both our business, and especially to consumers in general. Until we have more clarity, our outlook excludes the impact of tariffs on List 4 products. Our teams are doing an admirable job of controlling the controllables in running our business. We continue to believe we are well-positioned to capture the significant opportunity ahead of us as we focus on creating and driving value for our shareholders.”
Conference Call Information
On
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 can
be identified by the fact that they address future events, developments
or results and do not relate strictly to historical facts. Any
statements contained in this press release that are not statements of
historical facts may be deemed to be forward-looking statements.
Forward-looking statements include, without limitation, statements
preceded by, followed by or including words such as “believe,”
“anticipate,” “expect,” “intend,” “plan,” “view,” “target” or
“estimate,” “may,” “will,” “should,” “predict,” “possible,” “potential,”
“continue,” “strategy,” and similar expressions. For example, our
forward-looking statements include statements regarding second quarter
2019 and full-year 2019 results of operations, including consolidated
net sales, expenses, same-store sales, operating income, diluted
earnings per share, operating cash flow and tax rate; our square footage
growth; estimated costs relating to our initiatives, including the
discrete costs, and costs relating to lease obligations and fixtures in
closed stores; our expectations regarding imposed and proposed tariffs
and plans to address or mitigate the effects of tariffs on our business;
the impacts of increases in wage rates, fuel costs and freight costs on
our business; the timing of and expected annual cost savings from the
completion of our headquarters consolidation; the benefits, results and
effects of the ongoing integration with Family Dollar, including our
estimates of future annual cost savings resulting from the acquisition
and our efforts to make both Company-wide improvements as well as those
targeted at Family Dollar; our plans and expectations relating to our
store optimization program, including the opening of new stores,
renovation of Family Dollar stores, re-bannering Family Dollar stores to
| DOLLAR TREE, INC. | |||||||
| Condensed Consolidated Income Statements | |||||||
| (In millions, except per share data) | |||||||
| (Unaudited) | |||||||
| 13 Weeks Ended | |||||||
| May 4, 2019 | May 5, 2018 | ||||||
| Net sales | $ | 5,808.7 | $ | 5,553.7 | |||
| Cost of sales | 4,081.5 | 3,854.1 | |||||
| Gross profit | 1,727.2 | 1,699.6 | |||||
| 29.7% | 30.6% | ||||||
| Selling, general and administrative expenses | 1,341.7 | 1,262.0 | |||||
| 23.1% | 22.7% | ||||||
| Operating income | 385.5 | 437.6 | |||||
| 6.6% | 7.9% | ||||||
| Interest expense, net | 41.4 | 230.0 | |||||
| Other expense, net | 0.2 | 0.2 | |||||
| Income before income taxes | 343.9 | 207.4 | |||||
| 5.9% | 3.7% | ||||||
| Provision for income taxes | 76.0 | 46.9 | |||||
| Income tax rate | 22.1% | 22.6% | |||||
| Net income | $ | 267.9 | $ | 160.5 | |||
| 4.6% | 2.9% | ||||||
| Net earnings per share: | |||||||
| Basic | $ | 1.13 | $ | 0.68 | |||
| Weighted average number of shares | 238.0 | 237.5 | |||||
| Diluted | $ | 1.12 | $ | 0.67 | |||
| Weighted average number of shares | 239.1 | 238.5 | |||||
| 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 expenses outlined below is beneficial to the users of its financial statements in evaluating the Company's current operating results in relation to past periods. In addition, the Company's debt covenants exclude the impact of certain unusual, non-recurring expenses. The Company has included a reconciliation of this information to the most comparable GAAP measures in the following tables. | |
|
On February 3, 2019, the Company adopted Financial Accounting Standards Board Accounting Standards Update No. 2016-2, "Leases (Topic 842)" and subsequent amendments ("ASC 842") which requires lessees to recognize right-of-use assets on the balance sheet. The Company did not elect the hindsight practical expedient; therefore, the adoption also resulted in the recognition of an estimate of the embedded impairment of right-of-use assets as a reduction to Retained earnings. In March 2019, the Company announced a store optimization program which includes the closing of up to 390 under-performing stores in 2019. Under ASC 842, the right-of-use assets must be amortized over the remaining operating terms which resulted in the acceleration of rent expense for the stores that the Company plans to close. The accelerated rent expense net of the rent foregone as a result of the embedded lease impairment was $6.7 million and this amount will be excluded in calculating the Company's compliance with its debt covenants, which requires reporting in accordance with GAAP as of the date of the Credit Agreement. |
|
| In the first quarter of 2018, the Company entered into a new Credit Agreement that provided a $1,250.0 million revolving credit facility and a $782.0 million term loan facility. The Company also announced the registered offering of $750.0 million aggregate principal amount of Senior Floating Rate Notes due 2020, $1,000.0 million of 3.7% Senior Notes due 2023, $1,000.0 million of 4.0% Senior Notes due 2025 and $1,250.0 million of 4.2% Senior Notes due 2028. In connection with entry into the new Credit Agreement, the Company terminated the existing Credit Agreement and paid a redemption premium of $6.5 million for the early payment of the Term Loan B-2 Loans. In connection with the offering of the new Senior Notes, the Company redeemed the 5.75% Senior Notes due 2023 and paid a redemption premium of $107.8 million. In connection with the termination of the old Credit Agreement and the payment of Term Loan B-2 and the 5.75% Senior Notes due 2023, the Company accelerated the expense of approximately $41.2 million of amortizable non-cash deferred financing costs and expensed approximately $0.4 million in non-capitalizable transaction costs. Interest on the new debt was approximately $7.9 million in the first quarter and the interest foregone on the redemption of Term Loan A-1 and Term Loan B-2 was approximately $3.3 million. | |
| Reconciliation of Adjusted Net Income: | |||||||||
| 13 Weeks Ended | |||||||||
| May 4, 2019 | May 5, 2018 | ||||||||
| Net income (GAAP) | $ | 267.9 | $ | 160.5 | |||||
| Cost of sales adjustment: | |||||||||
| Accelerated rent expense | 6.7 | - | |||||||
| Interest expense adjustment: | |||||||||
| Redemption premium on 2023 Senior Notes | - | 107.8 | |||||||
| Redemption premium on Term Loan B-2 | - | 6.5 | |||||||
| Deferred financing costs acceleration and non-capitalizable transaction costs | - | 41.6 | |||||||
| Interest expense new Senior Notes | - | 7.9 | |||||||
| Interest expense foregone on redemption of Term Loan A-1 and Term Loan B-2 | - | (3.3 | ) | ||||||
| Provision for income taxes on adjustment | (1.5 | ) | (36.9 | ) | |||||
| Adjusted Net income (Non-GAAP) | $ | 273.1 | $ | 284.1 | |||||
| Reconciliation of Adjusted EPS: | |||||||||
| 13 Weeks Ended | |||||||||
| May 4, 2019 | May 5, 2018 | ||||||||
| Diluted earnings per share (GAAP) | $ | 1.12 | $ | 0.67 | |||||
| Adjustment, net of tax | 0.02 | 0.52 | |||||||
| Adjusted EPS (Non-GAAP) | $ | 1.14 | $ | 1.19 | |||||
| DOLLAR TREE, INC. | |||||||||||
| Segment Information | |||||||||||
| (In millions, except store count) | |||||||||||
| (Unaudited) | |||||||||||
| 13 Weeks Ended | |||||||||||
| May 4, 2019 | May 5, 2018 | ||||||||||
| Net sales: | |||||||||||
| Dollar Tree | $ | 2,959.3 | $ | 2,784.5 | |||||||
| Family Dollar | 2,849.4 | 2,769.2 | |||||||||
| Total net sales | $ | 5,808.7 | $ | 5,553.7 | |||||||
| Gross profit: | |||||||||||
| Dollar Tree | $ | 1,021.2 | 34.5% | $ | 960.8 | 34.5% | |||||
| Family Dollar | 706.0 | 24.8% | 738.8 | 26.7% | |||||||
| Total gross profit | $ | 1,727.2 | 29.7% | $ | 1,699.6 | 30.6% | |||||
| Operating income (loss): | |||||||||||
| Dollar Tree | $ | 390.9 | 13.2% | $ | 372.7 | 13.4% | |||||
| Family Dollar | 90.4 | 3.2% | 143.8 | 5.2% | |||||||
| Corporate and support | (95.8) | (1.6%) | (78.9) | (1.4%) | |||||||
| Total operating income | $ | 385.5 | 6.6% | $ | 437.6 | 7.9% | |||||
| 13 Weeks Ended | ||||||||||||||||||
| May 4, 2019 | May 5, 2018 | |||||||||||||||||
| Dollar Tree |
Family Dollar |
Total | Dollar Tree |
Family |
Total | |||||||||||||
| Store Count: | ||||||||||||||||||
| Beginning | 7,001 | 8,236 | 15,237 | 6,650 | 8,185 | 14,835 | ||||||||||||
| New stores | 65 | 26 | 91 | 68 | 62 | 130 | ||||||||||||
| Re-bannered stores (a) | 45 | (84 | ) | (39 | ) | - | (3 | ) | (3 | ) | ||||||||
| Closings | (9 | ) | (16 | ) | (25 | ) | (2 | ) | (3 | ) | (5 | ) | ||||||
| Ending | 7,102 | 8,162 | 15,264 | 6,716 | 8,241 | 14,957 | ||||||||||||
| Selling Square Footage (in millions) | 61.2 | 59.2 | 120.4 | 57.9 | 59.7 | 117.6 | ||||||||||||
| Growth Rate (Square Footage) | 5.7 | % | (0.8 | %) | 2.4 | % | 4.3 | % | 2.6 | % | 3.4 | % | ||||||
| (a) Stores are included as re-banners when they close or open, respectively. | ||||||||||||||||||
| DOLLAR TREE, INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (In millions) | |||||||||
| (Unaudited) | |||||||||
| May 4, | February 2, | May 5, | |||||||
| 2019 | 2019 | 2018 | |||||||
| Cash and cash equivalents | $ | 725.8 | $ | 422.1 | $ | 475.2 | |||
| Merchandise inventories | 3,325.5 | 3,536.0 | 3,248.2 | ||||||
| Other current assets | 194.8 | 335.2 | 318.6 | ||||||
| Total current assets | 4,246.1 | 4,293.3 | 4,042.0 | ||||||
| Property, plant and equipment, net | 3,525.0 | 3,445.3 | 3,249.7 | ||||||
| Restricted cash | 24.7 | 24.6 | - | ||||||
| Operating lease right-of-use assets | 6,233.1 | - | - | ||||||
| Goodwill | 2,295.9 | 2,296.6 | 5,024.2 | ||||||
| Favorable lease rights, net | - | 288.7 | 354.9 | ||||||
| Trade name intangible asset | 3,100.0 | 3,100.0 | 3,100.0 | ||||||
| Other assets | 51.6 | 52.7 | 56.3 | ||||||
| Total assets | $ | 19,476.4 | $ | 13,501.2 | $ | 15,827.1 | |||
| Current portion of long-term debt | $ | 750.0 | $ | - | $ | - | |||
| Current portion of operating lease liabilities | 1,202.9 | - | - | ||||||
| Accounts payable | 1,186.5 | 1,416.4 | 1,181.5 | ||||||
| Income taxes payable | 125.2 | 60.0 | 81.7 | ||||||
| Other current liabilities | 701.7 | 619.3 | 654.0 | ||||||
| Total current liabilities | 3,966.3 | 2,095.7 | 1,917.2 | ||||||
| Long-term debt, net, excluding current portion | 3,516.9 | 4,265.3 | 5,040.1 | ||||||
| Operating lease liabilities, long-term | 4,984.6 | - | - | ||||||
| Unfavorable lease rights, net | - | 78.8 | 94.5 | ||||||
| Deferred income taxes, net | 954.2 | 973.2 | 976.2 | ||||||
| Income taxes payable, long-term | 35.8 | 35.4 | 42.5 | ||||||
| Other liabilities | 262.7 | 409.9 | 400.9 | ||||||
| Total liabilities | 13,720.5 | 7,858.3 | 8,471.4 | ||||||
| Shareholders' equity | 5,755.9 | 5,642.9 | 7,355.7 | ||||||
| Total liabilities and shareholders' equity | $ | 19,476.4 | $ | 13,501.2 | $ | 15,827.1 | |||
| The February 2, 2019 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 | ||||||||
| May 4, | May 5, | |||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 267.9 | $ | 160.5 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 151.2 | 151.5 | ||||||
| Provision for deferred income taxes | 3.0 | (9.0 | ) | |||||
| Amortization of debt discount and debt-issuance costs | 1.6 | 49.7 | ||||||
| Other non-cash adjustments to net income | 33.4 | 33.6 | ||||||
| Loss on debt extinguishment | - | 114.7 | ||||||
| Changes in operating assets and liabilities | 157.0 | (113.4 | ) | |||||
| Total adjustments | 346.2 | 227.1 | ||||||
| Net cash provided by operating activities | 614.1 | 387.6 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (209.2 | ) | (180.9 | ) | ||||
| Proceeds from governmental grant | 16.5 | - | ||||||
| Proceeds from (payments for) fixed asset disposition | 0.3 | (0.2 | ) | |||||
| Net cash used in investing activities | (192.4 | ) | (181.1 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from long-term debt, net of discount | - | 4,775.8 | ||||||
| Principal payments for long-term debt | - | (5,432.7 | ) | |||||
| Debt-issuance and debt extinguishment costs | - | (155.3 | ) | |||||
| Proceeds from revolving credit facility | - | 50.0 | ||||||
| Repayments of revolving credit facility | - | (50.0 | ) | |||||
| Proceeds from stock issued pursuant to stock-based compensation plans | 5.8 | 4.6 | ||||||
| Cash paid for taxes on exercises/vesting of stock-based compensation | (23.3 | ) | (21.2 | ) | ||||
| Payments for repurchase of stock | (100.0 | ) | - | |||||
| Net cash used in financing activities | (117.5 | ) | (828.8 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (0.4 | ) | (0.3 | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 303.8 | (622.6 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 446.7 | 1,097.8 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 750.5 | $ | 475.2 | ||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190530005413/en/
Source:
Dollar Tree, Inc.
Randy Guiler, 757-321-5284
Vice President,
Investor Relations
www.DollarTree.com
DLTR-E