USA- Retailer Dollar Tree reported a net sales increase of 4.2% year-on-year (YoY) to US$7.6 billion in Q1 2024 in a promising showing after announcing it would close more than 1,000 stores during last quarter’s earnings call and suffering significant losses due to inventory losses in April.
The retailer reported a same-store net sales increase of 1.7%, primed by a 2.1% increase in traffic. However, the increase was derailed by a 1.1% decrease in average tickets compared to the same quarter last year.
The company’s gross profits also increased by 5.3% YoY to US$2.35 billion, while gross margin expanded by 30.8%. A reduction in transport costs drove the gross margin expansion.
Dollar Tree’s Family Dollar reported a 0.1% YoY increase in net sales, but the company’s performance was dismal. The company intends to conduct a strategic review of the Family Dollar business, which will most likely result in a complete sale, spin-off, or other forms of disposition.
The retailer’s strong performance can be attributed to its operation optimization strategy.
The retail giant initiated a store portfolio review in late 2023 that would identify stores for relocation, closure, or re-bannering, depending on individual store performance and prevailing market conditions.
During the earnings call, the company announced it had closed more than 550 outlets in the reported quarter and forecasts it would close more than 150 outlets by the end of 2024.
Dollar Tree also opened 116 new outlets and 41 new Family Dollar stores throughout the US. The company converted 926 stores to the more efficient in-line multi-price line format, which enhances customer experience.
Rick Dreiling, Dollar Tree’s CEO, lauded this strategy: “We remained focused on rapidly rolling out our next generation of multi-price stores, and at Family Dollar, we are taking the steps necessary to position the business for long-term success.”
The company’s strong performance has impressed and surprised analysts equally, especially after the retailer suffered a huge setback in April. Dollar Tree completely lost inventory in its Marietta, Oklahoma distribution center, which was destroyed by a tornado. The company incurred a US$47 million loss in equipment and property damage and US$70 million in destroyed inventory.
Dollar Tree foresees full-year net sales growing by single percentage points, with consolidated net sales projected to reach US$31 billion.
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