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3Q17 Earnings Preview: What’s in Store for Dollar Tree?

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Part 2
3Q17 Earnings Preview: What’s in Store for Dollar Tree? PART 2 OF 5

Why Dollar Tree Expects a Low-Single-Digit Rise in 3Q17 Comps

Dollar Tree’s 3Q17 revenue expectations

Dollar Tree (DLTR) is expected to release its third-quarter 2017 results on November 21. It’s projected to report a 5.5% rise in total sales. If results meet expectations, they would mark the fifteenth consecutive quarterly increase in the company’s top line.

Year-to-date (YTD), the company’s top line has improved 4.8% to $10.56 billion. Growth was largely driven by solid performance from the company’s Dollar Tree banner, though the Family Dollar banner also managed positive comps in the second quarter.

Why Dollar Tree Expects a Low-Single-Digit Rise in 3Q17 Comps

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A look at sales comps

Same-store sales under the Dollar Tree banner improved 2.5% in the first quarter, followed by a 3.9% jump in the second quarter. The company has posted 38 consecutive quarters of positive sales comps under this banner.

Coming to the Family Dollar banner, we find that comps were down 1.2% during the first quarter. However, in the second quarter, sales comps turned positive and rose 1%, beating consensus expectations for a 0.6% rise.

Management’s outlook for the third quarter

For the third quarter, the management is looking for total sales to range $5.20 billion–$5.29 billion, rising 4.9% at the mid point. Growth is likely to be driven by a low-single-digit rate increase in sales comps and a 3.6% YoY rise in square footage.

For fiscal 2017, total sales are projected to range between $22.07 billion and $22.28 billion (+7% YoY growth at the mid-point), based on a low-single-digit rise in comps and 3.9% YoY growth in square footage.

In comparison, competitor Dollar General’s (DG) management projected a 5%–7% rise in full fiscal 2017 sales, based on slightly positive to 2% growth in comps. The company is expected to report third-quarter results on November 29.

Investors looking for exposure to Dollar Tree through ETFs can consider the Consumer Discretionary Select Sector SPDR Fund (XLY), which invests 0.9% of its total holdings in the company.

Read the next part of this series to learn about the company’s profitability and margins.

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