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What Happened to Dollar Tree’s Top Line in 4Q16?

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Better sales comps and new store openings

Dollar Tree (DLTR), America’s leading discount store operator, delivered a sales beat on March 1, when it reported its 4Q16 results. The company had fallen short of the Wall Street consensus estimates in all the three previous quarters of 2016.

The company’s top line improved 5% YoY (year-over-year) to $5.64 billion in 4Q16. Analysts on average were expecting total sales of $5.62 during the quarter.

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DLTR CEO (chief executive officer) Bob Sasser stated: “We believe we are extremely well positioned in the most attractive sector of retail to deliver increased value for our long-term shareholders…Our Dollar Tree and Family Dollar banners are each focused on offering great value and convenience to our shoppers.”

What drove the top-line growth?

The company’s sales growth during the fourth quarter was helped by improvements in same-store sales, which rose 1.2% during the quarter. The company also opened 104 stores during the quarter, which boosted sales.

Dollar Tree’s banner sales rose 7.9% to $2.9 billion, with balanced sales growth in the discretionary and consumable products. Sales comps rose 2.3% as both the average ticket size and traffic improved during the quarter.

Family Dollar’s sales jumped 2.2% as comps rose 0.2% during the quarter. While the average ticket size was up 30 basis points, this metric was partially offset by a slight decline in traffic.

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Family Dollar integration boosts fiscal 2016 sales

For fiscal 2016, the company’s total revenues rose 33% YoY to $20.7 billion. Around 85% of this increase came from the incremental sales added by the integration of the Family Dollar stores. The remaining jump came from the 584 stores that the company added during the year and a 1.8% increase in same-store sales.

By comparison, retail heavyweight Wal-Mart Stores (WMT) and supermarket giant Kroger (KR) reported full-year sales growth of 0.8% and 5%, respectively, in their most recent results.

DLTR expects revenue to lie in the $21.9 billion–$22.3 billion range for the next year, implying a growth of 7% at the midpoint. It plans to open another 650 stores during the year. Notably, investors looking for exposure to Dollar Tree through ETFs can consider the Consumer Discretionary Select Sector SPDR Fund (XLY), which invests 0.8% of its total holdings in the company.

Continue to the next part for a look at the company’s same-store sales performance.

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