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Dollar Tree Just Delivered 1 of Its Best Quarters in Years

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Dollar Tree beats 3Q17 top-line expectations

Dollar Tree (DLTR) reported its third-quarter (3Q17) results on November 21. It posted a 6.3% YoY (year-over-year) rise in total sales to $5.32 billion. Wall Street, in comparison, projected a 5.5% rise in sales while management predicted $5.20 billion to $5.29 billion in the 3Q17 top line. Positive comps at the company’s Dollar Tree and Family Dollar banners anchored 3Q17 growth.

Management was immensely happy with the company’s performance. “I’m really pleased with the terrific third quarter our team delivered with the performance of each of our business segments,” said Gary Philbin, president and CEO of Dollar Tree.

“Our third quarter results demonstrate our continuing progress in delivering value and convenience, serving more customers in more markets across North America, through our diversified business model,” added Philbin.

Competitor Dollar General (DG), which is slated to report its third-quarter results on December 7, is expected to register a 9% YoY jump in quarterly sales.

What drove the 3Q17 top line

3Q17 total sales were mainly driven by a 3.2% jump in same-store sales (versus analyst expectations of 2.4% rise) and a 3.4% rise in square footage. Higher sales comps were driven by both better traffic and improved basket size. The company opened 169 new stores during the quarter.

Dollar Tree banner sales improved 8.8% YoY to $2.69 million (50.5% of sales) as sales comps rose 5% during the quarter. 3Q17 was the thirty-ninth consecutive quarter of positive sales comps for the Dollar Tree banner.

“The Dollar Tree banner delivered a 5% comp, it’s best quarterly comp since Q4 of 2014 along with 20 basis point improvement in its sector leading operating margin,” said Philbin.

He added, “Sales performance was led by discretionary as we delivered one of our best seasonal quarters in years, both consumables and discretionary comp did better than 4% for the quarter.”

Family Dollar segment sales rose 3.8% to $2.63 billion with sales comps improving 1.5% during the quarter.

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.

For 3Q17 profitability and margins, read the next part of this series.

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