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Comparing Sales Outlook of Dollar General and Dollar Tree

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Sales growth in Q1

Dollar General (DG) and Dollar Tree (DLTR) surpassed analysts’ sales expectations for the first quarter of fiscal 2019. Dollar General generated higher sales growth than rival Dollar Tree in the first quarter. Dollar General’s first-quarter sales grew 8.3% to $6.62 billion and exceeded analysts’ estimate of $6.57 billion. Dollar General’s sales growth was driven by new store sales and higher same-store sales, partially offset by the impact of store closures. Dollar General’s first-quarter same-store sales growth of 3.8% was driven by improved average basket size and higher customer traffic. Consumables, seasonal, and home categories experienced growth while the apparel category disappointed investors with lower sales.

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Dollar Tree’s first-quarter sales grew 4.6% to $5.81 billion and exceeded analysts’ estimate of $5.78 billion. Dollar Tree’s sales growth was driven by sales of $135.4 million from new Dollar Tree and Family Dollar stores and same-store sales growth of 2.2%. Same-store sales of the Dollar Tree banner grew 2.4% due to strength in consumables and seasonal businesses. Same-store sales of the Family Dollar banner grew 1.9%, marking the highest growth since Family Dollar was acquired in 2015.

Sales outlook

Dollar General kept its fiscal 2019 sales outlook unchanged even after strong sales growth in the first quarter. Dollar General expects sales growth of about 7% and same-store sales growth of about 2.5% in fiscal 2019. The company is trying to increase its sales by expanding its new non-consumable offering in categories like home, domestics, housewares, party, and occasion from over 1,100 stores at the end of the first quarter to about 2,400 stores by the end of fiscal 2019.

Dollar General’s other sales growth initiatives include expansion of the number of coolers, the launch of private cosmetic brand Believe (priced at $5 or less), the addition of new stores, and the remodeling of stores to improve store traffic.

Dollar Tree updated its fiscal 2019 sales outlook to the range of $23.51 billion–$23.83 billion compared to its previous outlook of $23.45 billion–$23.87 billion. Same-store sales growth in the low single digits is anticipated in fiscal 2019.

Dollar Tree continues to improve its Family Dollar business by remodeling its stores and re-bannering some stores to the Dollar Tree banner. The company’s new model H2 for new and renovated Family Dollar Stores is generating positive results driven by enhanced merchandise offerings and a higher count of freezers and cooler doors.  Dollar Tree added adult beverages to 45 stores in the first quarter and plans to roll-out adult beverage products in 1,000 stores in fiscal 2019.

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