Yahoo Finance Dollar Tree's (DLTR) Strategic Initiatives Appear Encouraging
Dollar Tree, Inc. DLTR has been benefiting from growth across segments, higher traffic trends and robust market share gains. The company has been making significant progress in optimizing its store portfolio through new store openings, renovations, re-banners and closings. Its restructuring and expansion initiatives also bode well. Driven by such strengths, the retail discount stores’ operator’s shares have gained 9.4% in the past six months compared with the industry’s 11.5% growth.
Let’s delve deeper.
What’s More?
Dollar Tree’s store portfolio optimization through openings, renovations, re-banners and closings progresses well. It is delivering compelling results from its Key Real Estate Initiatives, which include the expansion of its $3 and $5 plus assortment in Dollar Tree stores as well as Combo Stores. We note that the company has completed the rollout of $3, $4 and $5 frozen and refrigerated items, which are currently available in more than 6,500 stores.
Dollar Tree’s restructuring and expansion initiatives, as evident from steady store openings and improvement of distribution centers, have been driving revenues. In fourth-quarter fiscal 2023, the company opened 219 stores, re-bannered five and closed 72. It opened 146 Dollar Tree stores and 73 Family Dollar outlets. In the reported quarter, the company also closed 13 Dollar Tree and 59 Family Dollar stores.
Recently, this Zacks Rank #3 (Hold) company announced a comprehensive review of its Family Dollar portfolio to identify stores that are not aligned with its transformative vision for closure, relocation or re-bannering. As part of the review, Dollar Tree expects to close 600 Family Dollar stores in the first half of fiscal 2024. Additionally, it has identified provisions to close 370 Family Dollar and 30 Dollar Tree stores over the next several years, subject to the end of each store’s current lease term.
Despite these efforts, Dollar Tree’s Family Dollar segment has been pressured by weak spending trends among low-income consumers, resulting in soft demand for discretionary items. For fiscal 2024, the company’s guidance incorporates the benefits of favorable freight rates and moderating headwinds from reduced SNAP benefits. However, it expects current shrink and mic levels to remain headwinds in the first half of fiscal 2024. In addition, product cost inflation, an unfavorable sales mix and elevated shrink may continue to hurt results.
Nevertheless, management remains confident of its progress on the key growth initiatives and business transformation plan. For fiscal 2024, Dollar Tree expects consolidated net sales in the range of $31-$32 billion, higher than $30.6 billion reported last fiscal. The company anticipates low to mid-single-digit comps growth for the enterprise. Comps are likely to increase in the mid-single digits for the Dollar Tree banner and low-single digits for the Family Dollar segment. Management expects adjusted earnings per share (EPS) in the range of $6.50-$7, up from $5.89 last fiscal.
For second-quarter fiscal 2024, the company expects consolidated net sales in the range of $7.3-$7.6 billion, based on low to low-single-digit comps growth for the enterprise. Comps are expected to improve 2-4% for the Dollar Tree banner and remain nearly flat for the Family Dollar banner. Adjusted EPS is estimated to be in the band of $1-$1.10, including about 10 cents of incremental transportation and other costs related to the loss of the Marietta distribution center.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and EPS is currently pegged at $31.3 billion and $6.63, respectively. These estimates indicate corresponding growth of 2.2% and 12.6% year over year. The consensus mark for second-quarter sales and EPS is $7.51 billion and $1.06, respectively, indicating year-over-year increases of 2.6% and 16.5%.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie ANF, American Eagle AEO and Deckers DECK.
Abercrombie, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). ANF delivered an average earnings surprise of 180.9% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s financial-year sales indicates growth of 1.7% from the year-ago reported figure.
American Eagle, a casual apparel retailer, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 22% in the last reported quarter.
The consensus estimate for American Eagle’s current financial-year sales indicates growth of 3.4% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an average earnings surprise of 32.1% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.8% from the year-ago reported figure.
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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
