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Dollar Tree Begins $1.25 Price Point Roll-Out; Tightens FY21 Outlook

Dollar Tree Inc (NASDAQ: DLTR) reported third-quarter FY21 sales growth of 3.9% year-on-year, to $6.415 billion, marginally beating the analyst consensus of $6.410 billion. EPS of $0.96 was in line with the analyst consensus.

  • Enterprise same-store sales grew 1.6% and increased 6.7% on a two-year stacked basis. Dollar Tree same-store sales rose 0.6% on a constant currency basis.
  • Dollar Tree segment revenue rose 3.4% Y/Y, and Family Dollar increased 4.3%.
  • The gross margin for the quarter declined 370 basis points Y/Y to 27.5%.
  • The operating margin contracted 270 basis points to 4.8%, and operating income for the quarter declined 33.3% to $310.5 million.
  • Dollar Tree held $701.4 million in cash and equivalents as of October 30, 2021. Net cash provided by operating activities for the nine months totaled $1 billion.
  • $1.25 Price Point: Dollar Tree has begun rolling out the $1.25 price point at all its stores nationwide. It plans to introduce the new price point in more than 2,000 additional stores in December and complete the rollout to all stores by the end of Q1 of 2022.
  • Outlook: Dollar Tree sees Q4 sales of $7.02 billion – $7.18 billion versus the consensus of $7.03 billion. The company expects Q4 EPS of $1.69 – $1.79 versus the consensus of $1.75.
  • Dollar Tree expects FY21 sales of $26.25 billion – $26.41 billion (prior view $26.19 billion – $26.44 billion), versus the consensus of $26.26 billion.
  • The company sees FY21 EPS of $5.48 – $5.58 (prior view $5.40 – $5.60) versus the consensus of $5.59.
  • The company said freight and supply chain disruptions would continue to be the company’s biggest challenge in the near term.
  • Price Action: DLTR shares are trading higher by 6.29% at $140.89 on the last check Tuesday.

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