Dollar Tree Inc. (DLTR), Large Cap AI Study of the Week

August 20, 2024

Weekly AI Pick from the S&P 500

Company Overview

Dollar Tree, Inc. operates 16,774 retail discount stores under the brands Dollar Tree, Family Dollar, and Dollar Tree Canada across the U.S. and Canada. The company is divided into two business segments: Dollar Tree, which primarily offers merchandise at the $1.25 price point with some multi-price options, and Family Dollar, which targets lower-income customers with goods priced between $1.00 and $10.00. Growth strategies involve new store openings, expanding product assortments, renovating stores, investing in the workforce, and modernizing supply chains and technology. Key initiatives include expanding Dollar Tree's multi-price product range and partnering with Instacart for same-day delivery from over 15,000 stores. Family Dollar is also enhancing store formats and product assortments tailored to local demographics and expanding private label offerings.

The company is optimizing its store portfolio by closing underperforming locations, including about 970 Family Dollar and 30 Dollar Tree stores. Marketing strategies feature a new app for better customer engagement and a NASCAR sponsorship, while substantial buying power and distribution efficiencies support competitive pricing. Dollar Tree, Inc. emphasizes employee engagement through competitive pay, benefits, and growth opportunities, investing significantly in wages and development programs. They strive for gender and racial pay equity and offer numerous benefits, including retirement savings plans, health and welfare benefits, educational assistance, and financial support for those impacted by disasters or personal hardships. Talent development and retention are prioritized through extensive training programs, tuition reimbursement, and leadership development opportunities, leading to over 48,400 promotions in fiscal 2023. The company also focuses on Diversity, Equity, and Inclusion (DEI) by forming a DEI Executive Council, establishing associate resource groups, and promoting a culture of inclusion. Workplace safety is integral, with comprehensive safety and workplace violence prevention programs in place. Communication and engagement are key, with new channels for two-way dialogue and surveys to gather and act on associate feedback, ensuring alignment with key priorities and continued cultural evolution.

By the Numbers

• Annual 10-K Report Summary:
  • Net sales: $30,581.6 million, an 8.0% increase.
  • Comparable store sales: up 4.6%.
  • Gross profit: $9,309.6 million, a 4.3% increase.
  • Gross profit margin: declined by 110 basis points to 30.4%.
  • SG&A expenses: $10,213.6 million, a 52.5% increase.
  • Operating income: a loss of ($881.8) million.
  • Net loss: ($998.4) million or ($4.55) per diluted share.
  • Store count: 16,774 stores, a net increase of 434 stores.
  • Impairment charges and inventory markdowns: $503.9 million and $80.6 million, respectively.
  • Dollar Tree segment gross profit margin: declined to 35.8%.
  • Family Dollar net sales: $13.81 billion, a 7.0% increase.
  • Family Dollar gross profit margin: decreased from 24.4% to 23.9%.
  • Family Dollar operating income: a loss margin of (19.3)%.
  • Operating cash flow: improved by $1.07 billion.
  • Cash used in investing activities: increased by $853.8 million.
  • Share repurchases: 3.9 million shares for $504.3 million.
• Quarterly 10-Q Report Summary:
  • Net sales: $7.626 billion, a 4.2% increase.
  • Comparable store net sales: up 1.0%.
  • Gross profit margin: improved by 30 basis points to 30.8%.
  • SG&A expenses: increased by 50 basis points to 25.3% of total revenues.
  • Net income: $300.1 million, or $1.38 per diluted share.
  • Dollar Tree segment net sales: up 5.9%.
  • Dollar Tree segment operating income margin: decreased from 13.6% to 12.5%.
  • Family Dollar net sales: $3.460 billion, a 2.2% increase.
  • Family Dollar gross profit margin: increased to 25.2%.
  • Family Dollar operating income margin: increased to 1.1% from 0.3%.
  • Net cash provided by operating activities: decreased by $56.3 million.
  • Cash used in investing activities: increased by $120.3 million.
  • Cash used in financing activities: increased by $120.2 million.
  • Long-term borrowings: $3.45 billion.
  • Liquidity: $1.5 billion under the Revolving Credit Facility and $355.0 million in trade letters of credit.