Dive Brief:
- Dollar Tree’s Chief Financial Officer Jeff Davis plans to leave the company when it files its fiscal year 2024 10-K, likely in March, the retailer said Wednesday. The company has initiated an external search for a successor. Dollar Tree is also looking for a new chief executive after former CEO Rick Dreiling resigned last month, citing health issues.
- The company reported Wednesday that its Q3 consolidated net sales were $7.56 billion, rising 3.5% from $7.31 billion last year. Overall same-store sales rose 1.8%. Comps at the company’s namesake banner also rose 1.8%, while same-store sales at Family Dollar were up 1.9%.
- Dollar Tree narrowed its full-year guidance again. It now forecasts net sales ranging from $30.7 billion to $30.9 billion, with comparable store growth in the low-single-digits. The company’s most recent guidance was for net sales ranging from $30.6 billion to $30.9 billion.
Dive Insight:
Dollar Tree is losing another executive at a pivotal time, as the retailer undergoes a strategic review of its Family Dollar business. The review, which could include a sale or spinoff of the business, is “moving forward as planned,” according to a release.
In the meantime, interim CEO Mike Creedon said Dollar Tree’s better-than-expected financial performance was thanks in part to a sales boost from non-comp stores. He said new Dollar Tree stores, including those acquired from 99 Cents Only, contributed more than three times more revenue this year.
Dollar Tree acquired designation rights for 170 stores and some intellectual property after the rival retailer filed for Chapter 11 bankruptcy and went out of business earlier this year. So far, Creedon said, 158 former 99 Cents Only stores have reopened as Dollar Tree. The remaining stores slated for conversion are expected to open by the end of this month.
Executives also said Family Dollar saw its first positive discretionary comp since the fourth quarter of 2022, with the strongest performance in children’s apparel, electronics and hardware. Creedon attributed the positive comp to the banner’s improved merchandising efforts, including placing more emphasis on value and higher frequency items, along with increasing the number of items offered at or below $5.
However, Family Dollar’s improved comps are insufficient to offset inflation and not indicative of a substantial improvement to the business, Neil Saunders, managing director of GlobalData, said in emailed comments.
“While Dollar Tree continues to operate Family Dollar and is making some changes to course correct the division, its efforts are more akin to treading water than swimming strongly forward,” Saunders said, attributing it to a likely sale of the banner. “This exploration has been going on for quite some time and, in our view, it likely reflects the fact Dollar Tree would like to sell off Family Dollar but has not been successful in finding any buyers who are willing to pay the premium it wants.”
Last month, Dollar Tree appointed Jason Nordin president of Family Dollar, saying he would play a key leadership role as the strategic review continues.
The company continues to close stores at the banner as well, in line with a plan announced in March to shutter about 970 underperforming Family Dollar stores. At the close of Q3, the company said 670 were closed as part of the review and an additional 25 are slated to close by the end of the fiscal year.
While Dollar Tree's business is generally trending as expected, uncertainty with leadership transitions and growth strategy and “tough consumer spending trends and an uptick in promotion and competition across retail should keep trends in check,” analysts with Telsey Advisory Group, led by Joe Feldman, said in a Wednesday note.
