Dollar Tree Stores Inc. came out relatively unscathed last week as it reported earnings for the final quarter of last year while other retailers scramble for cover amid falling sales.
The company’s revenue was up and profit down only slightly as other retail chains close stores and lay off employees. More important to Wall Street, management’s guidance for sales and profits this year beat some analysts’ estimates. Dollar Tree shares rose 10 percent Thursday, the most in 18 months, when the company released its results and outlook.
The number of Dollar Tree stores nationwide rose by 192 last year. The company has laid off no employees and plans to open an additional 275 stores this year.
Its discount variety stores sell merchandise such as candy and food, personal grooming items, cleaning products, party goods and apparel.
Like many retail chains, earnings of the Chesapeake, Va.-based company have been under pressure for the past six months as sales fall victim to the nation’s struggling economy.
Last month, home and personal care product stores Sharper Image and Lillian Vernon filed for bankruptcy. Home Depot laid off 500 workers at its headquarters, and jeweler Zales said it would close 60 stores.
They are following retail business strategies common during economic downturns, namely cutting inventory, reducing payroll and shutting stores.
“Our business fundamentals are sound,” said Dollar Tree Chief Executive Bob Sasser.
Discount prices offered at the company’s 3,411 stores in 48 states become increasingly important to customers “in the face of the current economic environment,” Mr. Sasser said.
Dollar Tree reported that its net income fell 3 percent in last year’s fiscal fourth quarter to $94.7 million, or $1.04 per share, compared with $97.6 million, or 96 cents per share, one year earlier. The period ended Feb. 2 and covered 13 weeks, compared with 14 weeks for the final quarter of 2006 because of an adjustment to the retail calendar.
Sales reached $1.30 billion, a 5 percent increase over the $1.24 billion in the comparable 13 weeks of the previous year.
The company’s stock, DLTR on the Nasdaq Stock Market, has fallen about 24 percent since September but rose yesterday after Dollar Tree announced a corporate-level restructuring. The reorganization is intended to improve efficiency but would not affect Dollar Tree’s business operations or its stores, the company said. The stock closed at $27.88, up $1.05 or nearly 4 percent.
Industry analysts said Dollar Tree’s stock performance of the past few days was good but questioned how long it would last because of strains that the nation’s economy is putting on retail chains.
“We believe that consumers, especially at the middle and lower end, will be forced to allocate more of their expenditures to necessities such as food and fuel, given strong commodity inflation and stagnating real income growth,” Scott A. Mushkin of Banc of America Securities wrote in a research note last week.
As a result of the restructuring, the new parent company will be called Dollar Tree Inc., but the board of directors, corporate officers and bylaws will stay the same.
David Cumberland, analyst for Robert W. Baird & Co., said a projected 16 percent increase in fuel prices in 2008 represents a greater threat for Dollar Tree than for many businesses.
Dollar Tree’s “management has cited energy prices as having the largest impact on its customers,” Mr. Cumberland said.
The company was founded in 1986 and operates with about 13,000 full-time employees. In addition to its stores, it runs a coast-to-coast logistics network with nine distribution centers.
FOR A FEW DOLLARS MORE
Shares of Dollar Tree Stores Inc. are down sharply in the past six months, but have rebounded recently with help from management’s better-than-expected outlook for this year.
Oct. 141.37
Oct. 841.26
Oct. 1537.46
Oct. 2237.99
Oct. 2936.50
Nov. 528.64
Nov. 1226.63
Nov. 1926.80
Nov. 2628.66
Dec. 329.24
Dec. 1026.60
Dec. 1726.46
Dec. 2426.13
Dec. 3123.13
Jan. 722.25
Jan. 1423.50
Jan. 2225.80
Jan. 2827.79
Feb. 425.35
Feb. 1125.17
Feb. 1925.52
Feb. 2526.83
March 327.88 Yesterday’s close: up $1.05
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