Dollar Tree Beats Estimates With Best Sales Since 2011

(RTTNews) - Discount retailer Dollar Tree, Inc. (DLTR), which agreed to buy Family Dollar Stores, Inc. (FDO), reported Thursday a profit for the third quarter that grew six percent from last year, despite lower margins, reflecting double-digit sales growth.

Both adjusted earnings per share and quarterly sales topped analysts' expectations. The company also provided earnings and revenue forecast for fourth quarter, in line with Street view, and narrowed earnings outlook range for the full-year 2014, while raising annual sales outlook.

"I am extremely pleased with our third quarter performance. Excluding acquisition costs, we delivered a Company-record third quarter operating margin of 11.2%. Our 5.9% same-store sales growth was our strongest comp since 2011, and represented our 27th consecutive quarter of positive same-store sales," CEO Bob Sasser said in a statement.

The Chesapeake, Virginia-based operator of discount variety stores selling everything for $1 or less, reported net income of $133.0 million or $0.64 per share for the third quarter, higher than $125.4 million or $0.58 per share in the prior-year quarter.

Excluding acquisition-related costs, adjusted net income for the quarter was $142.4 million or $0.69 per share. On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $0.64 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated net sales for the quarter grew 11.2 percent to $2.10 billion from $1.88 billion in the same quarter last year, and topped twenty-three Wall Street analysts' consensus estimate of $2.06 billion.

Consolidated comparable store sales for the quarter increased 5.9 percent on top of a 3.1 percent growth last year. The company delivered its 27th consecutive quarter of positive comparable store sales growth.

Dollar Tree continues to grow as it opened 117 stores, closed 1 store, and expanded or relocated 18 stores during the third quarter.

Dollar Tree agreed in late July to acquire Family Dollar Stores for $74.50 per share in a cash and stock deal valued $9.2 billion. However, rival Dollar General Corp. (DG) is also hotly pursuing Family Dollar, attempting to thwart Dollar Tree with a couple of offers that were rejected outright.

Dollar General's latest was a hostile offer for Family Dollar at $80 per share. That tender offer was rejected by Family Dollar, which continued to support the Dollar Tree deal.

Looking ahead to the fourth quarter, the company expects adjusted earnings in a range of $1.07 to $1.14 per share, on projected quarterly sales between $2.39 billion and $2.46 billion, based on low-single digit positive comparable store sales. Analysts project earnings of $1.13 per share on revenues of $2.45 billion for the quarter.

For fiscal 2014, Dollar Tree now expects earnings in a range of $2.97 to $3.04 per share, on projected annual sales in the range of $8.52 billion to $8.58 billion. Street is currently looking for full-year 2014 earnings of $3.05 per share on revenues of $8.55 billion.

Earlier, the company projected earnings in a range of $2.94 to $3.06 per share, on sales in the range of $8.44 billion to $8.55 billion and low- to low-mid-single digit positive comparable-store sales.

DLTR closed Wednesday's regular trading session at $62.63, up $0.23 on a volume of 3.91 million shares. In the past 52-week period, the stock has been trading in a range of $49.59 to $62.72.