Dollar Tree Q1 Results Miss View, Narrows 2015 Outlook Range

(RTTNews) - Discount retailer Dollar Tree, Inc. (DLTR) reported Thursday a profit for the first quarter that nearly halved from last year, despite improved sales at established stores, reflecting acquisition-related costs and lower operating margins.

Both adjusted earnings per share and quarterly sales missed analysts' expectations. The company also provided earnings and revenue forecast for second quarter, and narrowed outlook range for the full-year 2015.

"Despite challenges presented by delayed receipts of merchandise related to the west coast port congestion and the impact of the holiday calendar shift, our team worked together to deliver solid sales and earnings, both of which were well within our guidance range," 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 $69.5 million or $0.34 per share for the first quarter, higher than $138.3 million or $0.67 per share in the prior-year quarter.

Excluding acquisition-related costs of $0.37 per share associated with the pending merger with Family Dollar Stores, Inc. (FDO), adjusted net income for the latest quarter was $146.3 million or $0.71 per share.

On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $0.75 per share for the quarter. Analysts' estimates typically exclude special items.

Consolidated net sales for the quarter grew 8.8 percent to $2.18 billion from $2.00 billion in the same quarter last year, but missed twenty-four Wall Street analysts' consensus estimate of $2.20 billion by a whisker.

Comparable store sales for the quarter increased 3.4 percent on a constant currency basis. Adjusted for the impact of Canadian currency fluctuations, same-store sales increased 3.1 percent.

The company noted that sales performance was negatively impacted by delayed receipts at four of the company's 10 distribution centers related to the west coast port congestion and the previously disclosed estimate of $8 million impact from the holiday calendar shift.

Operating margin for the quarter contracted 90 basis points to 10.7 percent, as gross margin declined 40 basis points and selling, general and administrative expenses rate increased 50 basis points from last year.

Dollar Tree continues to grow as it opened 93 stores, closed six stores, and expanded or relocated ten stores in the first quarter. Retail selling square footage increased 7.1 percent to 47.2 million square feet from last year.

Looking ahead to the second quarter, the company expects adjusted earnings in a range of $0.63 to $0.68 per share, on projected quarterly sales between $2.17 billion and $2.23 billion, based on low to low-mid single-digit positive comparable store sales. Analysts project earnings of $0.70 per share on revenues of $2.23 billion for the quarter.

For fiscal 2015, Dollar Tree now expects adjusted earnings in a range of $3.32 to $3.47 per share, on projected annual sales between $9.24 billion and $9.42 billion, compared to the prior adjusted earnings forecast in the $3.30 to $3.50 per share, on sales between $9.21 billion and $9.45 billion. The company also expects low to low-mid single-digit positive comparable-store sales.

Street is currently looking for full-year 2015 earnings of $3.49 per share on revenues of $9.41 billion.

Dollar Tree said it continues to make progress with the Federal Trade Commission and divestiture buyers in order to complete the pending acquisition of Family Dollar. The company intends to close the proposed merger in early July 2015.

DLTR closed Wednesday's regular trading session at $76.26, down $1.40 on a volume of 3.49 million shares. In the past 52-week period, the stock has been trading in a range of $52.26 to $84.22.