Dollar Tree Drops on Earnings Report

Dollar Tree, Inc. (NYSE:DLTR) lost some momentum in its stock price, on reporting quarterly earnings at $2.11 per share on revenue of $6.79 billion before the opening bell.

Consolidated net sales increased 7.2% to $6.77 billion from $6.32 billion in the prior year’s fourth quarter. Enterprise same-store sales increased 4.9% on a constant currency basis (or 5.0% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for Family Dollar increased 8.1%. Dollar Tree same-store sales increased 2.4%.

Gross profit increased 9.8% to $2.15 billion in the quarter compared to the prior year’s fourth quarter. Gross margin was 31.8%, compared to 31.0% in the prior year’s quarter. The 80 basis point improvement was driven by sales mix, reduced markdowns, leverage on occupancy costs from strong same-store sales, and shrink results, partially offset by higher freight and distribution costs.

Selling, general and administrative expenses were 21.7% of net sales, compared to 27.1% of net sales in the prior year's fourth quarter. The prior year’s quarter included a $313.0 million non-cash pre-tax and after-tax goodwill impairment charge and an $18.0 million charge to the litigation reserve.

Operating income for the quarter improved 173% to $681.6 million, compared with $249.4 million in the same period last year and operating income margin was 10.1%, compared to 3.9% in the prior year’s quarter.

The Q4 included total incremental operating costs of $24.8 million, or $0.08 per diluted share, for COVID-19-related expenses.

DLTR shares descended 47 cents to $98.47.