CHESAPEAKE, Va. — Aggressive courting of bargain-focused shoppers drove strong quarterly sales for discounter Dollar Tree here, but the retailer maintained a cautious outlook for the second half of the year.
Dollar Tree reported net income of $37.6 million, or 42 cents per share, on sales of $1.1 billion for the quarter, which ended Aug. 2. Earnings improved by 27.3% over the same period a year ago, while sales were up by 12.5% and comps increased by 6.5%.
Bob Sasser, president and chief executive officer, said Dollar Tree “saw an opportunity” to gain sales and new customer trials amid worsening economic fears this spring, and authorized a “stretch your dollar” promotion around food and consumables. The retailer supported the promotion with extra product inventory in those categories and the message “Look what $20 buys.”
Additional sales in the consumable and grocery categories, along with higher fuel costs, contributed to a 40-basis-point decrease in quarterly gross margins of 33.2%, Dollar Tree said. Margin pressure was partially offset by better shrink control, fewer markdowns and better sales leverage.
The financial results came in slightly above analyst expectations for the quarter, but officials took a cautious stance for the remainder of the year.
“We still face an uncertain economy, with many pressures on the consumer,” said Kathleen Mallas, chief financial officer, adding that a shorter holiday selling season may adversely affect sales growth.
Earnings are expected to be between $2.33 and $2.43 per share, slightly below analysts' estimates.