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Dollar Tree beats expectations on strong Q2 sales

Renovation pace to increase as consumer sentiment ticks up

Dollar Tree on Thursday said sales in its fiscal second quarter improved in excess of the company’s forecast, indicating a combination of progress in improving the Family Dollar division and perhaps, strengthening consumer sentiment.

“Somewhere towards the end of second quarter, especially, it felt like the consumer was in a better place and was responding with a little more zeal … to our offering,” Dollar Tree CEO Bob Sasser said in a conference call discussing results for the period, which ended July 29.

“Whether consumers are in a better place or whether there's more customer confidence, I really can't tell you. It's probably too early to proclaim that,” he added. “But it did feel like there was some tailwind from a customer perspective and I see other good retailers reporting good results.”

The Chesapeake, Va.-based operator of Dollar Tree and Family Dollar stores said sales for the period totaled $5.3 billion, a 5.7% increase, while same-store sales improved by 2.4% reflecting 3.9% comps at Dollar Tree and 1% comps at Family Dollar.

The Dollar Tree comps represented the company’s strongest quarterly performance since the fourth quarter of 2014, while the Family Dollar figures reflected increased traffic at the brand, which has slowly recovered since its acquisition two years ago.

The company said growth in food and consumables paced sales at Family Dollar in the quarter, while improved store conditions including 111 completed remodels during the quarter are drawing more traffic. Renovated stores include better product adjacencies, expanded assortment of refrigerated and frozen foods, expanded adult beverage sections where permitted, a new “power alley” to promote $1 items and redesigned checkouts to serve shoppers faster, Sasser said.

“We are very pleased with the initial results we are seeing in these [renovated] stores, and especially about the feedback we are receiving from our store teams and customers,” he said, adding that the company would accelerate its remodeling program with an eye on completing 350 renovations this year — about 100 more than first anticipated.

The company, which ended the quarter with 14,581 stores, (6,506 Dollar Trees and 8,075 Family Dollar) will open approximately 650 new stores this year. Sasser added the company had “years of growth ahead,” with the potential to operate 26,000 stores in the U.S. and Canada.

Dollar Tree stock was up by more than 8% Thursday afternoon. “This was the quarter that Dollar Tree needed to get the proverbial monkey off its back and get the stock out of purgatory,” Gordon Haskett analyst Chuck Grom said.

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