What Dollar Tree Earnings Mean for Dollar General

Retail

Published: February 25, 2015 1:10 pm

Last Updated: February 25, 2015 1:13 pm

Dollar Tree Inc. (NASDAQ: DLTR) reported its fourth-quarter financial results before the markets opened Wednesday. The company had $1.00 in earnings per share (EPS) on $2.48 billion in revenue, versus Thomson Reuters consensus estimates of $1.15 in EPS and $2.47 billion in revenue. In the fourth quarter of last year, the discount retailer posted $1.02 in EPS and $2.23 billion in revenue.

Consolidated net sales for the first quarter of 2015 are expected to total between $2.15 billion and $2.20 billion. EPS, excluding acquisition-related costs, are expected to come in between $0.69 and $0.74. The consensus estimates are EPS of $0.77 and $2.21 billion in revenue.

The company opened 90 stores, expanded or relocated six stores and closed five stores during the fourth quarter. Retail selling square footage increased to 46.5 million square feet, a 7.4% increase from in the prior year.

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Dollar Tree included an update regarding its acquisition of Family Dollar Stores Inc. (NYSE: FDO):

The Company continues to make progress in its effort to obtain clearance from the Federal Trade Commission (“FTC”) to complete the Company’s pending acquisition of Family Dollar. The Company remains confident in its belief that the FTC will require the divestiture of no more than roughly 300 stores. Given the number of stores that the FTC continues to analyze, the Company now hopes to reach agreement with the FTC on the stores to be divested in early March and will work to close the acquisition by April 27, 2015. The final number and location of the divested stores and the closing date are subject to uncertainties such as the timing of final approval by the FTC Commissioners of the divested stores and the divestiture buyer or buyers.

Shares of Dollar Tree were up 3% at $79.70 Wednesday afternoon. The stock has a consensus analyst price target of $77.46 and a 52-week trading range of $49.69 to $80.83.

Competitor Dollar General Corp. (NYSE: DG) does not report its fourth-quarter financials until March 12, 2015, so we will have to wait for that. However, both Dollar General and Dollar Tree hit 52-week highs in Wednesday’s trading, effectively all-time highs, following Dollar Tree’s earnings report.

It would appear that despite Dollar Tree winning out in the war for Family Dollar, Dollar General will still press ahead with its business model, but more will be seen in its fourth-quarter earnings.

Shares of Dollar General were up 1.3% at $72.87. The consensus price target is $76.84, and the 52-week trading range has a low of $53.00 and Wednesday’s high of $73.27.

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