Dollar Tree seeing a return to normalcy in China
Chesapeake, Va. – Dollar Tree Inc. sees supply chain disruptions from the coronavirus outbreak in China leveling out.
At this point, only a very small percentage of product has been canceled and some product moving on to later delivery, usually by a few weeks, president and CEO Gary Philbin told investors during the hard discount retailer's quarterly conference call yesterday.
The global sourcing group and merchants are meeting daily to monitor individual purchase orders, he added.
“Generally, we are seeing production pick up, and factory attendance is increasing each week,” said Philbin. “All ports and third-party freight consolidators are open and operating at near normal levels, and we are gaining all needed space on vessels for our freight.”
Other key takeways from the call:
During the fiscal year, the company closed more than 400 stores, converted 200 Family Dollar stores to Dollar Trees and renovated more than 1,100 Family Dollar units into the H2 format.
Family Dollar H2 format stores are comping 10% higher than the chain, mostly driven by traffic. They are focused on price impact, spotlighting Family Dollar private brands, expanded frozen food and a new $1 impact section with a frequently changing assortment. The company plans to renovate at least 1,250 Family Dollar stores to the H2 format this year.
The Family Dollar chain is still working to improve its discretionary assortment, a key objective for 2020.
The Dollar Tree Plus concept, which launched in mid-2019, is moving into phase 2.0. The assortment is shifting away from consumables and expanding margin-enhancing discretionary items including electronics, toys, health & beauty, craft, seasonal and more. All are priced at $5 or less. The tests are rolling out to more stores this month.
Crafter Square, now in more than 650 Dollar Tree stores, will expand to more stores this spring. The assortment consists of arts and crafts supplies priced at $1.
The company has expanded its supply chain beyond China to eight other Asian countires.
For the fourth quarter ended Feb. 1, sales were fairly slack. Total company sales increased 1.8% to $6.32 billion, with consolidated same-store sales ticking up 0.4%. Comp for the Dollar Tree segment rose 1.4% on a constant currency basis while comp for the Family Dollar segment slipped 0.8%.
Net income swung to a profit of $123.0 million, or $0.52 per diluted share, compared to a net loss of $2.4 billion, or $9.69 per share, in the prior year's quarter.
Total sales for the fiscal year rose 3.5% to $23.61 billion, with consolidated comp up 1.8%. Comps were up 2.3% for Dollar Tree
Consolidated net sales increased 3.5% to $23.61 billion from $22.82 billion in the prior year. Enterprise same-store sales increased 1.8%. Same-store sales for the Dollar Tree segment increased 2.2% on a constant currenty basis and up 1.4% Family Dollar.
Dollar Tree Inc. generated net income of $827.0 million, or $3.47 per diluted share, compared to a loss of $1.6 billion, or $6.69 per share in the previous fiscal year.
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