Dollar Tree, Dollar General Q2 Earnings Report: Can They Avoid The Retail Apocalypse?

Dollar Tree (DLTR) and Dollar General (DG) may be avoiding the retail apocalypse as they posted strong earnings for Q2, sending their shares soaring as a result of their Thursday earning report announcement.

Dollar General saw its Q2 net sales increase by 8.4 percent to $7 billion with a same-store sales growth of 4.0 percent. The company also reported an operating profit of 5.9 percent to $577.8 million and a diluted EPS of 8.6 percent to $1.65 for the quarter.

“We are pleased with our second-quarter results, driven by strong performance on both the top and bottom lines,” Todd Vasos, Dollar General CEO said. “Our results this quarter were fueled by solid execution across many fronts, including category management, merchandise innovation, store operations, and continued progress with our strategic initiatives.

“In addition, we remained focused on disciplined cost control, which culminated in another quarter of strong earnings growth. Given our first-half performance and expectations for the remainder of the year, we are raising our full-year financial guidance.”

Dollar General’s revised full-year guidance included the impact of tariffs on certain Chinese-imported products sold within its stores, which the retailers said it can mitigate, absorb, or offset. The company expects a net sales growth of 8 percent, up from its previous 7 percent estimate.

The company also expects to see its same-store sales increase by the low-to-mid 3 percent range, up for 2.5 percent, and an increase in operating profits of 5 to 7 percent, also up from 4 to 6 percent, as previously reported. Dollar General said its diluted EPS should reach $6.36 to $6.51, up from its earlier estimates of $6.30 to $6.50.

Beyond the increased financial guidance, Dollar General said it expects to execute about 2,075 real estate projects in fiscal year 2019, which includes 975 new stores, 1,000 store remodels, and 100 store relocations.

Dollar Tree, also the owner of Family Dollar, also saw strong earnings results for Q2 2019. The company reported a net sales increase of 3.9 percent to $5.74 billion, slightly down from the $5.53 billion it saw in Q2 2018. Same-store sales increased 24 percent, with Dollar Tree reporting a 2.4 percent increase and Family Dollar also seeing a 2.4 percent growth.

Gross profits for the company were $1.65 billion for Q2 compared to $1.66 billion during the same time last year. Dollar Tree’s GAAP diluted earnings per share for Q2 was $0.76 versus $1.15 in the year prior.

“The turnaround of the Family Dollar business continues to gain momentum,” Gary Philbin, president and CEO at Dollar Tree said. “Family Dollar’s same-store sales increase of 2.4% was the third consecutive quarter of sequential acceleration and represented a 160 basis point improvement in the two-year stacked comp.

“And, despite sales headwinds created by the global helium shortage, the Dollar Tree segment delivered a same-store sales increase of 2.4%, while cycling a strong 3.7% increase from the prior year’s quarter. Dollar Tree has now delivered 46 consecutive quarters of positive same-store sales, and eight consecutive quarters with two-year stacked comps exceeding 6%.”

Dollar Tree’s 2019 year-end revised expectations include a net sales earning ranging from $23.57 to $23.79 billion, compared to its previous guidance of $23.51 to $23.83 billion. The company also said it expects to see a low single-digit increase in same-store sales and 1.3 percent selling square footage increase. Net income per diluted share is anticipated to range from $4.90 to $5.11. Dollar Tree said its outlook does not include the recently announced tariff increases as it is already working to mitigate these costs.

Dollar Tree opened 150 new stores in Q2, expanded or relocated another 19 stores and closed 296 Family Dollar locations and nine Dollar Tree stores.

Shares of Dollar General stock were up 11.33 percent at 3:09 p.m. ET on Thursday while shares of Dollar Tree stock were down 2.26 percent at the same time.