Dollar Tree Inc.’s third quarter profit soared on strong top line results

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Dollar Tree Inc.’s third quarter profits rose 58.2 percent, beating analyst expectations, partly due to a reduction in Selling, General and Administrative expenses, as well as increased traffic and sales in stores.

The Virginia-based discount variety store had a net income of $68.2 million, or 76 cents per diluted share, in the quarter ended Oct. 31. That compared with year-earlier quarterly income of $43.1 million, or 47 cents per diluted share. The estimate by analysts polled by Zacks Investment Research Inc.was 65 cents per diluted share.

Quarterly revenues were $1.2 billion compared with $1.1 billion in the year-earlier period, an increase of 12 percent.

Bob Sasser, president and CEO of Dollar Tree, said in a press release Tuesday, “The sell-through on Halloween and fall seasonal products was excellent and our stores are now set with an exciting presentation of extreme-value merchandise for Thanksgiving and the Holiday season.”

Dollar Tree’s top selling items were health and beauty care basics, cleaning supplies, party goods.

Brent Rystrom, analyst with Feltl and Company Inc., said in a research note released Tuesday that, “Dollar Tree stores has performed extremely well through the difficult economic environment, and we believe its performance will continue strong as the economy recovers because of the flexibility of its store format and merchandise assortment.”

Charles Grom, analyst with J.P. Morgan Chase & Co., said in analyst notes that, “We [J.P. Morgan] believe that store expansion/investment remains the top priority (midsingle digit annual square footage growth) with the most compelling return profile, followed by share repurchases.”

In the third quarter, Dollar Tree opened 94 new stores, closed eight stores, and expanded or relocated 33 stores.

Net income in the nine-month period ended Oct. 31 was $185.5 million, or $2.05 per diluted share, compared with $124.3 million, or $1.37 per diluted share, in the year-earlier period. Revenue rose 12.7 percent to $3.7 billion from $3.3 billion.

Dollar Tree expects earnings of $3.34 per fully diluted share to $3.43 per diluted share in the current fiscal year. The company expects that annual revenue will be in the range of $5.17 billion to $5.21 billion. Analysts polled by Bloomberg LP estimated earnings of $3.28 per diluted share and sales of $5.2 billion in the current fiscal year, compared with earnings of $2.53 per diluted share and sales of $4.6 billion in the year-earlier period.

By midday Tuesday, Dollar Tree’s stock was at $51.34, up $2.24 or 4.6 percent from the previous day’s close of $49.10.

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