Dollar Tree Profit Misses Expectations Even with Boost in Sales

Dollar Tree said its profit for the latest quarter was down as the discount retailer is working to integrate a recently acquired competitor, though that acquisition added a more than two-fold increase in revenue.

The company based in Chesapeake Virginia completed its acquisition of $9 billion of Family Dollar last July, which brought its number of locations to over 14,000.

Several months into that merger, Dollar Tree was focused on fixing and cleaning up the stores of Dollar Tree as well as making improvements to operations such as better stocking.

While that merger has helped to increase its sales, as Family Dollar helped with $2.67 bill for the quarter, which was up from $811.6 during the same quarter last year, representing more than 50% of the top line of the company.

However, some analysts as well as investors are worried that the benefits from the deal might take longer to materialize that originally thought.

Dollar Tree and other retailers in the discount sector attracted large numbers of shoppers during the most recent recession to stores conveniently located selling inexpensive, products that were smaller sized.

However, sales at its stores that have been opened for at least one year have cooled recently, partly due to the improving economy that reduces the reliance of some consumer on products that are purchased at dollar stores.

During the most recent quarter, sales at same stores were up 2.1% after an increase of 2.7% for the second quarter and one of 3.4% for the first quarter. One year ago, during the same period, same store sales increased by 5.9%.

Meanwhile the Family Dollar integration resulted in costs of $11.8 million during this most recent quarter and continued to pressure store margins.

Gross profit margin was down from 34.6% to 28.3% thanks in a big part to a lower margin mix of products at the Family Dollar business.

Overall, profit at the retailer was $81.9 million equal to 35 cents per share, which was down from last year during the same period of $133 million equal to 64 cents per share.

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