Dollar Tree says Family Dollar integration remains on schedule

Customers enter a Family Dollar store on Plaza Boulevard, in Kinston, N.C.
Customers enter a Family Dollar store on Plaza Boulevard, in Kinston, N.C. The Associated Press

Dollar Tree, the new parent company of Matthews-based Family Dollar, said Tuesday that the integration of the two discount giants is on schedule, and that sales at Family Dollar stores helped boost the company’s overall fourth-quarter results.

Still, as has been the case in the past, the company’s fourth-quarter margins sank because less-profitable Family Dollar products were added to the mix.

“We successfully completed the acquisition of Family Dollar; we initiated, and remain on schedule with, the integration of our companies; and we are on track to achieve our stated synergy targets,” Bob Sasser, Dollar Tree’s chief executive officer, said in a statement.

Sales for the quarter that ended Jan. 30 totaled $5.37 billion, a 116.7 percent increase from the same period a year ago, Dollar Tree reported. The boost in revenue was the result of $2.68 billion in sales from the Family Dollar segment.

Just over two quarters in, the stores are cleaner, the shelves are better stocked.

Dollar Tree CEO Bob Sasser, in a call with analysts

But revenue fell short of Wall Street analysts’ expectations by $50 million. And though profit was $229 million, up by $22.4 million from a year ago, adjusted earnings per share fell short of analysts’ expectations by 6 cents.

As a percent of sales, gross margin fell to 30.8 percent for the quarter, compared with 37.1 percent in the prior year. Dollar Tree again cited the “overall lower-margin product mix for the Family Dollar business” as part of the reason for the margin drop.

After Virginia-based Dollar Tree completed its acquisition of the locally based dollar chain in July, the company said improving the product selection at Family Dollar stores was a priority for making the chain more profitable. Family Dollar’s profits started sagging in the past when it added more low-margin consumable products like food, and sold fewer high-margin discretionary products like clothing.

Under the merging plan, Dollar Tree has said it’s working to clear out old Family Dollar inventory and clean up existing stores.

“Just over two quarters in, the stores are cleaner, the shelves are better stocked,” Sasser said in a call with analysts Tuesday.

Also part of the integration plan, Dollar Tree has said, includes re-bannering underperforming Family Dollar stores as Dollar Tree stores.

Over the fourth quarter, Dollar Tree said it opened 58 former Family Dollar store locations as new Dollar Tree stores.

Dollar Tree operated 13,851 stores in North America as of Jan. 30, making it the largest dollar-store chain by store count.

Shares in Dollar Tree closed Tuesday at $82.03, up more than 2 percent.

Katherine Peralta: 704-358-5079, @katieperalta