Dollar Tree reports strong sales and Easter headwind
Shoppers are flocking to Dollar Tree and Family Dollar stores for food and essential supplies during the COVID-19 crisis.
On Tuesday, the company reported that as of March 29, same-store sales for the period ending May 2, were up 7.1% at Dollar Tree and up 14.4% at Family Dollar. The retailer said sales of food and consumables remain strong at both banners, but noted that sales of Easter related merchandise were tanking at Dollar Tree locations. During the seven day period ended March 29, same store sales declined 19.4% at Dollar Tree and increased 8.8% at Family Dollar. The company is scheduled to report earnings on May 28.
“Customers rely on Dollar Tree and Family Dollar as an essential retailer for their daily shopping needs. Understandably, they are very concerned about the recent global spread of the coronavirus. Our stores experienced an unprecedented spike in demand for certain products,” said CEO Gary Philbin. “Our efforts have been focused on continuing to protect the health and safety of our associates and customers, and to effectively serve customers during their time of need.”
Dollar Tree says sales for the remainder of the first quarter could be impacted by uncertainties related to the company’s ability to secure and re-stock certain products in high demand; consumer shopping patterns, especially in states and communities with shelter-in-place mandates; weaker-than-expected sales and related markdowns for certain discretionary products, and COVID-19 related impact to the Easter holiday selling season.
Recently, the company announced three actions related to the current COVID-19 crisis:
- Modifying store hours to close all stores at 8:00 p.m. local time to provide store teams adequate time to exercise enhanced cleaning protocols and to replenish store shelves
- Communicating the company’s plans to hire 25,000 motivated individuals to support its stores and distribution centers
- Rewarding hourly paid store and distribution associates with an estimated total of $30 million in wage premiums for at least a four-week period in recognition of the team’s extraordinary efforts. Additionally, the company is dedicating the first operating hour each morning in all 15,000-plus stores to serving at-risk customers
Also, to assist in minimizing exposure to COVID-19, the company has taken several proactive, precautionary steps, including equipping stores, distribution centers and its store support center with necessary supplies for enhanced cleaning protocol; activating its Business Response Team to meet daily to communicate, assess and address potential exposure throughout the organization; eliminating all non-essential air travel; utilizing technology options for all large group meetings; prohibiting external visitors access to its store support center; and enabling the majority of its support teams to work remotely.
The company says it expects to see merchandise mix pressure to gross margin rates in both business segments in the quarter. Additionally, certain first quarter costs are expected to be higher than previously anticipated, including investments in pay and benefits, the distribution and transportation related to the material demand volume increase in consumables, and the additional hours dedicated to enhanced cleaning protocol in stores, distribution centers and its store support center.
As a result of the volatile economic environment related to COVID-19, including uncertain customer demand and government actions, the company has withdrawn its outlook for first quarter and full-year fiscal 2020. All Family Dollar H2 renovations and Dollar Tree Snack Zone installations have been suspended through at least April 27.
"I could not be more proud of our team’s commitment, dedication and efforts during this unprecedented time. Their focus on supporting our stores and rising to the occasion to serve customers seeking essential products has been extraordinary," added Philbin. "Over time, Dollar Tree has demonstrated its ability to perform well through ever-changing economies. The focus on value and convenience may be greater in the months ahead than ever before. Our strong balance sheet and financial flexibility, the experience and alignment of our leadership teams and the commitment from more than 190,000 associates across North America prepares us to be part of the solution for millions of customers through these challenging times."
Dollar Tree, a Fortune 200 Company, operated 15,288 stores across 48 states and five Canadian provinces as of Feb. 1. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.