Dollar Tree, Inc. (NASDAQ:DLTR) exploded on a huge turnover of traded shares after delivering its strongest same-store sales performance in ten quarters. Improvement in operating margin affirms growth in the bottom line as the discount retailer continues to thrive in a challenging business environment owing to COVID-19.
Q3 Milestones
The better than expected third-quarter financial results could be attributed to the merger of Dollar Tree and Family Dollar, which has given rise to more opportunities. The company is now able to serve more customers in more ways and in more locations. New store openings, renovations, and banners have also been a key component of the momentum.
Dollar Tree has also started reaping the rewards of the multi-price initiative, Dollar Tree Plus, launched in more than 1000 stores. By focusing on the $1, $3, and $5 price range, the company has been able to generate more revenues. Buoyed by the initiative, the retailer intends to expand the initiative to about 500 stores by the spring of 2021.
Renewed investor interest also stems from Dollar Tree growing financial position. The company cash flow from operations has improved significantly since Family Dollar integration. Similarly, the company has been able to aggressively pay down its debt, having also purchased $400 million in shares.
Solid Cash Flow
Dollar Tree ended the recent quarter with $1.12 billion in cash on its balance sheet. Given the solid financial position, plans are underway to complete 480 new store openings and 750 Family Dollar H2 store renovations before year-end.
Revenue in the recent quarter was up 7.5% to $6.18 billion, beating consensus estimates by $60 million. Earnings per share, on the other hand, climbed to $1.38 a share against 23 cents a share expected. As it stands, Dollar Tree is firing on all cylinders depicted by revenue and earnings growth. Positive comps and margin expansion underscore growth in the overall business.
The discount retailer generated more cash flow to return some to shareholders at a time when most companies were cutting dividends and pulling back on stock repurchases. In the recent quarter, it repurchased 2.15 million shares for $200 million.