Both Dollar General and Dollar Tree reported strong Q2 earnings results, illustrating that U.S. consumers are shopping for discounts even as consumer confidence maintains record highs.
Net sales at Dollar General increased 8.4% to $7.0 billion in Q2, while same-store sales increased 4%, driven by increases in both average order value and customer traffic. The same-store sales increase is well above initial estimates of 2.4% from Refinitiv.Additionally, while earnings per share (EPS) increased 8.6% to $1.65 per share, adjusted EPS jumped 14.5% to $1.74 per share, significantly ahead of anticipated EPS of $1.57.
Q2 Dollar Tree net revenues rose 3.9% to $5.7 billion on a same-store sales jump of 2.4%. While the company earned $0.76 cents per share (adjusted), shy of the $0.81 per share analyst expectations, Dollar Tree expects its full-year adjusted EPS range to increase from $4.77 to $5.07 to $4.90 and $5.11.
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Dollar Tree got help from Family Dollar, which also saw same-store sales increase 2.4%, marking the third straight quarter of accelerated growth for the segment. Dollar Tree acquired Family Dollar in 2015, but since the acquisition, Family Dollar has been the weaker segment, with plans to close up to 390 stores in 2019. In January, activist investor Starboard Value LP even pushed Dollar Tree to sell Family Dollar.
The Q2 results are encouraging for both Dollar Tree and Dollar General, particularly in the face of a new batch of tariffs the U.S. will impose on goods imported from China. The new tariffs are slated to take effect in two rounds on Sept. 1 and Dec. 15.
“Both companies have been able to handle increased tariffs very well through their diversified supply chain and cost control,” said Moody’s VP Mickey Chadha in commentary provided to Retail TouchPoints. “Moreover, the treasure hunt shopping that these stores offer can’t be replicated by e-Commerce, as average ticket for a dollar store is around $10 and it is uneconomical for e-Commerce vendors to compete with, given cost of shipping. The constantly changing product assortment in the dollar stores drives foot traffic into the store and the variety of goods are often curated at the store level.”
Chadha noted that Moody’s continues to expect the major dollar stores to outperform, particularly since many locations are so close to each other that local distribution centers can make multiple deliveries a day.
