Dollar Tree Q2 Earnings & Sales Beat Estimates, Comps Rise 6.5%

Core Insights - Dollar Tree, Inc. (DLTR) reported strong second-quarter fiscal 2025 results, with earnings and sales exceeding expectations and showing year-over-year growth, driven by effective strategic initiatives [1][7] - Despite the positive quarterly performance, shares fell over 10% in pre-market trading due to a weak third-quarter adjusted EPS outlook, although the stock has gained 16.2% over the past three months [2] Financial Performance - Adjusted earnings per share (EPS) from continuing operations increased by 13.2% year over year to $0.77, surpassing the Zacks Consensus Estimate of $0.38 [1][7] - Net sales from continuing operations rose by 12.3% year over year to $4.57 billion, exceeding the Zacks Consensus Estimate of $4.45 billion [4][7] - Same-store sales grew by 6.5% year over year, supported by a 3% increase in customer traffic and a 3.4% rise in average transaction size [4][7] Profitability Metrics - Gross profit increased by 12.9% year over year to $1.6 billion, with a gross margin expansion of 20 basis points to 34.4%, aided by reduced freight costs and improved pricing strategies [5] - Selling, general and administrative (SG&A) costs represented 29.6% of sales, up 60 basis points from the previous year, primarily due to higher depreciation and payroll expenses [6] Financial Health - As of the end of the second quarter, Dollar Tree had cash and cash equivalents of $666.3 million, with no borrowings under its revolvers [9] - The company repurchased 5 million shares for $501.4 million during the quarter, with an additional 0.6 million shares repurchased for $71 million post-quarter [10] Strategic Developments - Dollar Tree completed the sale of its Family Dollar business for $1.0 billion, with net proceeds expected to provide significant cash and tax benefits [12] - The company opened 106 new Dollar Tree stores and converted nearly 585 stores to a multi-price format during the second quarter [14] Guidance - For fiscal 2025, Dollar Tree projects net sales from continuing operations between $19.3 billion and $19.5 billion, with adjusted EPS expected to be between $5.32 and $5.72 [16] - The company anticipates a positive timing benefit of approximately $0.20 on adjusted diluted EPS for the third quarter, although this benefit will reverse later in the year [17]