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Dollar Tree (DLTR) Reports 2Q Earnings, Family Dollar Rejects Dollar General Bid

By: , dated August 21st, 2014

Shares of Dollar Tree Inc. (DLTR) were trading down -0.90 or -1.64 percent to $54.10 per share in premarket trading this morning, after having been up as much as five percent before the company released its second quarter earnings. The company reported lower than expected earnings and revenue, but sales increased in the quarter. Dollar Tree stock closed at $55.00 per share, up +0.29 or +0.53 percent in Wednesday’s regular trading session.

Chesapeake, Virginia based Dollar Tree Inc. is a domestic chain of discount variety stores best known for selling items for one dollar or less. Dollar Tree operates over 5,080 stores under the Dollar Tree and Dollar Bill brands in the 48 continental United States and Canada and is part of the Fortune 500.

Dollar Tree reported second quarter earnings of $0.61 per share on $2.03 billion in revenue. Analysts were expecting the company to earn $0.64 on revenue of $2.01 billion. Consolidated same store sales rose +4.5 percent, adjusting for Canadian currency fluctuations, comparable store sales increased by +4.4 percent.

Bob Sasser, the Dollar Tree’s Chief Executive Officer said he was pleased with the company’s second quarter results, stating in the company’s press release that, “Expanded assortments of high-value product contributed to our strongest quarterly comparable store sales performance in two years. Pet supplies, hardware, household products, food, electronics and party goods all performed well in the quarter. Our 4.5% comp sales resulted from increases in both customer traffic and average ticket. I am particularly proud of our store associates. Our store teams continue to execute at a high level as the Company delivered its 26th consecutive quarter of positive comparable store sales growth. In challenging macro environments, consumers are increasingly relying on Dollar Tree to be part of the solution in managing their family’s budget. Our stores are well-stocked with incredible values and we are prepared for the fall selling season.”

Dollar Tree’s 2014 third quarter guidance was for earnings of $0.61 – $0.64 on revenue of $2.02 billion – $2.07 billion. The analyst consensus was for third quarter was for earnings of $0.66 on revenue of $2.05 billion. Dollar Tree’s full year 2014 guidance is for earnings per share of $2.94 – $3.06 on revenue of $8.44 – $8.55 billion, analysts were expecting $3.13 on revenue of $8.51 billion.

The company has missed analyst expectations for earnings and revenue in the last four quarters and is currently embroiled in a bidding war with Dollar General Corp (DG) for Family Dollar Stores (FDO). Dollar Tree originally bid $74.50 in cash and stock for Family Dollar on July 28th. Dollar General made a competing bid for Family Dollar on August 18th for $78.50 per share in an all cash deal. The competing bid will also assume $1.5 billion in Family Dollar debt making the deal worth approximately $9.7 billion.

The most recent development in the tentative takeover of Family Dollar is that Family Dollar announced this morning it was rejecting Dollar General’s sweetened bid on antitrust considerations. In addition, Family Dollar’s board unanimously reiterated its support for Dollar Tree’s bid.

Family Dollar’s Chief Executive Officer, Howard Levine said in a statement this morning that, “Our board reviewed, with our advisors, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed”. He added that a letter sent by Dollar General on Wednesday, “contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General’s proposal.”

Other News About Dollar Tree
Dollar Tree Raising Offer Means Playing to Lose: Real M&A
Dollar Tree unlikely to raise their bid for Family Dollar despite Dollar General bid.
An Odd Tale Of Family Dollar and Dollar Tree
An interesting Forbes article on the possible motivations for the takeover.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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