CHESAPEAKE, Va - Dollar Tree, Inc. (NASDAQ: DLTR), North America's leading operator of discount variety stores, today reported financial results for its fourth quarter and fiscal year ended February 1, 2020.
~ Consolidated Net Sales Increased 1.8% to $6.32 Billion ~
~ GAAP Diluted Earnings per Share of $0.52 ~
~ Adjusted EPS of $1.79 vs. Guidance Range of $1.70 to $1.80 ~
~ Enterprise Same-Store Sales Increased 0.4% ~
~ Same-Store Sales by Segment: Dollar Tree +1.4%, Family Dollar -0.8% ~
~ 2020 Plans Include: 1,250 Family Dollar H2 Renovations; Launch of Dollar TreePlus! 2.0 ~
'I am proud of the team's accomplishments in 2019, including the successful consolidation of our store support centers, the material acceleration in the Family Dollar store optimization program where we continue to see strong performance at renovated stores, and the initial launch of our Dollar TreePlus! initiative. For the fourth quarter, despite the compressed holiday shopping season, we delivered positive comps for the enterprise, while managing margins and costs effectively to achieve adjusted earnings per share near the top of our guidance range,' stated Gary Philbin, Chief Executive Officer. 'Our support functions are now working together in one location under one leadership team; which we expect will build greater collaboration, efficiencies and teamwork to enable us to support Dollar Tree and Family Dollar stores more effectively. Fiscal 2019 was a very important year for our organization to further develop the foundation to grow and improve our business.'
Fourth Quarter Results
In the fourth quarter, the Company incurred several discrete charges, as described below:
$313.0 million non-cash pre-tax and after-tax goodwill impairment charge based on the Company's annual assessment of the Family Dollar segment.
$24.6 million reduction in tax expense for the reversal of a valuation allowance related to the Company's foreign net operating loss carry forwards.
$18.0 million charge to the litigation reserve.
$0.3 million acceleration in non-cash deferred financing costs associated with a debt prepayment.
Discrete items, or adjustments, for fiscal 2019 and 2018 are included in the Reconciliation of Non-GAAP Financial Measures within the tables of this earnings release.
For the fourth quarter, including the impact of each of the items listed above, the Company reported GAAP earnings per share of $0.52. Adjusted earnings per share for the quarter, excluding the impact of the identified items, was $1.79, near the high end of the Company's guidance range.
Consolidated net sales increased 1.8% to $6.32 billion from $6.21 billion in the prior year's fourth quarter. Enterprise same-store sales increased 0.4%. Same-store sales for the Dollar Tree segment increased 1.4% on a constant currency basis (or 1.5% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for the Family Dollar segment decreased 0.8%.
Gross profit increased 2.5% to $1.96 billion in the quarter compared to the prior year's fourth quarter. As a percentage of net sales, gross margin was 31.0% compared to an adjusted gross margin of 31.5% in the prior year. The decrease in gross margin was driven by tariffs, partially offset by improved freight costs. Other contributors to the decrease were higher occupancy, distribution and shrink costs as a percentage of net sales.
Selling, general and administrative expenses, including discrete charges, were 27.1% of net sales compared to 65.4% of net sales in the prior year's fourth quarter. Excluding the discrete charges in 2019 and 2018, adjusted selling, general and administrative expenses as a percentage of net sales were 21.9%, compared to 21.3% in the prior year's quarter. The increase was driven primarily by higher payroll and depreciation costs.
Operating income for the quarter was $249.4 million compared with an operating loss of $2.15 billion in the same period last year. Excluding the discrete charges from the fourth quarter of both years, adjusted operating income for the quarter was $580.4 million compared with $632.6 million in the prior year's period. Adjusted operating income margin was 9.2% of net sales in the fourth quarter compared to 10.2% of net sales in last year's quarter.
Net income was $123.0 million in the fourth quarter and GAAP diluted earnings per share for the quarter were $0.52 compared to a loss of $9.69 per share in the prior year's quarter. Excluding discrete costs from the fourth quarter of both years, adjusted diluted earnings per share were $1.79 in fiscal 2019, compared to $1.90 in fiscal 2018.
During the quarter, the Company opened 112 new stores, expanded or relocated 17 stores, and closed 95 stores. Additionally, the Company opened 10 Dollar Tree stores that were re-bannered from Family Dollar and completed five renovations to the Family Dollar H2 format. Retail selling square footage at quarter end was approximately 121.3 million square feet.
Full Year Results
Consolidated net sales increased 3.5% to $23.61 billion from $22.82 billion in the prior year. Enterprise same-store sales increased 1.8%. Same-store sales for the Dollar Tree segment increased 2.3% (or 2.2% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for Family Dollar increased 1.4%.
Gross profit increased $93.2 million to $7.04 billion. As a percentage of net sales, gross margin was 29.8%, compared to an adjusted gross margin of 30.6% in the prior year.
Selling, general and administrative expenses were 24.5% of net sales compared to 34.5% of net sales in the prior year. Excluding the discrete costs in 2019 and 2018, adjusted selling, general and administrative expenses as a percentage of net sales were 23.1% in 2019 compared to 22.6% in 2018.
Operating income was $1.26 billion in 2019 compared to an operating loss of $939.5 million in 2018. Excluding the discrete charges in 2019 and 2018, adjusted operating income was $1.60 billion in 2019 and $1.84 billion in 2018. As a percentage of net sales, adjusted operating income margin decreased to 6.8% in 2019 from 8.1% in the prior year.
Net income was $827.0 million in fiscal 2019 and GAAP diluted earnings per share were $3.47 compared to a loss of $6.69 per share in the prior year. Excluding the discrete items for 2019 and 2018, adjusted net income for fiscal 2019 was $1.13 billion and adjusted diluted earnings per share was $4.76 for fiscal 2019 compared to $5.42 in fiscal 2018.
Company Outlook
The Company's fiscal 2020 outlook includes an estimated incremental impact of $47 million related to tariffs, with nearly all of it being incurred in the first half of the year. Additionally, the outlook includes an estimated impact of $15 million related to the new clean fuel regulations for ocean shipping. The outlook does not include any potential impact related to the supply chain or other aspects of the Company's business for the COVID-19 coronavirus.
The Company estimates consolidated net sales for the first quarter of 2020 will range from $5.89 billion to $5.99 billion, based on a low single-digit increase in same-store sales for the enterprise. Diluted earnings per share for the quarter, including tariff costs, are estimated to be in the range of $1.00 to $1.09.
Consolidated net sales for full-year fiscal 2020 are expected to range from $24.21 billion to $24.66 billion. This estimate is based on a low single-digit increase in same-store sales and approximately 3.1% selling square footage growth. Diluted earnings per share are expected to range from $4.80 to $5.15. While share repurchases are not included in the outlook, the Company currently has $800 million remaining under its board repurchase authorization.
'As we enter 2020, our teams are aligned, energized and focused. Plans for the year include approximately 1,250 Family Dollar H2 renovations, the launch of Dollar TreePlus! 2.0 initiative, and a focus on driving sales, improving gross margin and managing costs effectively,' Philbin added. 'While our first quarter outlook includes expected pressure from the incremental tariffs and promotional activity, we believe we are well-positioned to deliver improved sales, operating margin and earnings in the following three quarters and for full-year fiscal 2020. We are focused on growing and improving our business to deliver long-term value to our shareholders.'
Conference Call Information
On Wednesday, March 4, 2020, the Company will host a conference call to discuss its earnings results at 9:00 a.m. Eastern Time. The telephone number for the call is 800-367-2403. A recorded version of the call will be available until midnight Tuesday, March 10, 2020, and may be accessed by dialing 888-203-1112. The access code is 8921588. A webcast of the call is accessible through Dollar Tree's website and will remain online through Tuesday, March 10, 2020.
Dollar Tree, a Fortune 200 Company, operated 15,288 stores across 48 states and five Canadian provinces as of February 1, 2020. Stores operate under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada. To learn more about the Company, visit www.DollarTree.com.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS: Our press release contains 'forward-looking statements' as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments or results and do not relate strictly to historical facts. Any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by or including words such as 'believe, anticipate, expect, intend, plan, view, target or estimate, may, will, should, predict, possible, potential, continue, or strategy,' and similar expressions. For example, our forward-looking statements include statements regarding first quarter 2020 and full-year fiscal 2020 results of operations, including consolidated net sales, same-store sales, diluted earnings per share and the estimated impact of tariffs and new clean fuel regulations; our expected square footage growth in fiscal 2020; our plans concerning fiscal 2020 Family Dollar H2 renovations and the launch of Dollar TreePlus! 2.0; the impact of the COVID-19 coronavirus on our supply chain and fiscal 2020 outlook; our plans and expectations regarding improvements in fiscal 2020 sales, gross margin and managing costs; and our other plans, objectives, expectations (financial and otherwise) and intentions. These statements are subject to risks and uncertainties. For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the 'Risk Factors,' 'Business' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' sections in our Annual Report on Form 10-K filed March 27, 2019, and other filings with the Securities and Exchange Commission. We are not obligated to release publicly any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this report and you should not expect us to do so.
DOLLAR TREE, INC. 
