Dollar Tree, Inc. Earnings Boosted by Spiking Customer Traffic

By Markets Fool.com

Discount retailer,Dollar Tree , which sells a variety of consumer products for $1 or less, announced earnings resultson Wednesday for the all-important holiday quarter. The company beat top and bottom line expectations, while providing a conservative outlook for 2015.

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Quarterly results
Fourth quarter sales improved by 11% year-over-year to reach $2.48 billion, above the high end of guidance management provided in November. It was also slightly higher than analyst estimates of $2.47 billion.

Dollar Tree benefited from continued growth in customer traffic over the holiday quarter. The business logged a 5% traffic jump on its way to booking its first-ever year of over 1 billion transactions. That surging popularity helped the company post a comparable-store sales increase of 6%, which again beat previous guidance and marked its 28th consecutive quarter of positive comps.

"Our results continue to validate that Dollar Tree is part of the solution for millions of customers seeking great value as they strive to balance their household budget," said CEO Bob Sasser in a press release.

Profit growth was also strong this quarter. Earnings jumped by 14% year-over-year to $1.16 per share, finishing just ahead of Wall Street targets. And the gross margin inched higher to 37.1% of sales, suggesting that competition did not force Dollar Tree into slashing prices.

In fact, the company had fewer markdowns this quarter than in the prior holiday season. For the full year, gross profit margin fell slightly due to higher freight and transportation costs.

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Outlook for 2015
Management issued initial guidance for 2015 that calls for sales growth in the range that investors saw last year. However, the outlook was below aggressive Wall Street targets. The company sees first quarter revenue of $2.18 billion, as compared to $2.21 billion analyst forecasts.

And Dollar Tree is targeting full-year earnings of about $3.40 per share, for a 9% improvement over 2014. Wall Street had higher hopes of nearly $3.60 per share.

Source: The Motley Fool.

In the meantime, investors will have to wait just a bit longer for final word from the Federal Trade Commission on the pending acquisition of Family Dollar. Management had hoped to close the deal as early as March, but the FTC is still deciding how many stores the company will have to divest before giving its blessing.

Dollar Tree believes that the total should be fewer than 300 locations, but because of the review process, management now expects to complete the acquisition by the end of April.

The article Dollar Tree, Inc. Earnings Boosted by Spiking Customer Traffic originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.