Key Points from Dollar Tree’s COVID-19 Update
As we navigate through how COVID-19 impacts the retail industry, we want to provide as many updates as possible to our clients. Here are a few takeaways from Dollar Tree’s recent update as it pertains to COVID-19.
- The company said they saw a material pickup in-store traffic and sales at both Dollar Tree and Family Dollar in March related to CoV concerns
- Quarter-to-date comps through March 29 were up 7.1% for Dollar Tree
- Quarter-to-date comps through March 29 were up 14.4% for Family Dollar
- The company said sales have materially moderated very recently as the company enters the peak of the Easter selling season
- Dollar Tree comps have been down 19.4% in the 7 days ending 3/29
- Family Dollar comps have been up 8.8% in the 7 days ending 3/29
- The company said consumables sales remain strong in both banners
- The company said sales for the remainder of the quarter could be impacted by uncertainties related to:
- The company’s ability to secure and re-stock certain products in high demand
- Consumer shopping patterns, especially in states and communities with shelter-in-place mandates
- Weaker-than-expected sales and related markdowns for certain discretionary products
- CoV impact to the Easter holiday selling season
- The company expects merchandise mix pressure to gross margin for both DT and FD in the quarter
- Also, certain 1Q costs are expected to be higher than previously anticipated, including investments in pay and benefits, distribution and transportation, and additional labor hours
- The company is withdrawing 1Q and full-year guidance
- The company is also in process of reassessing its 2020 plans and initiatives and is suspending all Family Dollar H2 renovations and Dollar Tree Snack Zone installations through at least 4/27/20 to protect employees
- The company said it has a strong balance sheet and liquidity position but said it will not be repurchasing shares in the near term
Dollar Tree, Inc. Provides Business Update Related to COVID-19
CHESAPEAKE, Va.–(BUSINESS WIRE)–Mar. 31, 2020– Dollar Tree, Inc. (NASDAQ:DLTR) today provided a business update regarding impacts related to the novel coronavirus (COVID-19).
In March, directly related to COVID-19 concerns, both Dollar Tree and Family Dollar stores began to experience a material pick-up in-store traffic and sales related to essential products, including cleaning supplies and sanitizer, household products, paper goods, food, and over-the-counter medicine.
“Customers rely on Dollar Tree and Family Dollar as an essential retailer for their daily shopping needs. Understandably, they are very concerned about the recent global spread of the coronavirus. Our stores experienced an unprecedented spike in demand for certain products,” stated Gary Philbin, Chief Executive Officer. “Our efforts have been focused on continuing to protect the health and safety of our associates and customers, and to effectively serve customers during their time of need.”
Recently, the Company issued three press releases related to the current macro-environment:
- March 18 – Modifying store hours to close all stores at 8:00 p.m. local time to provide store teams adequate time to exercise enhanced cleaning protocols and to replenish store shelves;
- March 19 – Communicating the Company’s plans to hire 25,000 motivated individuals to support its stores and distribution centers; and
- March 25 – Rewarding hourly-paid store and distribution associates with an estimated total of $30 million in wage premiums for at least a four-week period in recognition of the team’s extraordinary efforts. Additionally, the Company is dedicating the first operating hour each morning in all 15,000-plus stores to serving at-risk customers.
Also, to assist in minimizing exposure to COVID-19, the Company has taken several proactive, precautionary steps, including communicating and adhering to Centers for Disease Control and Prevention (CDC) recommendations; equipping stores, distribution centers and its store support center with necessary supplies for enhanced cleaning protocol; activating its Business Response Team to meet daily to communicate, assess and address potential exposure throughout the organization; eliminating all non-essential air travel; utilizing technology options for all large group meetings; prohibiting external visitors access to its store support center, and enabling the majority of its support teams to work remotely. The Company’s Board of Directors remains engaged and has been briefed on the Company’s actions in response to COVID-19 and its impact on the Company and its stakeholders.
Regarding same-store sales trends through March 29, quarter-to-date same-store sales were +7.1% for Dollar Tree and +14.4% for Family Dollar. Sales have materially moderated very recently, however, as the Company enters the peak of the Easter selling season with Dollar Tree recording same-store sales of -19.4% in the seven days ending March 29, and Family Dollar +8.8%. Sales of household consumables and food remain strong in both banners. The Company’s first quarter will end on May 2, 2020, and the Company is scheduled to report earnings on May 28, 2020.
Sales for the remainder of the first quarter could be impacted by uncertainties related to the Company’s ability to secure and re-stock certain products in high demand; consumer shopping patterns, especially in states and communities with shelter-in-place mandates; weaker-than-expected sales and related markdowns for certain discretionary products, and COVID-19 related impact to the Easter holiday selling season.
The Company expects to see merchandise mix pressure to gross margin rates in both business segments in the quarter. Additionally, certain first-quarter costs are expected to be higher than previously anticipated, including investments in pay and benefits, the distribution and transportation related to the material demand volume increase in consumables, and the additional hours dedicated to enhanced cleaning protocol in stores, distribution centers, and its store support center.
As a result of the volatile economic environment related to COVID-19, including uncertain customer demand and government actions, the Company has a wide range of potential financial outcomes for the first quarter and fiscal 2020. Accordingly, the Company is withdrawing its outlook for first-quarter and full-year fiscal 2020. The Company is in the process of reassessing its full-year fiscal 2020 plans and initiatives given the current state of uncertainty. In order to protect its associates, all Family Dollar H2 renovations and Dollar Tree Snack Zone installations have been suspended through at least April 27, 2020.
The Company has a strong balance sheet with significant liquidity and a resilient business model. The Company has a $1.25 billion revolving line of credit. As of March 30, the Company had approximately $1.9 billion of cash and investments, including $750 million drawn on its revolver. The Company plans to repay the remaining $250 million of its floating rate note due in April. The Company does not expect to repurchase shares in the near term under the current share repurchase authorization that has $800 million remaining.
“I could not be more proud of our team’s commitment, dedication, and efforts during this unprecedented time. Their focus on supporting our stores and rising to the occasion to serve customers seeking essential products has been extraordinary,” added Philbin. “Over time, Dollar Tree has demonstrated its ability to perform well through ever-changing economies. The focus on value and convenience may be greater in the months ahead than ever before. Our strong balance sheet and financial flexibility, the experience, and alignment of our leadership teams and the commitment from more than 190,000 associates across North America prepares us to be part of the solution for millions of customers through these challenging times.”