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Dollar Tree's Q1 Profit Blooms; Boosts FY09 View - Update

DollarTree 052709

Wednesday, Dollar Tree Inc. (DLTR) published dollars-and-cents details of its first quarter, posting a net profit that rose from last year on a 14.2% increase in top line, as cost-conscious shoppers flocked to their stores to stretch a dollar. Per share earnings rose 37.5% and topped the Street view by six cents. In addition, the company issued financial forecast for second quarter and boosted full year guidance.

Q1 Results

The company's first-quarter net income grew to $60.4 million from $43.6 million in the year-ago quarter. On a per share basis, earnings advanced 37.5% to $0.66 from $0.48 earned in the same quarter of last year.

On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.60 per share. Analysts' estimates typically exclude special items.

Quarterly net sales amounted to $1.20 billion, an increase of 14.2% from the previous year's sales of $1.05 billion, and exceeded twelve Wall Street analysts' consensus revenue estimate of $1.19 billion. Comparable store sales rose 9.2% during the latest quarter.

Bob Sasser, President and CEO of Dollar Tree, said, "As consumers are searching for ways to balance their budgets in these uncertain times, more of them are turning to Dollar Tree and finding exceptionally high value merchandise and a fun, convenient shopping experience. Our customer traffic once again increased in the first quarter, driving sales and earnings ahead of guidance and outstanding financial performance for our shareholders."

Outlook For Q2, FY09

Looking forward to the second quarter, the company expects earnings to range between $0.47 and $0.51 per share, with sales in the range of $1.17 billion - $1.20 billion, based on low to mid single digit positive comparable store sales.

For the full year, earnings are currently projected to range between $2.75 and $2.90 per share, on sales in a range of $5.05 billion - $5.15 billion. Earlier, the company had expected fiscal 2009 earnings in the range of $2.55 - $2.75 per share on sales between $4.96 billion and $5.09 billion, based on a low to low-mid single digit comparable-store sales.

Peer Review

Among Dollar Tree's rivals, 99¢ Only Stores (NDN) posted third-quarter net income of $12.45 million or $0.18 per share, up from $9.5 million or $0.14 per share in the prior year quarter, driven by improved sales that totaled $351.08 million, compared to $324.98 million in the comparable quarter of the previous year.

Another competitor, Family Dollar Stores Inc. (FDO) reported a 33.3% growth in the second-quarter profit that totaled $84.14 million or $0.60 per share, compared to $63.30 million or $0.45 per share in the year-earlier quarter. Net sales rose 8.7% to $1.99 billion from $1.83 billion in the previous year.

For the third quarter, Family Dollar projects earnings to range between $0.54 and $0.58 per share, with net sales growth estimated to increase in a range of 7% - 9% from the prior year, with a comparable store sales increase in a range of 5% - 7%.

Family Dollar lifted its 2009 earnings forecast to $1.90 - $2.00 per share from prior range of $1.63 - $1.81 per share. The company currently expects net sales to increase 5% - 7% from last year and comparable store sales to grow 3% - 5%. Earlier, Family Dollar had projected net sales growth of 4% - 6% and comparable store sales growth of 2% - 4%.

Stock Performance

Dollar Tree shares, which have been trading between $27.61 and $45.33 in the past 52 weeks, is currently trading at $45.49, up $1.09 or 2.45%.

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