Dollar Tree Shares Up On Q4 Earnings Beat, Sale Of Family Dollar For $1.01 Bln

(RTTNews) - Shares of Dollar Tree, Inc. were gaining around 4 percent in the pre-market activity on the Nasdaq, after the discount retail chain on Wednesday reported fourth-quarter adjusted earnings above market estimates with higher same-store net sales. The company also issued first quarter and fiscal 2025 outlook.

Separately, Dollar Tree, after a thorough review of strategic alternatives, announced a definitive agreement to sell its Family Dollar business to Brigade Capital Management, LP and Macellum Capital Management, LLC for a purchase consideration of $1.01 billion.

Mike Creedon, Chief Executive Officer, Dollar Tree, said, "This is a major milestone in our multi-year transformation journey to help us fully achieve our potential. We will continue to grow and optimize our Dollar Tree business ......an enhanced focus on compelling initiatives, including our expanded assortment, significant planned new store openings across the United States, and transactions that advance our growth strategy."

Family Dollar sale

Regarding the proposed deal to turn Family Dollar a private company, Dollar Tree said the sale closure is anticipated later in the second quarter of 2025, subject to satisfaction of customary closing conditions, including receipt of US antitrust approval.

Net proceeds are estimated to total approximately $804 million, and the economic impact of tax benefits from losses on the sale is expected to be around $350 million.

Following the sale, the Family Dollar business will remain headquartered in Chesapeake, Virginia. Duncan MacNaughton, a former President and Chief Operating Officer of the company, will be joining as Chairman.

Dollar Tree Outlook

For its first quarter, Dollar Tree projects adjusted earnings per share to be in the range of $1.10 to $1.25, with no benefit from the Family Dollar Transition Services Agreement or TSA, which is expected to commence with the close of the deal.

The Wall Street analysts on average expect the company to report earnings of $1.48 per share. Analysts' estimates typically exclude special items.

The company expects net sales from continuing operations to range from $4.5 billion to $4.6 billion, based on comparable store net sales growth in the range of 3 percent to 5 percent.

The divesting Family Dollar segment has been treated as discontinued operations.

Further, for 52-week fiscal 2025, the company expects adjusted earnings per share from continuing operations to range from $5.00 to $5.50, and net sales from continuing operations in the range of $18.5 billion to $19.1 billion, based on comparable store net sales growth in the range of 3 percent to 5 percent.

The company's earnings will be negatively impacted by approximately $0.30 to $0.35 having only half-year benefit of Family Dollar TSA. The impact would be concentrated in the first two quarters of the fiscal year.

The Street is looking for earnings of $5.96 per share for the year.

In 53-week 2024, on a continuing operations basis, earnings per share were $4.83, adjusted earnings per share were $5.10 on net sales of $17.6 billion. Dollar Tree's same-store sales increased 1.8 percent.

The full-year outlook is on a continuing operations basis, reflecting the operations of Dollar Tree segment.

Q4 Results

In its fourth quarter, Dollar Tree's net loss widened to $3.70 billion from last year's loss of $1.71 billion. Loss per share was $17.17, compared to loss of $7.83 in the same period last year.

The quarterly results reflected loss of $4.1 billion or $19.03 per share from the Family Dollar segment as discontinued operations, compared to loss of $2.24 billion or $10.27 per share a year ago.

On a continuing operations basis, income from continuing operations was $400.2 million or $1.86 per share, compared to $532.4 million or $2.44 per share a year earlier.

Adjusted earnings from continuing operations were $454.8 million or $2.11 per share for the period, compared to $543.7 million or $2.49 per share last year.

In total, adjusted earnings per share were $2.29 for the quarter. The Street expected earnings of $2.20 per share for the quarter.

Adjusted operating income decreased 15.2 percent to $627.8 million and adjusted operating margin contracted 230 basis points to 12.6 percent.

Quarterly net sales edged up 0.7 percent to $5 billion from $4.964 billion in the same period last year.

Dollar Tree same-store net sales growth was 2 percent driven by a 0.7 percent rise in Traffic and 1.3 percent increase in average ticket.

In pre-market activity on the Nasdaq, Dollar Tree shares were trading at $70.10, up 4.4 percent.

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