Did Dollar Tree Shareholders Get an Early Stocking Stuffer?

Dollar Tree (NASDAQ: DLTR  ) may not tell you if you should back up the truck or not on its shares. However, the company management is doing it for you. Dollar Tree is so confident in its future that it has gone heavily into debt to bet on itself.

Results
Dollar Tree reported third-quarter results on Nov. 21. Net sales jumped 9.5% to $1.88 billion. Same-store sales climbed 3.1%. Adjusted earnings per share leaped 13.7% to $0.58.

CEO Bob Sasser noted that the strong performance was during a "very cautious consumer environment." Sasser credited Dollar Tree's positive performance to growth in its merchandise and increased traffic as new customers add Dollar Tree to household budgets. This implies that the weak economy and resulting budget-constrained consumers may actually be helping to bring more people in the doors and increase sales.

The company entered a "$1.0 billion Accelerated Share Repurchase program" during the quarter, with a due date of June 2014. This is a rather aggressive buyback considering the company's market cap is only $12.5 billion. On an annualized basis, this is between 10% and 15% return in capital to shareholders. Dollar Tree is so confident in the future that it elected to go into debt to finance the repurchase program.

Conference call
The call added a bit more color. Early on, Sasser explained that not only was it a record third quarter, but that the performance was "relatively consistent across the country." He pointed out that October was the strongest month. This all suggests successful company execution from the top, with momentum picking up going into the holiday season.

Sasser then spoke of expansion and made his opinion clear. The company has a vast amount of growth opportunity still to go with new stores, existing stores, new formats, etc. Dollar Tree is on track to add around 10% more stores and expansions in 2013 alone.

The only lump of coal in the call was when CFO Kevin Wampler pointed out that there happens to be six fewer selling days between Black Friday and Christmas this year due to the late Thanksgiving holiday. He said these six days represent a "$25 million sales challenge."

The executives were hesitant to give any details about November. Still, Sasser may have let slip that the company was sandbagging a little. In reference to November, during the Q&A session he stated, "It's all in our guidance, and we're running a little bit ahead of our forecast." This hints that the company is already on pace to beat its own guidance given the same day. It appears Sasser accidently let the cat out of the bag and plans to deliver "surprisingly" good fourth-quarter results.

Competitors
Not everybody is seeing what Dollar Tree is seeing. Family Dollar Stores (NYSE: FDO  ) last reported its results on Oct. 9. Though Family Dollar saw an adjusted earnings-per-share gain of 14.7% to $0.86, its same-store sales were flat. CEO Howard Levine stated the reason was that the "environment was more challenging than expected."

Dollar General  (NYSE: DG  ) is expected to report its results on Dec. 5. However, in the prior quarter, it saw sales rise 11.3% and same-store sales leap 5.1%. CEO Rick Dreiling mentioned on the conference call that the economy is still a challenge. He stated, "I think it's fair to also say that our consumer is still a little hesitant out there."

All three of these dollar stores feel the economy is hurting them, but Dollar Tree and Dollar General continue to plow ahead with growth in revenue, same-store sales, and profits.

Foolish final thoughts
As Dollar Tree aggressively expands and soaks up shares in buybacks, it appears ready to deliver a fantastic holiday quarter and beyond. It's always a good idea to keep an eye on companies that perform well while complaining about the bad economy. If and when the economy does improve, these are the companies that will shock the Street with positive results.

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