What happened
Discount retailer Dollar Tree (DLTR +1.07%) outpaced the market last month, as its shares gained 12% compared to a 2% increase in the S&P 500, according to S&P Global Market Intelligence. The rally put the stock back in positive territory for the year, up about 25% compared to 18% for the broader market.
So what
September's boost was powered by good earnings news, as Dollar Tree reported improving sales results on the final trading day of August. Its Family Dollar brand notched its third straight quarter of accelerating growth, with comparable-store sales rising 2.4% to match the expansion pace of the Dollar Tree segment. Family Dollar isn't yet performing up to management's high growth hopes, though, which means investors will be looking for improving gross profit margin over the coming quarters rather than the declines they've been seeing in 2019.
Image source: Getty Images.
Now what
CEO Gary Philbin and his team are predicting that sales will rise by the same low-single-digit rate over the second half of fiscal 2019 that investors saw over the past six months. As for the longer term, executives believe they're seeing concrete results from their store remodeling initiative and so they now plan to modernize over 1,100 locations this year. Ideally, these investments, plus firming trends at Family Dollar, will lay the foundation for faster sales growth in 2020.
