Despite being perfectly positioned to capture consumer concerns during the pandemic, Dollar Tree (NASDAQ:DLTR) instead posted faltering results that lagged its deep discount rivals. That changed in the third quarter as the owner of the Family Dollar chain and its namesake stores generated solid sales and profits.
The retailer said revenue rose 7.5% to $6.2 billion and earnings jumped 29% to $1.39 as both the Dollar Tree and Family Dollar chains saw comparable-store sales rise for a combined gain of 5.1%.
The path forward
Dollar Tree has been in a long slog to overcome the burden it assumed after acquiring the Family Dollar chain in 2015. Last year the turnaround really seemed to take hold and sales and profits jumped.
After a brief stumble earlier this year, the discount chain where most items sell for under $10 quickly regained its balance and was able to keep Dollar Tree on track during the pandemic.
This quarter Family Dollar's comps led the way with a 6.4% gain compared to a 4% rise at Dollar Tree. That banner has been the anchor holding back the retailer of late, but it has been testing a new concept called Dollar Tree Plus!, featuring prices above the $1 level.
Although the brand has long been the lone pure play among dollar stores, the ability to deliver quality and value across a broad range of products at only $1 each was proving difficult. Dollar Tree began experimenting with prices in the $3 and $5 range in dedicated aisles of its stores and found consumers responded well to the enhanced selection.
As a result, the deep discounter says it will expand the availability of such higher priced goods to 500 stores beginning in the spring, which ought to help improve its profitability even further.