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Dollar Tree, Inc. (DLTR)

Capital Markets Conference Call

September 22, 2011 10:30 AM ET


Bob Sasser – President and CEO

Gary Philbin – COO

Kevin Wampler – CFO

Alan Goldman – SVP, Deal Stores

Joe Lampassi – Real Estate Manager

Tim Reid – VP, IR


Aram Rubinson – Nomura

Joe Feldman – Telsey Advisory Group

Vincent Sinisi – Bank of America

Anthony Chukumba – BB&T Capital Markets

Matt O’Connor – Deutsche Bank

Guy Kelvin Raj [ph] – Goldman Sachs

Wayne Hood – BMO Capital Markets

Brent Rystrom – Feltl and Company

Dan Binder – Jefferies

Peter Keith – Piper Jaffray

Denise Tri [ph] – Bank of America


Bob Sasser

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Gary Philbin, our Chief Operating Officer is going to give you some insight into our stores, how we think about our store operations, our real-estate, planning, logistics and technology. And then Kevin is going to talk about the financial highlights. And at the end of all that, we’ve got about 45 minutes set aside for questions and answers and we have the people here that are happy to answer those questions. So, as we go through the presentation, make your notes and at the end I would feel free to ask anyone one of us, whatever is on your mind.

And again, in an effort to make it more efficient, the meeting, we did a little video. I think it’s about 20 minutes, about 18 to 20 minutes. And it sort of gives you the story as we see it in a very concise way. So, we’d like to roll the video.

[Video Presentation]

Bob Sasser

That was great. It was an enjoyable video. Thank you very much. Everybody appreciated, informative. Great, I hope you enjoyed your trip to the store today. I’m going to talk a little bit about the merchandizing things about it mentioned in his recap of the meeting.

Dollar Tree, Dollar Tree stands for every things of value. As we celebrated our 25th anniversary, Dollar Tree as Bob mentioned even more relevant. One, everything is a $1. There are plenty of stores that sell for a $1 or less but we have a 10,000 to 12,000 preferred model where everything in it is $1. That is an absolute and compelling visit for our customer. Extreme value merchandizing, you visited the deal store today, you saw some of the great values of product that you may not even see any place else, when you look at it and realize that everything there $1, it is compelling.

Our locations are convenient, now there are some places, you shop where you have to park in the parking lot, you have a five or ten minute walk to the front door, at Dollar Tree, the store is located, so you can park conveniently, walk in the store, store is 10,000 square feet, you can find everything you want, faster as you check out. It really is an outstanding shopping experience. And the shopping experience that you’ve experienced today of a clean, well lit variety and well merchandized store is really a signature which Dollar Tree from many of other folks that are considered in the Dollar Channel. But at the end, high value, ever changing assortment of trend relevant variety merchandize is really why people shop Dollar Tree as often as they do and continue to come back.

The compelling concept, we’ve talked about it before. Over the past 12 years Dollar Tree’s assortment has expanded to include more of the things that people want, more Home Store, more party, more variety merchandize, more toys, more wow frankly. At the same time, we’ve also increased lots of things that people need. As you shop in our stores today, you see a compelling assortment of food, health and beauty care and you see chemicals and cleaning supplies. And everywhere you look, there is an opportunity to buy something you need. And we also try at the same time to give you an opportunity to buy something that you want.

You know, with Dollar Tree, even treating yourself as something special and exciting as solar flower, double wall coffee cup you saw today, some of the, to our customer, that’s a treat. And remembering that everything in the store is only a $1 whether it’s seasonal or it’s wow or it’s variety, excites our customers. If you talk to them as you visit our stores, we feel the niche that’s a good and exciting place to shop.

Lot of questions today as always about, you know, our compelling and flexible merchandizing sourcing model. It hasn’t changed. You know, we have a unique model. It’s different. It’s not what you hear when you go any place, you go other place, you know, you don’t hear the same story. We don’t have planograms in Dollar Tree, it’s flexible. We provide high value quality merchandize to the customer and it’s all a $1. We exceed the customer’s expectations with broad assortments. As you go visit the stores and you visit them. So you look around and look at the assortment within it, you don’t have a brush for a $1 and a shampoo at $1, you have a fairly complete assortment. You can meet many of your needs and get the accessories like at the same time, surprising value.

You know, as we showed you today with some of the anniversary specials and bonus buys, you know, in a world of rapid inflation and all the reasons why we shouldn’t be able to deliver these values, you saw for yourself today the values that we’ve been able to offer in celebration of our 25th Anniversary. And it’s compelling. Some of is corporate brands, some of is national brands. But it was not in just one category throughout the store.

Thrill-of-the-Hunt, we talk about it, it is what we do. Our buyers or merchandize manager teams are very competitive about who’s bringing the newest, hottest, fastest, most interesting out in the market. And they measure how quickly it sells in the stores. We’ll get reports about daily sales, weekly sales the sell-through. It’s really as exciting and the stores get energized, the customers get energized. And it really is something you don’t really find very many places. We do all that and we deliver the margin that’s required for our merchandize mix. And we do it and we’ve done it for 25 years. You’ve asked us in times of deflation, inflation and the Solar store is all the same. I think if you look over the history of your experience with our chain, you’ll see that it’s not just a strategy that we talk about, we have history of proving it year-over-year-over-year. So, whether there is issues with inflation or issues with assortment availability, we always find a wide variety of high value product in our stores, always delivering their shareholders the value that we’ve always delivered.

Dollar Tree’s marketing, in Dollar Tree, we create events within our stores. Our store is our brand. We’ve said it before, you know, Dollar Tree, what’s the difference, it’s the store, the four walls. You know the difference when you go into a Dollar Tree store or then when you’re in any place else. So the combination of these in-store events that changes that very important in front of the store that we showed you today, the signs and the windows, the end-caps, the ever changing seasonal presentation, the first of the month promotions, that’s what we feature in our events. Now a lot of retailers have run these events and what they do to high-low retailers. So, it’s 30% off this, it was 40.99, how is that. Well, in Dollar Tree, everything is a $1 everyday.

So, we create value not by changing the price but by increasing the value and offering the customer in our promotions the added value but also things that they may never see again, that one time incredible buy that I can’t believe it’s only a $1 and it may never come back. During the spring season you’ll recall, we carried solar lights, solar stakes at a $1, those were things that you couldn’t get anywhere else and that’s what we used to promote our business.

Deals, deals, I’m very excited about our Deals chain. We’re getting a lot of traction. What does deal stand for? Deal stands for every things of value, not only a $1 but every things of value. By lifting the restriction of the price point, we’re able to provide more complete assortments, more brands, more value and it’s all that everyday prices. So you don’t have to wait for sale the shop at your deal store. Everyday values, extreme values, our customers recognize it. More complete assortments such as sheet sets, cookware, Christmas trees, things we could never do at a $1, but yet things that our customer really would like to buy at a store then they don’t have to wait for an ad for it.

More compelling values like our stock up and save in our stores, these areas where you can see bigger sizes, bigger savings. And it’s exciting for the customer and we see the merchants are just flying off the shelf and we introduced these on a monthly basis. Like Dollar Tree, we put our Deal stores in convenient locations and we offer superior shopping experience. They’re cleanly well merchandized and always a thrill to have an opportunity. Different price point strategy, same shopping experience, it’s a very compelling concept. It’s not all the dollars, it’s very compelling.

Deals, as the consumer’s first place to shop, what do we mean, we’d like them to come to us first, buy that what you offer and then complete their shopping experience someplace else. We strive to be the first on their shopping list. We have a unique blend of even more of what consumers need and what they want. Deals, it’s an amazing opportunity to go in the store. And we have Christmas trees for the holiday. We have the appliances you saw on the video, these are things we can never do. But everything in the store is a value. So, definitely just a unique blend of the things that people want and more of the things they need.

Deals, has the same selective merchandizing strategy and sourcing that makes this Dollar Tree, nothing is really that different. Yes we have more everyday basics in the store, but we still haven’t ever changed this at high valuable or variety merchandize, we still offer that Thrill-of-the-Hunt, we still can walk away from an item and make a switch in a moment’s notice. So, all of that still baked into the deals chain that keeps us that flexible and very nimble, more nimble than a lot of retailers out today. Just like you visit any Dollar Tree store, when you visit Deal stores, you’ll see that same Thrill-of-the-Hunt, you’ll see that unexpected value that you just never really thought about and may not be $1 but it is a great value.

Deal’s real estate focus, well, Deals, are a retail relevant model that basically live anywhere. Right now our focus is to expand in the high population density areas in the Northeast and the Southeast, the underserved retail markets. And also, Key is opening up at our existing marketplace so we get brand identity, get some density of the brand and also feel off that they logistic sufficiency is working out of those existing PC.

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