The company, with more than 14,000 discount variety stores, topped analysts' third-quarter earnings estimates and bumped up guidance. No wonder, the stock is up nearly 15% this year and is outperforming rivals Dollar General, Fred's and PriceSmart.
Although critics have suggested that Walmart and even Amazon could cut into discount-store sales numbers, Dollar Tree has withstood the competition.
After the Family Dollar acquisition, Dollar Tree has fortified its sizable scale, as well as its fixed and multi-price-point product offerings.
The sector should perform favorably and will continue to find currency given its convenient locations and low prices.
Dollar Tree's debt situation at $7.3 billion should improve in the next 12 months. This will happen even as its debt/earnings before interest, taxes, depreciation and amortization may fall below 4 times from 6 times as the company integrates its July 2015 acquisition of Family Dollar.
The company's third-quarter same-store sales were up 1.7%, with total sales at $5 billion.
The retailer also said that average ticket and customer traffic were individually encouraging during the three-month period.
Gross margins as a share of sales improved 210 basis points to 30.4%, while selling, general and administrative expenses fell 20 basis points to 23.6% of revenue.
Solid results from Dollar Tree and Burlington Stores' third-quarter report have pushed expectations higher. Chico's FAS and DSW also delivered solid reports.