Dollar Tree reported results for its second fiscal quarter ended July 30, 2016. Net sales increased 65.9% to $5.00 billion from $3.01 billion in the prior year's second quarter.
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Second quarter fiscal 2016 results include nine additional weeks of operations for the Family Dollar segment when compared to the second quarter of fiscal 2015, which included four weeks of operations following the acquisition on July 6, 2015.
Net sales increased 65.9% to $5 billion from $3.01 billion in the prior year's second quarter.
The $1.99 billion increase was the result of an incremental $1.80 billion in net sales from Family Dollar stores, sales from new Dollar Tree stores, and a 1.2% same-store sales increase, on a constant currency basis.
Same-store sales increased 2.7%, on a constant currency basis, in the prior-year period. Adjusted for the impact of Canadian currency fluctuations, the same-store sales increase was 1.1%.
The positive same-store sales growth was driven by increases in customer count and average ticket.
Gross profit increased by $657.2 million, or 76.8%, to $1.51 billion in the second quarter compared to $855.2 million in the prior year's second quarter.
The increase included an incremental $588.4 million of gross profit for Family Dollar and a 9.2% increase in Dollar Tree's gross profit for the quarter. As a percent of sales, gross margin increased to 30.3% compared to 28.4% in the prior year.
The prior year's second quarter included $60.0 million of markdown expense related to product assortment rationalization and planned liquidations at Family Dollar.
Selling, general and administrative expenses were 23.1% of sales compared to 24.3% of sales in the prior year's second quarter.
Excluding $17.7 million of acquisition-related costs from the prior year's period, selling, general and administrative expenses, as a percent of sales, improved to 23.1% from 23.7%.
This 60 basis point improvement was the result of lower payroll and operating and corporate expenses, as a percent of sales, partially offset by higher store repairs and maintenance expenses and depreciation expense.
Operating income increased 189.5% to $357.2 million compared with $123.4 million in the same period last year.
Operating income margin increased to 7.1% in the current quarter from 4.1% in last year's quarter. This increase in operating income is the result of an incremental $189.7 million of operating income in the Family Dollar segment, and a $44.1 million increase in operating income in the Dollar Tree segment.
The Company's effective tax rate for the quarter was 36.9% compared to a benefit of 31.1% in the prior year period. The increase is primarily attributable to a pre-tax loss in the second quarter of 2015.
Net income compared to the prior year's second quarter increased $268.2 million to $170.2 million, and diluted earnings per share increased to $0.72. ■