Dollar Tree reported results for its fourth quarter and fiscal year ended January 30, 2016.
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Consolidated net sales increased 116.7% to $5.37 billion from $2.48 billion in the prior year's fourth quarter. The increase was the result of $2.68 billion in sales from the Family Dollar segment and a same-store sales increase of 1.7% on a constant currency basis for the Dollar Tree segment.
In comparison, same-store sales, on a constant currency basis, increased 5.6% in the prior-year period for the Dollar Tree segment. Adjusted for the impact of Canadian currency fluctuations, the same-store sales increase was 1.3%. The positive same-store sales were driven by increases in customer count and average ticket.
Gross profit increased by $734.5 million, or 80.0%, to $1.65 billion in the fourth quarter compared to $918.1 million in the prior year's fourth quarter. The dollar increase was primarily driven by $673.7 million of gross profit for Family Dollar as well as higher sales at Dollar Tree.
As a percent of sales, gross margin decreased to 30.8% compared to 37.1% in the prior year. The primary contributors to the decrease were the impact of the overall lower-margin product mix for the Family Dollar business, $15.9 million for Family Dollar related to the amortization of the stepped up inventory basis, and $11.5 million of planned markdowns associated with rebannering Deals stores.
Selling, general and administrative expenses were 22.0% of sales compared to 21.6% of sales in the prior year's fourth quarter.
Excluding $8.9 million of severance costs, as well as purchase accounting-related costs of $19.3 million for favorable lease rights amortization and $16.0 million in depreciation for useful life and fixed asset revaluation, selling, general and administrative expenses were 21.2% in the fourth quarter of 2015.
Excluding acquisition-related costs of $6.7 million for the fourth quarter of 2014, selling, general and administrative expenses were 21.3% of sales.
Net income compared to the prior year's fourth quarter increased $22.4 million to $229.0 million, and diluted earnings per share decreased by 2.9% to $0.97. Adjusted net income increased from $239.0 million to $239.4 million and adjusted diluted earnings per share decreased from $1.16 to $1.01.
During the quarter, the company opened 128 stores, expanded or relocated 53 stores, closed 28 stores and divested of 325 Family Dollar stores. Additionally, as part of its re-banner initiative, the company opened 58 former Family Dollar store locations as new Dollar Tree stores during the quarter. The company also converted 52 Deals stores to Dollar Tree stores in January.
Retail selling square footage at the end of the quarter was approximately 108.4 million square feet.
Full year results
Consolidated net sales increased $6.90 billion, or 80.2%, to $15.50 billion from $8.60 billion in the prior year. Family Dollar sales represented $6.16 billion of the increase.
Same-store sales, for the Dollar Tree segment, increased 2.5% on a constant currency basis, compared to a 4.4% increase in the prior-year period. Adjusted for the impact of Canadian currency fluctuations, the same-store sales increase was 2.1%.
Gross profit increased $1.62 billion, or 53.5%, to $4.66 billion from $3.03 billion in the prior year. As a percent of sales, gross margin decreased by 520 basis points to 30.1%.
The primary contributors to the decrease were $73.0 million of markdown expense for Family Dollar related to SKU rationalization and planned liquidations, $70.3 million for Family Dollar related to the amortization of the stepped up inventory basis and the impact of the overall lower-margin product mix for the Family Dollar business.
Selling, general and administrative expenses were 23.3% of sales compared to 23.2% of sales in the prior year. Purchase accounting-related costs of $87.1 million in the year included $45.1 million for favorable lease rights amortization and $42.0 million in depreciation for useful life and fixed asset revaluation.
In addition, we incurred $39.2 million in acquisition-related costs and $13.4 million of severance costs. Acquisition-related costs for 2014 were $28.5 million. Excluding all of these costs, selling, general and administrative expenses improved 40 basis points to 22.4% of sales.
Net income decreased $316.8 million compared to the prior year, resulting in net income of $1.26 per diluted share. Adjusted net income decreased from $645.6 million to $518.2 million and adjusted diluted earnings per share decreased from $3.12 to $2.32.
The company estimates consolidated net sales for the first quarter of 2016 to range from $5.05 billion to $5.12 billion, based on a low single-digit increase in same-store sales and year-over-year selling square footage growth of 132%. Diluted earnings per share are expected to range from $0.75 to $0.83.
For fiscal 2016, the company estimates consolidated net sales to range from $20.76 billion to $21.11 billion. This estimate is based on a low single-digit increase in same-store sales, and 4.0% square footage growth. Fiscal year 2016 diluted earnings per share are expected to range from $3.35 to $3.65. ■