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Dollar Tree sales miss as Family Dollar acquisition drags
September 1, 2015 / 11:48 AM / 2 years ago

Dollar Tree sales miss as Family Dollar acquisition drags

(Reuters) - Discount retailer Dollar Tree Inc’s (DLTR.O) quarterly sales rose less than analysts had expected as it focused on integrating Family Dollar stores amid intense competition from mass retailers such as Wal-Mart Stores Inc (WMT.N).

Shares of the company, which also forecast current-quarter sales below Wall Street’s estimates, fell as much as 8.6 percent to $69.68 in early trading on Tuesday.

Analysts had touted Dollar Tree’s acquisition of Family Dollar as a game changer for the smaller discount retailer, as it propelled the company to the No. 1 spot among U.S. discount chains dethroning Dollar General Corp (DG.N).

But they had also cautioned that integrating Family Dollar would be challenging as the company had been struggling with pricing, merchandising and store layout issues.

“While we would not go so far as to say that Dollar Tree acquired a troubled retailer, in purchasing Family Dollar it did take on a retail entity where operational efficiencies and strategic efficacy are quite some way below its own abilities,” research firm Conlumino’s CEO Neil Saunders said on Tuesday.

Addressing these problems made Dollar Tree take its “eye off the ball” in relation to competition, and this took some shine off sales in the quarter, he said.

An exterior view of a Dollar Tree store is seen in Pasadena, California August 31, 2015. REUTERS/Mario Anzuoni

Dollar Tree said it expected third-quarter sales to more than double to $4.78 billion-$4.87 billion, helped by the acquisition.

Analysts were expecting $4.91 billion, according to Thomson Reuters I/B/E/S.

Net sales for the second quarter rose 48.3 percent to $3.01 billion, but missed analysts’ average estimate of $3.04 billion.

Dollar Tree’s same-store sales, excluding the contribution from Family Dollar, rose 2.7 percent. That missed Consensus Metrix forecast for a rise of 3.2 percent.

Dollar Tree also swung to a loss in the quarter ended Aug. 1 due to higher integration costs.

However, excluding such one-time items, the company posted a profit of 67 cents per share, topping the average analyst estimate by 5 cents.

Through Monday’s close, Dollar Tree’s shares had risen about 8 percent this year.

Reporting by Subrat Patnaik in Bengaluru; Editing by Savio D'Souza and Sriraj Kalluvila

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