Deutsche Bank Comments On Dollar Tree Following Earnings Report

Dollar Tree's DLTR EPS was $1.29 vs consensus of $1.27 but sales were $1.73b versus consensus of $1.744b and comps were 3.9% versus consensus of 5.0%. Weather was the main culprit, as management commented that comps in non-weather-impacted regions were still running in the mid single digit range. While Deutsche Bank believes DLTR remains well positioned given the economic backdrop, it notes that continued growth in consumables could weigh against margins, and a slowdown in EPS growth warrants a Hold rating. Given the outlook on fuel, where management believes the headwinds could offset most/all of the gains from other areas (merchandise margin, shrink control). As such, the focus is on process improvements both at the corporate and store level. Smoothing inventory flows into the DCs will improve the efficiencies there and will also provide more efficient flow of goods to the stores, which could help reduce stocking times. Other expense control initiatives include better use of labor scheduling and systems to help reduce corporate spend. Deutsche Bank has a $56 PT on DLTR DLTR closed Thursday at $48.58