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Friday, February 26, 2010

Dollar Tree Profits Climbing


Discount Isn't Dead. High-end retailers are on the mend, but Dollar Tree shows the low-price chains are still attracting consumers.

Pricy retail chains were bruised by the recession, but recent earnings reports show cost-cutting has helped several right the ship. That doesn't mean the other end of the price scale is suffering though, as discount retailer Dollar Tree breezed past fourth-quarter earnings estimates Wednesday.

Bargain-conscious consumers flocked to the discount chain, helping Dollar Tree report better sales and bigger profits. Earnings jumped 32.2% to $1.52 per diluted share from $1.15 per share a year ago.

The discount retailer recorded a 12.4% uptick in total sales to $1.6 billion, while same-store sales, a metric that measures growth at stores open at least a year, were up 6.6%. The company didn't forego expansion either, upping total square footage by 6.6% during the period.

Dollar Tree doesn't plan on slowing down the growth. It forecasts same-store sales improvement in the low-to-mid single digits for the first quarter of 2010 with sales ringing in between $1.29 billion and $1.33 billion. Square footage will climb by 6.3% during the quarter.

"The firm will continue to benefit from healthy customer traffic as value-conscious consumers turn to the deep-discount chain for low-priced daily necessities," said Morningstar analyst Zoe Tan in a note.

Several higher end retailers also reported earnings this week. While Dollar Tree has roped in cost-conscious customers with discounted novelty items and an expanded selection of consumables, Saks and Nordstrom cut costs as the sluggish economy slowed down

Investors sent shares of Dollar Tree rocketing to an all-time high on Wednesday, before closing with a 12.3% gain.