Dollar Tree's Q3 results beat on improving demand, CFO to step down

By Anuja Bharat Mistry

(Reuters) -Dollar Tree's third-quarter profit and sales beat market expectations on Wednesday as more customers shopped at its discount stores for products including apparel and electronics.

Shares of the company, which have lost nearly half of their value this year, rose about 4% as the dollar store raised the lower end of its annual forecasts, whose midpoint exceeded analysts' estimates.

Dollar Tree also said CFO Jeff Davis will step down after roughly two years on the job, but will remain with the company until the end of fiscal 2024. His exit comes just weeks after CEO Rick Dreiling resigned.

"Given the string of recent disappointments, the quarterly results and guide are a relative win," said Scot Ciccarelli, analyst with Truist Securities.

He said the company faces challenges, including a new management and the need to gain market share from rival Walmart.

Discount retailers have been losing market share in a race with big players including Walmart, Target and PDD Holding's e-commerce platform Temu as they keep prices low to attract cost-conscious consumers.

Dollar Tree is in the middle of an overhaul, especially of its Family Dollar banner. It decided to shutter 970 of its Family Dollar stores and review options, including the potential sale or spin off of the struggling banner.

"The fourth quarter got off to a softer start given the election and later-than-usual Thanksgiving timing," interim CEO Mike Creedon said.

In the third quarter, it benefited from higher store traffic as well as shoppers buying more per trip on average. Store traffic rose 1.6%, with growth in Dollar Tree and Family Dollar banners.

Its quarterly gross margin expanded 120 basis points to 30.9%, partly due to lower freight costs.

Net sales of $7.56 billion beat expectations of $7.44 billion, while the company's adjusted earnings per share of $1.12 exceeded estimates by 5 cents, according to data compiled by LSEG.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Arun Koyyur)

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