No Weather Excuses Here

 | May 24, 2013 | 11:00 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

dltr

,

wmt

,

fdo

We heard you loud and clear retailers, first-quarter misses were all about the weather.

Just when you thought you couldn't take the weather blame game any longer, Dollar Tree (DLTR) comes along with a clean quarter and raises guidance. No excuses necessary here.

Dollar Tree reported a first-quarter comparable sales increase of 2.1%, in line with estimates. But here is the impressive part: comps increased in every month of the quarter while most retailers experienced monthly volatility and were saved by April.

If that is not enough to get you excited about DLTR, the discretionary category actually outperformed consumables. This is in contrast to what the discount/dollar-store space has been reporting for as long as we can remember. The trend to a higher-mix shift of consumables has been dragging down gross margins in the industry. But for DLTR the strength in categories, including stationary and party, helped gross margins increase 20 bps year over year. Continued lack of inflation should also help with margin upside.

With the stock up 25% year to date, DLTR is still an attractive investment for 2013. The company continues to roll out freezers/refrigerators and has a runway of 50% of the store footprint ahead. This should continue to drive traffic and average ticket. This quarter, DLTR traffic increased 100bps and painted quite a different picture than what Wal-Mart (WMT) reported (traffic down 180 bps). Can you say market share story?

It's interesting that WMT pointed out pressure on cigarette sales this quarter as Family Dollar (FDO) and DG are rolling out the category. While DLTR does not stock cigarettes (that would be hard at $1 price point), it is hard argue consumers won't continue to migrate toward the convenient format.

While the company raised guidance yesterday, estimates are still conservative for the year. And don't forget compares ease into the second half of the year. I expect while most retailers will be looking for a blame game during the holiday, DLTR will once again tell us no excuses necessary.

Columnist Conversations

Index Chart of the Day: SPX and RUT Divergence SPX vs. RUT (YTD) View Chart »&nbs...
Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
The S&P 500 index finished the week unchanged, but the VIX was up 5%, the divergence sending a bit of a mi...
Weyerhaeuser has been struggling since testing the 2013 highs last month. The stock extended a powerful...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.