(Bloomberg) -- Dollar Tree Inc. sales improved in the third quarter, a sign the discounter is making headway in fending off competition and drawing in more shoppers.
“Customers continue to seek value, and many are focused on buying for need and buying closer to the time of that need,” Interim Chief Executive Officer Michael Creedon said Wednesday on a call with analysts.
Lower-income consumers are under pressure and continue to tighten their budgets, he said. After curtailing big purchases, middle- and higher-income shoppers are having fewer or smaller gatherings. Overall, shoppers are also eating more at home, which is helping to drive up sales of food and other frequently purchased products.
The company reported comparable sales for both Dollar Tree and Family Dollar grew 1.8% in the three months ended Nov. 2, better than what Wall Street analysts were expecting. Traffic grew during the latest quarter and shoppers spent slightly more per trip.
Still, the US presidential election and a later Thanksgiving resulted in a slower start to the fourth quarter, executives said.
The stock rose 1.3% at 9:37 a.m. in Wednesday trading in New York. Shares fell 49% for the year through Tuesday’s close, while the S&P 500 index gained 27%.
Dollar Tree also said its chief financial officer Jeff Davis will step down early next year. The company has started an external search for his replacement.
The results will alleviate the pressure on Creedon, who took over last month after Rick Dreiling, the previous CEO, stepped down, citing health issues. Dollar Tree and other discounters have struggled with soft sales this year as lower-income shoppers remain under pressure following years of high inflation and interest rates.
Dollar stores are also straining to compete effectively against companies such as Walmart Inc. that offer delivery options and a wider assortment of products at low prices. Some retailers, including Aldi Inc., are doubling down on deals. Dollar Tree has broadened its assortment of products, including items that cost as much as $7, and it’s converting stores to carry these higher-priced goods.
At the same time, the retailer is exploring a sale and other strategic options for the Family Dollar chain that it acquired about a decade ago. Executives said the priority is to finish the strategic review of the Family Dollar chain and set up a longer-term road map for Dollar Tree.
The company narrowed its full-year sales expectations and now expects sales of $30.7 billion to $30.9 billion, raising the low end of the range.
Company executives said the retailer is preparing for potential tariffs. It negotiated lower costs with suppliers, shifted products or dropped items when it last dealt with tariffs. It also has plans in place to shift supply sources to alternate countries if needed.
“It’s still unclear what will make its way to policy,” Creedon said.
Dollar Tree’s competitor, Dollar General Inc., is scheduled to report results on Thursday before US markets open.
(Updates shares and adds commentary from analyst call.)
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