Dollar Tree share price up, boosts outlook on best sales since 2011

Dollar Tree Inc reported its biggest same-store sales growth since 2011 as the discount retailer raised its outlook and is nearing the acquisition of Family Dollar Stores Inc.

Dollar Tree projected full-year earnings to range between $2.97 and $3.04 per share, up from its previous forecast of $2.94 and $3.06 per share. It also boosted its expectations for full-year revenue to be between $8.52 billion to $8.58 billion, versus the $8.44 billion to $8.55 billion it had stated before.

Same-store sales increased 5.9% in the quarter ended November 1, surpassing analysts expectations of 4%, and marking the companys 27th consecutive quarter of growth. Overall, net sales climbed 11% to $2.1 billion, compared to last years performance of $1.88 billion.

For the third quarter the company reported net income of $133 million, up 6% compared to last year, when Dollar Tree stated net income of $125.4 million. Earnings per share stood at $0.64, better than the $0.58 per share of last year. Excluding some items, earnings per share were $0.69.

Gross margin narrowed 0.4 points to 34.6% on increased freight costs.

Dollar Tree said the performance included $14.3 million in costs related to the Family Dollar acquisition. For the reported period the company expected per share earnings to be between $0.61 and $0.66 on a revenue of $2.02 billion to $2.07 billion.

For the current quarter, Dollar Tree projected earnings per share to stand between $1.07 and $1.14 on a revenue of 2.39 billion to $2.46 billion, excluding acquisition-related costs. Analysts polled by Thomson Reuters forecast $1.13 earnings per share and a revenue of $2.45 billion.

In July, Dollar Tree agreed to acquire Family Dollar for $8.5 billion in an attempt to build up a bigger company and compete better with rivals such as Wal-Mart Stores Inc. The agreement provoked another player to interfere, Dollar General Corp made a $9.1 billion offer. However, the bid was rejected by Family Dollar due to antitrust concerns.

Family Dollar postponed the shareholder vote on Wednesday as it waits for the U.S. antitrust authorities to approve the agreement. Dollar Tree said is ready to reduce the number of its stores, if needed and by a sensible amount, in order to get the deal done.

Should the merger get an approval the combined company will become the biggest dollar store in the U.S.

Dollar Tree Inc edged up 1.03% on Wednesday and closed at $62.63 on the NASDAQ. On Tuesday the stock gained 5.46% to trade at $66.05 at 15:37 GMT, marking a one-year increase of 12.15%. The company is valued at $12.88 billion. According to the Financial Times, the 19 analysts offering 12-month price targets for Dollar Tree have a median target of $64.00, with a high estimate of $68.00 and a low estimate of $56.00. The median estimate represents a 2.19% increase from the last close price of $62.63.