No. of Recommendations: 5
For the desperate optimist, the DLTR Q2 press release is not 100% bad. It was nice to see that Dollar Tree saw increasing footfall. Up 1.1% YOY overall, 1.5% at Dollar Tree branded stores. More people coming in the door, the average one spending less, so very much in tune with the key narrative at both chains that the customers themselves just don't have a lot of cash (rather than, say, that they're shopping elsewhere). And gross profit and gross margin were up. And I'm not sure that it means much, but the press release does not contain the word "shrink". The rest of the report is all bad, of course.
They bought back 750k shares at an average price of $121 for 90.8 million, which equals 69% of the quarter's net profit. It's quite impressive that it was such a bad price in hindsight. They must of done the buying in the first two weeks of the quarter (first half May) before the subsequent share price slides, then stopped buying during the slide....
You are an eternal optimist! Of course, that's usually a good thing. And it is true that higher traffic is a good sign, even if their target customer has an empty wallet.
I don't see a lot to distinguish DLR.TO from DLTR as a business model, beyond the differences in Canadian consumer profiles & its grocery industry -- not the cleanest place I've shopped, though there's quite a bit of variance; 'difficult clientele', to say the least (local DLRs often serve as a crack etc user meeting ground in the urban cores of the Canadian cities I've lived in); threadbare staffing; a WMT almost always a 20 minute drive,...Dollaramas started in Quebec, and have spread all over Canada, but they really are much more heavily concentrated in non-urban settings; have a look at this map:
https://www.redliondata.com/wp-content/uploads/201...If you looked at a population map, Canada is very urbanized, with most of the population in cities within 100km of the southern border, and these Dollarama dots show a lot of stores in small towns a long way from a Walmart. There's one in my small town, and a few more in my region, with no Walmart for 300km ...
...Dollarama is primarily Canadian, and may not have seen the large increase in minimum wages in the last couple of years. Minimum wages have to be hurting the dollar stores in the us.I think we have had the same increase - even worse, for employers: it is true that the minimum wage has gone up a lot, from about $10 ten years ago to $15.75 now in Quebec (different in every province). But employers like Dollarama and Walmart have to offer a lot more than $15 just to get jobs filled. It's great having low unemployment, but this is one of the side effects - minimum wage lows are becoming obsolete.
dtb
