Specialist
Former executive at Dollar Store Inc
Agenda
- Dollar store industry trends and developments, focusing on Dollar Tree (NASDAQ: DLTR)
- Demand trends and top-line growth as namesake chain increases price point
- Profitability pressure as Dollar Tree accelerates Family Dollar transformation and combination store format
- Medium-to-long-term outlook
Questions
1.
Could you share your up-to-date perspective on the industry and pull out 2-3 key trends or developments that you’ve been watching?
2.
You touched on industry growth. At what the pace has the market been growing? What are your growth expectations for 2022, 2023 and over the next 3-5 years?
3.
Do you expect Dollar Tree to be ahead, below or in-line with broader deep discount industry growth?
4.
Can you walk us through Dollar Tree’s product assortment, its main lines of merchandise and your outlook on their performance?
5.
Are there any areas of the assortment under the Dollar Tree or Family Dollar banners where you see the biggest opportunities for improvement?
6.
How could Family Dollar’s turnaround and Dollar Tree’s price point increases impact the businesses’ positioning against a player such as Dollar General?
7.
You brought up the point on traffic. How concerned are you about traffic trends at Family Dollar? Do you believe the recent pricing actions – closing the gap with Dollar General, maybe Walmart – will be enough to turn the tide there? Are there other options available to the team that you believe could make a difference?
8.
You brought up the inflationary environment in your introduction. Where are the key inflationary pressures coming from that are impacting Dollar Tree’s business model today?
9.
You talked about the shift to USD 1.25 from USD 1 at Dollar Tree, and that may seem small, but it’s obviously a pretty significant increase on a percentage basis. Now we’re talking about Dollar Tree Plus and the USD 3-5 price point. How does that resonate with customers? Could the business have any challenges increasing the price, and are there any key learnings from seeing these adjustments over this period?
10.
Has online competition had any impact on demand for Dollar Tree or its banners?
11.
Dollar Tree has been trying to integrate Family Dollar for a while now. It’s done quite a bit with the footprint. What are some easy things to improve, where are the biggest challenges and why has it been so challenging to fix the business?
12.
How much of an impact could a refresh of store managers have at Family Dollar? How has Dollar Tree been more successful when it comes to the store managers? What is the difference you see there?
13.
How does Dollar Tree think about bringing up store managers? Do people usually grow within the organisation, or are they picked off from other areas? How does the company train and create the kind of quality needed?
14.
You talk about the Targets of the world having better salaries or being able to attract store managers a little bit better. Is a loyalty to Dollar Tree generated by going through the process to become a store manager? You were there for nine years, so is there a culture around the workforce that keeps people there and is valued by the employees?
15.
You mentioned the large store count that Dollar Tree has. It also has plans to continue to grow its store base. What are your views on this expansion? How achievable is Dollar Tree’s growth target, and how is it thinking about its footprint?
16.
You talked about final footprints for Dollar Tree and Family Dollar. What would allow Family Dollar to grow its store count further than Dollar Tree’s? What allows for one to have more space than the other?
17.
You highlighted that Dollar Tree is more urban vs Family Dollar being more rural. Clearly, the economics are going to be different between these markets. Does the real estate team at Dollar Tree have the expertise to expand the Family Dollar banner in rural markets, given it’s been working on the urban Dollar Tree markets for as long as it has?
18.
It sounds as if the Family Tree and Dollar Tree banners have quite a bit of room left to grow their footprints. Do you have, or have you ever had, concerns about store saturation, especially given Dollar General has been on a land grab over the past several years? How do you think about saturation?
19.
How large are the investments that Dollar Tree needs to make to modernise its distribution centre footprint?
20.
You mentioned that Family Dollar distribution centres still ship to Family Dollar stores and Dollar Tree centres to Dollar Tree stores. How much cost synergy could be realised from doing more joint distribution? Are there also any early learnings from the combination store fronts?
21.
How do you think about Dollar Tree’s potential growth and profitability profile over the next few years?
22.
We’ve talked about Family Dollar and its attempts to optimise its merchandise and store layout and maybe to improve its distribution. If and when this is able to be achieved, what do you believe is a sustainable operating margin for Family Dollar?
23.
Dollarama is a similar concept to Dollar Tree out of Canada. It has margins in the low 20% range in 2022. It’s already rolled out the multi-price point over the past decade, and it’s achieved margins in the low 20% range. Is there any reason Dollar Tree can’t also achieve 20% margins? I think Dollar Tree hasn’t rolled out the multi-price point to all of its stores. If it does that, could it get to those margins?
24.
What are your thoughts on M&A? Are there any viable, attractive targets that could make sense for Dollar Tree?
25.
Could you share your views on Dollar Tree’s management? How would you characterise its ability to execute? Have there been any moves you would question?
26.
What are your best and worst-case scenarios for Dollar Tree over the next 12-18 months?
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