UPDATE 3-Dollar Tree profit beats, raises full-year view

Tue Nov 24, 2009 11:55am EST

* Q3 share 76 cents vs Wall St view 66 cents

* CEO says long time customers shopping more frequently

* Raises full-year sales, EPS view

* Shares up 5 pct (Adds analyst, company comment, byline; previous NEW YORK)

By Nicole Maestri

SAN FRANCISCO, Nov 24 (Reuters) - Dollar Tree Inc (DLTR.O) reported a higher-than-expected quarterly profit and raised its full-year outlook as shoppers sought its low prices on everything from hand sanitizers to Halloween candy, and its shares rose over 5 percent.

Dollar Tree, which sells most of its merchandise for $1, said sales were driven by demand for health and beauty care items, household cleaning supplies and party goods. In the fourth quarter, which includes the busy holiday season, it expects sales of discretionary merchandise to rise.

"Our traffic is up. Long-time customers are shopping more frequently, and new customers are finding us all the time," Chief Executive Officer Bob Sasser said on a call with analysts on Tuesday.

While Dollar Tree has seen a surge in store traffic as recession-weary shoppers look for bargains, Sasser reiterated that he expects the business to remain strong even after the economy improves.

UBS analyst Neil Currie wrote in a note that Dollar Tree's appeal "has never been broader" and expects that the company could expand on gains seen in 2009 as shoppers make thrift a habit. He has a "neutral" rating on the shares.

Dollar Tree said profit for the third quarter ended Oct. 31 rose to $68.2 million, or 76 cents per share, compared with $43.1 million or 47 cents per share, a year earlier.

Analysts, on average, were expecting earnings of 66 cents per share, according to Thomson Reuters I/B/E/S.

As Dollar Tree reported earlier this month, its quarterly net sales rose more than 12 percent to $1.25 billion, while comparable-store sales rose 6.5 percent.

SOUP TO SANITIZER

Its stores sell items such as dishwashing detergent, toys, Campbell's soup and Reynolds Wrap aluminum foil for $1. Sasser said shoppers are also buying products to fend off the flu, like hand sanitizers.

While Dollar Tree operates 3,803 stores, Sasser said it has the capacity to run 7,000 stores over the long run. He also said it sees growth potential for its Deal$ store chain, which carries items priced mainly at $5 or below. It currently operates 156 Deal$ stores.

Dollar Tree said it has decided to close its distribution center in Utah and will instead open a new one in San Bernardino, California. The total cost for the project will be approximately $36 million, but over the long run it said the new center should help it lower costs.

For the full year, Dollar Tree forecast capital expenditures in the range of $160 million to $165 million.

For the fourth quarter, the retailer forecast sales of $1.49 billion to $1.53 billion, based on a low- to mid-single-digit rise in same-store sales. It expects earnings of $1.30 a share to $1.39 a share for the period; analysts have been expecting $1.35.

For the full year, it anticipates sales of $5.17 billion to $5.21 billion, up from its prior outlook of $5.09 billion to $5.19 billion.

It sees earnings per share of $3.34 to $3.43 for the period. It had earlier expected to earn $3.10 to $3.25.

Dollar Tree shares rose $2.56, or 5.2 percent, to $51.66 in late morning New York Stock Exchange trading. (Additional reporting by Dhanya Skariachan in New York, editing by Gerald E. McCormick and Maureen Bavdek) ((nicole.maestri@thomsonreuters.com, +1-415-677-3975; Reuters Messaging: nicole.maestri.reuters.com@reuters.net)) ((See blogs.reuters.com/shop-talk/ for Shop Talk -- Reuters' retail and consumer blog))

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