UPDATE 2-With frugal now cool, Dollar Tree pursues growth
* CEO says shoppers "forever changed," proud to be frugal
* Sees expanding Deal$ chain in Northeast, Southeast
* CFO comfortable with earnings forecasts issued in August
* Shares down 0.9 pct (Recasts, adds byline, CEO, analyst comments, updates stock)
SAN FRANCISCO, Sept 23 (Reuters) - Dollar Tree Inc's (DLTR.O) business is booming amid the downturn, and that momentum will not fade when economic conditions improve as a new frugal mind-set has emerged, making it cool to be thrifty.
That was the message delivered by Dollar Tree executives on Wednesday at the retailer's annual capital markets conference, which was broadcast over the Internet.
The company also reiterated its third-quarter and full-year sales and earnings forecasts.
"We are getting new customers and our traffic is up and we believe, only anecdotally, that these customers are forever changed by what has occurred in America," said Chief Executive Bob Sasser.
He said shopping at Dollar Tree has become "cool."
"You can be proud of being frugal now," he said.
Dollar Tree has seen a surge in store traffic as recession-weary shoppers seek out its rock bottom prices. It sells everything from toothpaste to potato chips to toys for $1.
Its shares, which were up 20 percent this year through Tuesday, rose 5 percent on Monday after Goldman Sachs analyst Adrianne Shapira reiterated her "buy" rating for the stock.
"While economic indicators point to a macro stabilization and the early stages of a recovery, consumers are likely to retain their thrifty mind-set as they look to repair battered balance sheets," she wrote. "Dollar Tree's $1 price point, particularly on the discretionary side, plays well to this theme."
EXPANDING DESPITE THE DOWNTURN
While Dollar Tree operated 3,717 stores as of Aug. 1, it will finish the year with about 3,800 stores, expanding its square footage by 6.5 percent at a time when many retailers have put store expansion plans on hold.
"For us, the world's our oyster," said Chief Operating Officer Gary Philbin of real estate opportunities. "With other folks canceling deals or cutting back, Dollar Tree is still out there to take advantage and we can move quickly."
Dollar Tree is also expanding its Deal$ store chain, which it acquired in 2006. Deal$ stores carry items priced above $1 that the retailer would not be able to sell at its Dollar Tree stores, like a $10 set of sheets or a $10 twelve-cup coffee maker.
While Dollar Tree wants to open more Deal$ stores in the Northeast and Southeast, it said it is still in the "early innings" of refining the chain's operations, from improving its supply chain to its merchandise selection.
"We intend to improve and prove the Deal$ model so that we can expand the number of stores that we can open and operate profitably," Sasser said.
CFO Kevin Wampler said the retailer remains comfortable with the third-quarter and full-year sales and earnings forecasts it issued last month when it reported second-quarter results. [ID:nN2417542]
At the time, it forecast third-quarter sales of $1.19 billion to $1.23 billion, and earnings of 58 to 64 cents per share. It also said it expected full-year sales of $5.09 billion to $5.19 billion and full-year earnings per share of $3.10 to $3.25.
Analysts, on average, expect earnings per share of 63 cents for the third quarter and $3.26 for the full year, according to Reuters Estimates.
Dollar Tree shares declined 44 cents to $49.77 in afternoon Nasdaq trading. (Editing by Gerald E. McCormick and Steve Orlofsky)
