(Reuters) - Dollar Tree Inc’s (DLTR.O) quarterly profit and same-store sales beat Wall Street estimates on lower costs, fewer discounts and as its Family Dollar business reported better-than-expected comparable sales for the first time.
Shares of the biggest U.S. dollar-store chain operator were up 8.9 percent at $80.97 on Thursday after the company raised its profit and sales forecasts for fiscal 2017 ending January.
Comparable sales at Family Dollar stores rose 1 percent in the second quarter, above the 0.6 percent rise expected by analysts polled by Consensus Metrix.
Dollar Tree started breaking out comparable sales for the Family Dollar business from the fourth quarter of 2016.
“We are seeing the benefits of greater values and better stores at Family Dollar and customers are responding,” Gary Philbin, Dollar Tree’s enterprise president said on a conference call.
Dollar Tree acquired Family Dollar in 2015 after a tussle with Dollar General (DG.N) and has been working to make the variety store chain more attractive through better product assortments and promotions.
Visits to Family Dollar stores show better stock levels, improved merchandising and more compelling assortment of products, Anthony Riva, analyst at GlobalData Retail, said.
“All of these things should help to fuel growth over the coming quarters.”
Sales at Dollar Tree’s stores open more than 12 months rose 2.4 percent, above the 1.6 percent growth expected by analysts polled by research firm Consensus Metrix.
The small-format of dollar stores and their popularity with lower-income customers have helped them sustain revenue growth at a time when big retailers such as Wal-Mart (WMT.N) and Kroger (KR.N) are slashing prices of groceries and household essentials.
Net income jumped 37.4 percent to $233.8 million, or 98 cents per share, in the second quarter ended July 29.
Excluding items, the company earned 99 cents per share, beating the average analyst estimate of 87 cents per share, according to Thomson Reuters I/B/E/S.
Net sales rose 5.7 percent to $5.28 billion, coming in above analysts’ estimates of $5.24 billion.
The company said it now expects full-year net sales to be in the range of $22.07 billion and $22.28 billion, compared to its previous forecast of $21.95 billion to $22.25 billion.
Dollar Tree also raised its full-year profit forecast to between $4.44 and $4.60 per share, from $4.17 to $4.43 per share.
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Arun Koyyur