FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: July 25, 2001
Date of Earliest Event Reported: July 24, 2001
DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-25464
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employ
incorporation or organization) Identification No.)
500 Volvo Parkway
Chesapeake, VA 23320
(Address of principal executive offices)
Registrant's telephone number, including area code: (757) 321-5000
Item 9. Regulation FD Disclosure
The following summarizes information distributed in a press release on July 24,
2001 and in a publicly available telephone conference call the same day. In
addition, the condensed consolidated financial statement information included in
the press release is attached as Exhibit 99.1. The Company is filing this Form
8-K pursuant to the Securities and Exchange Commission's Regulation FD.
Earnings
Earnings per common share were $0.19 in the second quarter of 2001 compared to
$0.19 for the first quarter of 2000 ($0.22 in 2000 excluding merger-related
costs and expenses and extraordinary items).
Year-to-date earnings per common share were $0.29 in 2001 compared to $0.31 in
2000 ($0.34 in 2000 excluding merger-related costs and expenses and
extraordinary items). Net earnings available to common shareholders were $32.4
million through June 2001 compared to $33.7 million through June 2000.
Sales
Sales for the quarter increased 14.5% to $440.4 million compared to sales of
$384.5 million for the second quarter of 2000. Comparable store net sales, which
include sales at expanded or relocated stores, decreased 2.7% for the second
quarter compared to the prior year period. Excluding the positive effect of
expanded or relocated stores, comparable store net sales decreased approximately
6.1% for the quarter. This decrease was primarily caused by the shift of the
Easter selling season by one week and the 14.3% comparable store net sales
increase in the second quarter of 2000.
Year-to-date net sales were $827.7 million in 2001 compared to $711.6 million in
2000. Comparable store net sales, which include sales at expanded or relocated
stores, decreased 1.3% for the six-month period.
As we open our larger format stores, sales at our existing stores (especially
core stores) near the new or expanded large format stores may be negatively
affected. We believe this is because of the wider array of merchandise offerings
and the improved shopping environment in our larger format stores. We expect
this to continue as we increase the number of larger format stores in our
existing markets.
Gross Margin
For the quarter, gross margin was 35.7% compared to 35.6% for the second quarter
of 2000. Excluding merger related costs, gross margin in the second quarter of
2000 was 35.9%. This decrease in gross margin resulted primarily from increases
in shrink and markdowns and from loss of leverage on occupancy costs. The
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increase in shrink was due to continuing challenges in operating our
Philadelphia distribution network. The increase in markdowns was primarily
related to special promotions in select stores. These increases were partially
offset by improved merchandise costs due to better pricing from vendors and a
higher mix of import merchandise compared to last year. In addition, we
terminated a purchase agreement previously entered into by Dollar Express and
recognized a $1.6 million gain. The gain related to the unamortized portion of a
payment received upon commencement of the contract.
Operating Expenses and Other Items
For the quarter, operating expenses, as a percentage of net sales, were 24.7%
compared to 23.7% in the second quarter of 2000. Excluding merger related
expenses in the second quarter of 2000, operating expenses were 22.8%. The
increase in operating expenses was primarily caused by increases in
payroll-related costs, including insurance, and loss of leverage resulting from
decreased comparable store net sales. In addition, certain expenses, such as
store supplies and repairs and maintenance costs were slightly higher than the
prior year primarily as a result of opening more larger format stores. We are
actively managing our operating expenses.
Inventories
Inventory at June 30, 2001 increased approximately 17.6% compared to June 30,
2000. Inventory in comparable stores increased approximately 5%, excluding the
Dollar Express stores. Excluding our Philadelphia distribution center,
distribution center inventories decreased approximately 16%. The decrease in
distribution center inventory levels is the result of improved planning of
receipts in 2001, including moving the receipt of our seasonal merchandise
closer to the respective holiday season.
Real Estate
Year-to-date we opened 149 new stores, closed 15 stores and expanded or
relocated 53 stores. Of the 149 stores opened in 2001, 109 stores were our
larger format stores and 40 were our core stores. Of the 1,863 stores open at
June 30, 2001, 526 are our larger store format, which average approximately
10,800 square feet, and 1,337 are our core stores, which average approximately
4,300 square feet.
As planned, we converted 57 of the Dollar Express stores during the first half
of 2001. These conversions have resulted in up to double digit improvements in
those stores' comparable store net sales compared to pre-conversion results. We
plan to convert an additional 16 Dollar Express stores by September 2001.
Distribution Centers
We expect to begin shipping from our new Briar Creek distribution center in
mid-August, approximately 6 months ahead of schedule. We expect to incur
approximately $1 million to $2 million of costs in connection with our
transition to the new Briar Creek facility. These estimated costs include the
lease loss charge that will be incurred to write-off our remaining lease
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commitment and fixed assets at our Philadelphia distribution facilities. Our new
Briar Creek facility will serve our Dollar Express and Spain's stores as well as
our Dollar Tree stores in the Northeast.
Supply Chain
We are currently operating POS in the initial test phase in select stores. We
plan to proceed with our rollout to up to 150 stores during the third and fourth
quarter, contingent on the success of our initial test phase.
Other Information
On July 19, 2001, we were served a suit in which a California store manager
alleges that he should have been classified as a non-exempt salaried employee,
and, therefore, should have received overtime compensation in addition to his
salary. The suit also requests that the California state court certify the case
as a class action on behalf of the managers in all of our California stores. We
will vigorously defend ourselves in this matter. At this stage in the litigation
it is too early to predict our ultimate liability, if any, related to these
allegations.
Outlook
Third Quarter
We believe that our comparable store net sales could decrease as much as 3.0%
for the third quarter of 2001. This is based on continued weak sales to date in
July and a 5.3% comparable store net sales increase in the third quarter of
2000.
We expect gross margin to be between 35.0% and 35.5%. This expectation reflects
the high proportion of consumable products we traditionally sell during the
third quarter as well as current sales trends.
Selling, general and administrative expenses (excluding depreciation and
amortization) are expected to increase 25% to 26% compared to third quarter
2000, excluding the transition costs associated with our move to our new Briar
Creek distribution center, which we estimate will be between $1 million and $2
million.
We expect interest expense will be approximately $0.5 million for the third
quarter.
Fourth Quarter
We are planning for a 2.0% increase in comparable store net sales for the fourth
quarter of 2001.
We expect gross margin for the quarter will be between 38.0% and 38.3% compared
to gross margin of 39.0% in the fourth quarter of 2000.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS:
This filing contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
address future events, developments or results and typically use words such as
believe, anticipate, expect, intend, plan or estimate. For example, our
forward-looking statements include statements regarding:
o the effect on sales at our existing stores resulting from opening our
larger format stores;
o the planned conversion of the Dollar Express stores;
o the timing and costs associated with opening the Briar Creek
distribution center;
o our POS initiative;
o comparable store sales results in future periods; and
o future gross margins and merchandise mix, selling, general and
administrative expenses (excluding depreciation and amortization) and
interest expense.
These forward-looking statements are subject to numerous risks and uncertainties
that may affect us including:
o adverse weather and economic conditions, such as consumer confidence;
o possible difficulties in meeting our sales and other expansion goals
and anticipated comparable store net sales results, which may result
in loss of leverage of selling, general and administrative expenses;
o the difficulties and uncertainties in adding and operating larger
stores, with which we have less experience;
o the seasonality of our sales and the importance of our fourth quarter
operating results;
o increase in the cost of or disruption of the flow of our imported
goods, especially from China;
o the difficulties in managing our aggressive growth plans, including
opening stores on a timely basis;
o possible delays, costs and other difficulties in integrating Dollar
Express with our business;
o possible increases in merchandise costs, shipping rates, freight
costs, wage levels, inflation, competition and other adverse economic
factors; and
o the capacity and performance of our distribution system and our
ability to expand its capacity in time to support our sales growth.
For a discussion of the risks, uncertainties and assumptions that could affect
our future events, developments or results, you should carefully review the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" sections in our Annual Report on Form 10-K filed
March 30, 2001. Also, carefully review "Risk Factors" in our most recent
prospectuses filed November 15, 2000 and August 3, 2000. In light of these risks
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and uncertainties, the future events, developments or results described by our
forward-looking statements in this document could turn out to be materially and
adversely different from those we discuss or imply.
We are not obligated to release publicly any revisions to any forward-looking
statements contained in this filing to reflect events or circumstances occurring
after the date of this report or to reflect the occurrence of future events and
you should not expect us to do so.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit # Description
99.1 Condensed consolidated financial statement information for
Dollar Tree Stores, Inc. and subsidiaries as of June 30, 2001
and 2000 and for the three and six months ended June 30, 2001
and 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
DATE: July 25, 2001
DOLLAR TREE STORES, INC.
By: /s/ Frederick C. Coble
--------------------------------
Frederick C. Coble
Chief Financial Officer