Zacks_Analysts' Blog : Dollar Tree to Buy Back Shares - Analyst Blog

Chesapeake, Virginia based discount variety store Dollar Tree Inc. (DLTR) in an effort to boost shareholder worth and retain their long-term confidence in the company recently made an announcement to repurchase its common shares. As per the announcement, the company will repurchase $1.5 billion of its common shares.

Dollar Tree is committed to creating value for its shareholders by returning capital in the form of dividends and share repurchase programs. To improve shareholders' wealth, the company repurchases shares from time to time depending on market conditions. At the end of second quarter of fiscal 2011, the company has cash and investments of $545 million.

Earlier, in August, the company entered into an agreement with JPMorgan Chase Bank to repurchase its common shares under a variable maturity accelerated share repurchase program. As per the deal, the company will repurchase $200 million of its common shares under its ongoing $500 million share repurchase program announced on June 21, 2010. After acquiring shares from JPMorgan, the company will have $49.2 million worth of shares remaining under its share buyback program.

The company, in its history of share buybacks, has bought back $1.9 billion worth of shares since 2003, including $414.7 million in 2010 and $345.9 million in 2011, till date.

Second-Quarter 2011 Earnings Update

 Dollar Tree posted strong fiscal 2011 second-quarter earnings of 77 cents a share, up 26.2% from year-ago earnings of 61 cents and ahead of the Zacks Consensus Estimate of 75 cents a share.

Dollar Tree's total revenue grew 11.9% in the quarter to $1,542.4 million from $1,377.9 million in the prior-year quarter. Same-store sales for the period increased 4.7%. However, total revenue fell short of the Zacks Consensus Estimate of $1,547.0 million.

Management Guidance

Bolstered by better-than-expected second-quarter 2011 results, Dollar Tree has narrowed its sales expectation for fiscal 2011 to the range of $6.53 billion to $6.62 billion, up from $6.50 billion to $6.63 billion forecast earlier.

Accordingly, the company sees earnings in the range of $3.82 to $3.95 per share for fiscal 2011 compared with its earlier range of $3.69 to $3.85.

Dollar Tree operates as a discount retailer of general merchandise in the southern, south western, mid western and eastern United States. Currently, the company operates 4,242 stores in 48 states and 4 Canadian Provinces. The company is in direct competition with Dollar General Corporation (DG) and Family Dollar Stores Inc. (FDO).

Currently, Dollar Tree has a Zacks #2 Rank, implying a short-term Buy rating on the stock. The company retains a long-term Neutral recommendation.