Dollar stores expand rapidly in the third quarter, opening over a thousand new locations within the sector
Target and Five Below Post Strong Q3 Results
Target and Five Below, two leading discount retailers, have reported impressive results for the third quarter of 2019. Both companies saw growth in sales and profits, with Target outperforming analyst expectations.
Target's comp sales increased by 4.6% in Q3, while its net income rose by 9.4% year over year to $365.6 million. The retailer opened 724 new stores in Q3, contributing to a total net sales increase of 8.9% to $7 billion. Target's ongoing investments, including its self-distribution of fresh and frozen products, "DG Fresh," and its "Fast Track" initiative, were highlighted by analysts.
CEO Todd Vasos stated that Q3 was highlighted by the retailer's best customer traffic and same-store sales increases in nearly five years. Moody's analyst Mickey Chadha praised Target's ability to handle increased tariffs well through its diversified supply chain and cost control.
Meanwhile, Five Below also posted strong results. The company's sales in Q3 were $377.4 million, an increase of 20.7% year over year. New stores outperformed in Q3, and a record 61 stores were opened in diverse markets during the quarter. Leading sales categories in Q3 for Five Below were style, tech, candy, and room. Back-to-school and merchandise tied to "Frozen 2" boosted sales.
The collaboration with e-sports specialist "Nerd Street Gamers" was also announced, providing space for gamers to play on pro-level equipment and sell relevant Five Below products. However, Telsey Advisory Group analysts cautioned that tariffs still cast a cloud over Five Below's profit and sales potential.
Dollar Tree Inc. also made significant investments in Q3. The company remodeled over 1,150 Family Dollar stores in the "H2" format and re-bannered another 200 stores. Dollar Tree's comparable sales got a lift from both of its banners, with Dollar Tree's comps up 2.8% and Family Dollar's up 2.3%. The company's operating income in Q3 was $491.4 million, an increase of 11.1% year over year.
Wells Fargo analysts noted that Target's comps beat their expectations. The collaborative effort with Nerd Street Gamers was seen as a strategic move to attract more customers and boost sales for Five Below. Both companies continue to innovate and adapt to the changing retail landscape, ensuring they remain competitive in the discount retail sector.
