Dollar Tree's Flexible Revenue Model Is Paying Off

If an investor assumes that all dollar store operations are alike, and that it's best to avoid them due to pressure on the industry from the likes of deep discounter Wal-Mart Stores and online juggernaut Amazon.com, some compelling investment opportunities might get overlooked. Dollar Tree, Inc.'s (NASDAQ: DLTR) business model, which splits revenue between fixed price points ($1.00, of course!) and variable prices by maintaining two major brand concepts, is thriving.

Released last week, the company's third-quarter 2017 earnings illustrate some of this momentum. Revenue rose 6.3% due to a comparable-store sales increase of 3.2%, as well as the addition of 163 net new stores over a base of approximately 14,600 units.

Gross margin improved nearly 100 basis points during the quarter to 31.3%, resulting in gross profit of $1.67 billion. Dollar Tree attributed the rise to lower markdown expense and merchandise costs, and lower occupancy costs as a percentage of sales.

Source: Fool.com