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: January 28, 2003
Date of Earliest Event Reported: January 23, 2003
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. Employer
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 discussed in Dollar Tree Stores, Inc.'s
(the Company's) publicly available telephone conference call on January 23,
2003, regarding its fourth quarter 2002 earnings results. In addition, the
Company's fourth quarter earnings press release dated January 23, 2003 is
attached as Exhibit 99.1. The Company is filing this Form 8-K pursuant to the
Securities and Exchange Commission's Regulation FD.
On January 6, 2003, the Company's Board of Directors approved a switch from a
calendar year to a traditional retail fiscal calendar, effective for the fiscal
year beginning February 2, 2003. The Company has filed a Form 8-K that presents
the first three quarters of 2002 on the new fiscal calendar basis; later this
year, the Company expects to file a Form 8-K presenting its fiscal fourth
quarter of 2002.
2003 Outlook
Net Sales and Earnings
Based on our plans for a 22% selling square footage growth, we expect net
sales and earnings to increase 15% or more in fiscal year 2003 compared to
fiscal year 2002. We are also planning a modest increase in underlying
comparable store net sales of no more than 1%. We anticipate that new store
growth will provide the majority of our sales increase; most of our stores
will open in the first three quarters of the fiscal year. Our sales seasonality
is expected to be similar to fiscal year 2002.
As disclosed in our sales release, we expect net sales of $590-$610 million for
the first fiscal quarter of 2003. The first fiscal quarter includes Easter,
which falls three weeks later this year, on April 20, 2003.
Gross Margin
We will strive to maintain gross margin as high as possible but there is
pressure on it, as a result of increased domestic merchandise in our mix. Our
domestic merchandise, including consumable goods, generally costs more than our
imported merchandise.
Operating Expenses
In fiscal year 2003, we will incur additional expense in testing a program to
improve brand awareness in selected markets. The results of this program should
provide us with information on how to proceed in the future, to reach the
most customers and to generate the highest sales increase.
Depreciation will remain relatively high in fiscal year 2003 and 2004 as we
continue to invest in technology-related assets. We will continue to
convert existing stores to point-of-sale, add enhancements to our supply chain
systems and update our store hardware. We anticipate that in fiscal year 2005,
at the earliest, we will begin to reduce the growth of our technology assets to
be more in line with overall company growth. Depreciation
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expense will also increase as a result of higher costs associated with building
larger stores.
To offset increased costs discussed above, we have put into place a number of
cost-saving programs to reduce operating expenses. We expect to leverage workers
compensation in fiscal year 2003 and address other cost-saving measures related
to bank-related fees, store supplies, repairs and maintenance and store utility
usage. In addition, we will continue to use systems to improve labor
management. We are developing new models for store openings and leasing costs,
and we are finding ways to reduce our tax burdens. We plan to use the money
saved in these areas to invest in areas that will directly increase sales.
Operating Margin
Given our sales, gross margin and operating expense outlook, it will be
difficult to improve operating margin.
Capital Expenditures
Capital expenditures for fiscal year 2003 are expected to be $160-$170 million,
excluding any new distribution center costs. Generally, approximately 80% of
our capital expenditures are store related. In addition, as we previously
disclosed, we have over $113 million in a synthetic lease facility for three
of our distribution centers. We are evaluating the new Financial Accounting
Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities and will decide our course of action in the coming weeks. If our
distribution centers are included on our balance sheet, depreciation expense
will increase approximately $5 million annually, which amount is not included
in our planned 15% earnings increase. Additional details regarding our
synthetic lease are available in our most recent Form 10-K and Form 10-Q.
Real Estate
New stores opened in calendar 2002 averaged 7,800 selling square feet. We
expect new stores opening in fiscal year 2003 to average nearly 9,000 selling
square feet. We plan to add approximately the same amount of total selling
square footage in fiscal year 2003 as we did in fiscal year 2002, with larger
stores and more expansions. Our stores opened in calendar year 2001, most of
which are large format stores, have a cash contribution margin percentage that
is better than the corporate average. We will focus on increasing sales per
selling square foot while reducing costs per selling square foot in our stores.
Public Reporting
In the future, we will provide an interim quarter sales update, which will take
place approximately 30 days before our sales release. The purpose of this
update is to give our investors an additional communication during the quarter,
between the previous quarter's earnings release and the current quarter's sales
release. The update will take the form of a pre-recorded message that can be
accessed by dialing (757) 321-5TRE and will be available for approximately
four days. We will file the information on a Current Report on Form 8-K, so it
will be accessible through our website and the SEC's website. The update will
give an indication of whether we are above, below or on-plan for sales, as
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well as other information, as appropriate. The first interim sales update is
expected to be available the evening of April 7, 2003.
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 future net sales and earnings, including comparable store net sales;
o seasonality of our sales and our merchandise mix;
o gross margin;
o future operating expenses and our efforts to control them;
o depreciation expenses related to our supply chain and technology
initiatives;
o capital expenditure plans;
o the effect of our synthetic lease under new accounting interpretations;
o planned store-size growth; and
o selling square-footage growth.
These forward-looking statements are subject to numerous risks and uncertainties
that may affect us including:
o adverse economic conditions, such as declining consumer confidence or
spending, or bad weather;
o possible difficulties in meeting our net sales and other expansion goals
and anticipated comparable store net sales results,
which may result in loss of leverage of operating expenses;
o increase in the cost of or disruption of the flow of our imported goods;
o the difficulties in managing our aggressive growth plans, including
opening stores on a timely basis;
o competition and possible increases in merchandise costs, shipping rates,
freight costs, or other operating costs such as wage levels;
o the capacity and performance of our distribution network and our ability
to expand its capacity in time to support our net sales growth; and
o changes in accounting standards.
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 14, 2002. Also, carefully review "Risk Factors'' in our most recent
prospectuses filed November 15, 2000
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and August 3, 2000. In light of these risks 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 Dollar Tree Stores, Inc.'s press release regarding earnings
results for the fourth quarter and annual year ended
December 31, 2002.
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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: January 28, 2003
DOLLAR TREE STORES, INC.
By:
--------------------------------
Frederick C. Coble
Chief Financial Officer
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