(Reuters) - Dollar Tree Inc (NASDAQ:DLTR) said on Wednesday it would reformat a large number of its stores selling discretionary goods to include essentials, making it convenient for customers taking fewer trips outside their homes during the pandemic.
Shares of the Family Dollar parent rose 5% as it said the 50 combination stores it had already opened in small towns and rural communities were more productive and delivered higher gross margins.
Family Dollar stores sell discretionary goods, including apparel, comforters and automotive supplies for under $10, while Dollar Tree outlets typically sell essentials such as food and toilet paper for $1 or less.
Dollar Tree Chief Executive Michael Witynski said in a video https:// the company had identified over 3,000 locations to introduce the combination store concept.
The move comes at a time when people are consolidating their shopping trips to buy everything from cheap toilet paper to higher-priced electronics under one roof to allay fears of catching the new coronavirus.
Dollar Tree said several of the 200 new Family Dollar stores it plans on opening and 1,250 outlets it would renovate this fiscal year would follow the combination store format.
"The combination stores leverage Dollar Tree's growth narrative, supporting its compelling value and convenience proposition and delivering highly competitive prices in convenient locations," CFRA Research analyst Camilla Yanushevsky said.
In the fourth quarter ended Jan. 30, increased competition from big-box retailers and a resurgence in COVID-19 cases meant Dollar Tree missed market estimates for sales.
Net sales rose 7.2% to $6.77 billion, below Refinitiv IBES estimates of $6.79 billion.
Net income jumped over 300% to $502.8 million, or $2.13 per share, as the company took a $313 million charge last year. Analysts had estimated a per-share profit of $2.11.
Dollar Tree, which did not provide a forecast for fiscal 2021, also boosted its stock repurchase plan by $2 billion.