Dollar Tree on Thursday said Q2 total revenue rose 8.2% year over year to to $7.3 billion, with store comps up 7.8% at namesake Dollar Tree and up 5.8% at Family Dollar.
At Dollar Tree, customer traffic rose 9.6%, though average ticket dropped 1.6%; at Family Dollar customer traffic rose 3.4% and average ticket rose 2.3%, per an earnings presentation. Net income fell 44.3% to $200.4 million.
In an Aug. 17 agreement with the Occupational Safety & Health Administration over hazardous conditions at stores, Dollar Tree will pay $1.35 million in penalties, submit to open inspections and maintain a 24-hour hotline to receive safety complaints, among other concessions, the U.S. Department of Labor said this week.
Despite the profit decline in the second quarter, Dollar Tree CEO Rick Dreiling said the company is pleased with the progress in its effort to shift merchandising and pricing in order to meet customer demand. Dollar Tree stores increasingly have more higher-priced items and perishables, while Family Dollar has lowered prices on some merchandise.
“Over time, Dollar Tree will become more like Dollar General which, given the success of that chain, is no bad thing,” GlobalData Managing Director Neil Saunders said in emailed comments. “The slight downside at present is the financial pressure Dollar Tree’s core shoppers are under, which has reduced average ticket as people put fewer items in their basket.”
Lower prices at Family Dollar is helping it compete, Saunders also said.
Also among the company’s recent changes are those compelled by its agreement with OSHA. In addition to the immediate fine and requirements, Dollar Tree must “conduct a comprehensive, nationwide assessment of the root causes of the violations OSHA has repeatedly cited at multiple stores, with a plan to identify causes and make operational changes to correct them within a two-year period,” per the Labor Department’s release.
OSHA is giving the banners 48 hours to correct future violations related to blocked exits, access to fire extinguishers and electrical panels, and improper material storage at stores. Dollar Tree and Family Dollar must submit proof that the hazards have been addressed, or face fines of $100,000 per day, up to $500,000, and further enforcement actions, the Labor Department said.
The action against Dollar Tree is part of what Acting Secretary of Labor Julie Su called “President Biden’s commitment to be the most pro-worker administration in history.” The administration has also beefed up scrutiny and enforcement of labor laws related to union activity, including at retailers, most notably Amazon.
“At the Department of Labor, we know that every worker deserves to come home safe at the end of the workday,” Su said in a statement. “Through our robust enforcement of workplace protections and use of innovative legal methods that resulted in this agreement, thousands of workers will have a healthier, safer and more certain future.”
Dollar Tree didn’t immediately respond to a request for comment on the settlement with OSHA, and executives didn’t address it on their call Thursday morning.