Everything You Need to Know About Opening a Dollar Store by Vetted Biz
Written by: Collins Kibet
Last Updated by Maria Fernandez Amato: October 28, 2022Free Download Our Exclusive E2 Visa Business Guide
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Dollar Tree Inc is roots go back to 1953, more than 65 years ago, to K.R. Perry and a Ben Franklin variety store in Wards Corner, Norfolk, Virginia. And to Macon Brock’s, Doug Perry’s, and Ray Compton’s adventure into $1.00 retailing. Fast forward to 1995, Dollar Tree went public on the NASDAQ exchange in March at $15 a share with a whooping Market cap of $225 million.
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The Dollar Tree Story
Currently, it’s a Fortune 200 company, and the leading operator of discount variety stores serving North America. The company has national recognition in the US and is headquartered in Chesapeake, Virginia. Dollar Tree operates more than 15,500 stores across North America which are supported by a robust network of 24 supply warehouses and an active buying power in the discount market.
Stores operate under the brand’s Dollar Tree, Family Dollar, and Dollar Tree Canada. Most stores have many departments cutting across various industries, including food and beverage, beauty and health, party supplies, home goods, and more.
Dollar Tree does not offer franchising opportunities. All of their stores are operated from their corporate headquarters in Chesapeake, Virginia
Michael Witynski is the President and CEO of Dollar Tree and has been with the company for 11 years. To learn more about the brand and how to own an outlet, check below.
Initial Cost of Operating a Dollar Tree Store
Contrary to some sources, Dollar Tree does not have individual store owners. To open up a similar concept, you should expect to pay, on average, a franchise fee of $50,000. In addition, the total investment fee to operate an outlet will range from $65,900 to $463,000 depending on the size of the dollar store.
Dollar Tree Opening Requirements
Most Dollar Tree stores are about 10,000 square feet in size and the corporation likes its stores in shopping plazas where it is convenient for people running errands and with ample parking. Ideal locations would be empty retail opportunities near grocery stores, nail salons, gas stations, and other essential services.
How much do the Dollar Tree owners make?
Consolidated net sales in the fiscal year ending 2021 increased 3.1% to $26.31 billion from $25.51 billion in the prior year. The company had a gross profit of $7.73 billion and a net income of $1.3 billion in 2021.
Dollar Tree, Inc. Income Statement
DOLLAR TREE, INC. Condensed Consolidated Statements of Cash Flows (In millions, except for share data)
| 13 Weeks Ended | Year Ended | |||
|---|---|---|---|---|
| January 29, 2022 | January 30, 2021 | January 29, 2022 | January 30, 2021 | |
| Net Sales | $ 7,077.4 | $ 6,767.3 | $ 26,309.8 | $ 25,508.4 |
| Other revenue | 3.2 | 0.6 | 11.4 | 0.9 |
| Total revenue | 7,080.6 | 6,767.9 | 26,321.2 | 25,509.3 |
| Cost of sales | 4,940.3 | 4,615.1 | 18,583.9 | 17,721.0 |
| Selling, general & administrative expenses | 1,561.5 22.1% | 1,471.2 21.7% | 5,925.9 22.5% |
5,900.4 23.1% |
| Operating Income | 578.8 8.2% | 681.6 10.1% | 1,811.4 6.9% | 1,887.9 7.4% |
| Interest expense, net, Other expense, net | 79.5 0.1 | 34.2 – | 178.9 0.3 |
147.3 0.8 |
| Income before income taxes | 499.2 7.1% | 647.4 9.6% | 1,632.2 6.2% | 1,739.8 6.8% |
| Privision for income taxes, Income taxe rate | 45.0 9.0% | 144.6 22.3% | 304.3 18.6% | 397.9 22.9% |
| Net income | 454.2 6.4% | 502.8 7.4% | 1,327.9 5.0% |
1,341.9 5.3% |
| Net earnings per share: | ||||
| Basic | 2.02 | 2.14 | 5.83 | 5.68 |
| Weighted average number of shares | 225.0 | 234.6 | 227.9 | 236.4 |
| Diluted | 2.01 | 2.13 | 5.80 | 5.65 |
| Weighted average number of shares | 226.3 | 235.9 | 229.0 | 237.3 |
For the fiscal year ending in 2021, Dollar Tree had net sales of $26.3 billion which was a 3.1% increase from $25.5 billion in the prior year. The company also had a net income of $1.3 billion in 2021.
Dollar Tree, Inc. Cash Flow Statement
DOLLAR TREE, INC. Condensed Consolidated Statements of Cash Flows (In millions)
| Year Ended | ||
|---|---|---|
| January 29, 2022 | January 30, 2021 | |
| Cash flows from operating activities: | ||
| Net income | $1,327.9 | $1,341.9 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 716.6 | 686.6 |
| Provision for deferred income taxes | (23.2) | 30.7 |
| Stock-based compensation expense | 79.9 | 83.9 |
| Amortization of debt discount and debt-issuance costs | 8.9 | 4.0 |
| Other non-cash adjustments to net income | 11.2 | 19.0 |
| Loss om debt extinguisment | 43.8 | – |
| Changes in operating assets and liabilities | (733.0) | 550.2 |
| Total Adjustments | (103.6 | 1,374.4 |
| Net cash provided by operating activities | 1,431.5 | 2,716.3 |
| Cash flows from investing activities: | ||
| Capital expenditures | (1,021.2) | (898.8) |
| Proceeds from governmental grant | 2.9 | – |
| Proceeds from (payments for) fixed asset disposition | (1.6) | 9.1 |
| Net cash used in investing activities | (1,019.9) | (889.7) |
| Cash flows from financing activities: | ||
| Proceeds from long-term debt, net of discount | 1,197.4 | – |
| Principal payments for long-term debt | (1,000) | (550.0) |
| Debt-issuance and debt extinguisment costs | (59.3) | – |
| Proceeds from revolving credit facility | – | 750.0 |
| Repayments of revolving credit facility | – | (750.0) |
| Proceeds from stock issued pursuant to stock-based compensation plans | 17.8 | 17.0 |
| Cash paid for taxes on exercises/vesting of shock-based compensation | (42.4) | (16.9) |
| Payments for repurchase of stock | (950.0) | (400.0) |
| Net cash used in financing activities | (836.5) | (949.9) |
| Effect of exchange rate changes on cash, cash equivalents an restricted cash | (0.4) | 0.9 |
| Net increase in cash, cash equivalents and restricted cash | (425.3) | 877.6 |
| Cash, cash equivalents and restricted cash at beginning of period | 1,463.6 | 586.0 |
| Cash, cash equivalents and restricted cash at end of period | $1,038.3 | $1,463.6 |
At the end of the 2021 fiscal year, Dollar Tree had Cash and Cash Equivalents of $1.038 billion after adjusting the net income from all the operating, investing, and financing activities. This indicates healthy management of funds since the company can balance its investments, operations, and finances with net income without overspending.
Number of Dollar Tree Stores Opened and Closed in the last few years
The company has over 15,500 stores across North America. For the fiscal year ending in 2022, Dollar Tree plans to open 590 new stores. 190 Dollar Tree stores and 400 Family Dollar stores. It also plans to renovate 800 Family Dollar stores.
Conclusion
With a market cap of about $37.38 billion, Dollar Tree leads in the Discount Stores Industry. Dollar Tree has a large net income and gross profit margins. The company announced recently that it was lifting its long-standing $1 price format to $1.25 and has plans to roll out $3 and $5 product bundles in the coming months. If you are interested in owning a Dollar Tree store, we recommend to review other retail concepts on Vetted Biz.
