Dollar Tree is an American retail corporation that runs over 16,000 discount variety stores in 48 US states and five provinces in Canada. The company specializes in placing its stores near and within residential neighborhoods to reach households with high-value and quality assortments of necessities, consumables, and seasonal products (Bilbeisi et al., 2018). Apart from the physical stores, the company is also using an eCommerce business approach with its websites, digital channels, a company mobile app, and a partnership with Instacart. The 2021 financial report provides the basis for analyzing the company’s strategies, performance, and viability as a good investment for the next few years.
The financial report provides a detailed list of the company’s strategies to pursue and achieve in the 2022 fiscal year and beyond. The major strategy is to expand the company’s growth by deploying consolidated expenditures of about $1.3 billion, which will help achieve organic growth (Dollar Tree, 2022). With these capital expenditures, the company seeks to build on its foundation and accurate growth through several methods. First, it plans to open 590 new stores, of which 400 will be Family Dollar, and 190 will be Dollar Tree store brands. Secondly, the company plans to add Dollar Tree plus merchandise to more than 1,500 stores (Dollar Tree, 2022). Third, it plans to renovate 800 Family Dollar stores and turn them into the H2 format. Fourth, the company seeks to add and/or replace refrigerated and frozen capabilities in some selected stores. Moreover, the supply chain network will be upgraded, and its information technology systems will be developed and improved further.
The multinational professional services network and the giant accounting corporation KPMG International Limited is the independent public accounting and auditor for Dollar Tree Inc. In the 2021 financial year, the KPMG auditing report focused on internal control over financial reporting for Dollar Tree. The auditing was done for both Dollar Tree Inc. and its subsidiaries. They state that the client maintained effective internal control over its financial reporting in all material respects as of January 29, 2022 (Zohrehvand et al., 2022). The audit was based on the criteria set by the Committee of Sponsoring Organizations of the Treadway Commission. In addition, KPMG audited the consolidated income statements, shareholders’ equity, cash flows, and statements of comprehensive income for each of the three years preceding January 2022 (Zohrehvand et al., 2022). In all these cases, the auditor reports that all the protocols were followed according to the criteria. Furthermore, the internal control standards over financial reporting were found to be correct, with no evidence of bias or misstatements.
An analysis of the three financial reports shows that the company is improving in the critical areas of performance metrics. The consolidated income statements indicate that the company’s revenues are growing increasingly. In the fiscal year ending on January 29, 2020, the company recorded a revenue of $23,610.80 million, which increased to $25,509.3 million in the financial year ending on January 29, 2021 (Dollar Tree, 2022). Again, the total revenue value increased to $26,321.2 million in the last fiscal year. The increase in income over the three-year period reflects an increase in the net income, which increased from $827 million in the 2019-2020 fiscal year to $1,327.9 in the latest trading year (Dollar Tree, 2022). Similarly, the consolidated statements of comprehensive income increased significantly from $825 million to $1,327.9 million in the three years (Dollar Tree, 2022). An increase in income. An increase in income is the first insight that one’s business is succeeding and making the value of a person’s investment.
The company’s balance sheet for the fiscal years ending in January 2021 and 2022 is provided in the report and indicates that the shareholders’ equity increased from $20,696 to $21,721.8 million (Dollar Tree, 2022). Based on this analysis, this analysis provides evidence that Dollar Tree is experiencing growth in the key financial metrics, which reflects its commitment to improving its performance. Profitability is a key metric showing that the company benefits from its trade. The difference between the net assets and liabilities indicates its ability to meet its financial obligations, including improving the net worth of its investors. Consequently, the company’s liquidity and shareholders’ equity improved over the period, indicating its commendable financial health.
The company’s progressive improvement in the key financial metrics over the last three fiscal years indicates that its business is viable. In turn, the progressive improvement can provide insights into its performance in the next three to five years (Zohrehvand et al., 2022). Suppose all other relevant factors are held constant. In that case, it is possible to prospect that the company will experience progressive growth in all the key financial metrics over the next five years. The factors to be held constant include economic, social, political, environmental, and technological issues affecting the industry and the economy of North America in general. While these aspects are overly external to the company, they almost always affect the performance of a company. Therefore, developing a financial prospectus of the company requires consideration of these factors.
From a financial perspective, one can recommend that Dollar Tree Inc. is a potentially good investment over the next three to five years. It is recommended that potential investors should consider the company’s stock and equities, which are publicly traded in the US and Canada. Investors are constantly looking at the best options to improve their net worthiness within any trading period. They must inspect and analyze the performance of companies over the preceding trading periods to gain an insight into the potential performance in the next three to five years (Bilbeisi et al., 2018). Besides, the company’s strategies for growth and expansion seem to be an effective tool with the potential to help improve the shareholder’s value. Specifically, the company is dedicated to using organic growth by increasing the number of stores as it expands into the most economically potential regions. As previously noted, the company has dedicated some $1.3 billion as consolidated expenditures aimed at increasing the number of stores, advancing into multiple local markets, focusing on information technology, and reaching customers through social medial tools.
Dollar Tree must ensure that it achieves its growth objectives through the strategies it has adopted and considered. For instance, the dedication of more than $1.3 billion to organic growth is a noble idea that should be supported in the analysis (Dollar Tree, 2022). The company ought to benefit by marketing its products as high quality, high value, and healthy options necessary to meet the health needs of the people. It needs to convince customers in the local market that it is an as healthy and safe product. This analysis demonstrates that Dollar sign is on the right track as it continuously seeks to improve its e-commerce business.
Reference
Bilbeisi, K. M., Narayanaswamy, C. R. & Dinh, C. (2018). Was the Dollar Tree – Family Dollar merger synergic? Financial statements analysis. Journal of Business Economics and Finance, 7(2), 148-155.
Dollar Tree. (2022). A new chapter. Annual Report. Cengage.
Zohrehvand, A., Doshi, A., & Vanneste, B. (2022). Generalizing event studies using synthetic controls: An Application to the Dollar Tree–Family Dollar Acquisition. SSRN, 1(1). Web.