DLTR Dollar Tree Inc

Dollar Tree Inc. boosted its outlook for the year as it reported that sales more than doubled in the most recent quarter, helped by its acquisition of rival Family Dollar and overhead cost improvement.

Earnings easily topped expectations and shares jumped 6.6% to $83.51 premarket.

"I am very pleased with the company's performance in the first quarter," said Chief Executive Bob Sasser, pointing to sales improvement "through what continues to be a challenging economic environment."

The Chesapeake, Va.-based retailer, which has been working to integrate the Family Dollar business it bought last July for $9 billion, said those shops—some of which were converted to Dollar Tree stores—added $2.70 billion in first-quarter revenue. Meanwhile, sales in the company's Dollar Tree segment picked up 9.5%. Sales at stores open for at least a year rose 2.3% on a constant-currency basis from a year earlier, down from the 3.4% clip reported a year ago.

Mr. Sasser said the company remains on track with its integration of Family Dollar and associated synergy targets.

Dollar Tree joins Dollar General Corp. in posting earnings for the most recent quarter well above market views as sales at the discount retailers continued to climb and margins improve. The improvement marks a departure from other, higher-priced retailers reporting a disappointing start to the year. Chains from J.C. Penney Co. to Target Corp. posted sluggish sales as consumers cut back spending.

"We are part of what I consider, in this economic environment, the most attractive sector in retail," said Mr. Sasser.

For 2016, Dollar Tree now expects to earn an adjusted $3.58 and $3.80 a share, up dramatically from its previous guidance for $3.35 to $3.65 a share this year, and more in line with $3.77 average analyst estimate when the initial guidance was issued. Sales will range between $20.79 billion and $21.08 billion, higher than the $20.76 billion to $21.11 billion, previously forecast.

For the current quarter, however, Dollar Tree anticipates earnings of 66 cents to 72 cents a share, short of the 75 cents analysts forecast. Revenue is expected between $5.03 billion and $5.12 billion, bracketing analysts' estimates for $5.09 billion. Same-store sales are expected to grow in the single digits.

In all for the first quarter, Dollar Tree reported a profit of $232.7 million, or 98 cents a share, up from $69.5 million, or 34 cents, a year earlier. Excluding a tax benefit and acquisition-related expenses, per-share earnings rose to 89 cents from 71 cents.

Revenue increased to $5.09 billion from $2.18 billion, helped by the acquisition.

The company had guided for 75 cents to 83 cents in adjusted per-share earnings on $5.05 billion to $5.12 billion in sales.

Gross margin narrowed to 30.6% from to 34.4% in the prior year, hurt by lower-margin product mix for the Family Dollar business and $6.3 million for Family Dollar related to the amortization of stepped up inventory basis. But overhead expenses fell to 22.3% of sales compared with 23.7% in the quarter a year earlier.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

May 26, 2016 12:55 ET (16:55 GMT)

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