Dollar Tree Inc. (NASDAQ:DLTR)

The analysis of financial performance over the available periods reveals several notable trends and fluctuations.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates considerable variability. Starting with a positive value just above 1.18 billion in early 2017, it shows an increase in early 2018, reaching approximately 1.64 billion. However, a sharp decline occurs in early 2019, with NOPAT turning significantly negative, approximately -1.11 billion. The following years, 2020 through 2022, show recovery with NOPAT regaining positive territory, fluctuating around 1.17 billion to 1.68 billion but slightly decreasing again in 2022 to approximately 1.62 billion. This pattern indicates a substantial destabilization in 2019 but a subsequent recovery phase.

Cost of Capital

Cost of capital trends upward over the periods analyzed. Beginning at 8.71% in early 2017, it increases steadily reaching over 10% from 2021 onward, peaking at 10.51% in early 2022. This rise reflects potentially higher risk perception or financing costs associated with the invested capital over time.

Invested Capital

Invested capital shows a fluctuating but overall slight upward trend. From approximately 19.17 billion in early 2017, it peaks close to 19.85 billion in 2018, then declines to around 17 billion in 2019 and 2020. Subsequently, it recovers moderately to about 17.69 billion in 2021 and 18.2 billion in 2022. The dip in 2019 and 2020 suggests a reduction or disposal of assets or investment, followed by renewed capital investment in later years.

Economic Profit

Economic profit remains consistently negative throughout the periods, indicating that the returns on invested capital have not exceeded the cost of capital. The magnitude of economic profit losses is largest in early 2019, closely following the significant drop in NOPAT, indicating a challenging year financially. While there is some improvement after 2019, economic profit remains below zero in all subsequent years, reflecting ongoing challenges in generating value above capital costs.

Overall, the data depicts a company facing significant operational and profitability challenges around 2019, with partial recoveries in subsequent years. Cost of capital increasing over time increases the hurdle for profitability. Despite recovery in operating profit and invested capital growth, persistent negative economic profit suggests that the company has struggled to create sufficient shareholder value during these years.

Net Income (Loss) Trend

The net income exhibited significant fluctuations over the observed periods. Initially, there was a substantial increase from approximately $896.2 million in early 2017 to about $1.714 billion in early 2018. However, this positive trend was interrupted by a reversal in early 2019, where the net income turned negative, with a loss of approximately $1.59 billion. Subsequently, the company recovered, returning to positive net income values, rising to around $827 million in 2020, followed by further increases to $1.342 billion and $1.328 billion in 2021 and 2022, respectively. This pattern indicates a volatile earnings performance with a notable setback in 2019 but a steady recovery thereafter.

Net Operating Profit After Taxes (NOPAT) Trend

The net operating profit after taxes mirrored a similar trajectory to net income. It rose from about $1.187 billion in 2017 to $1.636 billion in 2018, before experiencing a substantial downturn to a negative $1.11 billion in 2019. Following this decline, NOPAT rebounded to approximately $1.177 billion in 2020 and continued to improve to $1.687 billion in 2021. In 2022, there was a slight decrease to around $1.622 billion, although levels remained strong relative to the earlier years except for 2019. The NOPAT trend reflects the operational challenges faced in 2019 and subsequent recovery, showcasing operational resilience in the following years.

Insights and Observations

The financial performance over the six-year span reveals a company experiencing cyclical volatility, with 2019 marking a particularly challenging year, featuring declines in both net income and operational profitability into negative territory. The recovery phase post-2019 was marked by restored profitability and an ability to sustain high levels of operating profit, suggesting effective management responses and operational adjustments. The relative stability of net income and NOPAT in the last two periods indicates a stabilization phase, with strong earnings sustained despite minor fluctuations. Overall, the patterns suggest responsiveness to external or internal challenges and a capacity for financial recovery and growth.

Provision for Income Taxes

The provision for income taxes shows considerable fluctuation over the six-year period. It started at a high value of 433,200 thousand US dollars in early 2017, then sharply declined to a negative figure of -10,300 thousand US dollars in early 2018, indicating a possible tax benefit or adjustment during that year. Subsequently, the provision increased again, reaching 281,800 thousand US dollars in early 2019 and maintaining similarly elevated levels in the following years, with values of 271,700, 397,900, and 304,300 thousand US dollars in early 2020, 2021, and 2022 respectively. Overall, the provision exhibits volatility, but generally remains in the positive range, with a notable exception in 2018.

Cash Operating Taxes

Cash operating taxes demonstrate a clear declining trend from 2017 through 2020. Initially, the amount stood at 786,228 thousand US dollars in early 2017 and decreased steadily over the next three years to 664,515, 424,099, and 353,258 thousand US dollars by early 2018, 2019, and 2020 respectively. After 2020, this figure experienced a rebound, increasing to 450,561 thousand US dollars in early 2021, before slightly decreasing again to 411,860 thousand US dollars in early 2022. This suggests a reduction in cash operating tax outflows mid-period, followed by partial recovery in subsequent years.

Total reported debt & leases

The total reported debt and leases show a consistent downward trend from January 28, 2017, to January 30, 2021, decreasing from approximately 12.43 billion US dollars to about 9.64 billion US dollars. This indicates a concerted effort towards debt reduction over this period. However, there is a slight increase in the debt level in the latest period, ending on January 29, 2022, rising to roughly 9.97 billion US dollars.

Shareholders’ equity

Shareholders’ equity exhibits fluctuations over the analyzed periods but generally trends upward. It increased substantially between January 28, 2017, and February 3, 2018, rising from approximately 5.39 billion to 7.18 billion US dollars. This was followed by a decline in the following year to around 5.64 billion US dollars, and then a steady recovery and growth through January 29, 2022, reaching about 7.72 billion US dollars. The overall increase suggests strengthening equity positions over the long term.

Invested capital

Invested capital shows a pattern characterized by an initial increase from January 28, 2017, to February 3, 2018, peaking at approximately 19.85 billion US dollars. Subsequently, there is a decline over the next two years, bottoming out at about 16.99 billion US dollars in February 1, 2020, before a gradual increase resumes, reaching approximately 18.20 billion US dollars by January 29, 2022. This trend suggests a period of contraction followed by renewed investment activities or asset accumulation.

Overall analysis

The data portray a company that has actively managed its capital structure, notably reducing total reported debt over a significant period while recovering from a dip in shareholders’ equity. The invested capital trend aligns with these dynamics, showcasing initial growth, mid-term contraction, and later resurgence. The slight uptick in debt in the most recent reporting period warrants monitoring, although the continuous increase in equity and invested capital indicates a potentially improving financial position.

Economic Profit

The economic profit exhibited significant fluctuations over the analyzed periods. Initially, there was a negative economic profit of approximately -481 million US dollars, which improved notably in the following year to around -241 million US dollars. However, in the subsequent year, a sharp decline occurred, with economic profit dropping drastically to approximately -2.8 billion US dollars, representing a substantial negative performance spike. This was followed by a recovery to around -410 million US dollars, and further improvement to -93 million US dollars the next year. The latest figure shows a deterioration to approximately -290 million US dollars. Overall, the company's economic profit remained negative throughout the period, indicating consistent economic losses with large volatility.

Invested Capital

Invested capital showed a declining trend initially, from about 19.2 billion US dollars in 2017 to approximately 17.0 billion US dollars in 2019, representing a reduction in the capital employed in the business. After this drop, the invested capital stabilized and then showed moderate growth, reaching roughly 18.2 billion US dollars by 2022. This pattern indicates some capital restructuring or asset sales followed by renewed investment or capital reinjection in later years.

Economic Spread Ratio

The economic spread ratio remained negative across all reported periods, reflecting that the company’s return on invested capital was consistently below its cost of capital. The ratio improved from -2.51% in 2017 to -1.21% in 2018, and then sharply worsened to -16.47% in 2019, aligning with the significant drop seen in economic profit. Subsequently, it improved again to moderate negative levels between -0.52% and -2.41% up to 2022. This trend suggests volatility in the company's ability to generate returns exceeding its capital costs, with a notable deterioration in 2019 followed by partial recovery.

An examination of the annual financial data reveals several notable trends and variations over the six-year period.

Net Sales

There is a consistent upward trend in net sales, increasing steadily from $20,719,200 thousand in early 2017 to $26,309,800 thousand by early 2022. This indicates a positive growth trajectory in the company’s revenue generation capacity over time.

Economic Profit

The economic profit figures demonstrate significant volatility. Initially, economic profit stood at a negative $481,388 thousand in 2017, improving considerably in 2018 to a negative $240,971 thousand. However, a sharp decline occurred in 2019, with economic profit dropping dramatically to a negative $2,801,107 thousand. The subsequent years show partial recoveries: -$409,569 thousand in 2020, -$92,887 thousand in 2021, and then a decline again to -$290,300 thousand in 2022. These fluctuations suggest challenges in generating results above the cost of capital, with 2019 as an outlier year with significant negative economic profit.

Economic Profit Margin

The economic profit margin follows a trend similar to the economic profit values but expressed as a percentage of net sales. The margin remained negative throughout the period, reaching its worst point in 2019 at -12.27%, coinciding with the substantial drop in economic profit. The margin improved in 2021 to a relatively modest negative value of -0.36%, the best performance in the timeframe, but worsened again to -1.1% in 2022. This indicates that while operational income relative to sales has seen some recovery, it has not achieved positive economic returns.

Overall, the company’s net sales growth contrasts with continued challenges in producing positive economic profit and margins. The 2019 fiscal year stands out as an exceptional period of diminished economic performance. Despite growth in sales, the company has not yet converted this into sustained economic profit, suggesting potential issues with costs, capital efficiency, or other operational factors affecting profitability.