This summary is based on the second quarter fiscal 2008 earnings call conducted by Dollar Tree, Inc. (DLTR: chart) on August 27, 2008.

Management:

VP IR: Tim Reid
President & CEO: Bob Sasser
VP, Controller: Katy Mallas

Key Investors Issues

- EPS were 42 cents per share compared to 33 cents per share last year.
- Profit was $37.6 million compared to $32.6 million in the same period a year ago.
- Sales rose 12.5% in the period to $1.1 billion.

Second Quarter Highlights

Earnings per share grew by 27.3% to 42 cents, driven by higher sales and a 10 basis point increase in operating margin.

- Total sales were $1.093 billion, an increase of 12.5% over the second quarter of fiscal 2007.
- Comparable store sales increased 6.5%, that was on top of a 4.4% increase last year and a 4.2% increase the year before.
- Comparable store sales increase was the result of a 3.7% increase in traffic and a 2.7% increase in transaction size.

- Sales of food and household consumables as well as health and beauty care basics increased more then 3.5% as a share of sales compared with the same period last year.
- At the end of the second quarter the company had freezers and coolers in 1,089 stores compared to 873 stores at the same time last year.
- The increase in in-store traffic and shopping frequency generated from consumer basics also helped drive increased sales in party and seasonal businesses.

- Debit card usage continues to increase and penetration increased 1%.
- The company saw a lift from VISA credit and has not yet anniversaried this so it expects the penetration of VISA credit to continue increasing throughout 2008.
- The company accepts food stamps in 1,461 qualified stores.

The company opened 50 new stores, relocated and expanded another 19 stores and grew total square footage about 7%.

This brings the total to 133 new stores opened in the first half of this year, 43 expansions and relocations which is similar to last year in terms of new stores.

- Gross margin was 33.2% which was 40 basis points below the 33.6% in last year’s second quarter. It is the result of two main factors, first a planned shift in product mix toward more consumable products and second the impact of higher diesel fuel costs. These two factors were partially offset by improvements in shrink, lower markdowns and the benefits to buying distribution and occupancy costs associated with the increase in comparable store sales.

- SG&A expenses were 27.6% expressed as a percent of sales. This is a 50 basis point decrease from 28.1% in the second quarter last year. The company leveraged expenses for payroll, benefits and incentive compensation and reduced advertising spend.
- These improvements offset higher utilities costs and increased fees for debit and credit card. Of course the top line benefits from increased usage of debit cards and VISA credit cards far outweigh the higher fees associated with the higher penetration of these forms of tender in the overall sales mix.

- Depreciation and amortization was $39.7 million. The overall rates as a percent of sales improved 35 basis points compared with the second quarter last year.
- Operating margin was 5.6%, an increase of 10 basis points from 5.5% in the second quarter last year.
- Cash and investments at the end of the second quarter approximated $115 million, an increase of $31 million from the $84 million at the end of the first quarter.

- Capital expenditures were $32.7 million versus $49.2 million in the second quarter last year. The majority of capital expenditures in the second quarter this year were for new stores, remodeled and relocated stores, and the addition of frozen and refrigerated equipment to 31 additional stores.
- Inventory grew by 4.3% on a per store basis compared with the prior year period. This is principally due to planned increases in inventory to meet the demands for basic products, to support back to school and Halloween promotions, and to support the build toward the Christmas selling season.

Year-to-Date Financial Highlights

For the first half of 2008 compared with last year, sales increased 10.2%, gross margin was up five basis points, SG&A was down 12 basis points, operating income increased by $16 million and 17 basis points as a rate of sales, and net income rose 15%, earnings per share increased 26.8% to 90 cents per share.

Third Quarter 2008 Outlook