Dollar Tree reported fourth-quarter earnings that topped expectations as the discounter continues to upgrade its Family Dollar portfolio and launches a new initiative.

The retailer said that it will renovate about 1,250 Family Dollar stores to its “H2” format in fiscal 2020. The format features improved merchandise offerings, including Dollar Tree $1 merchandise sections, an expanded party assortment and an expanded number of freezer and cooler doors. In addition, the company will launch its multi-price Dollar TreePlus! 2.0 initiative. It piloted the initial concept in 2019. 

Dollar Tree’s net income totaled $123.0 million, or 52 cents per share, for the quarter ended Feb.1, compared to a loss of $2.31 billion, or $9.69 per share, in the year-ago period. Adjusted earnings per share were $1.79, ahead of Street estimates for $1.76. 

Sales rose 1.8% to $6.32 billion from $6.21 billion last year. Analysts had forecast sales of $6.39 billion. 

Total same-store sales rose 0.4%. Same-store sales at Dollar Tree rose 1.5% and fell 0.8% at Family Dollar.

In a statement, CEO Gary Philbin said that Dollar Tree’s and Family Dollar’s support functions were now working together in one location under one leadership team, which the company expects will build greater collaboration and efficiencies. 

“Fiscal 2019 was a very important year for our organization to further develop the foundation to grow and improve our business,” Philbin said.

For the full year, Dollar Tree’s net sales increased 3.5% to $23.61 billion. Enterprise same-store sales increased 1.8%. Same-store sales for the Dollar Tree segment increased 2.3% (or 2.2% when adjusted to include the impact of Canadian currency fluctuations). Same-store sales for Family Dollar increased 1.4%.

The company’s fiscal 2020 outlook includes an estimated incremental impact of $47 million related to tariffs, with nearly all of it being incurred in the first half of the year. 

Additionally, the outlook includes an estimated impact of $15 million related to the new clean fuel regulations for ocean shipping. The outlook does not include any potential impact related to the supply chain or other aspects of the company’s business for the COVID-19 coronavirus.

“As we enter 2020, our teams are aligned, energized and focused,” Philbin stated. “While our first quarter outlook includes expected pressure from the incremental tariffs and promotional activity, we believe we are well-positioned to deliver improved sales, operating margin and earnings in the following three quarters and for full-year fiscal 2020.”

As of February 1, 2020, Dollar Tree operates 15,288 stores across 48 states and five Canadian provinces under the brands of Dollar Tree, Family Dollar, and Dollar Tree Canada.