Dollar Tree’s Price Cuts at Family Dollar Should Help Its Value Proposition, but Competition Looms

Dollar Tree's namesake banner has a long history of strong performance, enabled by its differentiated value proposition, but, aside from the pandemic era, its Family Dollar unit has struggled to generate top-line and margin growth. We suspect the Dollar Tree banner is better positioned long-term, but do not believe the aggregated firm benefits from a durable competitive edge, as competitive pressure in a fast-changing retail environment amid minimal switching costs limits results.