Dollar Tree Earnings: Traffic Trends Positive, but Declining Discretionary Mix Pressures Margins

No-moat Dollar Tree's strategic roadmap remains sound, but cautious consumer spending and heightened sensitivity to price increases drove another quarter of tight margins, with no near-term turnaround catalyst apparent. We didn't see anything particularly striking in the second-quarter results—not enough to justify the market sending the shares down 10% after the earnings release—and expect to leave our $105 fair value estimate relatively unchanged as we balance time value with tighter margin guidance than we'd previously assumed. The shares continue to look overvalued.