Dollar Tree: Dreiling’s Departure Comes at a Tumultuous Time, but No Reason to Change Our Outlook

On Nov. 4, no-moat Dollar Tree announced that CEO Rick Dreiling has stepped down due to health concerns. The firm appointed Michael Creedon (former COO) interim CEO while the board searches for a permanent replacement. The retailer also reiterated its fiscal 2024 third-quarter guidance (earnings expected to be released in early December) for low-single-digit comparable sales growth and adjusted earnings per share of $1.05 to $1.15, which aligns with our forecast. Shares surged by a mid-single-digit percentage as we surmise the reaffirmed financial outlook helped assuage investor concerns amid a tumultuous demand environment. In light of the news, we don’t plan to alter our $108 fair value estimate or our Standard Capital Allocation Rating, and we continue to view shares as significantly undervalued.