Dollar Tree Earnings: Financial Marks Pressured by Weak Discretionary Demand, but Shares Look Cheap

We don’t plan to materially alter our $108 per share fair value estimate on no-moat Dollar Tree after its fiscal 2024 third-quarter results landed mostly in line with our expectations. Companywide same-store sales expanded 1.8% and adjusted operating margin landed at 4.5%, up 40 basis points versus last year but still trailing the 5.5% level seen in the third quarter of fiscal 2022. Tepid demand for discretionary goods coincided with a bloated cost structure due to ongoing supply chain and technology investments and a review of the Family Dollar banner. Despite grappling with near-term uncertainty, we think shares are very undervalued.