Dollar Tree Earnings: Near-Term Results Likely To Be Choppy, but Family Dollar Sale Is a Positive

No-moat Dollar Tree posted mixed fiscal 2024 fourth-quarter results as comparable sales growth at its namesake banner of 2% outpaced our 1.2% forecast, but the negative effects of shrink, markdowns, and store investments weighed on profits. Management also issued tepid profit guidance for fiscal 2025, calling for EPS from continued operations of $5.00-$5.50. Even considering the elevated corporate costs from the planned divestiture of Family Dollar, the outlook still trails our $6.18 estimate before the earnings call. Thus, we plan to reduce our 2025 forecast to more closely align with the low end of guidance and note that management's outlook does not fully consider recently imposed tariffs, adding uncertainty to near-term results. Longer term, we think the Dollar Tree banner can deliver 2.5% comparable sales growth and a stand-alone EBITDA margin of around 13.5%-14%, slightly below the firm's 14.4% average margin from 2010-14.