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Dollar Tree Inc DLTR

Morningstar Rating
$133.15 +0.65 (0.49%)
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Company Report

Dollar Tree Earnings: Dollar Tree Banner Remains Strong as Store Closures Imminent at Family Dollar

No-moat Dollar Tree's fiscal 2023 fourth-quarter results landed mostly in line with our expectations—revenue expanded nearly 12% to $8.6 billion and adjusted operating margin improved 70 basis points to 8.7%—led by strong performance at the firm's namesake banner. However, the stock suffered a precipitous 14% decline as its Family Dollar segment grappled with reduced spending capacity from its core low-income consumer. Upon Rick Dreiling's ascension to CEO last year, management has stressed the need for operational improvement and store rationalization at the floundering banner, which seemingly culminated in plans to close 970 underperforming Family Dollar stores (about 12% of the banner's store base), with 600 of these closures planned for the first half of fiscal 2024. The firm incurred a nearly $600 million noncash charge from the strategic review and added a $2 billion write-down of goodwill and intangible assets associated with Family Dollar.

Price vs Fair Value

DLTR is trading at a 13% premium.
Price
$126.15
Fair Value
$471.00
Uncertainty
High
1-Star Price
$676.30
5-Star Price
$34.20
Economic Moat
Bjnz
Capital Allocation
Rbnltxlng

Bulls Say, Bears Say

Bulls

The new management team brings years of experience, and its revamped capital allocation priorities, particularly surrounding the Family Dollar banner, should drive a material improvement in financial performance.

Bears

Big box retailers have increasingly looked to expand their product assortment by offering items with $1.00 price points, which could add to competitive pressure.

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News

Trading Information

Previous Close Price
$132.50
Day Range
$132.16133.94
52-Week Range
$102.77161.10
Bid/Ask
$133.30 / $133.60
Market Cap
$29.02 Bil
Volume/Avg
5.9 Mil / 2.9 Mil

Key Statistics

Price/Earnings (Normalized)
22.57
Price/Sales
0.95
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
1.72%

Company Profile

Dollar Tree operates discount stores across the United States and Canada, with over 8,200 shops under its namesake banner and 8,350 under Family Dollar. About 45% of Dollar Tree’s sales in fiscal 2022 were composed of consumables (including food, health and beauty, and cleaning products), nearly 50% from variety items (including toys and homewares), and over 5% from seasonal items. The Dollar Tree banner sells most of its merchandise at the $1.25 price point and positions its stores in well-populated suburban markets. Conversely, Family Dollar primarily sells consumable merchandise (nearly 80% of the banner’s sales) at prices below $10. About two-thirds of Family Dollar’s stores are located in urban and suburban markets, with the remaining one-third located in rural areas.
Sector
Consumer Defensive
Industry
Discount Stores
Stock Style Box
Mid Core
Total Number of Employees
211,826

Competitors

Valuation

Metric
DLTR
TGT
WMT
Price/Earnings (Normalized)
22.5719.8427.21
Price/Book Value
3.976.095.78
Price/Sales
0.950.760.75
Price/Cash Flow
13.0910.8214.44
Price/Earnings
DLTR
TGT
WMT

Financial Strength

Metric
DLTR
TGT
WMT
Quick Ratio
0.150.270.20
Current Ratio
1.310.910.83
Interest Coverage
−8.2611.558.94
Quick Ratio
DLTR
TGT
WMT

Profitability

Metric
DLTR
TGT
WMT
Return on Assets (Normalized)
5.59%8.02%6.48%
Return on Equity (Normalized)
15.04%35.66%20.75%
Return on Invested Capital (Normalized)
7.27%15.13%12.00%
Return on Assets
DLTR
TGT
WMT
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