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Dollar Tree Inc DLTR

Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Freight, Supply Chain Costs Pressure Dollar Tree, but Higher Prices Offer Offset; Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $95 fair value estimate for no-moat Dollar Tree should not change materially after the firm announced third-quarter results and plans to roll out a $1.25 price point across its namesake stores. Although we expect the new price to increase the scope of values offered with little customer backlash, our long-term forecast still expects mid-single-digit yearly top-line growth and high-single-digit adjusted operating margins. We suggest investors await a more attractive entry point.

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Company Profile

Business Description

Dollar Tree operates discount stores in the U.S. and Canada, including over 7,800 shops under both its namesake and Family Dollar units (nearly 15,700 in total). The eponymous chain features branded and private-label goods, generally at a $1.25 price. Nearly 50% of Dollar Tree stores' fiscal 2020 sales came from consumables (including food, health and beauty, and household paper and cleaning products), just over 45% from variety items (including toys and housewares), and 5% from seasonal goods. Family Dollar features branded and private-label goods at prices generally ranging from $1 to $10, with over 76% of fiscal 2020 sales from consumables, 9% from seasonal/electronic items (including prepaid phones and toys), 9% from home products, and 6% from apparel and accessories.

Contact
500 Volvo Parkway
Chesapeake, VA, 23320
T +1 757 321-5000
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Oct 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Classic Growth
Employees 199,327

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