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Dollar Tree Poised on Strategic Initiatives: Should You Hold?
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Dollar Tree, Inc. (DLTR - Free Report) has gained momentum on the back of its solid first-quarter fiscal 2016 results, thereby starting the year on a strong note. Shares of the company have jumped roughly 19% year to date. Recently, the stock hit a 52-week high of $93.33 on Jun 21. Let’s delve deeper and try to find the reasons to hold on to this attractive stock.
Growth Strategies
The rise in the company’s stock price can be attributed to its long-term strategies and growth initiatives. These include store expansion endeavors, enhancement of store productivity, creating new store formats, tapping of new markets and incorporating innovative sales channels to serve its patrons better.
Going forward, this leading discount variety store chain intends to continue implementing strategies such as increasing consumables mix, rolling out freezers/coolers at stores, along with multi-price point expansion to boost top-line growth.
Dollar Tree has hit the bull’s eye by acquiring Family Dollar. The giant that has risen from the combination of these two companies is strong enough to single-handedly counter competition from retail bellwethers in the dollar-discount store segment. The combined chain is likely to be in a better position to reach out to more value-seeking consumers through a network spanning across vast geographies. It will further help in achieving operational and distributional efficiencies as well as cost synergies.
Dollar Tree also owns an eCommerce platform through which it advertises in-store events and showcases its special and seasonal promotions for featured products.
Additionally, the company is concentrating on expanding its store base and incorporating technological advancements. It leverages an extensive network of stores to effectively penetrate its targeted markets. This in turn enables it to generate healthy sales and gain market share.
Dollar Tree began fiscal 2016 on a positive note, with both its top and bottom lines surpassing estimates and improving year over year in the first quarter. The company staged a comeback with an earnings beat after four straight quarters of misses. Further, Dollar Tree’s comps remained solid as the first quarter marked its 33rd straight quarter of comps growth.
Encouraged by this performance, the company raised its guidance for fiscal 2016. This led to an uptrend in the Zacks Consensus Estimate in the last 30 days.
The Overhangs
Though the company’s first-quarter results were impressive, its gross margins remained pressurized owing to costs related to Family Dollar’s integration. While the integration of Family Dollar is expected to generate synergies in the long run, the aforementioned costs and cannibalization will likely continue affecting results throughout the integration and re-banner process. Also, foreign currency headwinds, stiff competition and macroeconomic issues may pose hurdles.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both carrying a Zacks Rank #2 (Buy).
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Dollar Tree Poised on Strategic Initiatives: Should You Hold?
Dollar Tree, Inc. (DLTR - Free Report) has gained momentum on the back of its solid first-quarter fiscal 2016 results, thereby starting the year on a strong note. Shares of the company have jumped roughly 19% year to date. Recently, the stock hit a 52-week high of $93.33 on Jun 21. Let’s delve deeper and try to find the reasons to hold on to this attractive stock.
Growth Strategies
The rise in the company’s stock price can be attributed to its long-term strategies and growth initiatives. These include store expansion endeavors, enhancement of store productivity, creating new store formats, tapping of new markets and incorporating innovative sales channels to serve its patrons better.
Going forward, this leading discount variety store chain intends to continue implementing strategies such as increasing consumables mix, rolling out freezers/coolers at stores, along with multi-price point expansion to boost top-line growth.
Dollar Tree has hit the bull’s eye by acquiring Family Dollar. The giant that has risen from the combination of these two companies is strong enough to single-handedly counter competition from retail bellwethers in the dollar-discount store segment. The combined chain is likely to be in a better position to reach out to more value-seeking consumers through a network spanning across vast geographies. It will further help in achieving operational and distributional efficiencies as well as cost synergies.
Dollar Tree also owns an eCommerce platform through which it advertises in-store events and showcases its special and seasonal promotions for featured products.
Additionally, the company is concentrating on expanding its store base and incorporating technological advancements. It leverages an extensive network of stores to effectively penetrate its targeted markets. This in turn enables it to generate healthy sales and gain market share.
DOLLAR TREE INC Price and Consensus
DOLLAR TREE INC Price and Consensus | DOLLAR TREE INC Quote
Quarterly Performance Impresses
Dollar Tree began fiscal 2016 on a positive note, with both its top and bottom lines surpassing estimates and improving year over year in the first quarter. The company staged a comeback with an earnings beat after four straight quarters of misses. Further, Dollar Tree’s comps remained solid as the first quarter marked its 33rd straight quarter of comps growth.
Encouraged by this performance, the company raised its guidance for fiscal 2016. This led to an uptrend in the Zacks Consensus Estimate in the last 30 days.
The Overhangs
Though the company’s first-quarter results were impressive, its gross margins remained pressurized owing to costs related to Family Dollar’s integration. While the integration of Family Dollar is expected to generate synergies in the long run, the aforementioned costs and cannibalization will likely continue affecting results throughout the integration and re-banner process. Also, foreign currency headwinds, stiff competition and macroeconomic issues may pose hurdles.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>