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Dollar Tree's (DLTR) Solid Strategies on Track Amid Hurdles
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Dollar Tree, Inc. (DLTR - Free Report) looks well placed, given its solid long-term growth strategies, constant store expansions, prospects from Family Dollar’s buyout and solid fourth-quarter fiscal 2016 performance.
Starting with Dollar Tree’s long-term growth strategy, we believe that the company is progressing well with its growth initiatives, which include store expansion strategies, enhancement of store productivity, creating new store formats, tapping of new markets and incorporating innovative sales channels to serve its patrons better.
Further, we remain confident that the company will continue to implement strategies such as increasing consumables mix, rolling out freezers/coolers at stores along with multi-price point expansion to boost top-line performance. Also, in order to improve the operating margin, Dollar Tree is focusing on imported goods, supply chain efficiency and aggressive cost cuts.
The company is also well on track with Family Dollar’s integration, which it had acquired last year. With the completion of the integration, the company is likely to become a mega U.S. discount retailer. This will make the retailer a behemoth that can single handedly counter competition from retail bellwethers in the dollar-discount store segment. Further, the company will be strongly positioned to reach out to more value-seeking consumers, offering multiple assortments at more compelling prices. Also, it will be in a better position to negotiate with suppliers, which is expected to enhance its purchasing power.
Backed by these solid initiatives, the company posted robust fourth-quarter fiscal 2016 results, wherein both top and bottom line surged year over year. While greater traffic helped the company to post its 36th straight quarter of comps growth, reduced costs fuelled gross margin expansion – thus boosting results. Further, the fiscal 2016 performance remained solid, as the company crossed $20 billion in sales, alongside generating record earnings.
However, Dollar Tree’s shares have underperformed the Zacks categorized Retail – Discount Stores industry in the last six months. Evidently, shares of Dollar Tree have dropped 8.3% in the past six months, underperforming the industry’s growth of about 1.5%.
Dollar Tree’s global presence keeps it prone to foreign currency headwinds, as was witnessed in the fourth quarter. Further, the company operates in the highly competitive discount retail merchandise sector, which may weigh upon its results. Dollar Tree shares space with Wal-Mart Stores, Inc. (WMT - Free Report) , Dollar General Corporation (DG - Free Report) and Big Lots, Inc. (BIG - Free Report) , among others.
While Dollar Tree remains on track with Family Dollar’s integration, cannibalization is expected to hurt comps throughout the re-banner process. Nonetheless, synergies generated from this acquisition are likely to be beneficial in the long run. Strategic investments in technological advancements also bode well.
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Dollar Tree's (DLTR) Solid Strategies on Track Amid Hurdles
Dollar Tree, Inc. (DLTR - Free Report) looks well placed, given its solid long-term growth strategies, constant store expansions, prospects from Family Dollar’s buyout and solid fourth-quarter fiscal 2016 performance.
Starting with Dollar Tree’s long-term growth strategy, we believe that the company is progressing well with its growth initiatives, which include store expansion strategies, enhancement of store productivity, creating new store formats, tapping of new markets and incorporating innovative sales channels to serve its patrons better.
Further, we remain confident that the company will continue to implement strategies such as increasing consumables mix, rolling out freezers/coolers at stores along with multi-price point expansion to boost top-line performance. Also, in order to improve the operating margin, Dollar Tree is focusing on imported goods, supply chain efficiency and aggressive cost cuts.
The company is also well on track with Family Dollar’s integration, which it had acquired last year. With the completion of the integration, the company is likely to become a mega U.S. discount retailer. This will make the retailer a behemoth that can single handedly counter competition from retail bellwethers in the dollar-discount store segment. Further, the company will be strongly positioned to reach out to more value-seeking consumers, offering multiple assortments at more compelling prices. Also, it will be in a better position to negotiate with suppliers, which is expected to enhance its purchasing power.
Backed by these solid initiatives, the company posted robust fourth-quarter fiscal 2016 results, wherein both top and bottom line surged year over year. While greater traffic helped the company to post its 36th straight quarter of comps growth, reduced costs fuelled gross margin expansion – thus boosting results. Further, the fiscal 2016 performance remained solid, as the company crossed $20 billion in sales, alongside generating record earnings.
However, Dollar Tree’s shares have underperformed the Zacks categorized Retail – Discount Stores industry in the last six months. Evidently, shares of Dollar Tree have dropped 8.3% in the past six months, underperforming the industry’s growth of about 1.5%.
Dollar Tree’s global presence keeps it prone to foreign currency headwinds, as was witnessed in the fourth quarter. Further, the company operates in the highly competitive discount retail merchandise sector, which may weigh upon its results. Dollar Tree shares space with Wal-Mart Stores, Inc. (WMT - Free Report) , Dollar General Corporation (DG - Free Report) and Big Lots, Inc. (BIG - Free Report) , among others.
While Dollar Tree remains on track with Family Dollar’s integration, cannibalization is expected to hurt comps throughout the re-banner process. Nonetheless, synergies generated from this acquisition are likely to be beneficial in the long run. Strategic investments in technological advancements also bode well.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>