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Bear of the Day: Dollar Tree, Inc. (DLTR)

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Dollar Tree, Inc. (DLTR - Free Report) stock has fallen nearly 20% in 2021 and it tumbled following its second quarter earnings release near the end of August. Wall Street dumped the stock after the discount retail powerhouse warned about supply-chain setbacks and rising costs possibly impacting its profits.

The Basics

Dollar Tree is a discount retailer that operates over 15,000 stores that includes its namesake and Family Dollar. The company sells everything at its stores for $1 or less, which stands in contrast to rival Dollar General (DG - Free Report) . Meanwhile, Family Dollar stores sell many items at the $1 price point, along with a broader array of offerings under $10.

Zacks Investment Research
Image Source: Zacks Investment Research

DLTR doesn’t really compete against the likes of Target (TGT - Free Report) or Walmart (WMT - Free Report) , which is a good thing. But the stock has still struggled over the past five years, up only 10% to lag far behind its industry and many of the standouts in the space. Wall Street clearly hasn’t loved DLTR’s Family Dollar purchase, which it made back in 2015.

Dollar Tree’s consensus earnings estimates have slipped since its report to help DLTR grab a Zacks Rank #5 (Strong Sell) right now. Management noted in its second quarter remarks that higher freight costs and other “inflationary pressures” are poised to continue to negatively impact the firm. The issues are exacerbated for a business that sells goods for $1 or less since it doesn’t create much wiggle room on the pricing front.

Zacks estimates call for its adjusted Q3 earnings to slip 32% from the year-ago period to $0.95 a share. Meanwhile, its fiscal 2021 earnings are expected to dip only 2%.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Dollar Tree shares closed regular hours Monday at $89.26, or about 16% below where they were on August 25. The stock is now down 17% in 2021 and it has moved roughly sideways over the past 12 months.

On top of that, its Retail - Discount Stores space is in the bottom 29% of over 250 Zacks industries right now. And unlike many of its peers and other national retailers, Dollar Tree doesn’t pay a dividend.