Back to top

Image: Bigstock

Dollar Tree (DLTR) Trends Up the Charts: Will It Continue?

Read MoreHide Full Article

Dollar Tree Inc. (DLTR - Free Report) has been benefiting from a range of initiatives like multi-price point strategy, restructuring and expansion initiatives, and efforts to optimize its store portfolio through new store openings, renovations, re-banners and closings. These actions have resulted in consistent sales growth across various segments, rising traffic trends and substantial gains in market share. This aided its comparable store sales (comps) performance in fourth-quarter fiscal 2023.

In fourth-quarter fiscal 2023, Dollar Tree’s enterprise comps increased 3% year over year, with 4.6% higher traffic offsetting 1.5% lower ticket.

Looking at the segments, the Dollar Tree segment reported comps growth of 6.3%, driven by 7.1% increase in traffic, partially offset by 0.7% decline in average ticket. Dollar Tree's performance was particularly strong in consumables, with comps increase of 10.8%. Additionally, discretionary items also showed growth of 3.1%. This robust result was attributable to increased traffic and solid performance across both consumable and discretionary categories, despite challenges such as the impact of winter storms.

Further, growth in key metrics such as sales per square foot, transactions and units sold indicates positive momentum and progress toward the company’s operational objectives. Notably, Dollar Tree is experiencing positive results ahead of schedule in these areas.

Driven by these trends, shares of DLTR showcased an impressive performance in the last six months. This Zacks Rank #3 (Hold) stock has risen 18.6% in the past six months compared with the industry’s growth of 27.6%.

Zacks Investment Research
Image Source: Zacks Investment Research

Factors and Initiatives in Focus

Dollar Tree is implementing a strategic step forward with the More Choices initiative, emphasizing its multi-price point strategy to offer a wider range of products to its customers. It is delivering compelling results for its Key Real Estate initiatives, which include the expansion of its $3 and $5 plus assortment in Dollar Tree stores, as well as Combo Stores.

Additionally, DLTR has made significant progress by introducing frozen and refrigerated items at price points of $3, $4 and $5. These items are now available in more than 6,500 stores. It also plans to further expand the multi-price assortment in the years ahead, with an aim of featuring multi-price products in eight out of its ten coolers.

Management is actively working on improving its supply-chain efficiency by the introduction of rotacart deliveries. It is currently providing rotacart deliveries to approximately 600 Family Dollar stores through its distribution centers in Matthews, NC. By the end of the current year, it expects to operate more than 3,000 stores, receiving rotacart deliveries from its six distribution centers. By taking this step, the company expects a meaningful reduction in unloading times at stores.

Challenges Hindering Growth

DLTR is particularly witnessing challenges at its Family Dollar segment, owing to persistent inflation and reduced government benefits, impacting its lower-income customer base. Family Dollar's consumables comps decreased from 6.2% in the fiscal third quarter to 2.2% in the fiscal fourth quarter.

Discretionary comps, which include non-essential items like apparel, home decor, electronics and general merchandise, were particularly hard hit in the fiscal fourth quarter, falling by 12%. This downtick suggests a decrease in consumer demand for discretionary products, possibly due to economic conditions, changing consumer preferences or other factors impacting consumer behavior.

Looking ahead, management predicts that there will be a decline in SNAP benefits which might pose a challenge in the first half of fiscal 2024.


Despite these challenges, DLTR is still optimistic about the future of the Family Dollar segment. It believes that a well-managed and strategically located Family Dollar store holds powerful retail force. Also, its Dollar Tree format and other growth initiatives place it well.

3 Picks You Can’t Miss

Here, we have highlighted three better-ranked stocks, namely American Eagle Outfitters (AEO - Free Report) , Burlington Stores (BURL - Free Report) and Abercrombie & Fitch Co (ANF - Free Report) .

American Eagle operates as a multi-brand specialty retailer. It currently sports a Zacks Rank #1 (Strong Buy). AEO has a trailing four-quarter earnings surprise of 22.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle’s current financial-year sales and earnings suggests growth of 3.3% and 12.5%, respectively, from the year-ago reported figures.

Burlington Stores, a retailer of branded merchandise, currently flaunts a Zacks Rank #1. BURL has a trailing four-quarter earnings surprise of 10.1%, on average

The Zacks Consensus Estimate for Burlington Stores’ current fiscal-year sales and earnings suggests growth of 10.2% and nearly 22.3%, respectively, from the year-ago reported numbers.

Abercrombie, a specialty retailer of premium, high-quality casual apparel for men, women, and kids, sports a Zacks Rank #1. ANF delivered an earnings surprise of 715.6%, on average

The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings suggests growth of around 5.6% and 19.1%, respectively, from the year-ago reported numbers.

Published in