Key Stats for Dollar Tree Stock
- 1- Year Price Change for Dollar Tree stock: 97%
- $DLTR Share Price as of Jan. 16: $140
- 52-Week High: $142
- $DLTR Share Price Target: $124
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What Happened?
Dollar Tree (DLTR) stock fell on Friday even as Evercore ISI upgraded the discount retailer to “Tactical Outperform” from “In Line”. Analyst Michael Montani raised his price target to $165 from $125, suggesting 17% upside from current levels.
The upgrade follows an Orlando store tour and detailed discussions with CFO Stewart Glendinning. Montani said his conviction in Dollar Tree’s execution ability increased after seeing the improved store standards firsthand.
The analyst wrote:
“We see Dollar Tree’s multi-price point merchandising strategy as a way to drive newness and relevance in its assortment. A further comp driver is the rollout of enhanced store standards which should increase customer satisfaction, sustain share gain and enhance margin performance.”
The timing matters because Dollar Tree just posted strong third-quarter results.
- Comparable store sales increased 4.2%, accelerating from the 3.8% trend management shared in mid-October.
- October same-store sales were down just 1% year-over-year, showing clear momentum heading into the critical holiday season.
CEO Mike Creedon emphasized the progress during the recent earnings call: “We are making substantive progress on our Back to Basics plan. We’ve been hard at work in our marketing engine, strengthening our food and beverage offering, improving our operations, refreshing our games offering and revamping our remodels.”
The company’s multi-price strategy continues to drive results.
- In Q3, items above $2 represented 15% of the sales mix but delivered significantly higher profit per unit than lower-priced items.
- Halloween sales topped $200 million, an all-time record, with multi-price items accounting for roughly 25% of total Halloween sales despite representing only 8% of units sold.
CFO Stewart Glendinning highlighted the efficiency gains:
“By combining this increase per unit profitability with a higher multi-price mix, we were able to generate approximately 25% more margin dollars from our Halloween assortment this year compared to 2022 while selling approximately 10% fewer units.”
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What the Market Is Telling Us About DLTR Stock
The upgrade reflects growing confidence that Dollar Tree has turned a corner following its Family Dollar divestiture. The company is now a pure-play value retailer with a clear strategic focus and improving execution.
Store standards remain a key focus area. Management acknowledged that half the fleet hasn’t been refreshed in over a decade. The company launched a new refresh program targeting about 3,000 stores, with low-cost improvements such as paint, flooring, and fixtures that quickly pay for themselves.
Traffic was slightly negative in Q3, which initially worried some investors. But management explained that this was largely due to resticker activities, which peaked in August and September.
As CFO, Glendinning noted, those red price stickers created a temporary distraction but are now essentially complete.
More importantly, the customer response to multi-price remains strong across all income cohorts.
Dollar Tree added 3 million new households in Q3 compared to the prior year.
- About 60% of these new shoppers came from households earning over $100,000 annually, while the core customer base earning under $60,000 posted the highest same-store sales growth.
- Gross margin expanded 40 basis points to 35.8% in Q3, driven by merchandise margin improvements, favorable freight costs, and strong seasonal mix.
- The company expects a gross margin of around 18% in Q4 as high-margin products, such as the redesigned ES8, drive stronger sales.
Looking ahead, DLTR stock could benefit from several tailwinds.
- Management guided to 4% to 6% same-store sales growth in Q4, implying full-year comps of 5% to 5.5%.
- Adjusted EPS guidance of $2.40 to $2.60 for Q4 would bring full-year earnings to $5.60 to $5.80.
- The company’s three-year algorithm targets 5% to 7% annual sales growth supported by 3% to 4% comps and new store openings.
- With approximately 400 new stores opening each year, generating 25%+ returns, Dollar Tree has a long runway for profitable expansion.
Corporate SG&A is being aggressively managed down from 3% of sales currently to 2% by 2028. Combined with the elimination of restickering costs totaling $100 million to $115 million in 2026, DLTR stock should benefit from meaningful operating leverage.
Management expects to deliver 12% to 15% EPS growth through 2028, with underlying growth of 8% to 10% plus discrete cost reductions mostly front-loaded into 2026. This implies high-teens EPS growth next year, normalizing to high-single-digit to low-double-digit growth in subsequent years.
The balance sheet remains strong with low leverage and $442 million in total liquidity. Free cash flow generation should accelerate as capital spending moderates from elevated levels related to distribution center construction.
Management indicated the Board may consider introducing a modest dividend next year to complement the share buyback program.
If Dollar Tree can sustain improved store standards, continue gaining market share from convenience and drug channels, and execute its multi-price expansion, DLTR stock has room to run beyond Evercore’s $165 target. The key will be proving the Q3 momentum wasn’t just a Halloween-driven blip but the start of sustained comp improvement.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
