Review all prior DLTR research and portfolio changes on the TSOH website
From “The Dollar Store Downturn” (September 2024):
“Once Family Dollar is sold, I think Dollar Tree (DLTR) has a clear path forward at the core banner. The combination of the low opening price point ($1.25) and the inclusion of some multi-price SKU’s (~15% of the product mix) presents the opportunity for a better customer experience and a better business… At ~$66 per share, Dollar Tree has a market cap of ~$14 billion [adjusted for FDO]… Mr. Market’s asking price for the core banner - less than 10x EV/EBIT - is simply too low… I believed DLTR was priced to generate attractive long-term returns at ~$85 per share, and that remains true at current prices. I have decided to buy more DLTR (to a ~13% weighting).”
Shortly after that update was penned, the investment thesis was thrown a curveball as a result of significant changes to U.S. tariff policies. The past two years presented a number of twists and turns, and few retailers were more impacted than Dollar Tree. Despite this, as we now approach the (hopeful) end of these external developments, the company has managed to navigate its way through as a result of its unique value proposition in U.S. retail. While Mr. Market is looking more favorably on Dollar Tree’s long-term prospect, with the stock price nearly doubling over the past 24 months to ~$128 per share, I believe the company’s strategic transformation remains in its early innings.
In Q2 FY26, Dollar Tree reported +3.7% same store sales (comps) growth, with traffic returning to positive territory. In combination with the strong +6.5% comp in Q2 FY25, that brings the two-year stacked comps growth to +10% (as a point of comparison, that’s ~300 basis points higher than Walmart U.S.).
