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Globe and Mail
a day ago
- Business
- Globe and Mail
Dollar Tree Stock Is Soaring. Is This the Time to Buy?
Shares of Dollar Tree (NASDAQ: DLTR) are up more than 60% since mid-March and are fast approaching a 52-week high. As the company prepares to divest itself from its Family Dollar brand and embraces a new pricing model, Dollar Tree appears capable of thriving even as many retailers struggle with tariffs and economic uncertainty. There's a lot happening with Dollar Tree -- management changes, the Family Dollar mess, and its 3.0 pricing model. But all of it makes Dollar Tree a compelling stock that appears capable of producing oversized gains for investors. How is Dollar Tree threading the needle? And more importantly, is there still time for investors to join the rally? Family Dollar didn't work out Dollar Tree excels by providing low-cost household goods, food, cleaning supplies, and beauty products. Most items are priced at $1.25 (it used to be just a dollar, but the company began raising prices in late 2021 to offer a wider selection). Shares of Dollar Tree stock topped the $170 mark as recently as 2022, but began a long fall in 2024, stretching into the first quarter of 2025. Dollar Tree CEO Rick Dreiling stepped down, citing his health, and was replaced by Michael Creedon, who was formerly chief operating officer. Meanwhile, Family Dollar, which it purchased for $8.5 billion in 2015, continued to drag on the business. Dollar Tree finally shuttered several hundred Family Dollar stores in recent years, and then in 2024 announced it was exploring divesting itself of the brand. This March, Dollar Tree announced it had a buyer -- a partnership of hedge fund Brigade Capital Management and investment firm Macellum Capital Management, which are buying the stores for just over $1 billion. The deal is expected to close in this quarter. Not surprisingly, Dollar Tree stock started to recover soon after the announcement. Shares are up 61% since mid-March and 33% on a year-to-date basis. Dollar Tree stock has a long way to go from its 2022 ceiling, but it's only about 10% off its 52-week-high. Writing a new chapter The most interesting thing about Dollar Tree is its willingness to walk away from what made it famous. The company is embracing its 3.0 multi-price store format that includes wider store aisles, better signage, and a tiered price structure, where products range up to $7. Dollar Tree began switching stores over in 2024 and now has about 3,400 in the new format. Management hopes to have half of the company's stores working in the 3.0 format by the end of 2025. The format means that Dollar Tree can expand its offerings and draw in additional customers at higher price points. Same-store sales in the first quarter of fiscal 2025 (ending May 3) showed a 5.4% gain, which management attributed to higher prices and greater traffic. Gross profit increased to $1.6 billion, thanks to lower freight and occupancy costs. Adjusted earnings per share came in at $1.26. Dollar Tree opened 148 stores during the quarter and now has more than 9,000 locations, with plans to open a total of 400 stores this year. Management reiterated its full-year revenue guidance of $18.5 billion to $19.1 billion, while raising its guidance for earnings. The company is now expecting full-year EPS of $5.15 to $5.65, up from a range of $5 to $5.50. What's ahead for Dollar Tree? Even with higher-priced items, Dollar Tree is a discount retailer, and when people feel like their pocketbooks are getting squeezed, they are much more likely to look for consumer staples in a store that specializes in low prices rather than luxury items. So that helps Dollar Tree's outlook. But there's also the continued threat of tariffs, although President Donald Trump is developing the practice of announcing huge punitive tariffs as a negotiating ploy and then immediately rolling them back. Tariffs are a threat to any discount retailer, but perhaps even more to a store that sells many of its products for $1.25. If the tariffs come roaring back, Dollar Tree will need to make some changes either in pricing, the types of goods it offers, or will have to work some price relief with its suppliers. So is Dollar Tree a buy? Dollar Tree today is a pretty cheap stock -- the price-to-earnings ratio of 19.7 and the forward P/E of 18.3 are both attractive, as is its low price-to-sales ratio of 1.2 times. Now that the company is ridding itself of the Family Dollar fiasco and appealing to more consumers with its 3.0 multi-price format, Dollar Tree stock appears capable of setting a new 52-week high this summer. It's too early to say if it gets back to its 2022 heyday, but Dollar Tree is certainly on the right track. Should you invest $1,000 in Dollar Tree right now? Before you buy stock in Dollar Tree, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dollar Tree wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor 's total average return is1,062% — a market-crushing outperformance compared to177%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 23, 2025
Yahoo
15-03-2025
- Business
- Yahoo
It's Been One Year Since Dollar Tree Announced Its $7 Price Hike — Here's How It's Affecting Shoppers
This article may contain affiliate links that Yahoo and/or the publisher may receive a commission from if you buy a product or service through those links. Take a quick scroll through TikTok or Instagram, and you'll find countless recipes made with ingredients entirely from Dollar Tree. Steak fajitas! Alfredo pasta (with blackened salmon)! Chicken Parmesan! In recent years, the discount chain has been busy expanding its assortment of frozen shortcuts, pantry staples, desserts, and more. The number of new groceries isn't the only thing that's growing, though: Along with an increase in variety, the cost of goods has slowly been creeping up from $1 all the way up to $7. One year after the company announced its latest pricing plans, we're taking a closer look at what's happening in Dollar Tree's aisles and how these changes might affect shoppers. We spoke with a long-time Dollar Tree shopper, public health and food security experts, and a vice president at Dollar Tree (over email). Here's what we learned. If you've been to a Dollar Tree lately, you've probably noticed most items aren't actually $1. Back in late 2021, Dollar Tree announced a 25-cent bump across the aisles and introduced a selection of $3, $4, and $5 products. The shakeup, dubbed 'More Choices' by the company, was an early step in its 'multi-price-point strategy,' says Rick Dreiling, chief executive officer at Dollar Tree, in an earnings call last March. The expansion brought in 'new and higher-income customers,' says Dreiling. 'In 2023, Dollar Tree added 3.4 million new customers — mostly from households earning over $125,000 a year,' he adds. Building on the successful launch of items like $3 ribeye steaks, Dollar Tree added premium-priced staples, like name-brand jarred pasta sauce, ground coffee, frozen dumplings, trash bags, and even cat food to more than 6,500 stores. The company broke news again in 2024 when it reported more than 300 new items would be coming to thousands of stores, this time priced between $1.50 and $7. Currently, the vast majority of items are at the lower price points: 'More than 90% of products at Dollar Tree remain at $1.25 or less,' writes Kate Kirkpatrick, vice president of communications at Dollar Tree, over email. At the same time, Dreiling says the company is 'making tremendous progress' with its new high-priced offerings — at least with certain shoppers. Dollar stores, including Dollar Tree, Family Dollar (also owned by Dollar Tree), and Dollar General, among others, have become the fastest-growing food retailers in the United States, according to a Tufts University study published in 2023. (Dollar stores' share of household food purchases in rural areas increased by 102.9% in 2020.) While they don't account for most food purchases nationwide, dollar stores play a crucial role in grocery shopping — particularly in systemically marginalized and rural communities. 'Rural areas are the most likely to have residents who depend on dollar stores,' says Dr. Courtney Coughenour, associate professor at the School of Public Health at the University of Nevada. These 'areas also have far fewer options to accommodate changes in purchases, so [those] residents are more than likely going to be overburdened by this change.' Dollar Tree aims to attract higher-income households, but many of its shoppers are Supplemental Nutrition Assistance Program (SNAP) participants. This program, administered by the United States Department of Agriculture, provides food benefits to assist low-income individuals in supplementing their grocery budget. 'When I was a young mom of four on a shoestring budget, it was one of the only places I could go to pick up odds and ends for the house and spend under $10,' says Jamie Miles, a decades-long Dollar Tree shopper and frequent contributor to Passionate Penny Pincher, a website dedicated to frugal shopping. 'The main draw for me has always been that everything I see is well within my reach.' The most recent USDA data shows that 13.5% of U.S. households experienced food insecurity in 2023. That's over 47 million people and 7.2 million children living in a food-insecure household. 'Rising food prices disproportionately affect the most vulnerable populations,' says Dr. Coughenour, which makes equitable access to healthy food even more challenging. As a result, households are likely to change their purchasing and food-sourcing strategies to 'stretch their budgets,' explains Ceci Henriquez, director of Share Our Strength. For food-insecure individuals, this could mean turning to retailers that provide 'great value at lower costs,' visiting local emergency food organizations like pantries, or applying for additional government assistance programs, like SNAP (if they qualify). Further research is needed to fully understand the impact of Dollar Tree's rising costs, particularly for low-income shoppers. The worry is Dollar Tree may be on the brink of making its products less accessible. As the company introduces more higher-priced items, the variety of affordable options may start to decrease to make room for its 'new higher-priced neighbors,' says Miles. Do you shop for groceries at Dollar Tree? Tell us about it in the comments below. Sign up for The Weekly Checkout to get the most up-to-date grocery news, tips, and highlights. Subscribe to The Kitchn! 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