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On Thursday, Telsey Advisory Group analyst Joseph Feldman increased the price target on Dollar Tree stock (NASDAQ:DLTR) to $82.00 from $75.00, while maintaining a Market Perform rating. Currently trading at $69.21 with a market capitalization of $14.9 billion, the stock has seen significant movement following Dollar Tree’s announcement on Sunday, March 26, of the sale of its Family Dollar division for approximately $1.007 billion. The sale marks a strategic shift for the company, which originally acquired Family Dollar for around $9 billion in 2015.
Dollar Tree’s decision to divest Family Dollar is seen as a move to streamline operations and enhance the value of its primary Dollar Tree brand. According to InvestingPro analysis, while the company isn’t currently profitable over the last twelve months, analysts expect net income growth and a return to profitability this year. The company is actively working on its transformation, focusing on enhancing productivity and profitability. Efforts include improving the value, convenience, and discovery aspects of the Dollar Tree shopping experience.
The retailer has successfully attracted a broader customer base, including higher-income households looking for value, while continuing to serve its traditional middle-income shoppers by offering a variety of products. With annual revenue of $31.2 billion and a steady revenue growth of 5.17%, the company’s strategy includes opening approximately 400 new stores, which represents a growth of about 4.5%. Additionally, Dollar Tree is expanding its multi-price point assortment across more categories, a strategy that has shown promising results in its 3.0 store format.
The 3.0 format stores have demonstrated a comparable sales increase of 2.2% over other formats, with a consumable sales lift of 40 basis points and a discretionary lift of 290 basis points in the fourth quarter of 2024. Dollar Tree is also investing in its workforce and technology to improve the overall shopping experience. This investment is expected to result in an increase in selling, general, and administrative (SG&A) expenses by 50 to 80 basis points in 2025, despite the anticipated strong comparable sales outlook of 3% to 5%.
In other recent news, Dollar Tree has reported its fourth-quarter 2024 earnings, which exceeded analyst expectations. The company achieved an adjusted earnings per share (EPS) of $2.29, surpassing the forecasted $2.19. However, net sales from continuing operations were $5 billion, falling short of the revenue forecast of $8.24 billion. In a strategic move, Dollar Tree announced the sale of Family Dollar for over $1 billion, allowing the company to focus exclusively on its Dollar Tree brand. The company plans to open approximately 400 new stores in 2025. Truist Securities has updated its outlook on Dollar Tree, raising the stock target to $84 and maintaining a Buy rating, highlighting strong sales momentum and the expectation of 3%-5% comparable store sales growth. Dollar Tree’s strategic initiatives, such as the Dollar Tree 3.0 format, have shown positive results, contributing to a 220 basis point lift in comparable sales. Looking forward, Dollar Tree anticipates 2025 sales in the range of $18.5 billion to $19.1 billion, with expected comparable store sales growth of 3% to 5%.
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