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Investing.com -- Dollar Tree was upgraded to Outperform from Market Perform at Telsey Advisory Group (TAG), which said the discount retailer now offers a “cleaner story” following the sale of Family Dollar and has a clearer path for multi-year growth through its multi-price point expansion.
The broker raised its 12-month price target to $130 from $100, applying a roughly 20 times multiple to its 2026 EPS forecast of $6.50.
Telsey analysts cited stronger visibility after the Family Dollar divestiture in July, with new growth drivers coming from higher price points and its updated 3.0 store format.
Early results from the strategy have been encouraging, with stores in the multi-price configuration delivering a 150-basis point comp lift and a 120-basis point ticket increase in the first quarter of 2025.
“We are encouraged by the early results from the introduction of multi-price point products in select categories, such as home and toys, as well as $3, $4, and $5 food/frozen and refrigerated products,” analysts led by Joseph Feldman wrote.
The company plans to have half its chain in the 3.0 format by the end of 2025. TAG emphasized that Dollar Tree remains a value-first retailer, with an average unit retail of $1.35 and 85% of items priced under $2.
TAG expects Dollar Tree to deliver annual comparable sales growth in the low-to-mid single digits from 2025 to 2027, alongside high single-digit to mid-teens EPS growth, supported by improved profitability. Around 400 new stores are planned for 2025, representing about 4.5% unit growth.
While tariffs remain a near-term headwind, the discount store chain operator is mitigating the pressure by adjusting sourcing and leveraging its ability to add higher price points.
The analysts also noted that the U.S. government’s move to close the de minimis exemption loophole, which had benefited rivals like Shein and Temu, should support the company’s competitive position.
Overall, TAG sees Dollar Tree benefiting from broader merchandising flexibility, stronger traffic from higher-income households—including a meaningful increase from customers with incomes above $100K in the first quarter of 2025—and investments in associates and technology.
“We now have greater confidence and visibility into the Dollar Tree growth story, resulting in our increased rating to Outperform,” the brokerage concluded.