Dollar Tree: Progress Continues on Its Family Dollar Integration; Shares Undervalued
We continue to view narrow-moat Dollar Tree as undervalued, with 4% first-quarter revenue growth and 10 basis points of operating margin expansion to 8.3% supporting our thesis that the company is poised to continue to gain market share and synergies from its Family Dollar acquisition. We expect to keep our fair value of $92 and long-term assumptions of 5.0% top-line growth and operating margins of 9.2% on average over the next 10 years (versus fiscal 2016 at 8.2%). Shares appear undervalued at ...Dollar Tree is an operator of discount variety stores. The company's stores operate under the names of Dollar Tree, Family Dollar and Dollar Tree Canada. The company's segments are: Dollar Tree, which is the operator of discount variety stores providing merchandise at the fixed price point of $1.00; and Family Dollar, which operates general merchandise discount retail stores. The merchandise mix in the company's Dollar Tree stores consists of consumable merchandise, variety merchandise, and seasonal goods. The merchandise mix in the company's Family Dollar stores consists of consumable merchandise, home products, apparel and accessories merchandise, and seasonal and electronics merchandise.
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