DLTR - Embedded Expectations Analysis - 2021 03 30
Dollar Tree, Inc. (DLTR:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 20.7x Uniform P/E. At these levels, the market has bearish expectations for the firm. Although management's concerns about new store formats, freight costs, and sales growth suggest the potential for near-term headwinds, longer-term equity upside remains warrantedSpecifically, management may lack confidence in their ability to further strengthen their business partnerships, keep capturing merchandise synergies from DT Plus!, and capitalize on opportunities from Crafter's Square and the Family Dollar store reorganization. Moreover, management may have concerns about the timing and magnitude of government stimulus as well as higher freight surcharges . They may also lack confidence in their ability to improve the format of their distribution centers,recover lost store days in Texas, and leverage their Combination Store concept to bring it into new markets. Additionally, management may be exaggerating their ability to sustain two-year high comp sales, accelerate revenue growth, and continue reducing COVID-related costs. Finally, they may lack confidence in their ability to maintain their EPS growth, further increase share repurchases, and sustain customer satisfaction improvements
Although management's concerns about new store formats, freight costs, and sales growth suggest the potential for near-term headwinds, market expectations are far too bearish given the firm's progress integrating Family Dollar, suggesting longer-term equity upside remains warranted for DLTR
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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