Dollar Tree, Inc.NASDAQ
Go Long Dollar Tree - A Stable Retailer Potentially Undervalued By 70%
Luis V. Sanchez • 18 Comments
Luis V. Sanchez • 18 Comments
Thu, Oct. 13, 10:31 AM
- KeyBanc has discounters on its mind.
- Five Below (FIVE -0.9%) earns an Overweight rating and price target of $47 from the investment firm.
- Dollar Tree (DLTR) also catches an Overweight initiation. "DLTR is a compelling multi-faceted story, supported by a strong execution at legacy DLTR, as well as a synergy and turnaround story at legacy FDO, acquired in 2015," writes analyst Bradley Thomas.
- Dollar General (DG -0.6%) is started at Sector Weight.
- YTD comparison: FIVE +19.9%, DG -4.4%, DLTR +0.3% vs. S&P Retail ETF -0.5%.
Sat, Oct. 8, 9:09 AM
- Retailers want the U.S. election over and quick. The negative tone has created a degree of uncertainty with consumers that has impacted spending and traffic patterns, according to a host of top execs.
- "There is just great uncertainty as to what is going to happen in the U.S. in particular as a result of the outcome of the election," noted Yum Brands (NYSE:YUM) CEO Greg Creed recently. "People may be hunkering down a little bit," he added.
- Expect the topic to be raised on a large number of Q3 earnings calls over the next month to explain away revenue misses.
- It's not an excuse that everyone is buying into. Retail Metrics president Ken Perkins doubts that daily shopping needs are cut short by election fascination and notes consumer confidence is measuring high. Then there's Amazon (NASDAQ:AMZN) which seems to be rolling right along without any Clinton-Trump fatigue.
- Beyond the election wildcard, two underestimated factors impacting some retailers in a more concrete way are the lower level of SNAP (food stamps) benefits being paid out by the government and the elevated cost of health care. There is also the massive challenge with a millennial generation that shuns chains. Just ask anyone in the restaurant sector (NASDAQ:BITE).
- Add it all up and it makes for a challenging period for a mix of retailers that includes Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Fred's (NASDAQ:FRED), Ross Stores (NASDAQ:ROST), Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Staples (NASDAQ:SPLS), McDonald's (NYSE:MCD), Popeyes Louisiana Kitchen (NASDAQ:PLKI), Wendy's (NYSE:WEN), Supervalu (NYSE:SVU), Kroger (NYSE:KR), SIgnet (NYSE:SIG), TJX Companies (NYSE:TJX), and Casey's General Stores (NASDAQ:CASY).
- Retail ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, IYC, FDIS, SCC, RCD, UCC, PMR, UGE, SZK, CNDF, FTXD, JHMC.
Thu, Oct. 6, 3:08 PM
- There's an interesting move higher in Dollar General (DG +2.8%) and Dollar Tree (DLTR +4%) today that could have its roots in the Wal-Mart investor meeting going on in Arkansas.
- The retail giant disclosed a subdued plan to add stores in the U.S. as part of its major commitment to growing out its e-commerce business.
- Investors could be taking that as a sign that Wal-Mart is ceding some ground to the discounters.
- Previously: Wal-Mart execs in the spotlight at investment meeting (Oct. 6)
- Previously: E-commerce the star at Wal-Mart investor meeting (Oct. 6)
Tue, Oct. 4, 10:11 AM
- Cleveland Research downgrades Dollar Tree (DLTR -3.2%) to a Neutral rating from Buy after channel checks indicate a slowdown in sales trends.
- Headwinds in the discounter space include increased competition, price deflation in key categories, and a reduction in SNAP benefits.
- The investment firm's dour outlook on the sector is hitting Dollar General (DG -1.5%) and Fred's (FRED -2.2%) as well.
Fri, Aug. 26, 8:18 AM
- Disappointing earnings reports from Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) have thrown a spotlight back on the reduced amount of benefits being paid out from the Supplemental Nutrition Assistance Program. While health care cost inflation is a major consideration for retailers with a high mix of low-income customers, the SNAP program factors in as well.
- The issue has been used by executives in the retail sector sporadically in the past as an excuse/explanation for soft sales, but it has added significance in an election year. Both Donald Trump and Hillary Clinton have promised to improve the food stamp program, although in different manners.
- The companies listed below talked about the impact of food stamps on their recent earnings conference calls.
- SpartanNash Company Earnings Call Transcript
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- Papa Murphy's Earnings Call Transcript
- Dollar Tree Earnings Call Transcript
- Dollar General Earnings Call Transcript
- Related stocks: BIG, FIVE, WMT.
Thu, Aug. 25, 12:45 PM
Thu, Aug. 25, 9:35 AM
- A common theory from analysts is that dollar stores are in the sweet spot of retail - somewhat shielded from the Amazon Effect and geared toward a demographic in which consumers are seeing a meaningful benefit from higher wages and low gas prices.
- That premise could be questioned after discounters Dollar Tree (DLTR -6.9%) and Dollar General (DG -10.8%) both disappointed with their Q2 earnings and were perhaps surprisingly outperformed by retail giant Wal-Mart (WMT +0.2%).
- Though the reporting periods don't match up exactly, Wal-Mart showed a 1.6% increase in U.S. comparable sales in Q2 to top Dollar General's 0.7% mark and Dollar Tree's 1.2% pace. It should be noted that at Wal-Mart's scale every basis point of comp gain means a significant amount of extra revenue to help lever down costs.
- In early trading, Five Below (FIVE -3.7%) and Big Lots (BIG -3.4%) are both lower due to the dollar store earnings disappointment.
Thu, Aug. 25, 9:16 AM
Thu, Aug. 25, 7:31 AM
Wed, Aug. 24, 5:30 PM
Wed, Aug. 17, 10:18 AM
- Data from the National Retail Federation indicates shoppers may be holding back on their back-to-school shopping despite the earlier push by retailers.
- A NRF survey showed 48% of families have completed the BTS task, compared to 50% at the same point in time a year ago.
- It's a bit of good news for chains hoping that the huge Amazon Prime Day sales event didn't dominate the crucial season.
- The NRF reports that 53% of consumers are heading to discount stores (FIVE, DG, DLTR) for part of their school shopping.
- National Retail Federation press release
Fri, Aug. 5, 2:04 PM
- Dollar Tree (DLTR +1%) announced it will eliminate 370 positions, including 100 vacant positions at its Family Dollar store support center in Matthews, NC.
- The moves are part of the company's integration process with Family Dollar.
- The discounter intends to continue to operate and grow both the Family Dollar and Dollar Tree banners.
- Looking ahead, management says it is well positioned to achieve its goal of $300M in combined run rate annual synergies by the end of its third year following its July 2015 acquisition.
- The company expects to incur pre-tax expense of approximately $6M during FY16 related to the announced restructuring.
- Dollar Tree spills Q2 earnings on August 25.
- Source: Press Release
Mon, Aug. 1, 8:18 AM
- Deutsche Bank dives into the dollar store sector to upgrade Dollar Tree (NASDAQ:DLTR) to Buy from Hold and lower its rating on Dollar General to Hold from Buy.
- The investment firm thinks Dollar Tree has more upside potential from current levels to boost profit margins than Dollar General.
- DG -0.78% premarket to $94.00.
Wed, Jul. 20, 10:02 AM
- Tracking from NPD Group indicates 19% of all spending at dollar stores is from households with over $100K in income.
- The dollar store group still generates more sales from consumers with under $25K in income who frequent Dollar Tree (DLTR -0.3%), Dollar General (DG +0.3%), and Family Dollar at twice the rate of the wealthy.
- Dollar General reports Q2 earnings on August 25, while Dollar Tree spills numbers on September 6. Both stocks are up over 23% for the year to top the returns of retail giants such as Wal-Mart, Target, Macy's, and Gap with more complicated global businesses.
- On Seeking Alpha, Luis Sanchez made the case recently for an extended Dollar Tree rally, while David Zanoni sees a continued run for Dollar General.
Thu, Jul. 14, 9:34 AM
- Niantic Labs appears set to allow businesses to officially sponsor locations for in-game activities for Nintendo's (OTCPK:NTDOY, OTCPK:NTDOF) Pokémon, according to media reports.
- That's not news to followers of Reddit posts which dug deep into the Pokémon code to discover bits with "McDonald's" already in it (see code here)
- Though the monetization of the Pokémon phenomenon was widely expected, it also has deeper implications for retailers even beyond trying to scrap for foot traffic through establishing Lure modules, PokeStops, and Pokemon Gyms. Pokémon may come and go. The intersection of real-world shopping and augmented reality games is probably here to stay.
- Companies with an eye on augmented reality and location-based entertainment as it relates to increasing traffic run far and wide. Restaurants (QSR, SBUX, MCD, CMG, WEN, NDLS, PNRA, DNKN), store chains (GPS, AEO, ANF, TGT, ROST, DG, DLTR), and movie theaters (AMC, CKEC, IMAX, CNK, RGC) come to mind.
- Google (GOOGL, GOOG) is also keeping track of all the Pokémon developments as it served as an incubator for Niantic Labs up until the Alphabet creation. Recode says it's unclear what stake that Google still has in the software developer.
- Pokémon news on Seeking Alpha
Wed, Jul. 6, 2:52 PM
- The percentage of shoppers buying meat from dollar store chains rose to 7% this year from just 3% in 2014, according to a survey conducted by the Food Marketing Institute and North American Institute.
- It's more likely that Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), and Family Dollar (DLTR subsidiary) are taking meat market share from grocery stores (including higher-end chains) than Target and Wal-Mart.
- The positive trend follows last month's data read indicating that a higher rate of millennials than anticipated are dollar store shoppers.