Dollar Tree, Inc.

DLTR Details

Dollar Tree, Inc. (NASDAQ: DLTR) is a major discount retailer with over 15,800 shops in the United States and Canada. Its operating segments are: 1) Dollar Tree, the leading operator of discount variety stores offering merchandise primarily at a fixed price point of USD 1.00, and 2) Family Dollar, which operates general merchandise retail discount stores offering consumers a selection of competitively priced merchandise local shops. As of November 16, 2021, DLTR's market capitalization stood at USD 29.82 billion.

Latest News:

• Expanded Collaboration with Instacart: DLTR announced on October 28, 2021, that it is expanding its cooperation with Instacart, North America's premier online grocery platform. This collaboration allows DLTR customers to avail same-day delivery from roughly 7,000 Dollar Tree locations in as little as one hour.

H1FY21 Results:

• Progress in Revenues: DLTR witnessed a minor increase of 2.01% in its net sales to USD 12.82 billion during H1FY21 (ended July 31, 2021) compared to USD 12.56 billion during H1FY20 (ended August 01, 2020), attributable to the opening of new stores.
• Increase in Net Income: The company recorded a net income of USD 656.9 million during H1FY21 vs. USD 509.1 million during H1FY20.
• Leveraged Balance Sheet: As of July 31, 2021, the company had cash and cash equivalents of USD 720.8 million and total debt of USD 3.23 billion.
• Stores Count: DLTR operates 15,865 stores as of July 31, 2021, compared to 15,479 outlets as of August 01, 2020.

Key Risks:

• Reliance on Distribution Network: The capacity of DLTR to import or transfer products to distribution centers and then truck merchandise to its stores in a timely and cost-effective way is critical to its success. Supply chain disruptions, higher freight costs, or goods shortages might all impact the company's operations and cash flow.
• Supplier Concentration Risk: Through its connection with McLane Company, Inc., which distributes consumable items from several manufacturers, DLTR acquired and delivered about 13% of its merchandise for its Family Dollar division in FY20. Accordingly, any severance of its ties with McLane Company, Inc. might have a substantial influence on its activities shortly.

Outlook:

• Q3FY21 Estimates: DLTR forecasted Q3FY21 net sales of roughly USD 6.40-6.52 billion as of August 26, 2021, based on low single-digit growth in same-store sales for the combined business. It also estimates its diluted EPS to range between USD 0.88-0.98.
• FY21 Estimates: DLTR expects its net sales to be around USD 26.19-26.44 billion, based on a low single-digit increase in same-store sales and 3.4% square footage growth. It further anticipates its diluted EPS to be in the range of USD 5.40-5.60.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DLTR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

DLTR's share price surged 33.57% in the past month and is currently leaning towards the higher band of its 52-week range of USD 84.26 to USD 133.21. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 85.24. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 110.80.

Considering the uptick in the stock price in the short span, other technical indicators, and the current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 132.59, up 2.60% as of November 16, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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