Dollar Tree Stores Inc.DLTR

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

Deep-discount stores have become an increasingly relevant concept in this difficult economic environment. With more than 3,800 stores, Dollar Tree is the nation's largest single-price-point retail chain, and we believe it's well-positioned to benefit Read more

Bulls Say

Dollar Tree's multi-price-point concept, Deal$ stores, should help the firm improve profitability and increase its procurement flexibility. The firm's buying team is no longer restricted to only source products that can be profitably sold for $1 or less.

Dollar Tree's suburban locations expose the company to more middle-income consumers, as opposed to rivals Family Dollar and Dollar General, which operate primarily in rural and urban locations and tend to serve lower-income customers.

Dollar Tree's rollout of coolers in its stores should help boost sales growth and drive more frequent customer visits. Also, the acceptance of debit and credit cards has expanded the firm's customer reach and significantly boosted its average ticket size. Read more

Bears Say

A prolonged economic downturn would severely pressure Dollar Tree's core customer base of low- to middle-income consumers. In the wake of tightening credit, a slumping housing market, and increasing unemployment, the company's sales and profitability could potentially take a hit.

Dollar Tree could run into difficulty stocking its stores with attractive closeout merchandise as it rapidly expands its store base. Poor merchandising would negatively affect customer perception and eliminate the appeal of the treasure hunt atmosphere.

Dollar Tree's profitability could come under pressure as lower-margin consumables become an increasing part of the company's overall merchandise mix.

The popularity of dollar stores tends to rise during difficult economic times. Dollar Tree may struggle to retain new middle-income consumers when economic conditions improve. Read more

Strategy

Dollar Tree plans to broaden its merchandise mix and afford its buyers more flexibility to pursue attractive closeout deals by rolling out its multi-price-point concept Deal$ stores. The move should Read more

Management

Although Dollar Tree's executive team and board of directors boast a wealth of experience, we have qualms about the board's true independence. Bob Sasser was appointed president in 2001 and CEO in 2004. Macon Brock, who co-founded the company in 1986, Read more

Profile

Dollar Tree Stores is the largest single-price-point retailer in the United States. The company's stores offer a variety of consumable merchandise, including candy and food, Read more

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