6. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 38
Dollar Tree (NASDAQ:DLTR) is an American multi-price-point network of discount variety stores that sells a variety of merchandise, ranging from food and snacks to decor, electronics, automotive, toys, glassware, and much more. It operates more than 15,000 stores in the US and Canada, supported by a nationwide logistics network comprising 24 distribution centers. The company offers exceptionally discounted merchandise in convenient neighborhood stores, contributing to its popularity among consumers.
In 2024, Dollar Tree (NASDAQ:DLTR) acquired leases for 170 “99 Cents Only” stores across California, Arizona, Texas, and Nevada. As part of the deal, Dollar Tree (NASDAQ:DLTR) is also acquiring the North American Intellectual Property of 99 Cents Only stores, including select on-site furniture, equipment, and fixtures. The acquisition is a step forward in the brand’s accelerated growth strategy and an opportunity for expansion in priority markets with strong profitable growth potential.
Dollar Tree (NASDAQ:DLTR) functions on a strong differentiated business model and holds a long-term strategy of multi-price expansion with store growth acceleration, strengthening its position in the market. The company believes that increasing market share and sales growth stems from being responsive and sensitive to customers’ needs, which is precisely what it is doing by offering convenience and value to its customers.
The company’s multi-expansion strategy of converting its stores into its newest in-line format is working, as those stores are seeing an outsized sales lift. It is now prioritizing ready-to-convert stores and pushing them to the front line instead of focusing on stores that need additional prep work before realizing the complete array of conversion benefits.
Expansion of the in-line multi-price across the Dollar Tree portfolio is expected to be one of the primary drivers of growth for the company in the coming years, as less than 15% of its SKUs are multi-price. Dollar Tree has also created a completely new infrastructure to support its multi-price rollout, including in-store price checkers, self-tagged printers, and back-office functionality. It ranks sixth on our list of the best discount retailer stocks to buy. It is currently trading at a forward P/E of 12.00, at a -33.33% discount to its sector.
Here is what Madison Investors Fund stated regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its Q2 2024 investor letter:
“Dollar Tree, Inc. (NASDAQ:DLTR) underperformed following a plethora of concerns: weakness surrounding the low-end consumer, pricing actions by peers, and disappointing sales at the core Dollar Tree banner. In addition, the significant news that management has placed the struggling Family Dollar banner under strategic review was received skeptically by investors. Despite these concerns, we are encouraged by the long-term prospects of the multi-price initiatives at the Dollar Tree banner and are entirely supportive of management’s effort to enhance value by evaluating alternatives for Family Dollar. We also see a comfortable margin of safety in the shares at the current price.”
