5. Dollar Tree, Inc. (NASDAQ:DLTR)
Forward P/E: 13.73
Analyst Upside Potential as of September 23, 2024: 15.59%
Number of Hedge Fund Holders as of Q2 2024: 38
Dollar Tree (NASDAQ:DLTR) is a discount variety store retailer based in Virginia. It operates more than 15,000 stores across the country, and is supported by a logistics network spanning 24 distribution centers across the country. The company holds a significant competitive advantage due to its highly discounted prices on an elaborate array of merchandise offered in convenient neighborhood stores. Dollar Tree (NASDAQ:DLTR) is running on a strong, differentiated business model, supported by its long-term strategy of multi-price expansion and store growth acceleration.
To navigate the uncertain economic backdrop, the company is focusing on factors within its control and rolling out key transformation initiatives. Its multi-expansion strategy resonates with its audience, with the 1,600 stores converted into its newest in-line format and seeing a substantial sales lift. Comps for these 1,600 converted stores were up 4.6% in Q2 2024, around 0.5% less than those in other formats in the same quarter.
Dollar Tree (NASDAQ:DLTR) also reopened 85 of the recently acquired former 99 Cents stores in Q2, with plans to open 20 additional stores immediately. The remaining 56 stores are expected to reopen by the end of 2024. Since these 99 Cents Only stores are located in high-quality, proven stores in strong markets, they are expected to boost the company’s profitability and bring great growth potential. Expanding its footprint across the Southwest and California also marks a notable achievement for the company.
Dollar Tree (NASDAQ:DLTR) added 2.8 million new customers to its consumer share over the past 12 months, with the best-performing categories split across discretionary and consumables, including apparel, beverages, health OTC, and personal care. The company is also making considerable progress in its modernization initiatives, with its new warehouse management system going live at its first two DCs. Two more are slated for early 2025. It has transitioned more than 9,000 stores to its network infrastructure, supporting business operations by enhancing in-store Wi-Fi access for associates and improving Internet connectivity. Dollar Tree (NASDAQ:DLTR) takes the fifth spot on our list of the top cheap retail stocks to buy according to analysts.
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.”
