Dollar Tree, Inc. (DLTR), Dollar General Corp. (DG), Family Dollar Stores, Inc. (FDO): Better Than Peers?

The company is not just focused on increasing its store count; it is also focused on opening more productive stores. In 2012, Dollar Tree’s new store productivity was the highest since 2001, and in 2013 the company is witnessing a similar performance so far .

Dollar Tree has been trying to drive impulse sales by refreshing merchandise around checkout lanes, along with cross-merchandising and suggestive selling by store staff.

In addition, Dollar Tree is aggressively installing coolers and freezers in stores. Almost 3,000 stores now provide frozen and refrigerated products, and the company intends to cover 550 stores this year, out of which 444 stores have already been covered. Management is of the opinion that frozen and refrigerated products lead to increased traffic, and drive sales across all categories, which includes higher-margin items as well .

Valuation
Dollar Tree, Inc. (NASDAQ:DLTR), with a trailing P/E of 18.6, is slightly cheaper than Dollar General Corp. (NYSE:DG) (P/E of 18.66) and Family Dollar (P/E of 19.6). However, according to Yahoo! Finance, the expected annual earnings growth rate for the next five years is highest for Dollar Tree at 17%. Dollar General’s earnings are expected to grow 15% annually over the next five years, while Family Dollar Stores, Inc. (NYSE:FDO)’s estimate sits at 11% .

Hence, considering the valuation, expected earnings growth, and Dollar Tree’s ideology of growing in a profitable manner and not just focusing on quantity, it seems to be the best pick among the dollar stores.

The article 3 Solid Reasons for Why You Should Buy this Retailer originally appeared on Fool.com and is written by Harsh Chauhan.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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