Dollar Tree, Inc. (DLTR), Dollar General Corp. (DG): The Smallest of the Dollar Store Companies Seems to Be the Strongest

Family Dollar Stores, Inc. (NYSE:FDO)’s management has failed to meet its own expectations from the previous quarter. Management has also cut its earnings forecast for the second time this year. I strongly believe that management failing to meet its own expectations over and over again while trimming earnings projections will only hamper investors’ confidence in the company and nothing else.

A different story altogether

The single-price-point retailer Dollar Tree, Inc. (NASDAQ:DLTR) has been the best performer among all of the dollar stores, surging about 23% this year. Though it is the smallest player, its smart and methodical strategy for expansion and a focus on productivity has kept it ahead of competition.

Dollar Tree, Inc. (NASDAQ:DLTR) has consistently focused in its discretionary business practices and worked on its $1 price point to attract customers. The company has been able to draw customers’ interest with candies, stationary, and healthcare products instead of low-margin consumables. Further, it is not selling tobacco like other dollar stores, something that helps it to keep its margin in good shape.

Dollar Tree, Inc. (NASDAQ:DLTR)’s revenue has risen 8% while the industry average has only improved by 6%, and its net sales have improved by around 15%. While its competitors are cutting their guidance and failing to meet their own expectations, Dollar Tree has beaten its estimates on earnings-per-share and raised its full-year guidance to a range of $2.61 to $2.77.

As Dollar Tree, Inc. (NASDAQ:DLTR)’s shares are presently trading in the range of late $40’s, well below its 52-week high of $57 a share, investors can expect the prices to surge from this range.

Final take

Both Dollar General Corp. (NYSE:DG) and Family Dollar are finding it hard to keep their margins and profitability intact, which will likely result in them not being as lucrative as before. As long as the economy and payroll taxes remain volatile, these companies might too find it difficult to please investors. Dollar Tree seems to be going ahead strong with all its strategies working well in its favor, however, making it a smart pick.

tarun bachhawat has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Smallest of the Dollar Store Companies Seems to Be the Strongest originally appeared on Fool.com is written by tarun bachhawat.

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