1. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 38
Dollar Tree, Inc. (NASDAQ:DLTR) runs retail discount stores. The Dollar Tree segment is characterized by its fixed pricing model, where items are sold at $1.25. The segment offers a broad selection of consumables, including food, health, and personal care products, household items, and seasonal merchandise targeted at various holidays.
The Family Dollar segment serves a different market niche, focusing on general merchandise. It provides a diverse range of consumables alongside household supplies, apparel, and seasonal items. It also offers consumer electronics and school supplies.
During his episode, Cramer said, “The fourth and fifth worst-performing in S&P: Dollar General and Dollar Tree.”
Despite its extensive offerings, Dollar Tree (NASDAQ:DLTR) is currently navigating a challenging retail industry. The company has observed a decline in discretionary spending as consumers prioritize essential items over higher-margin products. It has intensified competition from rival retailers, which has led to the company rethinking its approach.
The company launched a thorough review of its store portfolio during the fourth quarter of fiscal 2023. The evaluation sought to identify stores suitable for closure, relocation, or rebranding based on current market dynamics and individual store performance.
The review revealed approximately 970 underperforming Family Dollar locations, which led to the decision to close around 600 of these stores in the first half of fiscal 2024. Additionally, about 370 stores will close at the end of their current lease terms.
Further complicating matters, Dollar Tree (NASDAQ:DLTR) announced a formal review of strategic options for the Family Dollar segment. The process may explore potential sale opportunities, spin-offs, or other disposals of the business. While there is no fixed deadline for this review, the company is actively assessing its options.
As of August 3, the company had already closed around 655 stores identified in the optimization review and plans to close an additional 45 stores by the end of fiscal 2024.
Baird Mid Cap Growth Equity Strategy stated the following regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its Q2 2024 investor letter:
“Consumer discretionary performance was the quarter’s largest detractor. Thematically, our holdings in retail and in particular value retail hurt due to greater-than-anticipated operating challenges amid the persistent inflationary environment. In addition, our expectation that value-based retailers would benefit from consumers trading down, spurring revenue and new customer growth, has not yet materialized in a meaningful way. Of note, Dollar Tree, Inc. (NASDAQ:DLTR) and Five Below delivered disappointing performance.”
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