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Dollar Tree Inc DLTR

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Morningstar’s Analysis

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5-Star Price

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Economic Moat

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Capital Allocation

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Varied Price Points Should Give Dollar Tree Flexibility, but Long-Term Competitive Dynamic Remains

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $95 fair value estimate for no-moat Dollar Tree should not change much despite the announcement that the company will add items above its signature $1 price point at more of its namesake stores. It also raised its share-repurchase authorization by $1.05 billion, to $2.5 billion. Our reaction is considerably more muted than the shares’ midteens percentage jump; we had already expected increasing flexibility in light of recent tests and believe that the long-term competitive dynamic remains challenging. We suggest investors await a more attractive entry point.

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Company Profile

Business Description

Dollar Tree operates discount stores in the U.S. and Canada, including over 7,800 shops under both its namesake and Family Dollar units (nearly 15,700 in total). The eponymous chain features branded and private-label goods, generally at a $1 price (CAD 1.25 in Canada). Nearly 50% of Dollar Tree stores' fiscal 2020 sales came from consumables (including food, health and beauty, and household paper and cleaning products), just over 45% from variety items (including toys and housewares), and 5% from seasonal goods. Family Dollar features branded and private-label goods at prices generally ranging from $1 to $10, with over 76% of fiscal 2020 sales from consumables, 9% from seasonal/electronic items (including prepaid phones and toys), 9% from home products, and 6% from apparel and accessories.

Contact
500 Volvo Parkway
Chesapeake, VA, 23320
T +1 757 321-5000
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Classic Growth
Employees 199,327

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