Posted on May 10th, 2021
Dollar Tree Inc. (DLTR) has seen steady growth over the past year, with the stock rising by about 23%. The company was added to the WhaleWisdom Whale Index on February 18, 2021. While Dollar Tree underperformed the S&P 500’s gain of approximately 30.0%, the stock continues to rise.
Dollar Tree operates discount variety stores across North America under the names of Dollar Tree, Family Dollar, and Dollar Tree Canada. Dollar Tree’s stores offer an assortment of merchandise at the base price of one dollar, from seasonal decorative items to everyday groceries. Understandably, the company had a boost in its appeal at the start of the coronavirus pandemic. The retailer’s grocery inventory initially allowed it to remain open as an essential store during a time when many retailers were forced to close doors amidst government pandemic orders. Even when other retailers could reopen their doors, Dollar Tree still benefited by being affordable and maintained its elevated appeal across multiple consumer income brackets. The company met changing consumer needs when many faced reduced incomes, often combined with job losses as the pandemic continued.
Mixed Results from Hedge Funds and Institutions
Looking at fourth-quarter activity by hedge funds, the aggregate 13F shares held decreased to about 49.2 million from 51.0 million, a decrease of approximately 3.5%. Of the hedge funds, 33 created new positions, 61 added to an existing holding, 23 closed out their position, and 53 reduced their stake. In contrast to hedge funds, institutions were buying, though at a slow rate. Overall, institutions increased their aggregate holdings by about 0.1% to approximately 209.4 million from 209.2 million.
Analysts expect to see a positive trend continue through to 2023, with estimated year-over-year revenue growth of approximately $27.6 billion by January 2023, up from $26.3 billion in 2022. These year-over-year estimated increases could bring earnings per share to $6.92 by 2023, up from its predicted value of $6.16 in 2022.
Strategic Partnerships and Increased Demand Bring Optimism
Recently, the retailer announced the launch of a retail media network called Chesapeake Media Group. Dollar Tree established partnerships with Swiftly Systems and Aki Technologies to support this endeavor, with Swiftly supporting digital media placements and Aki providing personalized advertising across various forms of media.
While proposed federal minimum wage increases have the potential to impact Dollar Tree’s profit margin, they do not appear to outweigh increased consumer demand. However, even with an underperform rating, Dollar Tree made Bank of America Corp.’s high-conviction list an encouraging designation.
Dollar Tree’s growth remains slow and steady as demand continues to rise for this affordable retailer. Investors may be encouraged by future earnings estimates and the opportunities that Dollar Tree’s new retail media network offer.