David NewmanDollar TreeDLTRCOMMENTMay 13, 2016

Introducing multiple price points, which increases basket size. Its turnaround story was hit by Covid, higher interest rates, and the slowing economy. Less traffic. Fewer discretionary purchases, which hit margins. Reassessing number of Family Dollar stores, which could be reduced. Strategies gaining traction.

The question was on his preference between Dollar General and Dollar Tree in the U.S. Dollar General has cratered so it looks like a buying opportunity but actually isn't since it benefited from the pandemic and may just be returning to normal levels. This also causes him to be cautious on Dollar Tree. 

Disappointing. Latest results showed topline traction, but margins were hit. Repositioning. Lower income households have been hit by interest rates, so discretionary spending is down. Retail shrinkage a big US problem. She's holding for now.

In the early innings of implementing the successful strategy of DOL. Increasing price points and right-sizing stores. Doing well in this environment of a weakening consumer.

DG has executed very well but they've been dealing with cost inflation, consumers buying lower-margin consumables vs. discretionary and "shrink" (theft). Owns Dollar Tree, which suffers similar problems, but DT has been introducing more price points as the new CEO restructure, so she sees more potential here.

Delivered a poor quarter and blamed theft, but they also suffer from margin erosion and a store transformation that keeps taking longer. Guidance was poor. Shares have slumped.

Dollar Tree bought Family Dollar in 2015. The latter enjoyed a pop during the pandemic, but historically has not delivered consistent profitable growth. The street has mixed feelings about DT with seven buys, five holds and two sells. Read The dollar wars for our full analysis.

Has done. They continue to open new stores with some international presence. Inflation and a possible recession could drive more foot traffic. Highly defensive. She owns Dollar Tree in the US instead which offers more upside as they raise prices and add products. DOL also trades at a premium to peers.

During economic uncertainty and weakness, traffic to these stores rises. They're attracting customers from households with incomes around $80,000. They're introducing $1.25 and $3-5 price points which benefit basket size. They're adding more products to mix consumables with discretionary items; as an economy weakens, consumables outperform discretionary. DLTR trades at a lower PE than Dollarama and Dollar General. (Analysts’ price target is $169.16)