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How Analysts Reacted to Dollar Tree’s Q3 Results


Dec. 3 2018, Updated 3:29 p.m. ET

Reaction to fiscal 2018 third-quarter results

Dollar Tree (DLTR) reported mixed results for the third quarter of fiscal 2018 (which ended on November 3) on November 29, with its sales lagging analysts’ expectations and its earnings beating expectations. The company also lowered its fiscal 2018 guidance. Despite its weak sales and outlook, Dollar Tree stock rose 6.1% on November 29.

Perhaps investors reacted positively to the company’s decision to accelerate its store optimization plan, which—among other things—will include the renovation of at least 1,000 Family Dollar stores in fiscal 2019. The company also updated investors on its significant debt repayment.

On November 30, Dollar Tree stock was down 19.1% YTD (year-to-date), lagging close rival Dollar General (DG) and the S&P 500 Index, which were up 19.3% and 3.2%, respectively, YTD.

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Analysts’ reaction

On November 30, JPMorgan Chase lowered its price target on DLTR to $82 from $84. Morgan Stanley reduced its price target to $90 from $95. On the same day, Credit Suisse increased its price target to $97 from $96. RBC Capital revised its price target to $98 from $94.

On November 30, the 12-month average price target for Dollar Tree stock was $94.63. This price estimate indicated a potential rise of ~9%. On November 30, 15 out of 26 analysts had “buy” recommendations on Dollar Tree stock, while the remaining 11 analysts had “hold” recommendations.

Dollar Tree operates 15,187 stores under the Dollar Tree, Family Dollar, and Dollar Tree Canada brands. The company acquired Family Dollar in 2015. However, the performance of its Family Dollar stores has been a drag on its overall performance lately.

In the third quarter of fiscal 2018, Dollar Tree opened 127 stores, expanded or relocated 14 stores, and shut down 18 stores. Additionally, the company re-bannered 30 Family Dollar stores to the Dollar Tree brand.

Under its store optimization program, the company plans to open 350 Dollar Tree stores and 200 Family Dollar stores in fiscal 2019. Dollar Tree also plans to re-banner an additional 200 Family Dollar stores to Dollar Tree.

In the next article, we’ll discuss the company’s fiscal 2018 third-quarter earnings and outlook.


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