Dollar Tree Faces Mounting Headwinds: Analysts Lower Price Forecasts Amid Competitive Pressures and Rising Costs

Author: Nabaparna Bhattacharya | September 05, 2024 02:15pm

Dollar Tree, Inc. (NASDAQ:DLTR) shares are trading higher on Thursday.

Yesterday, however, the company’s shares tumbled after it reported worse-than-expected second-quarter financial results and cut the outlook.

The discount variety stores chain reported an adjusted EPS of $0.67, missing the consensus of $1.04, and down 26.4% year over year.

Analysts covering the company provided their takes:

• BMO Capital Markets analyst Kelly Bania downgraded the stock to Market Perform from Outperform, lowering the price forecast to $68 from $130.
• Truist Securities analyst Scot Ciccarelli reiterated the Buy rating, lowering the price forecast to $79 from $140.
• KeyBanc Capital Markets analyst Bradley B. Thomas maintained the Overweight rating, decreasing the price forecast to $84 from $145.
• Piper Sandler analyst Peter J. Keith reiterated the Neutral rating, decreasing the price forecast to $67 from $112.

Also Read: Dollar Tree’s Q2 Struggles: Analysts Question Pricing, Shrinkage, And Transformation Amid Macro Challenges

BMO Capital Markets: Bania warns of potential regulatory and labor cost headwinds impacting 2025, noting that competitive pressures could worsen. The analyst highlights tariffs as a risk under a 2024 Trump win and anticipates challenges from possible stricter Labor Department rules if a Democrat wins, leading to a revised FY25 EPS estimate of $5.47, down from $6.65.

Truist Securities: The analyst notes that, in addition to mounting ‘incremental’ costs and macro pressures affecting upstream, investors are concerned about growing competitive challenges. Despite the stock’s poor performance, it appears to have already factored in these ‘negatives’ at its current levels.

KeyBanc Capital Markets: Thomas highlights that the company’s results are impacted by widespread soft consumer trends across the industry. With valuations for both the company and sector at near all-time lows, the analyst acknowledges ongoing near-term consumer challenges but notes that self-help initiatives could enhance trends.

Additionally, an update on a potential Family Dollar divestiture could serve as a positive catalyst. Consequently, Thomas believes there is upside potential in the shares from current levels. The analyst lowered FY24 EPS estimate to $5.40 from $6.70.

Piper Sandler: According to the analyst, the 2H comp guidance appears ‘aggressive,’ assuming comp acceleration. The issues affecting Dollar Tree seem to extend beyond economic factors, with ongoing risks in 2025 from potential tariffs or changes to the Overtime Rule.

Price Action: DLTR shares are trading higher by 5.66% to $67.16 at last check Thursday.

Photo via Shutterstock

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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