Dollar Tree, Inc. DLTR is trading above its 50-day simple moving average (SMA), signaling a bullish trend. The company is gaining from sales growth across segments, higher traffic trends and market share gains.

The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of a stock’s uptrend or downtrend.

DLTR Stock Trading Above 50 Day Moving Average

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DLTR has shown impressive momentum, with its stock rallying 11.6% over the past three months, outperforming the industry’s growth of 3.8% in the same period. Furthermore, Dollar Tree's performance has also surpassed the broader Retail-Wholesale sector’s 9.5% growth and the S&P 500's 4.7% increase, showcasing the company's strong market positioning and resilience in a competitive environment.

DLTR Stock's Past Three Months Performance

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Factors Acting as Tailwinds for Dollar Tree

Dollar Tree has made remarkable progress in improving its store portfolio through new openings, renovations, re-banners and closures. In the third quarter of fiscal 2024, the company opened 255 new stores across Dollar Tree and Family Dollar locations, re-branded four stores under a different format and closed 49 underperforming locations as part of a broader portfolio review.

The company has successfully advanced its multi-price expansion strategy by rolling out $3, $4 and $5 frozen and refrigerated items, along with a broader product assortment across categories like food, snacks, beverages, pet care and personal care. The introduction of this $3 and $5-plus assortment has been particularly successful in Dollar Tree stores and Combo Stores, further strengthening its market position.

Dollar Tree converted 720 stores to 3.0 format in the fiscal third quarter, bringing the total to nearly 2,300 stores. These multi-price 3.0 stores now contribute around 30% of the company’s quarterly net sales and reported 3.3% comparable store sales growth, driven by a robust 6.6% increase in consumables. To sustain this growth, the company plans to convert additional 300-400 stores to the 3.0 format by the end of the fiscal year, which is expected to enhance both comps and profitability.

DLTR’s Promising Outlook

Dollar Tree has revised its fiscal 2024 outlook following robust third-quarter results. For the fiscal fourth quarter, the company projects consolidated net sales of $8.1-$8.3 billion, with comparable store sales (comps) growth expected in the low single-digits across the enterprise and both the Dollar Tree and Family Dollar segments.

For fiscal 2024, Dollar Tree estimates consolidated net sales to be $30.7-$30.9 billion, slightly up from the prior guidance of $30.6-$30.9 billion and higher than the $30.6 billion recorded in the previous fiscal year. Comps growth is projected at 1.8% for the fourth quarter and 1.3% for fiscal 2024, reflecting low single-digit growth across the enterprise and both segments.

Current Pressures on DLTR Stock

Dollar Tree has experienced increased selling, general and administrative (SG&A) expenses in recent quarters, largely due to rising operating costs. The increase was also driven by higher depreciation from store investments, reliance on temporary labor to support the multi-price rollout, elevated utility costs and reduced leverage from higher same-store sales.

The Family Dollar segment has been impacted by weak spending trends among low-income consumers, leading to lower demand for discretionary items. Family Dollar's core customers have faced additional financial strain from the reduction in government SNAP benefits, which has shifted their spending focus toward essential goods. These macroeconomic challenges have intensified financial pressures on lower-income households, affecting customer sentiment and discretionary spending behavior.

These factors introduce some uncertainty, prompting a more cautious approach to investing in the company. Dollar Tree has a Zacks Rank #3 (Hold), reflecting a neutral outlook for the stock.

Three Picks You Can't Miss

We have highlighted three better-ranked stocks in the broader sector, namely Deckers Outdoor DECK, Abercrombie & Fitch Co. ANF and The Gap, Inc. GAP.

Deckers, a footwear and accessories dealer, currently sports a Zacks Rank #1 (Strong Buy). DECK delivered an earnings surprise of 41.1% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Deckers’ fiscal 2024 sales and earnings indicates growth of 14.1% and 14.4%, respectively, from the year-ago reported figures.

Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. Abercrombie has a trailing four-quarter earnings surprise of 14.8%, on average.

The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings indicates growth of 15% and 69.3%, respectively, from the year-ago reported figures.

Gap operates as an apparel retail company, which offers apparel, accessories and personal care products for men, women and children. It currently flaunts a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Gap’s fiscal 2024 sales and earnings indicates growth of 0.8% and 41.3%, respectively, from the year-ago quarter’s reported numbers. GAP has a trailing four-quarter earnings surprise of 101.2%, on average.

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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report

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