Dollar Tree, Inc. DLTR has been making smart moves to enrich shoppers’ experience. The company’s progress on optimizing its store portfolio through store openings, renovations, re-banners and closings bodes well.

Analysts seem optimistic about the stock. The Zacks Consensus Estimate for DLTR’s fiscal 2025 sales and earnings per share is pegged at $32.2 billion and $6.06, respectively. The estimates indicate growth of 4.4% and 12.4% year over year.

DLTR’s Robust Strategies

Dollar Tree is gaining from its Key Real Estate Initiatives, which include the expansion of its $3 and $5 plus assortment in its stores, as well as Combo Stores. The company is on track with its multi-price expansion strategy.

Regarding its multi-price rollout, the company has converted another 720 stores to the 3.0 format in the third quarter of fiscal 2024, bringing the total number of converted stores to nearly 2,300. Such converted stores generated about 30% of Dollar Tree's overall quarterly net sales. The multi-price 3.0 stores produced an overall 3.3 comp in the fiscal third quarter, with a robust 6.6 consumables comp and a modestly positive discretionary comp. For the rest of the fiscal year, management anticipates converting additional 300-400 stores to the 3.0 format.

DLTR has been working on expanding the assortment, offering shoppers a broad range of choices across a variety of categories, comprising food and snacks, beverages, pet care, personal care and others. The company has almost completed the integration of $0.99 only stores. Such initiatives are anticipated to boost comps and profitability.

The company has been doing a comprehensive review of its Family Dollar portfolio to identify stores that are not aligned with its transformative vision for closure, relocation or re-bannering. As part of the review, it identified nearly 970 underperforming Family Dollar stores, including 600 stores to be closed in the first half of fiscal 2024 and approximately 370 to be shut at the end of each store's current lease term.

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What’s Hurting DLTR’s Growth?

Dollar Tree has been grappling with sluggishness in its Family Dollar arm. The segment has been pressured by soft spending trends among low-income consumers, resulting in soft demand for discretionary items. The lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits.

These trends underscore the increasing financial stress on lower-income households, who are directing their spending toward needs-based goods. The macro factors have been hurting customer sentiment and, in turn, the discretionary demand and buying behavior. In addition, Dollar Tree has been witnessing higher selling, general and administrative expenses. In third-quarter fiscal 2024, the metric increased 80 basis points to 26.5%.

Conclusion

Nevertheless, Dollar Tree has been making strategic efforts to revert growth in its Family Dollar segment.  Its store-related endeavors appear quite encouraging. DLTR’s shares have gained 10.9% in the past three months compared with the industry's 7.2% growth.

DLTR currently carries a Zacks Rank #3 (Hold).

Key Picks

We have highlighted three better-ranked stocks, namely Boot Barn BOOT, Deckers DECK and Genesco GCO.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure. The company has a trailing four-quarter earnings surprise of 7.2% on average.

Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1. DECK delivered an average earnings surprise of 36.8% in the trailing four quarters.

The Zacks Consensus Estimate for Deckers’ current financial-year sales implies growth of 15.3% from the year-ago figure.

Genesco, a leading footwear and accessories retailer, currently sports a Zacks Rank of 1. GCO delivered an average earnings surprise of 36.9% in the last four quarters.

The consensus estimate for Genesco’s current financial-year sales indicates growth of 2% from the year-ago figure.

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