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Dollar Tree (DLTR) Touches 52-Week High: Can it Soar Higher?

Zacks Equity Research

Dollar Tree, Inc. DLTR looks promising owing to its robust growth strategies, sturdy comparable-store sales (comps) performance and the successful ongoing integration of Family Dollar.

Shares of this Zacks Rank #2 (Buy) company have hit a 52-week high of $111.23 on Jan 5, though it closed a tad lower at $111.14. The probable reason for this momentum might be the robust holiday season alongside the company’s solid growth efforts. Over the past year, the stock has surged 44.1% outperforming the Retail–Discount Stores industry’s gain of 13.9%. The industry ranks in the top 36% (91 out of 256) of the Zacks classified industries.



Dollar Tree is progressing well with the integration of Family Dollar, which is contributing significantly to the company’s results. Evidently, sales from the Family Dollar banner represented nearly 50% of the company’s consolidated sales in the third quarter of fiscal 2017. Further, the company is undertaking significant store renovation initiatives for Family Dollar to attract more customers. Impressively, the company renovated 191 Family Dollar stores in the quarter and intends to complete 350 renovations in the fiscal year.

Moreover, the company is likely to generate run rate savings of about $300 million in three years from the integration of Family Dollar and re-banner process. In fact, with this transaction Dollar Tree is on track to become a mega U.S. discount retailer that can counter competition single handedly from retail bellwethers in the dollar-discount store segment. The combined chain, on the completion of the integration, will be positioned to reach out to more value-seeking consumers through a network spanning across vast geographies.

Additionally, Dollar Tree is concentrating on expansion of its store base and incorporating technological advancements. In fact, the company leverages an extensive network of stores to effectively penetrate in the targeted markets, thereby enabling it to generate healthy sales and gain market share. Going forward, Dollar Tree remains on track to operate over 10,000 Dollar Tree and over 15,000 Family Dollar outlets across the United States.

Impressively, this discount retailer has displayed remarkable comps growth, marking 39th straight quarter of growth in the last reported quarter. Comps remained robust mainly due to competitive pricing and its strategic store expansion plans including remodeling and relocations. Moving ahead, management anticipates comps growth in a low-single digit range for the fourth quarter and fiscal 2017.

These afore-mentioned robust strategic initiatives position Dollar Tree well for growth, thus reflecting its inherent potential. The company’s long-term earnings growth rate of 13.1% further buoys optimism in the stock.

Not Done Yet? Check These Retail Stocks

Other favorably ranked stocks in the sector are Zumiez Inc. ZUMZ, American Eagle Outfitters, Inc. AEO and Ross Stores, Inc. ROST. While Zumiez and American Eagle sport a Zacks Rank #1 (Strong Buy), Ross Stores carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez with a long-term earnings growth rate of 18% has pulled off an average positive earnings surprise of 22.2% in the trailing four quarters.

American Eagle with a long-term earnings growth rate of 7.5% has delivered an average positive earnings surprise of 2.6% in the last four quarters.

Ross Stores with a long-term earnings growth rate of 10% has delivered an average positive earnings surprise of 5.5% in the trailing four quarters.

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