Dollar Tree (DLTR) Q2 results were better than the headlines suggest, with the tariff refund, fuel costs and changing tariff rates creating some volatility, while the core business was much cleaner, UBS Securities said in a note emailed Friday.
The strategy outlined at last year's investor day seems to be gaining traction, with stores and product assortment improving and digital marketing becoming more targeted, the firm said. Multi-price is also broadening the customer funnel, and these initiatives are improving the shopping experience and increasing customer engagement, according to the note.
UBS said earnings model is also becoming more dependable, with Dollar Tree reporting a Q2 EPS of $1.39, marking the sixth consecutive quarter above consensus. The consistency matters, as the company is not only benefiting from a favorable value backdrop but also improving its execution, the note added.
Guidance still appears conservative, with the outlook assuming slower ticket growth and a continued helium drag, the brokerage said, adding that the company has several potential offsets, including rising multi-price penetration in H2, which could lift average unit retail.
UBS kept a buy rating on Dollar Tree and raised its price target to $150 from $145.
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