To The Moon

$Dollar Tree(DLTR)$ is expected to release its quarterly earnings result for Q4 2024 on 26 March 2025 before the market open.

The Zacks Consensus Estimate for revenues is pegged at $8.2 billion, indicating a drop of 4.7% from the prior-year quarter’s figure.

The consensus estimate for earnings is pegged at $2.20 per share, indicating a decrease of 14.5% from the year-ago period’s figure.

Dollar Tree (DLTR) Last Neutral Earnings Saw Share Price Decline 3.78%

Dollar Tree had a neutral earnings call on 04 Dec 2024 which saw its share price decline by 3.78%.

The earnings call highlighted strong customer growth, market share gains, and successful strategic initiatives at Dollar Tree, but also noted significant challenges at Family Dollar due to inflation, reduced government benefits, and increased costs. Despite these challenges, the company is optimistic about its transformation journey and future growth prospects.

Dollar Tree (DLTR) Guidance On Ongoing Transformation Initiatives

During the Dollar Tree third quarter 2023 earnings call, the company provided guidance that included several key metrics. The company reported a consolidated net sales increase of 5.4% to $7.3 billion, with a comp growth of 3.9% driven by a 4.7% increase in traffic, despite a slight decrease in the average ticket of less than 1%. The Dollar Tree segment saw a comp increase of 5.4%, with traffic up 7% and an average ticket decline of 1.5%, while Family Dollar's comp grew by 2%, with traffic up 1.4% and average ticket up 0.7%. For the fourth quarter, the company expects net sales to range from $8.6 billion to $8.8 billion, based on a low single-digit comp increase for the enterprise, including a mid-single-digit increase at Dollar Tree and a range of minus 1% to plus 1% at Family Dollar. The full-year guidance was tightened, projecting GAAP EPS between $5.81 and $6.01, with capital expenditures expected to total approximately $2 billion.

The company also highlighted ongoing transformation initiatives, including merchandise, IT, and supply chain improvements, with a focus on enhancing customer value propositions and optimizing the Family Dollar store portfolio.

Key Factors Influencing Dollar Tree (DLTR) Q4 2024 Earnings

Consumer Demand & Inflation

Value-Centric Shopping: As inflation persists, budget-conscious households may prioritize discount retailers. Dollar Tree’s $1.25 model and Family Dollar’s competitive pricing could see sustained traffic.

Dollar Tree added 4.3 million new customers and Family Dollar added 2.3 million new customers over the past year, with a significant contribution from households with incomes over $125,000.

Holiday Season: Q4 includes critical holiday spending. Sales of seasonal merchandise, gifts, and consumables (e.g., groceries, household items) will drive revenue. Gross profit dollars increased by 5% compared to the previous year.

Same-Store Sales Growth

Dollar Tree vs. Family Dollar: Dollar Tree’s same-store sales have outperformed Family Dollar in recent quarters. Family Dollar’s turnaround efforts (store renovations, pricing strategies) will be closely watched.

Consolidated net sales increased by 5.4% to $7.3 billion, with a comp growth of 3.9%. Dollar Tree gained 30 basis points of consumables market share.

Family Dollar's comp was up only 2%, with a significant 12.5% decline in discretionary categories like home decor, electronics, and toys.

Pricing Strategy: The Dollar Tree Plus assortment is now in 4,500 stores, with plans to expand to 4,900 by year-end. Dollar Tree's frozen and refrigerated assortments are in 6,500 stores.

Margin Pressures

Freight & Wage Costs: Elevated transportation costs and wage inflation could pressure margins, though easing supply chain bottlenecks may help. National Hiring Day resulted in nearly 14,000 part-time associates hired, a record for the event.

Lower-income consumers were affected by inflation and a 23% year-over-year reduction in SNAP benefits, impacting Family Dollar's performance. Operating income declined by 20.9%, with operating margin contracting by 140 basis points due to higher shrink, unfavorable product mix, and increased distribution costs.

EPS was negatively impacted by $0.05 due to the OTC product recall.

Product Mix: Growth in higher-margin discretionary items (e.g., holiday décor, toys) vs. low-margin consumables will impact profitability.

Operational Efficiency

Store Optimization: Closing underperforming Family Dollar stores (900+ planned closures in 2023–2024) may reduce drag on earnings.

Inventory Management: Improved inventory turnover (reducing excess stock) could free up cash flow.

Dollar Tree (DLTR) Price Target

Based on 8 Wall Street analysts offering 12 month price targets for Dollar Tree in the last 3 months. The average price target is $84.00 with a high forecast of $95.00 and a low forecast of $75.00. The average price target represents a 20.45% change from the last price of $69.74.

I think the important item to watch for this upcoming earnings for Dollar Tree is the Strategic Initiatives.

These will have an influence on how the price target might move.

Multi-Price Expansion: Dollar Tree’s “Plus” sections (items priced above $1.25) and Family Dollar’s “Combo Stores” aim to boost basket sizes and attract broader demographics.

Private-Label Growth: Expanding owned brands (e.g., Family Dollar’s “Smart & Simple”) to improve margins and customer loyalty.

E-Commerce: Online sales remain a small but growing segment, with curbside pickup and delivery partnerships (e.g., Instacart).

Technical Analysis - Exponential Moving Average (EMA)

If we looked at how DLTR have been trading, it seem like daily uptrend have been building up nicely, but will this continue after its earnings, we can see that investors sentiment creating a rather strong RSI momentum which is increasing steadily.

But I would like to assess it based on these bull and bear case scenarios on how the share price might move post earnings.

Bull Case: Strong holiday sales, successful Family Dollar restructuring, and margin improvement could drive upside. DLTR’s valuation (~20x forward P/E as of 2023) leaves room for growth if execution improves.

Bear Case: Weak same-store sales, persistent cost inflation, or disappointing Family Dollar performance might reignite concerns about the 2015 merger’s long-term value.

Summary

Dollar Tree’s Q4 2024 earnings will hinge on balancing inflationary pressures with value-driven demand. The company’s ability to stabilize Family Dollar, optimize pricing, and manage costs will be critical. While the discount retail sector is relatively defensive, DLTR’s stock performance will depend on proving its turnaround strategy can sustainably boost margins and market share. Investors should focus on:

• Same-store sales growth (especially at Family Dollar),

• Gross margin trends,

• Commentary on consumer spending patterns (trade-down vs. trade-up behavior).

Long-term, Dollar Tree’s niche in affordable essentials positions it well, but execution risks remain elevated. We also need to account for these factors that pose challenges and risks to DLTR overall performance as we head into its quarterly earnings.

Competition: Intense rivalry from $Dollar General(DG)$ , $Wal-Mart(WMT)$ , and $Amazon.com(AMZN)$ in the value segment.

Macro Risks: A weakening labor market or reduced SNAP benefits could hurt low-income shoppers, a key demographic for Family Dollar.

Regulatory Issues: FDA sends warning letter to Dollar Tree over lead-contaminated cinnamon apple fruit puree in June 2024; ongoing compliance costs could weigh.

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Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.