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Sergey Savastiouk's Avatar
published in Blogs
Jan 07, 2019

Will Dollar Tree (DLTR) Raise Prices Up from $1?

Jeffrey Smith, CEO of activist hedge fund Starboard Value, wants Dollar Tree to lift its $1 price ceiling on products.

Smith wrote to Dollar Tree  CEO Gary Philbin Monday to reveal that his fund had invested a 1.7% stake in the bargain retail company, while indicating that there should be more room to raise product prices at Dollar Tree stores.  "Dollar Tree has kept its prices at $1.00 since its founding thirty years ago, despite the fact that $1.00 in 1986 is worth approximately $2.30 today, due to inflation," Smith wrote. Smith feels that by rigidly restricting prices within $1, Dollar Tree could potentially be sacrificing product quality or size.

"Dollar Tree has a great customer base, and we believe its loyalty stems from the fantastic value customers find at Dollar Tree, not merely because everything in the store is the same price," Smith added in the note.

Starboard also wants Dollar Tree to consider selling Family Dollar, a chain of stores that it bought in 2015. Starboard has also planned to nominate seven directors for Dollar Tree's board at next shareholder meeting. The hedge fund hopes to work on strategic changes with Dollar Tree’s existing management team.

Dollar Tree appreciated Smith’s suggestions, and responded,  "Dollar Tree is focused on ensuring our brands are the premier shopping destination for value and convenience, taking the right actions to solidify our leadership position in value retail". The company has already added four new independent directors since May 2016.

 

 

Related Ticker: DLTR

DLTR's RSI Indicator is remaining in oversold zone for 1 day

It is expected that a price bounce should occur soon.

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 5 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where DLTR advanced for three days, in of 307 cases, the price rose further within the following month. The odds of a continued upward trend are .

Bearish Trend Analysis

The Momentum Indicator moved below the 0 level on June 05, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on DLTR as a result. In of 72 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .

The Moving Average Convergence Divergence Histogram (MACD) for DLTR turned negative on June 10, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 36 similar instances when the indicator turned negative. In of the 36 cases the stock turned lower in the days that followed. This puts the odds of success at .

Following a 3-day decline, the stock is projected to fall further. Considering past instances where DLTR declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

The Aroon Indicator for DLTR entered a downward trend on June 14, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. DLTR’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (3.116) is normal, around the industry mean (10.395). DLTR's P/E Ratio (0.000) is considerably lower than the industry average of (23.372). DLTR's Projected Growth (PEG Ratio) (1.122) is slightly lower than the industry average of (2.791). DLTR has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.024). P/S Ratio (0.750) is also within normal values, averaging (1.217).

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. DLTR’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 54, placing this stock worse than average.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

Notable companies

The most notable companies in this group are Walmart (NYSE:WMT), Costco Wholesale Corp (NASDAQ:COST), Target Corp (NYSE:TGT), Dollar General Corp (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Big Lots (NYSE:BIG).

Industry description

Companies in the discount stores industry specialize in offering substantial discounts on a vast array of retail products. Some companies in this industry also operate general merchandise warehouse clubs. Products sold at discount stores are typically similar to those of any department store, but the pricing of the goods is generally much lower (and hence the name “discount”). Think Dollar General Corporation, Dollar Tree, Inc. and Five Below, Inc. Many discount stores target low-income households and/or price-sensitive consumers as their potential market. Discount stores’ profitability could hinge on factors like competitive pricing, sufficient locations, healthy revenue per square foot, and effective advertisement. These store operators could have an edge over other retailers during financial crises or recessions, when many consumers could be looking for less expensive alternatives.

Market Cap

The average market capitalization across the Discount Stores Industry is 72.31B. The market cap for tickers in the group ranges from 1.78K to 539.08B. WMT holds the highest valuation in this group at 539.08B. The lowest valued company is TUEMQ at 1.78K.

High and low price notable news

The average weekly price growth across all stocks in the Discount Stores Industry was -3%. For the same Industry, the average monthly price growth was -7%, and the average quarterly price growth was 1%. OLLI experienced the highest price growth at 5%, while BIG experienced the biggest fall at -22%.

Volume

The average weekly volume growth across all stocks in the Discount Stores Industry was -11%. For the same stocks of the Industry, the average monthly volume growth was -13% and the average quarterly volume growth was -72%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 56
P/E Growth Rating: 58
Price Growth Rating: 57
SMR Rating: 50
Profit Risk Rating: 54
Seasonality Score: 45 (-100 ... +100)
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General Information

an operator of discount variety stores

Industry DiscountStores

Profile
Fundamentals
Details
Industry
Discount Stores
Address
500 Volvo Parkway
Phone
+1 757 321-5000
Employees
211826
Web
https://www.dollartree.com
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