Is Dollar Tree struggling?
While the core Dollar Tree business is performing well, Family Dollar continues to struggle. At a 22-23x P/E multiple, Dollar Tree shares are pricing in continued strength in gross margins and some degree of improvement in Family Dollar. Dollar Tree has been trying to turnaround Family Dollar since acquiring the business over 7 years ago.
Is Family Dollar's turnaround sustainable?
While current results are impressive, the turnaround of Family Dollar very much remains a 'show-me' story. In addition, while dramatic price hikes have caused gross and operating margins to soar, I am not convinced that this pricing strategy will prove sustainable in the longer-term. As such, I am avoiding Dollar Tree shares.
Is Dollar Tree (dltr) a good stock to buy?
Despite a broader stock market decline, Dollar Tree (NASDAQ: DLTR) shares have performed strongly during 2022 on the back of a significant price increase at its core Family Dollar chain. While the Dollar Tree chain has performed well, Family Dollar (acquired in mid 2015) continues to struggle.
Is Family Dollar a flawed concept?
While there have been numerous attempts by multiple management teams to try to 'fix' Family Dollar, I think the concept is fundamentally flawed as it struggles to compete on price and breadth of offering. This has resulted in consistently poor performance in same-store sales and profitability.