To The Moon

$Dollar Tree(DLTR)$ is scheduled to report its fiscal Q1 2025 earnings before the market opens on Wednesday, 04 June 2025.

Revenue Consensus: Analysts are projecting revenues of approximately $4.5 billion to $4.6 billion. This indicates a significant drop of over 40% from the prior-year quarter's figure ($7.6 billion in Q1 2024).Reason for the steep drop: This decline is largely due to the divestiture of the Family Dollar business, which is expected to incur shared service costs concentrated in the first two quarters of fiscal 2025. The full impact of this sale will be clearer after the official announcement.

Adjusted EPS Consensus: The consensus for adjusted earnings per share (EPS) is around $1.19 to $1.22. This would represent a decrease of approximately 16.1% to 16.8% from the $1.43 reported in Q1 2024.Impact of Divestiture: Earnings are expected to include a negative impact of 30-35 cents per share due to shared service costs related to the Family Dollar sale, with reimbursements only beginning in the second half of 2025 under a Transition Services Agreement (TSA).

Comparable Store Sales Growth (Comps): Management previously guided for comparable store sales growth of 3-5% for Q1 2025. Some models predict a 4.7% year-over-year increase for the Dollar Tree banner.

Dollar Tree (DLTR) Last Neutral Earnings Saw Share Price Rose 34.44%

Dollar Tree had a neutral earnings call which saw its share price rose by 34.44% since.

The earnings call reflects a strategic pivot for Dollar Tree with the sale of Family Dollar, allowing a focused strategy on the core brand and highlighting successful expansions in multi-price formats. However, significant challenges remain, particularly regarding tariff impacts and corporate cost structures, which introduce uncertainty for the upcoming fiscal year.

Dollar Tree (DLTR) Guidance

During the Dollar Tree Q4 2024 earnings call, the company provided guidance for fiscal year 2025, emphasizing the impact of the sale of Family Dollar and the focus on Dollar Tree as a standalone entity. The projected sales for 2025 are set to range between $18.5 billion and $19.1 billion, with an anticipated comparable store sales growth of 3% to 5%. The guidance also highlighted a modest improvement in gross margins due to mitigation efforts related to tariffs, although challenges like potential new tariffs and higher SG&A expenses, including IT costs and corporate expenses, are expected to result in a deleverage of approximately 50 to 80 basis points in the Dollar Tree segment.

The company's adjusted EPS for 2025 is projected to be between $5 and $5.50, factoring in the transitional effects of the Family Dollar sale and associated transition services agreement. Additionally, capital expenditures are expected to be between $1.2 billion and $1.3 billion, with plans for approximately 400 new Dollar Tree store openings.

Key Factors and Trends to Watch

Impact of Family Dollar Divestiture: This is the most significant factor. Dollar Tree announced the sale of its Family Dollar business to Brigade-Macellum for over $1 billion, with Dollar Tree expecting to receive $800 million in cash proceeds. The sale is expected to close in about 90 days, allowing Dollar Tree to focus solely on its core brand.

Revenue and Profitability Hit: The reported Q1 numbers will reflect the initial impact of the sale, including reduced top-line revenue and the aforementioned shared service costs impacting the bottom line.

Dollar Tree's Q4 comp was 2%, with traffic up 0.7% and ticket up 1.3%. The expanded multi-price holiday assortment drove strong year-end sell-through, with discretionary comp seeing its first positive reading since Q4 of the previous year.

Dollar Tree ended the year with $1.3 billion in cash and cash equivalents, and expects to receive $800 million from the Family Dollar sale, enhancing its financial flexibility.

Net sales from discontinued operations (Family Dollar) decreased by 11.2%, reflecting a 1.3% comp decline, store closings, and the impact of lapping a 53rd week from the previous year.

Strategic Focus: Investors will be looking for commentary on how the divestiture allows the company to better focus on the more profitable Dollar Tree brand and its ongoing initiatives.

Comparable Store Sales Performance (Dollar Tree vs. Family Dollar):

Dollar Tree Banner: Expected to show continued strength, driven by the multi-price point strategy (selling items at $1.25, $3, $5, and other higher price points) which caters to value-seeking customers, including those trading down from other retailers. Reports suggest Dollar Tree banner visits were up 4.8% YoY in Q1 2025.

Family Dollar Banner: Prior to the sale, Family Dollar has been an underperforming brand. The Q1 report will be the last to include its full contribution before the divestiture fully impacts the financials, though it's already being treated as "discontinued operations" in some reporting. Investors will watch for any commentary on its performance during the quarter leading up to the sale.

Consumer Spending Trends:Low-Income Consumers: Dollar Tree serves a predominantly low-income customer base. Continued pressures from inflation, higher interest rates, and reduced discretionary spending among these consumers could impact sales of non-essential items.

Dollar Tree is experiencing stronger demand from higher-income customers and maintaining market share amid challenging conditions, reflecting the value-seeking behavior of consumers across all income cohorts.

Consumables Strength: The consumables category (food, household staples) is generally a strong point for discount retailers during inflationary periods, as consumers prioritize essential goods. This trend is expected to continue.

Cost Pressures and Margins:Inflationary Headwinds: Ongoing inflationary pressures on merchandise, freight, and labor costs remain a challenge.

Shrink (Theft): Retail shrink continues to be a concern across the industry and can impact profitability.

SG&A Expenses: Higher selling, general, and administrative (SG&A) expenses due to elevated operating costs are expected to weigh on the bottom line.

The company expects deleverage of 50 to 80 basis points in SG&A for 2025, mainly due to higher store payroll, management incentive compensation, and increased IT spending.

Tariffs: Dollar Tree's reliance on Chinese imports makes it vulnerable to tariffs. Management's commentary on mitigation efforts (diversifying suppliers, exploring alternative manufacturing) and their impact on short-term costs will be crucial.

Dollar Tree faces potential impacts from tariffs, with an estimated unmitigated exposure of $20 million per month from the March tariffs. This has introduced uncertainty and volatility in their operations.

Store Optimization and Growth Initiatives:

New Store Openings & Renovations: Dollar Tree is continuing its store opening program (aiming for around 300 new stores in 2025 for Dollar Tree banner) and store remodels (e.g., "3.0 Model" which includes expanded freezer/refrigerator sections). Progress on these initiatives bodes well for future revenue.

The new 3.0 stores saw a 220 basis point comp lift compared to other formats, with significant lifts in both consumables and discretionary categories, demonstrating the success of the expanded multi-price assortment. While the 3.0 store format shows promise, the number of conversions fell short of targets, highlighting operational challenges and the need for readiness before conversion.

Store Closures: Commentary on the announced closures of underperforming Family Dollar stores will be noted.

Dollar Tree (DLTR) Price Target

Based on 18 Wall Street analysts offering 12 month price targets for Dollar Tree in the last 3 months. The average price target is $85.29 with a high forecast of $108.00 and a low forecast of $70.00. The average price target represents a -5.51% change from the last price of $90.26.

Analysts generally have a "Moderate Buy" or "Hold" rating on DLTR, with an average price target often suggesting upside from current levels.

Technical Analysis - Exponential Moving Average (EMA)

Looking at the positive momentum from RSI and the daily uptrend from DLTR share price, investors remains confident of DLTR future, but whether the bulls would be able to continue this daily uptrend continuation would depend on the market’s reaction whether the company meets or exceeds the lowered revenue and EPS expectations, and particularly on the commentary regarding the Family Dollar divestiture and the outlook for the core Dollar Tree business.

I think we might want to watch how DLTR would be trading on Monday (02 June) to see if investors would be affected by the new tariffs concern.

Summary

I think investors would be interested to listen into the earnings call on June 4th for more detailed insights from CEO Mike Creedon and CFO Stewart Glendinning.

Any positive surprises on comparable sales for the Dollar Tree banner or better-than-expected management of the divestiture costs could lead to a positive stock reaction. Conversely, weaker-than-expected results or a cautious outlook could lead to a decline.

Appreciate if you could share your thoughts in the comment section whether you think Dollar Tree would be able to provide a better-than-expected earnings result despite the tariff concern and impact.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

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