- Citi analyst Paul Lejeuz upgraded Dollar Tree (DLTR) from ‘Neutral’ to ‘Buy,’ raising the price target from $76.00 to $103.00, citing the company’s potential to benefit from tariffs affecting 50% of its products.
- Dollar Tree’s past pricing shift from $1 resulted in comparable store sales growth of 9% in 2022 and 6% in 2023, with EBIT margins reaching 13.7% in 2023, up 220 basis points from 2021, supported by a current ratio of 1.06 and strong cash flows.
- Lejeuz sees Dollar Tree leveraging a high-tariff environment to raise prices from $1.25 to $1.50 or $1.75, positioning it as a value retail winner amid rising industry costs.
Dollar Tree’s (DLTR) stock has caught the attention of Citi (C) analyst Paul Lejeuz, who upgraded it from ‘Neutral’ to ‘Buy,’ boosting the price target from $76.00 to $103.00, a bold move against the backdrop of its current trading price of $72.24. This optimism stems from a high-tariff environment impacting roughly 50% of the company’s products, which Lejeuz views as a potential catalyst rather than a burden. While the broader market reeled from tariff pressures, evidenced by a 10% drop in Dollar Tree’s stock over the past week, the analyst sees a silver lining: the company’s ability to adjust pricing upward from $1.25 to possibly $1.50 or $1.75, a shift he deems more palatable to consumers than the leap from $1 in 2022.
Lejeuz’s confidence is grounded in Dollar Tree’s proven adaptability. When the retailer first abandoned its iconic $1 price point, it delivered comparable store sales growth of 9% in fiscal year 2022 and 6% in fiscal year 2023, demonstrating strength in the face of change. This pricing flexibility, coupled with a robust financial profile, positions Dollar Tree as a standout in a retail landscape bracing for widespread price increases. The company’s EBIT margins climbed to 13.7% in fiscal year 2023, up 220 basis points from fiscal year 2021 and 40 basis points from fiscal year 2019, reflecting a successful two-year transition that bolstered profitability. With a current ratio of 1.06 and ample cash flows to service interest payments, Dollar Tree’s fiscal health further supports the case for its upside potential.
The tariff-driven environment, while a headwind for many, could amplify Dollar Tree’s edge as a value retailer. Lejeuz argues that rising costs across the sector may normalize higher price points industry-wide, making Dollar Tree’s adjustments less conspicuous to shoppers and potentially driving further market share gains. Unlike competitors struggling to pass on tariff-related costs, Dollar Tree’s established low-cost model offers a buffer, allowing it to capitalize on consumer demand for affordability even as prices tick upward. The stock’s current $72.24 valuation, well below Citi’s $103.00 target, suggests a significant runway for growth if Lejeuz’s thesis holds—an outlook that hinges on the company’s ability to turn a macroeconomic challenge into a strategic opportunity.
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