Updated Research Report On Dollar Tree - Analyst Blog

On Jun 13, 2014, we issued an updated research report on Dollar Tree Inc. DLTR following the company's impressive first-quarter fiscal 2014 results.

Dollar Tree started fiscal 2014 on a strong note, wherein earnings of 67 cents per share for the first quarter increased 13.6% year over year. Moreover, the company's earnings came in line with the Zacks Consensus Estimate, breaking the negative surprise trend of the past three quarters.

Revenues increased 7.2% on a year-over-year basis in the quarter to $2,000.3 million but fell marginally short of the Zacks Consensus Estimate of $2,014 million. The improvement from last year was driven by robust sales in both consumables and discretionary products with the seasonal and discretionary categories displaying a slightly higher growth rate.

Dollar Tree is one of the best-positioned dollar store concepts, especially with its evolving multi-price point chain. We believe that the company's sustained focus on price management, inventory management, product mix offering and merchandise strengthening has helped it attract more customers to its stores, as evident from positive comparable store sales performance in the trailing eight fiscal years.

Furthermore, we believe the company is progressing well with its growth endeavors, including store expansion strategies, omni-channel development, revamping of store formats and venture into new markets. We commend its strategic investments toward incorporation of technological advances focused on boosting its top and bottom line performances in the long run.

Despite the aforementioned positive factors, we remain slightly apprehensive about the stock's growth prospect due to the prevailing macroeconomic headwinds and intense competition. Also, risks of sourcing merchandise from overseas markets may drag the company's results going forward.

Other Stocks to Consider

Currently, Dollar Tree carries a Zacks Rank #3 (Hold). Some other stocks in the retail space worth considering include The Men's Wearhouse, Inc. MW, Foot Locker, Inc. FL and Zumiez Inc. ZUMZ. All of these stocks have a Zacks Rank #2 (Buy).