Why Barclays Is Bullish On Dollar Tree

In a recent report, Barclays discussed its outlook for Dollar Tree Inc DLTR. The report focused on Dollar Tree’s potential buyout of Family Dollar Stores Inc FDO.

Bid Coming Soon

Barclays analysts believe that a shareholder vote of approval for Dollar Tree’s bid to acquire Family Dollar will be coming soon, and they feel that the buyout would be a good thing for Dollar Tree.

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Analysts see growth potential at Family Dollar despite the disappointing recent performance of the company.

Sharing Experience

The report indicates Dollar Tree management is supportive of the buyout, even in light of recent Family Dollar personnel defections. Analysts believe many of the operational issues that have held back Family Dollar are fixable.

Two major issues the report highlights are a widespread lack of accountability within the organization, and a tendency for the company to take a haphazard approach to implementing new initiatives before proper testing and analysis.

Analysts believe Dollar Tree has successfully addressed these problems in the past.

“These are all problems that DLTR has resolved after years of focused effort, and its approach to FDO will be about sharing experiences and capabilities rather than imposing the DLTR way of doing things," they wrote.

The Numbers

Dollar Tree has identified $300 million of synergies that will be produced by the acquisition of Family Dollar.

Even though Barclays analysts do not incorporate a potential deal in their forecasts, they still rate Dollar Tree at Overweight given its operational strengths. Barclays raised its price target for Dollar Tree to $98.00, a 39.4 percent upside from current levels.