Dollar Tree's Q2 Outlook Looks Bright, Says Bullish Analyst

Checks indicate significant upside to Dollar Tree Inc's DLTR same-store sales, which is also driven by the strength of the company's base business, according to JPMorgan.

The Dollar Tree Analyst: Analyst Matthew Boss reiterated an Overweight rating, while establishing a price target of $138.

The Dollar Tree Thesis: The company is likely to generate same-store sales of 5.3% in the second quarter. That’s above the current consensus estimate of 4.7%. It’s also likely to beat even the high end of management's guidance of 3%-5%, Boss said in the note.

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Dollar Tree's base business would drive the upside, as the second quarter has fewer traffic-driving events or seasonal catalysts, he added.

Management's current full-year reflects a sequential moderation in same-store sales in the back half of the year, the analyst stated. He expects Dollar Tree to generate mid-single-digit same-store sales growth in the back half.

While the company's gross margin could contract in the second quarter, mainly due to tariff headwinds, the gross margin could expand by 165 basis points in the second half of the year, Boss added.

"In addition, the net proceeds from the Family Dollar sale are estimated to be ~$800M and a $375M tax shield, supporting additional $1.175B of incremental cash flow to return to capital to shareholders," he further wrote.

DLTR Price Action: Shares of Dollar Tree had risen by 2.27% to $112.62 at the time of publication on Monday.

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