Retailers selling only discretionary products took a hit when they had to temporarily shut down stores due to the COVID-19 pandemic. However, Dollar General and Dollar Tree continued to operate their stores as they sell food and essentials aside from discretionary merchandise.
Also, a challenging macro environment and rising unemployment are helping in driving traffic at these stores as consumers look for budget deals.
Stock Comparison tool, we will compare these two dollar store chains across several parameters to see which stock offers the most compelling investment opportunity.” data-reactid=”14″>Using the TipRanks’ Stock Comparison tool, we will compare these two dollar store chains across several parameters to see which stock offers the most compelling investment opportunity.
DLTR)” data-reactid=”27″>Dollar Tree (DLTR)
Dollar Tree has been under pressure in recent times as the strength in its namesake Dollar Tree brand stores was offset by the struggling Family Dollar stores, which it acquired in 2015. The company has over the years spent aggressively in streamlining the Family Dollar business by closing unprofitable stores, revamping some, and rebranding others to Dollar Tree brand stores.
Ironically, Family Dollar stores performed well in the fiscal first quarter compared to Dollar Tree brand. In the fiscal first quarter, which ended on May 2, same-store or comparable sales of the Family Dollar brand grew 15.5% while Dollar Tree brand’s comparable sales fell 0.9%.
Stocking up of basic goods during the lockdowns helped the Family Dollar business. The company cited weakness in the party, candy and Easter season categories due to shelter-in-place orders as the reason for the decline in Dollar Tree stores’ comparable sales.
See Dollar Tree stock analysis on TipRanks).” data-reactid=”31″>Overall, the company’s comparable sales growth of 7.0% helped in driving an 8.2% rise in the net sales to $6.29 billion. The first-quarter EPS fell 7.1% Y/Y to $1.04 due to incremental costs related to the pandemic and higher sales of lower-margin items. Dollar Tree stock has risen 5.1% year-to-date (as of August 16). (See Dollar Tree stock analysis on TipRanks).
Dollar Tree plans to open 500 new stores, including 325 Dollar Tree and 175 Family Dollar stores, in fiscal 2020 compared to its original target of 550. The company also trimmed down its Family Dollar store renovation plans to 750 stores from 1,250 stores. As at the end of the fiscal first quarter, the company operated over 15,300 stores.
Rupesh Parikh raised his price target for Dollar Tree stock to $100 from $95. The analyst expects strong sales growth and more stable margins in the short-term.” data-reactid=”33″>Earlier this month, Oppenheimer analyst Rupesh Parikh raised his price target for Dollar Tree stock to $100 from $95. The analyst expects strong sales growth and more stable margins in the short-term.
However, Parikh maintained his Hold rating for the stock. He cautioned, “However, on a 12-18-month basis, we have less confidence in its ability to drive share gains and sustainable profit growth, which we believe necessary to drive multiple expansion.”
price target of $106.24 suggests an upside of 7.5% in the stock over the next 12-months.” data-reactid=”35″>Overall, analysts have a Moderate Buy consensus for Dollar Tree stock based on 11 Buys and 7 Holds and no Sell rating. An average price target of $106.24 suggests an upside of 7.5% in the stock over the next 12-months.
DG)” data-reactid=”48″>Dollar General (DG)
Dollar General has long been known for its solid track record. The pandemic-led demand for essentials helped in further boosting the company’s growth. In the fiscal first quarter, Dollar General’s sales grew 27.6% to $8.45 billion driven by comparable sales growth of 21.7%.
Strong sales and impressive operating margin expansion translated into a 73% Y/Y rise in the company’s EPS to $2.56 despite additional costs related to COVID-19.
Dollar General has an extensive network of 16,500 stores, which are located within five miles of over 75% of the US population. The company operates smaller format stores, which help customers complete their purchases faster. Its store growth plan for fiscal 2020 includes 1,000 new stores, remodel of 1,500 stores, and relocation of 80 stores.
See Dollar General stock analysis on TipRanks)” data-reactid=”52″>To enhance its consumables offerings, the company aims to add 55,000 cooler doors this year. Dollar General is also enhancing its non-consumable merchandise across the home, housewares, domestics, party and occasion categories in several stores. (See Dollar General stock analysis on TipRanks)
Rupesh Parikh raised his price target for Dollar General stock to $225 from $205 while retaining a Buy rating. He commented “Based on our work, we believe the market is still underappreciating the company’s long-term earnings power, following the recent grocery boom, traction from management initiatives, and lasting market share gains coming out of the coronavirus pandemic.”” data-reactid=”53″>Last month, Oppenheimer analyst Rupesh Parikh raised his price target for Dollar General stock to $225 from $205 while retaining a Buy rating. He commented “Based on our work, we believe the market is still underappreciating the company’s long-term earnings power, following the recent grocery boom, traction from management initiatives, and lasting market share gains coming out of the coronavirus pandemic.”
price target reflects a 5.5% upside potential in the coming 12 months. Dollar General stock has already advanced 27% so far in 2020.” data-reactid=”54″>TipRanks data shows that Dollar General stock scores 14 Buy ratings and 3 Holds which add up to a Strong Buy consensus. The $209.44 average price target reflects a 5.5% upside potential in the coming 12 months. Dollar General stock has already advanced 27% so far in 2020.
Dollar General is a better choice based on its consistent performance, further upside potential despite a higher year-to-date rise in the shares than Dollar Tree, lower valuation, and Street’s consensus bullish opinion.
Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.” data-reactid=”65″>To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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