Dollar Tree (DLTR) Stock Forecast & Price Target

Dollar Tree has demonstrated a positive financial trajectory, with retail gross margin increasing 46 basis points to 35.8%, driven by improved markups and reduced freight costs, despite challenges posed by tariffs and shrink costs. The company also reported a growth in discretionary comp sales for four consecutive quarters, indicating a strengthening consumer preference and traffic improvements after a notable Halloween sales period. Furthermore, the planned divestiture of Family Dollar for $1 billion signals strategic refinements aimed at enhancing operational efficiency and focusing on the core Dollar Tree brand.

Dollar Tree has experienced a concerning 0.3% decline in customer traffic, which reflects a significant 330 basis points drop from previous performance levels and represents the worst year-over-year traffic results in nearly three years. Additionally, the retailer faces pressures from flattening consumables unit share gains and a projected 3-4% drop in total units, which may hinder overall sales growth as competition intensifies and market dynamics shift. Compounding these issues, there are significant risks related to their Family Dollar acquisition, potential challenges in maintaining profitability in smaller markets due to price point constraints, and broader economic uncertainties negatively impacting consumer spending and profit margins.