Why Dollar Tree Stock Surged This Week
Key Points
Dollar Tree's profits rose sharply in the first quarter.
Management sees decades of growth ahead.
- 10 stocks we like better than Dollar Tree ›
Shares of Dollar Tree (NASDAQ: DLTR) climbed more than 20% this past week after the discount chain reported strong quarterly operating metrics.
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Dollar Tree's low prices are appealing to budget-focused shoppers
Dollar Tree's net sales rose 7.2% year over year to $5 billion in its fiscal first quarter ended May 2.
The retailer opened 113 new stores during the quarter and closed 13 underperforming locations, bringing its total store count to 9,282.
Additionally, revenue at existing locations grew by 3.5%. These comparable store sales were fueled by a 4.5% increase in average order size, partially offset by a 1% decline in traffic.
After long adhering to its flat $1 pricing model, Dollar Tree began transitioning to a multi-price format in 2019 to offset rising costs. Yet with most items still priced at under $5, the expanded selection is resonating with bargain-hunting consumers.
"We continued advancing our strategic plan -- a more relevant assortment, agile cost management, a stronger customer connection, and new store growth coupled with improved store conditions -- all driving operating margin expansion and delivering a strong bottom-line performance," CEO Mike Creedon said.
All told, Dollar Tree's adjusted operating income jumped 22% to $473.3 million. Better still, stock buybacks helped to drive its adjusted earnings per share up by 38% to $1.74.
A long runway for further expansion
Dollar Tree intends to open a net total of 325 stores in fiscal 2026. Management projects full-year net sales of $20.5 billion to $20.7 billion, driven by same-store sales growth of 3% to 4%. The company is also targeting adjusted earnings per share of $6.70 to $7.10.
"As we celebrate our 40th anniversary in 2026, we are encouraged by the progress we are seeing across the business and remain focused on making thoughtful investments in our stores, assortment, and customer experience -- building Dollar Tree to last for decades to come," Creedon said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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