But then, quantity isn’t always everything and with the lower store count, Dollar Tree is at least better than Family Dollar, which reported same-store sales growth of 2.9% in the previous quarter, significantly below its prior expectation of 4%-5% growth. According to me, Family Dollar is not a great way to play the sector and I won’t be taken aback if Dollar Tree continues to perform better.
Also, while Dollar General might have an advantage in terms of size, it’s not that great when it comes to pricing. The company had to reduce prices last year and issue a disappointing forecast as it faced competition from retailers such as Wal-Mart and other discounters. Moreover, Dollar General had to resort to selling tobacco — a lower margin product — in order to keep traffic flowing, but Dollar Tree hasn’t taken such a route in order to prep up sales.
Thus, despite being smaller in comparison to its peers in terms of store count, Dollar Tree, Inc. (NASDAQ:DLTR) is punching above its weight and delivering robust gains. Throw in the positive impact of Dollar Tree Direct, the company’s e-commerce business, and the prospects would seem brighter.
The business saw a 23% increase in traffic from last year, with the number of visitors on mobile devices totaling more than 1.7 million. The company also launched an e-commerce site for Deal$ in the previous quarter and this should further contribute to growth.
The bottom line
Thus, with both brick and mortar and online businesses moving in the correct direction, and new stores turning out to be more productive than ever, Dollar Tree, Inc. (NASDAQ:DLTR) should get even better in the future. Its valuation is reasonable, there’s growth on all fronts (including margins), there’s still almost $800 million of share repurchase authorization left, and most importantly, the company is executing well. As such, if you’re still thinking whether or not to buy, I would say that Dollar Tree certainly looks like a buy.
The article Put Your Dollar in This Stock and Watch it Grow originally appeared on Fool.com and is written by Harsh Chauhan.
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