Dollar Tree, Inc. (NASDAQ: DLTR) didn’t perform well during the second quarter but the RiverPark Large Growth Fund still sees a value in the stock. In its Q2’18 investor letter, the fund discussed its investment thesis on Dollar Tree. Let’s take a look at what the fund’s comments.
Dollar Tree shares were our top detractor for the quarter as the company reported disappointing earnings. While the company’s Dollar Tree banner continues to perform well, posting 4% same store sales growth, its Family Dollar segment struggled, with same store sales decreasing 1.1% for the quarter. Family Dollar’s comps were disappointing as two weather-dependent departments, apparel and lawn and garden, were affected by the colder than normal spring. We were encouraged by consumables posting positive comps for the quarter and by sales momentum returning to the chain in recent weeks as the weather improved. Overall, sales increased 5%, operating income increased 13% and adjusted EPS grew a healthy 21% for the quarter.
While we were disappointed that the quarter was not more robust (and will monitor the Family Dollar performance closely), we continue to believe that the combined franchise will experience significant profit growth. The continued synergy gains from the combination of these two banners positions DLTR for years of double-digit bottom line growth as operating performance is augmented by material tax rate savings, continued Family Dollar debt pay-down and an expected resumption of the company’s formally aggressive share repurchase program.
Chesapeake, Va.-based Dollar Tree, Inc. (NASDAQ: DLTR) is the largest single-price-point retailer in North America. The company operates thousands of stores across 48 states and five Canadian provinces. It operates one-dollar stores under the names of Dollar Tree and Dollar Bills as well as a multi-price-point variety chain under Family Dollar.
If we look at stock charts, shares of Dollar Tree are down 21.12% since the start of the year. Over the past three months, the stock has lost 1.17% of their value, while the share price has moved up 15.17% over the past 12-month period. DLTR has a consensus average target price of $96.81 and a consensus average recommendation of ‘OVERWEIGHT’, according to analysts polled by FactSet Research. DLTR was closed at $84.28 on Wednesday.
Meanwhile, Dollar Tree is a popular stock among hedge funds covered by Insider Monkey. As of the end of the second quarter of 2018, there were 48 funds in our database owing shares of the company.