Last Update 08 Jan 26

Fair value Increased 1.18%

DLTR: Future Returns Will Be Constrained By SNAP Benefit Reductions

Narrative Update on Dollar Tree

The analyst price target for Dollar Tree in our model has edged higher by about US$1, reflecting slightly adjusted fair value and discount rate inputs as analysts weigh mixed sector views, recent target cuts toward US$103 and US$126, and more constructive targets up to US$149 that factor in potential consumer tax savings and rate cuts, alongside SNAP related headwinds for value focused shoppers.

Analyst Commentary

Recent Street research on Dollar Tree reflects a split view, with some bullish analysts raising targets and others turning more cautious as they reassess risks tied to the lower income shopper and government benefits.

Bullish Takeaways

Bullish analysts who lifted the upper end of price targets toward US$149 see room for valuation support if discretionary demand holds up and consumer tax savings materialize, especially with the stock already reflecting some operational improvements.
There is a constructive outlook on broadlines and food retail heading into 2026, with expectations that a potential stimulus and interest rate cuts could support traffic and ticket size at value retailers like Dollar Tree.
Several forecasts point to opportunities in discretionary categories if consumers gain a bit more spending power, which could help Dollar Tree leverage its multi price point format and mix shift efforts.
Even neutral stances at around US$126 acknowledge that Dollar Tree remains a key player for value focused shoppers, which can be important if consumers stay focused on stretching budgets.

Bearish Takeaways

Bearish analysts argue that with a target cut to around US$103, the shares already reflect improved fundamentals, so further upside could be harder to justify without clear evidence of stronger execution or margin gains.
Concerns around the lower income consumer are front and center, including pressure from reduced government benefits and food disinflation, which can weigh on traffic and basket size at value focused chains.
Wolfe Research highlights that SNAP benefits cuts of 20% create a 150 to 200 basis point headwind to retail industry sales, and Dollar Tree is identified as one of the retailers most over indexed to SNAP shoppers, which can be a direct drag on sales trends.
Some cautious views also point to a weaker consumer perception on price and value relative to other discounters, with a preference for competitors that are seen as offering a stronger value proposition, which can affect Dollar Tree's ability to defend share and pricing.

What's in the News

Dollar Tree updated its earnings guidance for the fourth quarter of fiscal 2025, expecting net sales from continuing operations between US$5.4b and US$5.5b, based on comparable store net sales growth of 4% to 6% (company guidance).
For fiscal 2025, the company updated its outlook for net sales from continuing operations to a range of US$19.35b to US$19.45b, tied to an updated comparable store net sales growth range of 5% to 5.5% (company guidance).
Dollar Tree reaffirmed guidance for the third quarter and fiscal 2025, with third quarter 2025 comparable same store sales growth of 3.8% quarter to date, and noted that EPS outlooks for the quarter and year do not factor in the benefit of third quarter 2025 share repurchases (company guidance).
The company provided earnings guidance for fiscal 2026, indicating EPS is expected to grow in the high teens percent, supported by higher discrete cost benefits in 2026 (company guidance).
From August 3, 2025 to December 1, 2025, Dollar Tree repurchased 5,762,292 shares for US$571.16m, and in total has completed the repurchase of 58,603,544 shares for US$5,597.88m under the buyback first announced on September 17, 2013, representing 26.47% of shares (buyback filing).

Valuation Changes

Fair Value: edged higher from about US$117.78 to about US$119.17, representing a small upward adjustment in the model estimate.
Discount Rate: moved slightly from 7.38% to about 7.41%, reflecting a modest change in the risk assumptions used in the analysis.
Revenue Growth: held essentially steady at about 6.39%, with no meaningful change in the projected top line growth rate.
Net Profit Margin: remained effectively unchanged at about 6.30%, indicating a similar view on long term profitability.
Future P/E: ticked up modestly from about 16.12x to about 16.32x, implying a slightly higher valuation multiple applied to forward earnings.

Expanded pricing strategies and targeted investments in digital partnerships are boosting sales, improving margins, and enhancing Dollar Tree's appeal to a broader customer base.
Strategic focus on store growth, operational efficiency, and full brand alignment positions the company for ongoing revenue gains and market share expansion.
Mounting cost pressures, operational complexity, and consumer volatility threaten Dollar Tree's margins, brand value, and earnings stability amid an uncertain economic environment.

Catalysts

About Dollar Tree

Operates retail discount stores under the Dollar Tree and Dollar Tree Canada brands in the United States and Canada.What are the underlying business or industry changes driving this perspective?

Dollar Tree is capitalizing on increased consumer prioritization of value and convenience amid ongoing cost-of-living pressures, resulting in strong traffic and sales growth-especially as more middle
and higher-income shoppers "trade down" during economic uncertainty. This dynamic is likely to support sustained revenue growth and market share gains over the long term.
The retailer's rapid rollout of multi-price point assortments beyond the historic $1.25 price cap has expanded average basket size and created margin uplift, while still retaining core value appeal-providing a structural path to gross margin improvement and potential EPS growth.
Aggressive store expansion into new markets-including conversions of legacy stores and recent acquisitions (such as former 99 Cents Only and Party City locations)-leverages underserved suburban and rural regions, supporting long-term unit growth and broadening the addressable customer base, thus driving higher revenue.
Investments in digital partnerships (ex: Uber Eats) and early omnichannel initiatives enable Dollar Tree to reach new customer segments, improve convenience, and drive incremental sales opportunities-positioning the company to benefit from shifting consumer shopping behaviors and future channel growth.
Post-divestiture of Family Dollar, management is focusing all capital and operational resources strictly on the Dollar Tree brand-accelerating decision-making and execution on assortment, pricing, and supply chain automation initiatives, which should enhance operational efficiency and support sustained improvements in operating margin and earnings.

Dollar Tree Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Dollar Tree's revenue will grow by 6.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.9% today to 6.2% in 3 years time.
Analysts expect earnings to reach $1.4 billion (and earnings per share of $7.05) by about September 2028, up from $1.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.1 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.6x on those 2028 earnings, down from 17.8x today. This future PE is lower than the current PE for the US Consumer Retailing industry at 21.7x.
Analysts expect the number of shares outstanding to decline by 5.13% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.37%, as per the Simply Wall St company report.

Dollar Tree Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent tariff volatility and higher import duties across China, Vietnam, India, and Bangladesh increase Dollar Tree's cost of goods sold and create ongoing uncertainty, raising the risk of eroding gross margins and pressuring net earnings if mitigation efforts become less effective.
Reliance on price increases as a lever to offset rising costs (including tariffs and inflation) risks damaging Dollar Tree's value-focused brand identity; if core customers experience "sticker shock" or perceive diminishing value, this could lead to reduced traffic, customer churn, and slower revenue growth.
The expansion of the multi-price point strategy introduces higher operational complexity and increased risk of inventory markdowns and shrink, potentially leading to further increases in SG&A expenses and negatively impacting operating margins.
Elevated and rising general liability and labor costs, compounded by industry-wide settlement inflation and wage pressures, are leading to anticipated SG&A deleveraging, which could compress net margins in the medium and long term as controlling these costs becomes more difficult.
Increased caution on the state of the consumer, particularly among lower-income households facing persistent cost-of-living increases, suggests a more volatile and unpredictable demand environment; this increases uncertainty around sustained traffic growth and could negatively impact both revenue and earnings stability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $112.304 for Dollar Tree based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $140.0, and the most bearish reporting a price target of just $75.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.1 billion, earnings will come to $1.4 billion, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 7.4%.
Given the current share price of $96.3, the analyst price target of $112.3 is 14.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Remain Split on Dollar Tree Outlook as Valuation Slips Amid Mixed Signals