DLTR Dollar Tree
Cleaner pure-play discounter with steady growth; value hinges on holding margins near 10.5% despite tariffs.
The story
Dollar Tree is now a pure-play extreme-value retailer after exiting Family Dollar. Its moat is scale in low-price-point sourcing and dense small-box real estate. Multi-price expansion (items at $3, $5 and up) and 400+ new stores a year give it a mid-single-digit growth runway. It is a mature business whose main lever is margin, and tariffs, shrink and wage costs cap that margin.
Growth of about 7% reflects store openings plus multi-price comps and fades toward nominal GDP. Target margin of 10.5% sits just under the TTM 11.1% because tariff and trade-down mix pressure makes the historical 13.6% peak unrealistic. Sales-to-capital of 2.8 is slightly below the reported 3.24 to cover store remodel and new-store capex, and beta is set near the staples-retail anchor.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 10.5% |
| Years to target margin | 3 |
| Sales-to-capital | 2.80 |
| Beta | 0.75 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 8.1% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 8.01B |
| PV of terminal value | 17.35B |
| Equity value | 23.17B |
| ÷ shares → per share | $123.50 |
News
neutral +0.15 · 8 articles
- Will Dollar Tree's Strategic Initiatives and Store Expansions Aid?
- 3 Retail Stocks Facing Margin Pressure as Consumers Trade Down
- The Zacks Analyst Blog Highlights Five Below, Dollar Tree, Kohl's, Target and The TJX Companies
- Arhaus, Sally Beauty, and Dollar Tree Stocks Trade Up, What You Need To Know
- These 4 Retail Stocks Are Winning the Race for Inflation-Weary Bargain Hunters
- DLTR Falls 17.9% in the Past Month as Margin Risks Test Its Rebound
- DLTR Lifts 2026 Earnings Outlook as Tariff Refunds Fund Reinvestment
- Is DLTR a Buy as Earnings Improve but Margin and Tariff Risks Remain?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 21.47B | 7.0% | 10.9% | 1.76B | 501.72M | 1.25B | 1.16B |
| 2 | 22.83B | 6.3% | 10.7% | 1.84B | 485.71M | 1.35B | 1.15B |
| 3 | 24.13B | 5.7% | 10.5% | 1.90B | 462.11M | 1.44B | 1.14B |
| 4 | 25.33B | 5.0% | 10.5% | 2.00B | 430.85M | 1.57B | 1.15B |
| 5 | 26.43B | 4.3% | 10.5% | 2.09B | 392.07M | 1.69B | 1.15B |
| 6 | 27.40B | 3.7% | 10.5% | 2.16B | 346.13M | 1.82B | 1.14B |
| 7 | 28.22B | 3.0% | 10.5% | 2.23B | 293.58M | 1.93B | 1.12B |
Key risks
- Tariffs on China-sourced goods compress gross margin at fixed or low price points
- Multi-price strategy dilutes the $1.25 value identity and hurts traffic
- Shrink, wage inflation and competition from Walmart, Temu and Five Below
Catalysts
- Multi-price rollout lifting comps and ticket size
- Buybacks funded by Family Dollar sale proceeds and FCF