Jefferies Ups Long Term Growth Rate On Dollar Tree

In an environment where the dollar store group has outperformed retail, Jefferies still favors Dollar Tree DLTR for its defensive profile, consistent performance and relatively strong unit growth story. Canada expands growth opportunity, so Jefferies is upping its long-term EPS growth rate to 19% from 16%. Management sees opportunity for 900 to 1,000 stores in Canada following its acquisition of Dollar Giant. This has prompted Jefferies to up its store sales and profit growth rates in future years and as a result our long-term EPS growth rate is now 19%, up from 16%. Jefferies is upping its price target to $57 with a Buy rating. Risks to the target price include accelerating square footage growth in the dollar store sector and increased price investment from competitors. From a macro perspective, risks to our target include extended high unemployment levels among households with lower education levels, rising gas prices, and amplified expense inflation risk as a single price point retailer. DLTR closed Thursday at $49.64