Despite Rough Waters, Dollar Tree Holds Promise In The Long Term, Says Analyst

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Dollar Tree Inc DLTR with a price target of $165.
Dollar Tree’s 1Q23 EPS of $1.47 missed the consensus estimate of $1.52, reflecting worse-than-anticipated adjusted operating margin contraction of 445 basis points to 6.1%.
The pressure on operating margin was driven by the gross margin compression of 345 basis points to 30.5%, primarily due to lower initial markup, and elevated shrink, and unfavorable product mix shift to consumables, noted the analyst.
Dollar Tree guided 2Q23 EPS of $0.79-$0.89, well below the consensus of $1.26, given the pressure on profits.
The analyst is disappointed by another mixed earnings report and the fourth consecutive lowered guidance.
However, the analyst continues to believe the company remains well-positioned for the long term to gain market share, given its convenient locations, value merchandise, and transformative initiatives.
Price Action: DLTR shares are trading lower by 10.09% at $139.67 on the last check Thursday.