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Takeaways
- Dollar Tree will have "cover" to raise prices now that tariffs will compel many of its discount retail rivals to begin charging more, Citi said in a note Monday.
- Citi analysts described Dollar Tree as a "dark horse winner" of the current economic environment and gave its stock a "buy" rating.
- They gave its shares an target price of $103, more than 52 percent above their most recent close price.
Dollar Tree may be a "dark horse" beneficiary of widespread tariffs, Citi analysts said Monday while upgrading the discount retailer's stock.
Dollar Tree’s (DLTR) ability to raise its prices without scaring away customers is a result of the impending import taxes that will affect nearly all U.S. business partners, according to a bank research note. Dollar Tree has performed well in previous downturns, and analysts say that the chain’s reputation for value will serve it well.
Citi upgraded from “neutral to “buy”, giving Dollar Tree a price target of $103 Citi upgraded its rating to “buy” from “neutral” and gave Dollar Tree a target price of $103
"We believe this higher-tariff-across-the-board environment is going to be a positive for [Dollar Tree]," the note said. "We think that [Dollar Tree] has cover to increase their base price in this environment with everyone else also increasing prices."
Citi Analysts Think Tariffs Will Hit Rivals Harder
About half of Dollar Tree’s products will be subject to import taxes under the “reciprocal” tariffs unveiled by the White House last week, Citi estimated. But the tariffs affect so many nations that many of the discount retailer’s rivals will also be paying—and charging—more for merchandise, the analysts said.
Customers accepted Dollar Tree moving away from a "base" item price point of $1 when freight costs shot up in 2022, Citi said. Current trade policies may get the chain to a $1.50 or $1.75 price point, analysts added.
“We believe the current environment is ideal for [Dollar Tree’s] value proposition to thrive”The note stated.
Dollar Tree shares increased by nearly 8% on Monday. The shares are still more than 40% lower than they were a year ago.
