Dollar Tree Price Hikes Lead to Best Stock Price Ever — Should You Buy?
Dollar Tree said it will hike its price points above its namesake $1 for certain items, a move that has sent the stock soaring to its best day in more than 20 years.
“For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar — and we remain committed to that core proposition — but many are telling us that they also want a broader product assortment when they come to shop,” Michael Witynski, president and CEO said in an announcement earlier this week.
“We believe testing additional price points above $1 for Dollar Tree products will enable us over time to expand our assortments, introduce new products and meet more of our customers’ everyday needs.”
Barron’s reports that Dollar Tree shares rose 16% to $100.58 on Wednesday, on pace for its biggest gain since Oct. 25, 2000. It’s also well above the 0.3% and 0.2% advances in the Dow Jones Industrial Average and the S&P 500. Still, even with the gain, Dollar Tree is down 7% in 2021, Barron’s added.
The company said that the decision was based “on positive customer reaction and the success of its new Combo and Dollar Tree Plus store formats.” It will begin adding new price points above $1 across all Dollar Tree Plus stores and will begin testing additional price points above $1 in selected legacy Dollar Tree stores.
In a note sent to GOBankingRates, CFRA Research analysts say they maintained a “Buy” rating following the second-quarter earnings the company released last month, despite the company’s “bleak near-term outlook.”
“By our estimates, investors are more than discounting the near-term risks associated with higher ocean freight rates and supply chain disruptions,” the analysts wrote in the note. “More importantly, DLTR’s core business is improving (excluding ocean freight), even though product costs are increasing as well. This could be a sign that DLTR could experience a massive tailwind once ocean freight moderates or declines, which could be sometime in 2022.”
They added that as a result, the company’s shares represent a good buying opportunity.
“We flag uncertainties regarding evolution of macro factors like unemployment benefits, change in shopping patterns when COVID-19 restrictions are lifted … and competition from Aldi, which should be the 3rd largest U.S. grocer by store count by ’22,” they added.
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