Dollar Tree shares fall to 9-year low: Worst day since 2001

Top line

Dollar Tree shares slumped Wednesday after the discount chain reported a disappointing second-quarter earnings report, its worst day on Wall Street in more than two decades.

Key data

Key quote

This is “another reminder of the headwinds facing low- to moderate-income consumers,” said Evercore ISI analysts Michael Montani and Greg Melich. The Evercore analysts wrote to clients that “the dollar store market as a whole remains challenging,” with Dollar Tree competitors Dollar General and Five Below also facing a difficult backdrop.

Important background

Shares of all three national dollar store chains have plunged this year: Dollar General has returned -39% year to date, Dollar Tree -57% and Five Below -65%. Dollar Tree is the third-worst performing stock in the S&P 500 index of the nation's most significant publicly traded companies in 2024, along with several other big-name retailers at the bottom of the S&P, with drugstore chains Walgreens and CVS and cosmetics chains Ulta and Bath & Body Works all among the index's 25 lowest-returning stocks. Dollar Tree's market cap fell to $13.6 billion on Wednesday from $17.6 billion after reaching a 2022 high of nearly $40 billion. Dollar Tree, which also operates the Family Dollar chain, has more than 16,000 stores in the U.S. and Canada.

Surprising fact

Dollar Tree's stock is trading at its lowest level compared to 12-month forward earnings since its IPO in 1995, according to FactSet data, with its price-to-earnings ratio of 8.9 down more than 50% from January. That suggests it's a buying opportunity for those who believe in Dollar Tree's turnaround, according to Truist analysts led by Scot Ciccarelli, who on Wednesday maintained their buy target on the stock despite cutting their price target to $79 from $140. “While the stock has been a disaster, it appears to be fully factoring in the negatives at this level,” the Truist group wrote to clients.