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Dollar Tree (DLTR) Earnings Preview

by | Aug 24, 2021

Dollar Tree (DLTR) reporting earnings on 8/26 before the open with the Street looking for $1.01 on $6.44B in sales. Next quarter is guided to $1.26/$6.43B while the FY is $5.99 and $26.4B. Shares have closed higher in three of the last five with an average closing move of 5% and a max move of 14.08%. The current implied move is 5.25%. DLTR flows have been bullish including buyers of 3,750 September $110 calls on 8/23, buyers of 1000 November $105 calls on 8/20, and buyers of 3,000 September $105 calls on 8/19. The weekly $100, $101, and $103 calls also with buyers in late July. On the chart, a bullish start to the week with shares working out of a bull flag and into a gap from May that stretches to $106.50. There’s a bigger volume node around $109 and then major resistance around $116. The $23.45B company trades 15X earnings, 0.91X sales, and 16.5X FCF. DLTR is seeing some early positives from a big restructuring plan as they expand customer-focused initiatives such as refining their multi-price strategy, new store concepts in rural markets, fresh produce and frozen meat, self-checkout and expanded home and seasonal categories.  DLTR faces a lot of questions about inflation into the quarter with both labor and freight costs hurting margins and uncertainty around their ability to pass on the higher costs to consumers. Analysts have an average target for shares of $116 with a Street High $134. Deutsche Bank downgrading to Hold on 8/9 citing valuation and renewed concerns about building inflationary pressures from both freight and wages. The firm also thinks negative revisions to earnings guidance may not be done as freight costs may be understated into the quarter. Piper downgrading to Neutral in late June as they think that inflation will sting the company and their inability to pass through price increases given its fixed $1-only price point. Short interest is 2%. Insiders active in the name including buyers in June like a director adding $505K in stock at $99 and another buying $250K at $99.16. Hedge fund ownership fell 5% last quarter. CPPIB bought 1.865M shares, a new position.

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