DOLLAR TREE, INC. (DLTR): what the price assumes

In the published model solve dated 2026-Q2, anchored at $127.81, DOLLAR TREE, INC. (DLTR) is priced for -4.5% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/DLTR

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=14)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Comparable store sales rose 3.5% in the quarter to May 2, 2026, but all of it came from a 4.5% bigger average ticket while customer traffic fell 1.0%. That is a discounter growing at the till rather than at the door.
• Selling Family Dollar left one banner behind: roughly 9,000 stores across 48 states and the District of Columbia plus about 275 in Canada, and fiscal 2025 gross profit rose 12.2% to $7,050.7 million, reaching 36.4% of net sales, 60 basis points better than the year before.
• The Supreme Court struck down the fiscal 2025 emergency-powers tariffs on February 20, 2026, and the company had collected roughly 110 million dollars of refunds by May 26, 2026, with further claims filed.

Bull Case

The trailing statements describe a company that no longer exists. Until the Family Dollar sale closed, this was two retailers with two customer bases, two supply chains and one blended set of accounts, and the weaker of the two set the arithmetic. What remains is a single banner running one format: roughly 9,000 stores across 48 states and the District of Columbia, plus about 275 across seven Canadian provinces. Continuing operations now consist of the Dollar Tree segment and corporate support, and what that leaves behind looks materially different from the record a screen would show.

The old structural objection is also gone. A retailer locked to a fixed shelf price of a dollar and a quarter has no lever at all when its costs rise, and for years that was the whole bear case. The annual report describes the change: "we continue to expand our multi-price offerings to provide a broader, more relevant assortment and differentiated value to our customers". Fiscal 2025 net sales rose 10.4% to $19,395.7 million on a 5.3% comparable store increase, and gross profit rose 12.2% to $7,050.7 million, reaching 36.4% of net sales and gaining 60 basis points on the year. Raising realised prices without losing the value proposition is the hardest trick in discount retail, and the gross line says it worked.

Profit is moving faster than sales. Fiscal 2025 operating income reached $1,653.1 million against $1,462.0 million the year before, up 13.1%, rising 20 basis points to 8.5% of total revenue. The first quarter of fiscal 2026 extended it further, with operating income of $473.3 million against $384.1 million and an improvement of 120 basis points to 9.5% of total revenue. The annual report attributes part of that to fleet work, noting that "Our modernization efforts include refresh and renovation programs, which are designed to improve the customer shopping experience." Incremental sales from a refreshed store land on a cost base that is already paid for.

Against the cohort, the shape of the business has changed groups. DG earns a 5.3% operating margin on $43.1 billion of revenue growing 4.7%, and BJ earns 3.7% on $22.0 billion growing 5.9%. The discretionary-led discounters sit far higher: FIVE at 11.0% on $5.1 billion growing 25.9%, and OLLI at 11.4% on $2.7 billion growing 16.7%. Dollar Tree's most recent quarter puts it between those groups rather than in the first one, on a revenue base more than twice the size of those two specialty names put together.

Capital return runs without a dividend to defend. The share count has fallen about 3.4% a year over the four years to May 2, 2026, entirely through repurchase. Financing costs are falling with it: interest expense, net came down to $85.5 million in fiscal 2025 from $107.5 million a year earlier, and to $16.3 million in the first quarter of fiscal 2026 from $22.7 million.

One tailwind should be read as temporary and is worth naming for that reason. Transition services agreement income contributed $54.9 million in fiscal 2025 and $21.1 million in the first quarter, earned for running back-office functions for the buyer of Family Dollar. That stops when the transition does. The rest of the improvement is merchandising and store-level execution, which does not. On the record of setting expectations, management has raised guidance on 12 separate occasions since 2006, reaffirmed on 9 and cut on 1.

Bear Case

The assumption doing the most work in this price is that the average basket keeps getting bigger. In the quarter to May 2, 2026, comparable store sales rose 3.5%, made up of a 4.5% increase in average ticket and a 1.0% decline in customer traffic. A year earlier the split ran the other way: traffic up 2.5%, ticket up 2.8%. The company names the source without hedging, attributing the ticket gain to "targeted retail price changes executed during the second and third quarters of fiscal year 2025 and higher mix of multi-price penetration". A discount retailer growing by charging more while serving fewer people is running the one strategy its own customer is least equipped to absorb.

Now set that against what the price requires. At about 21 times company-wide operating income, the market needs operating profit to compound roughly 6% a year for five years. The rate is inside what the company has recently produced, so the difficulty is not the pace but holding it for five consecutive years. Doing that in variety retail means either continuing to take price or getting the visits back, and the most recent quarter says the visits are not coming back yet. If the requirement fades, the multiple compresses toward the lenses that value the profit already earned, and those sit well below today's quote.

The cost base is in the wrong place for this decade. The 10-K states it flatly: "Among our foreign suppliers, China is the source of the majority of our direct imports." Last year's emergency-powers tariffs have been struck down and are being refunded, but the policy posture that produced them has not changed, and the next round is already in progress. Commerce Department circumvention proceedings cover paper plates from China and aluminium pans routed through Thailand and Vietnam, with estimated exposure as high as roughly 56 million dollars on the pans and 53 million on the plates as of May 26, 2026. On a chain whose proposition is a low fixed shelf price, an input-cost shock lands on gross profit rather than on the customer.

Below the gross line the trend is worse than the headline suggests. The selling, general and administrative expense rate was 28.2% of total revenue in fiscal 2025, against 27.5% the prior year and 25.3% the year before that. Almost three points of structural cost have been added in two years. Some of that is genuine investment in wages and store conditions and some is the loss of scale from operating one banner instead of two, but the direction is the point: the gross-margin gains are being partly consumed before they reach operating profit.

The balance sheet looks lighter than it is. Net debt of about $2.5B sits against liquid assets near $1.0B, and leverage runs about 1.78 times operating profit, which is unremarkable. The obligation that does not appear in that figure is rent. Counting the store leases attached to roughly nine thousand locations, total commitments run nearer 7.2 billion dollars, they are fixed for years at a time, and customer traffic is not. Meanwhile the price already sits about 71% above the asset-value methods and about 62% above the earnings-power methods, the latter capitalising a five-year average operating profit that still contains the two-banner era. Only the peer-multiple lens lands above the price, and it gets there by applying a sector rating to a company whose comparable sales are currently being carried by price increases.

Valuation

Six percent a year, for five years. That is what today's price asks of operating profit, and the interesting part is that the rate is not the hard bit. At about 21 times company-wide operating income, the pace being demanded sits inside what the company has recently delivered; the demand is that it holds for five consecutive years. Keep the figures approximate. The calculation runs at a 7.6% cost of capital with 4% terminal growth, and one point of cost of capital moves the required pace by roughly 7.7 points, which makes this a rate-sensitive read as much as an operating one.

Where the profit would come from is visible in the mix. Consumables are 49.0% of revenue, variety merchandise 46.0% and seasonal goods 6.0%. Consumables bring people through the door on the thinnest margins; the variety and seasonal half is where the money is actually made. The multi-price expansion works precisely on that seam, allowing higher-ticket discretionary items onto shelves that were previously capped. In fiscal 2025 that produced gross profit of $7,050.7 million, up 12.2%, on net sales of $19,395.7 million, with operating income of $1,653.1 million.

The families of method disagree in a revealing direction. The price sits about 71% above the asset-value methods and about 62% above the earnings-power methods, and the reason the second group lands where it does is that it capitalises a five-year average operating profit, which still carries the two-banner era inside it. The peer-multiple methods are the only group to land above the price: on revenue and earnings multiples the company screens inexpensively against its sector. That is the entire disagreement in one line. The backward-looking lenses are valuing a company that included Family Dollar; the relative lens is valuing the one that does not.

The retail comparison set says something similar. DG earns a 5.3% operating margin on $43.1 billion of revenue growing 4.7%, and BJ earns 3.7% on $22.0 billion. FIVE and OLLI, the nearest discretionary-discount comparisons, earn 11.0% and 11.4% on far smaller bases growing 25.9% and 16.7%. In its first quarter of fiscal 2026 Dollar Tree turned operating income of 9.5% of total revenue, which puts it between those two groups rather than alongside the food-and-consumables discounters it is usually screened with.

Solvency is not a live question here. Interest expense, net came down to $85.5 million in fiscal 2025 from $107.5 million a year earlier, and the first quarter continued that trajectory. Repurchases have taken the share count down about 3.4% a year over the four years to May 2, 2026, funded internally throughout, since there is no dividend. Net debt of about $2.5B sits against liquid assets near $1.0B, and leverage runs about 1.78 times operating profit. What the price is underwriting is therefore a merchandising outcome rather than a financial one, and the most recent quarter has the two halves of that outcome moving in opposite directions.

Catalysts

The clearest near-term item is a legal one already in motion. On February 20, 2026 the Supreme Court ruled that certain tariffs imposed in fiscal 2025 under the International Emergency Economic Powers Act were unlawful. On March 4, 2026 the Court of International Trade ordered Customs and Border Protection to begin refunding them, and on April 20, 2026 Customs opened a claims process. Dollar Tree filed its claims in April 2026 and had received roughly 110 million dollars by May 26, 2026, with the amounts recorded as they are collected rather than when claimed. For an importer sourcing the majority of its direct imports from China, that is a dated, mechanical addition to reported results over the next few quarters.

Two proceedings run the other way. The Commerce Department opened circumvention cases in July and August 2025 covering aluminium pans routed through Thailand and Vietnam and paper plates from China, and the company put its estimated exposure as high as roughly 56 million dollars on the pans and 53 million on the plates as of May 26, 2026. Neither figure is large for a company this size, but the pair make the same point: the refund is a one-time recovery, while trade policy is a standing cost that keeps re-forming.

Second-quarter results are scheduled for September 2, 2026. The line worth watching is customer traffic, which fell 1.0% in the first quarter while the ticket rose. Broker opinion moved in early July and moved a long way apart: JPMorgan lifted its target to 170 dollars from 160, Raymond James upgraded the shares to Outperform at 140 dollars, and Goldman Sachs went from Sell to Neutral at 125 dollars. That spread maps onto the same split the numbers show, with the higher targets crediting the multi-price rollout to keep lifting the basket and the lowest one crediting the traffic line.

Peer Cohorts (Per Segment, With Filing Citations)

Dollar Tree (reported)

• DG (DOLLAR GENERAL CORP)
• FY2025 10-K: …operate stores in many of the areas where we operate, and many of them engage in extensive advertising and marketing efforts. Our direct competitors include Family Dollar, Dollar Tree, and various local, independent operators, as well as Walmart, Target, Kroger, Aldi, Costco, Sams Club, BJ's Wholesale Club,…
• FY2025 10-K: …since September 2020. She joined Dollar General in 1998 and held roles of increasing responsibility in investor relations, financial planning and analysis, merchandise planning, pricing and merchandising operations prior to her promotion to Vice President, Pricing & Merchandise Data Optimization in March 2011. She…
• TGT (TARGET CORPORATION)
• FY2025 10-K: …drug stores, supermarkets, direct-to-consumer brands, and other forms of retail commerce. Our ability to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position within the retail industry. Intellectual Property Our brand image is a…
• FY2025 10-K: …and driving ethical business practices. Other Capabilities We generate revenue through a variety of other sources, including Roundel, which provides advertising services to vendors and other third parties; credit card profit sharing related to our Target Circle Card program; our third-party digital marketplace-Target…
• FIVE (Five Below, Inc.)
• FY2025 10-K: …our stores feature a sound system playing popular music throughout the shopping day. We employ novel and dynamic techniques to display our products, including distinctive merchandise fixtures and colorful and stimulating signage, which attract customers, encourage hands-on interaction with our products and convey our…
• FY2025 10-K: 4, increased by 2.8% in fiscal 2023, and decreased by 2.0% in fiscal 2022. We expanded our store base from 1,340 stores at the end of fiscal 2022 to 1,771 stores at the end of fiscal 2024 and we plan to open approximately 150 new stores in fiscal 2025. Between fiscal 2022 and fiscal 2024, our net sales increased from…
• OLLI (Ollie’s Bargain Outlet Holdings, Inc.)
• FY2025 10-K: …grown, and we continuously strive to broaden our supplier network. Trademarks and other intellectual property We own multiple state and federally registered trademarks related to our brand, including "Ollie's," "Ollie's Bargain Outlet," "Good Stuff Cheap," "Ollie's Army," "Real Brands Real Cheap!," and "Real Brands!…
• FY2025 10-K: …Our 962,000 square foot distribution center in Commerce, GA is leased under an agreement that expires in April 2029 with options to renew for two successive five-year periods. We also own and operate a 615,000 square foot distribution center in Lancaster, TX. In fiscal 2024, we completed construction of our fourth…
• BJ (BJ’S WHOLESALE CLUB HOLDINGS, INC.)
• FY2025 10-K: …programs 71,528 57,909 Membership 253,262 231,440 Gift card program 16,778 15,290 E-commerce sales 7,839 6,757 Long-term: Rewards programs: Co-brand initiatives 3,139 6,216 Total deferred revenue $ 352,546 $ 317,612 Current and long-term deferred revenue balances are included within accrued expenses and other current…
• FY2025 10-K: …than three times the number of clubs compared to the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, bjs.com, and our highly rated mobile app, which allows them to use our buy-online-pickup-in-club ("BOPIC") service,…
• PSMT (PriceSmart, Inc.)
• FY2025 10-K: …to an annual maximum of $500. Platinum Members can apply this rebate to future purchases at the warehouse club at the end of the annual membership period. The rebate is issued annually to Platinum Members on March 1 and expires August 31. Any rebate amount not redeemed by August 31 is recognized as breakage revenue.…
• FY2025 10-K: Table of Contents For example, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute in one country. Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million for…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.