Hamartia Antidote
ELITE MEMBER
- Joined
- Nov 17, 2013
- Messages
- 35,188
- Reaction score
- 30
- Country
- Location
The Trade War after a year may finally have its first victim retailer.
https://www.barrons.com/articles/do...hit-in-the-trade-war-analyst-says-51565023580
As the trade war heats up, Deutsche Bank argues that shares of discount retailer Dollar Tree (DLTR) look especially vulnerable to the new tariffs expected to hit Chinese goods in early September.
The back story. Dollar Tree stock is up 3.5% in 2019, and while that pales in comparison to the S&P 500 ’s nearly 17% rise, it’s more than enough to outdo its peers tracked by the SPDR S&P RetailETF (XRT), which has fallen 3% since the start of the year. Although the company reported strong earnings in May, not everyone is convinced it will breeze through a trade war. Moreover, its integration of Family Dollar, which it acquired in 2015, has been messy thus far, despite Dollar Tree’s efforts to improve the brands.
What’s new. On Monday, Deutsche Bank analyst Paul Trussell lowered his rating on Dollar Tree, to Hold from Buy, and slashed $7 off his price target, to $99, writing that the shares now look more fairly valued, especially with the escalation of the trade war. The retailer’s stock was 3% lower, to $93.88, in midday trading Monday.
“On the one hand, we still view Dollar Tree as a high quality retailer with a well regarded management team,” Trussell writes. “However, we cannot ignore choppy execution at Family Dollar.” He expects the September round of tariffs could prompt retailers to lower estimates further, and he places Dollar Tree among the most vulnerable of the companies he covers, since a good proportion of its supply chain will be hit by higher duties in the September hike.
Looking ahead. While Dollar Tree has already cut its full-year earnings per share forecast (after already guiding below expectations), Trussell warns that with the escalating tariff situation he’s “no longer confident that negative earnings revisions are behind us.”
In addition, the timing looks especially difficult for Dollar Tree: The company had planned for 2020 to be growth year, but Trussell sees “room for further disappointment in a more challenging retail environment.” He believes that bulls are too confident in Dollar Tree’s ability to turn Family Dollar around quickly, and suggests that investors who want to own shares of discount retailers would do better to buy into Walmart (WMT) instead.
https://www.barrons.com/articles/do...hit-in-the-trade-war-analyst-says-51565023580
As the trade war heats up, Deutsche Bank argues that shares of discount retailer Dollar Tree (DLTR) look especially vulnerable to the new tariffs expected to hit Chinese goods in early September.
The back story. Dollar Tree stock is up 3.5% in 2019, and while that pales in comparison to the S&P 500 ’s nearly 17% rise, it’s more than enough to outdo its peers tracked by the SPDR S&P RetailETF (XRT), which has fallen 3% since the start of the year. Although the company reported strong earnings in May, not everyone is convinced it will breeze through a trade war. Moreover, its integration of Family Dollar, which it acquired in 2015, has been messy thus far, despite Dollar Tree’s efforts to improve the brands.
What’s new. On Monday, Deutsche Bank analyst Paul Trussell lowered his rating on Dollar Tree, to Hold from Buy, and slashed $7 off his price target, to $99, writing that the shares now look more fairly valued, especially with the escalation of the trade war. The retailer’s stock was 3% lower, to $93.88, in midday trading Monday.
“On the one hand, we still view Dollar Tree as a high quality retailer with a well regarded management team,” Trussell writes. “However, we cannot ignore choppy execution at Family Dollar.” He expects the September round of tariffs could prompt retailers to lower estimates further, and he places Dollar Tree among the most vulnerable of the companies he covers, since a good proportion of its supply chain will be hit by higher duties in the September hike.
Looking ahead. While Dollar Tree has already cut its full-year earnings per share forecast (after already guiding below expectations), Trussell warns that with the escalating tariff situation he’s “no longer confident that negative earnings revisions are behind us.”
In addition, the timing looks especially difficult for Dollar Tree: The company had planned for 2020 to be growth year, but Trussell sees “room for further disappointment in a more challenging retail environment.” He believes that bulls are too confident in Dollar Tree’s ability to turn Family Dollar around quickly, and suggests that investors who want to own shares of discount retailers would do better to buy into Walmart (WMT) instead.
Last edited:
