Dollar Tree (DLTR) Stock Gains Ground as Analysts Turn Bullish on Traffic Recovery

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Jefferies lifted Dollar Tree’s rating from Underperform to Hold based on strengthening customer traffic patterns
Foot traffic in Q2 reached +1.4%, a significant improvement from Q1’s -0.8%, with July soaring to +4.5%
Jefferies increased its Q2 comparable sales forecast to 3.4% and earnings per share projection to $1.15
Wells Fargo boosted its price objective to $155 from $145 while maintaining an Overweight stance
DLTR shares gained approximately 1% during premarket hours after the rating change

Shares of Dollar Tree advanced roughly 1% in Tuesday’s premarket session after Jefferies elevated the discount retailer’s rating from Underperform to Hold.

Dollar Tree, Inc., DLTR

The rating improvement arrived as analysts under the direction of Corey Tarlowe highlighted strengthening customer visit metrics and noted that the stock now presents minimal near-term downside exposure.

Jefferies characterized Dollar Tree’s operations as having evolved back to being “simple and straightforward.” The firm’s earlier downgrade had raised red flags regarding the multi-price strategy implementation, intensifying competitive dynamics, and transaction-focused expansion that pressured customer visits and profit margins.

DLTR was changing hands near $130.48 ahead of the market open, representing a gain of $0.94.

While those previous concerns have materialized as expected, Jefferies noted, the narrative is now evolving. Comparable store performance remains robust and customer visit metrics are showing positive momentum.

The rolling foot traffic figure for Q2 registered at +1.4%, marking a substantial advancement from the -0.8% recorded in Q1. July’s standalone performance reached +4.5%, a figure that warrants significant attention.

Customer Visits Reach Nine-Quarter Peak

Jefferies noted that Q2’s customer traffic expansion represents the most robust performance across the previous nine trailing quarters. The analysis utilized Placer’s rolling three-month visitation metrics to construct its projections.

The analytical framework suggests approximately 0.8% in traffic-driven comparable growth, coupled with an estimated transaction value increase of roughly 2.6%, yielding a combined 3.4% total comparable sales projection. This figure exceeds Wall Street’s consensus of 3.1% and approaches the upper boundary of management’s provided guidance band of 2.5% to 3.5%.

Jefferies also elevated its Q2 earnings per share projection to $1.15 from $1.00, edging past the Street’s consensus estimate of $1.12.

Certain challenges persist. Company leadership must still transition all 9,000 locations to the organization’s “G.O.L.D. Standard” framework for signage clarity and pricing transparency. This represents a substantial operational undertaking.

Jefferies also identified a possible modest transaction headwind during Q3 connected to a 40th-anniversary promotional initiative featuring $1 pricing on specific merchandise. However, the campaign could potentially attract additional customer traffic in the immediate term.

Regarding competitive dynamics, Target has been capturing increased broader retail market share recently. Nevertheless, Jefferies indicated it doesn’t anticipate Dollar Tree losing additional market position in the near term as pricing strategies gain traction and customer visits continue their recovery trajectory.

Wells Fargo Increases Price Objective to $155

In a separate move, Wells Fargo elevated its price objective on DLTR to $155 from $145 while retaining an Overweight recommendation.

Wells projects Q2 earnings per share of $1.15 on comparable store sales expansion of 3.3%, and suggests potential upside to these forecasts is achievable.

The firm anticipates Dollar Tree will increase its full-year outlook, supported by moderating traffic comparisons, a reduced tariff burden during the latter portion of the year, and an expedited share buyback initiative.

Wells Fargo emphasized that tariff reimbursements constitute an investment reserve that could further bolster momentum entering the second half of the fiscal year.

Dollar Tree has scheduled its Q2 earnings release for September 3.

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