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Sentiment on Stocktwits ended on an ‘extremely bullish’ note on Wednesday
Shares of Dollar Tree (DLTR) climbed more than 3% on Wednesday after the company said it agreed to divest Family Dollar for about $1 billion and reported mixed fourth-quarter earnings. Retail sentiment was inching up.
Dollar Tree's adjusted earnings per share of $2.29 came above the consensus of $2.20, while Q4 revenue came in at $5 billion, below the consensus of $8.23 billion, according to The Fly.
Net sales increased 0.7% from the year-ago period, while its same-store net sales increased 2%, driven by a 0.7% increase in traffic and a 1.3% increase in average ticket, said the company.
The company said it agreed to sell Family Dollar after concluding a review of strategic alternatives. The buyers, Brigade Capital Management LP and Macellum Capital Management, LLC, will team up to acquire the business segment in a deal expected to close in the next quarter.
Dollar Tree reportedly bought the business nearly a decade ago for nearly $9 billion, and this sale would mark a deep discount on the business. Dollar Tree expects a roughly $0.30 to $0.35 per share negative impact on full-year earnings from the sale of Family Dollar.
"In the fourth quarter, our team was focused on successfully closing out the year, bringing the strategic review to a favorable conclusion, and setting Dollar Tree on a path to realize its full potential to create long-term value for our associates, customers, and shareholders," said Mike Creedon, CEO.
"We finished 2024 on a high note with strong execution at Dollar Tree as growing customer acceptance of our expanded assortment drove sales momentum. With the sale of Family Dollar set to close later this year, we will be able to fully dedicate ourselves to Dollar Tree's long-term growth, profitability, and returns on capital."
Sentiment on Stocktwits ended on an 'extremely bullish' note on Wednesday, with message volume in the 'extremely high' zone.
One bullish trader noted a "nice" hammer pattern emerging in its stock.
Following the sale development, Truist reportedly raised the firm's price target on Dollar Tree to $84 from $76 with a ‘Buy’ rating.
According to the brokerage, while the company's Q4 report contains "some negatives," the "bigger picture view" of the company is "clearly positive."
The analyst cited Dollar Tree's sales momentum and predicted a 3%- 5% comp growth rate, which is "better than most."
The Family Dollar sale will also provide cash and other tax benefits, providing a single focus to the management team, added the report. The firm also highlighted recent investments that will strengthen the company's balance sheet.
Dollar Tree stock is down 7.6% year-to-date. As of Nov. 2, 2024, the retailer operated 16,590 stores in 48 states and five Canadian provinces.
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