While the broader markets are touching fresh all-time highs every week lately, shares of discount retailer Dollar Tree (DLTR) are down over 60% from record levels. Valued at a market cap of $14.9 billion, the company has two primary business segments that include: Dollar Tree, which offers consumable merchandise, durable housewares, toys, stationery, and more; along with the more recently acquired Family Dollar, a chain of general merchandise retail discount stores that sell food and beverages, tobacco, household chemicals, automotive supplies, pet food, and similar.
Let’s see what Wall Street expects from the beaten-down retailer in fiscal Q3 of 2025 (which ended in October), and whether it can stage a comeback over the next 12 months.
Will Dollar Tree Beat Estimates in Fiscal Q3?
Dollar Tree is expected to report its fiscal Q3 earnings before the open next Wednesday, Dec. 4. Analysts expect the retailer to report revenue of $7.44 billion and adjusted earnings of $1.08 per share. In the year-ago period, DLTR posted revenue of $7.31 billion and earnings of $0.97 per share. So, while earnings growth is forecast at 1.75%, earnings might expand by 11% year over year.
DLTR stock tumbled over 22% on Sept. 22 following its fiscal Q2 results, as the company lowered its full-year outlook due to spending pressures on customers and higher expenses tied to customer-related litigation claims and other store incidents.
Management lowered the fiscal 2025 sales forecast to a range between $30.6 billion and $30.9 billion, below the previous guidance of $31 billion and $32 billion. It also cut the earnings midpoint guidance to $5.40 per share from $6.75 per share for fiscal 2025.
Why is DLTR Stock Dropping?
Historically, discount retailers such as Dollar Tree have thrived amid challenging economic conditions. However, over the last two years, dollar stores have faced a slew of micro and macro problems.
For instance, lower-income households in the U.S. account for the majority of dollar store sales, particularly in DLTR's Family Dollar segment. These households are under severe pressure due to inflation and elevated interest rates, thereby spending largely on consumables such as food and other essential household items. Conversely, middle-income and upper-income households have largely either avoided trading down due to a strong job market, or are opting instead for rival chains like Walmart (WMT).
In fiscal Q2, Dollar Tree reported revenue of $7.38 billion, compared to estimates of $7.49 billion. Its earnings of $0.97 per share were also lower than consensus estimates of $1.07 per share. In fact, Dollar Tree has missed earnings estimates in three of the last four quarters.
In March, Dollar Tree announced it would close 1,000 Family Dollar stores due to poor performance. A few months later, it disclosed plans for a potential sale of the Family Dollar brand, which it acquired for $9 billion in 2015.
Is DLTR Stock Undervalued?
Analysts expect Dollar Tree’s adjusted earnings to fall from $5.89 per share in fiscal 2024 to $5.40 per share in 2025. However, adjusted earnings are forecast to improve to $6.10 per share in fiscal 2026 and $6.80 per share in 2027. So, priced at 10 times forward earnings, DLTR stock is relatively cheap.
Moreover, Wall Street projects free cash flow to more than double to $1 billion in 2027, up from $416 million this fiscal year.
Out of the 24 analysts covering DLTR stock, the consensus is a “moderate buy,” and the average target price is $83.92, about 17.4% above the current trading price.
