Dollar Tree (DLTR, Financial) may emerge as a quiet beneficiary of the new U.S. tariff environment, according to Citi Research, which upgraded the discount retailer's stock to Buy from Neutral.
The firm sees the shifting trade policy landscape giving Dollar Tree more flexibility to raise prices beyond its current $1.25 threshold, without triggering the same resistance faced when it first broke the “buck” in 2022.
Citi analyst Paul Lejuez noted that the higher tariff regime allows the company to lift price points to the $1.50–$1.75 range. The last time Dollar Tree raised prices, comparable sales climbed 9% in fiscal 2022 and 6% in fiscal 2023, with EBIT margins gaining 220 basis points from 2021.
The company's multi-price-point strategy, which includes items priced at $3 and $5, appears to be gaining traction with value-focused consumers. According to Redfox Capital Ideas, this pricing approach has successfully reshaped customer perception, making higher-priced items feel like strong value propositions.
Citi also adjusted its view on rival Dollar General (DG, Financial), upgrading the stock to Neutral from Sell. The firm cited Dollar General's limited exposure to tariffs—only about 10% of its sales are affected—and its stable positioning within the value retail space.
