The past decade has seen an explosion for dollar stores in North America. Low dollar retailers were somewhat of a niche industry before the Great Recession. However, this decade has seen these retailers greatly expand their customer base.
This advantage has waned in the final years of the decade. Here in Canada, Dollarama (TSX: DOL) has seen its growth slow on the domestic front. The company made a big investment in a Latin America-based dollar store retailer to bolster its growth moving into the 2020s.
Dollar Tree (NASDAQ:DLTR), one of the two largest dollar store chains in the United States, has seen its stock drop 17% over the past three months as of close on December 17. The stock took a significant hit after the release of its third quarter fiscal 2019 results.
In the third quarter, Dollar Tree reported consolidated net sales of $5.75 billion, which was up 3.7% from the prior year. Earnings per diluted share came in at $1.08, which was at the lower end of Dollar Tree’s guidance range. Enterprise same-store sales rose 2.5%, driven by an increase in average ticket and transaction count.
The company lowered its fourth-quarter guidance and blamed the damaging impact of tariffs on its earnings miss. A trade deal between the United States and China, though limited, will take a bite out of some tariffs and analysts are expecting a rebound for growth. Dollar Tree stock last had an RSI of 35, putting it just outside of technically oversold territory. I like Dollar Tree as a buy-low pick before the New Year.