Citi has upgraded Dollar Tree (NASDAQ:DLTR) from Neutral to Buy, raising its price target to $103 from $76, citing an unexpected advantage stemming from rising tariffs. Currently, the company’s shares are up 8% intra-day.
While nearly half of Dollar Tree’s product mix is exposed to newly heightened import duties, Citi argues that the environment of sweeping tariffs will actually favor the discount retailer. In this new landscape, where retail prices are poised to rise industry-wide, Dollar Tree can justify broader pricing increases—something the company had previously been cautious to implement.
Unlike its 2022 move when Dollar Tree raised its famous $1 price point for the first time—sparking some consumer pushback—the current climate offers better optics and consumer acceptance for additional hikes. According to Citi, this could allow the retailer to comfortably move pricing tiers up to $1.50 or $1.75, unlocking new margin potential.
Historical data supports this thesis. After Dollar Tree raised prices in 2022, the company saw strong comparable sales growth of +9% and +6% in fiscal 2022 and 2023, respectively. Earnings also surged, with EBIT margins climbing 220 basis points over two years.
Given its strong brand association with value and affordability, Dollar Tree is well-positioned to capture market share in an inflationary environment. Citi believes the chain’s pricing power and consumer trust make it a standout winner as retail adjusts to a costlier global supply chain.