This Gem Will Definitely Make Your Portfolio Shine
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
At any point of time, the safest option to invest is the discount retail industry. Even if the economy is uncertain and consumer demand is weak, the industry will manage to make the most of it. A price sensitive customer will always reach out to discount retail for its daily needs so that he can save as much of his hard earned money as possible. And this is what has made discount retailers fair well in the last few years.
Dollar Tree (NASDAQ: DLTR), a leading discount retailer, again lit up the Street with sparkling second quarter results which were way ahead of the market’s estimates. Let us dig deeper into this shining company.
In the prevailing market conditions, the very first reason for Dollar Tree to do well is its attractive discounts which led to increased traffic in its stores enabling the company to post 10.5% growth in revenue over last year. The retailer’s strategy of providing products, especially basic commodities, for $1 is its USP (Unique Selling Propostion), the results of which are commendable. In fact, Dollar Tree played smart by offering high value products side by side in order to lure shoppers.
The growing interests of customers has enables Dollar Tree to continuously perform well and pass this on to investors in various ways. The discount retailer has been giving value to its shareholders by repurchasing shares which it continues to do in the coming quarter also. But this time it has gone a step further by exercising a 2 for 1 stock split during the period making its stock price lower for investors.
Moreover, going on to the year to date performance of its stock price, the company has won it here also. It has provided an 18% return to its investors since the start of the year. However, it is not alone in this case. Its peers such as Dollar General (NYSE: DG) and Family Dollar Stores (NYSE: FDO) have also performed equally well owing to the industry trend of doing well in an uncertain economy. Dollar General and Family Dollar have returned 25% and 13% respectively in the same period which reflects the growing attractiveness of the industry.
Expansion – Key Growth Strategy
The Chesapeake-based retailer looks to be on an expansion spree. With 187 new stores already opened during the first two quarters it plans to have a total of 315 new stores opened by the end of the fiscal year. The growing number of stores is a sign of a confident retailer which looks out to reap increasing profits with each unit added to its kitty.
Moreover, Dollar Tree’s move to expand its frozen and refrigerated business continues to pose great opportunities to the company. This segment has played an important role to drive consumers into the stores since it caters to the most essential need of the consumers.
Additionally, the company has not forgotten the need of a well placed distribution center for its expanded reach. It has been focusing on growing its infrastructure in order to reach out efficiently to its stores.
It’s a complete package when you look at this retailer. Dollar Tree exactly knows what to do to fulfill its objective. It caters to its customers’ needs well, efficiently manages costs and grows at the same time. Moreover, its growing online business and efforts to drive seasonal demands such as Summer Fun Promotion has been having a solid impact on the customers.
Also, the company is always ready to pass on its growth to its investors which serve as a great attraction. Everything seems to work favorably for this smart retailer and cashing in on this gem is definitely a golden opportunity, especially in the prevailing economic conditions.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.