Should You Invest in Dollar Tree?

PHOTO CREDIT: Dollar Tree

OVERVIEW

Dollar Tree Incorporation is a company based in the United States. The company operates a chain of retail stores across the nation. Through the company’s over 15,500 stores, it sells food, personal care, decorative, home, and many other kinds of products for a cheap price to consumers. The company was founded in 1986.

Why You Should?

  1. Dollar Tree is a great reopening play in an investor’s portfolio. As the pandemic comes to an end, consumers will have more money in their pockets and can spend more money at stores like Dollar Tree. This sales growth after the pandemic will benefit the company and make it a good long-term investment option.
  2. The COVID-19 pandemic benefited the company. As people had less income and only needed to spend on essential goods, Dollar Tree was a great option for them. Dollar Tree is known to sell essential personal care and food products to consumers in communities for a cheap cost (around 1 dollar per product). These benefits from the pandemic will benefit the company.
  3. Dollar Tree is a safe investment option due to the essential nature of the products that it sells. Despite the economic conditions, consumers will continue to spend on cheap food and personal care products, as well as an assortment of other goods A safe investment option will benefit investors looking for good long-term investment options and will also benefit the company.
  4. Dollar Tree operates an extremely popular business model with tons of growth opportunities. Despite the pandemic, the company opened over 500 dollar stores in 2020 and looks to open another 600 in 2021. As this growth continues to occur, it will benefit the company and its investors in the future.

Why You Should Not?

  1. The company faces tough competition in the retail industry. Some of these competitors include Costco, Walmart, Dollar General, and many others. This competition might hurt the company and its investors in the future.
  2. Inflation and supply chain issues might hurt the company’s growth until prices return to normal. The company recently announced several price increases due to rising costs of labor, shipping, and product cost. This caused the company’s stock price to fall as it starts to see profit margins fall. This will continue to hurt investors as well.
  3. Dollar Tree has to deal with a negative political environment in many of the communities that it operates in. The company is known to enter low-income communities and offer people cheap and bad-quality products. The company also causes other small grocery chains and discount retailers to go out of business. This might hurt the company’s future growth.

MY OPINION

I think that Dollar Tree is a good long-term investment because of its position as a good reopening play, positive impacts from the pandemic, its position as a safe investment option, as well as its popular business model. However, tough competition, negative impacts from supply chain issues, as well as a negative political environment might hurt the company and its investors in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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