TLDR
- Jefferies upgraded Dollar Tree from Underperform to Hold, citing improving traffic trends
- Q2 foot traffic hit +1.4%, up from -0.8% in Q1, with July surging to +4.5%
- Jefferies raised its Q2 comp estimate to 3.4% and EPS estimate to $1.15
- Wells Fargo raised its price target to $155 from $145, keeping an Overweight rating
- DLTR stock rose about 1% in premarket trading following the upgrade
Dollar Tree stock climbed around 1% in premarket trading on Tuesday after Jefferies upgraded the discount retailer from Underperform to Hold.
The upgrade came as analysts led by Corey Tarlowe pointed to improving foot traffic data and said the stock now carries limited near-term downside risk.
Jefferies described Dollar Tree’s business as having returned to being “simple and straightforward.” The previous downgrade had flagged concerns around the multi-price rollout, competitive pressure, and ticket-driven growth squeezing traffic and margins.
DLTR was trading around $130.48 before the open, up $0.94 on the day.
Those concerns have largely played out, Jefferies said, but the picture is now shifting. Comps are running strong and traffic data is turning in the right direction.
Q2 rolling foot traffic came in at +1.4%, a clear step up from -0.8% in Q1. July alone hit +4.5%, which is a number worth paying attention to.
Traffic Trends Hit Nine-Quarter High
Jefferies said Q2 traffic growth was the strongest across the last nine trailing quarters. The firm used Placer’s rolling three-month visit data to build its estimates.
The model points to roughly 0.8% in traffic comp, with an implied ticket comp of around 2.6%, combining for a 3.4% total comp estimate. That sits above the Street’s 3.1% and near the top of management’s own guidance range of 2.5% to 3.5%.
Jefferies also lifted its Q2 EPS estimate to $1.15 from $1.00, nudging above the Street consensus of $1.12.
Some risks remain. Management still needs to bring all 9,000 stores up to the company’s “G.O.L.D. Standard” on signage and pricing clarity. That is a big operational task.
Jefferies also flagged a potential minor ticket headwind in Q3 tied to a 40th-anniversary $1 rollout on select items. That said, the move could pull more shoppers through the door in the short term.
On competition, Target has been picking up broader retail market share lately. But Jefferies said it does not expect Dollar Tree to lose further ground near-term as pricing efforts take hold and traffic continues to recover.
Wells Fargo Lifts Price Target to $155
Separately, Wells Fargo raised its price target on DLTR to $155 from $145 while keeping an Overweight rating.
Wells models Q2 EPS of $1.15 on same-store sales growth of 3.3%, and says upside to those estimates is possible.
The firm expects Dollar Tree to raise full-year guidance, helped by easing traffic comparisons, a lower tariff rate in the back half of the year, and an accelerated share repurchase program.
Wells Fargo added that tariff refunds represent an investment pool that could further support momentum heading into the second half.
Dollar Tree is scheduled to report Q2 earnings on September 3.
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