Citi reduced its recommendation on Dollar Tree to Neutral from Buy on Friday, arguing that recent share gains have materially reduced the upside for investors even as the retailer continues to make operational progress.
The downgrade follows a substantial rally in the stock, which Citi notes has doubled off its low after the U.S. administration announced tariffs in April 2025. The firm said the shares are now trading within roughly 3% of its $132 target price, a position Citi describes as producing a "balanced risk/reward."
Citi analyst Paul Lejuez pointed to evidence that Dollar Tree is "showing signs of success in its multi-price strategy," but concluded the limited incremental upside warrants the Neutral rating.
Looking ahead to the retailer’s fourth-quarter report due March 16, Citi expects a strong result, forecasting earnings of $2.63 per share compared with a consensus of $2.53. The firm attributes its estimate to same-store sales growth of 6% and an approximate 150 basis point expansion in gross margin.
For fiscal 2026, Citi anticipates management will provide earnings guidance in a range of $6.50 to $7.00 per share, a band that brackets consensus of $6.70. Lejuez also observed that management had previously signaled high-teen percentage EPS growth for 2026 at its October investor day, while the market, in his view, appears to expect more than $7 in EPS. Citi’s internal modeling produces an estimate of $7.45 for 2026.
On traffic and spending trends, Citi’s internal tracker shows a deceleration in foot-traffic to 1.1% growth in the fourth quarter from 2.2% in the prior period. At the same time, Citi’s credit-card data indicate dollar-store spending rose 9.1% in the quarter, suggesting customer spend per visit remained healthy.
Overall, Citi described the setup into the fourth-quarter print as "slightly favorable," but warned that the next 12 months present a more evenly balanced outlook given current valuations and the expectations gap. The bank’s move to Neutral reflects its assessment that, despite operational tailwinds and an anticipated solid quarterly report, the stock’s recent run-up limits potential near-term upside for investors.
Key details:
- Citi downgraded Dollar Tree from Buy to Neutral.
- Shares have roughly doubled off their low after April 2025 tariff announcement and now trade within about 3% of Citi’s $132 target.
- Citi forecasts Q4 EPS of $2.63 versus consensus $2.53 and expects fiscal 2026 guidance of $6.50 to $7.00 per share, with the firm modeling $7.45.
Sectors affected: Retail, consumer discretionary, and discount retail operators.