Value-conscious investors, very like value-conscious shoppers, wish to stretch their dollars as much as possible. Dollar Tree (NASDAQ:DLTR) can have bargains galore in its stores, but DLTR stock isn’t necessarily the proper pick for value and growth.

It may appear self-evident that Dollar Tree should thrive when product prices at many big-box retail chains are on the rise. Indeed, as the corporate’s name implies, Dollar Tree must be a haven for affordably priced goods.

Perhaps there are bargains to be present in Dollar Tree and at its associated Family Dollar locations, but the corporate still faces stiff competition from Walmart (NYSE:WMT) and from Temu, an increasingly popular Chinese e-commerce platform. Granted, Dollar Tree is succeeding in some respects, but with regards to DLTR stock, the phrase “buyer beware” applies in 2024.

Dollar Tree is changing and stores are closing

To its credit, Dollar Tree resisted inflationary pressures and sold all items for $1 or $1.25 for a surprisingly very long time. Nonetheless, it seems that even Dollar Tree needed to succumb to cost pressures ultimately.

Unfortunately, food-price inflation hits struggling Americans directly of their pocketbooks, and it’s forcing Dollar Tree to sell food items for far more than $1. As evidence of this, Dollar Tree is now selling $3, $4 and $5 frozen and refrigerated food items at greater than 6,500 locations.

This isn’t only happening within the food section. In accordance with the corporate’s latest quarterly report, Dollar Tree currently sells $3 and $5 center-store merchandise at around 5,000 stores. This might prompt some bargain hunters to show to Walmart and even Temu for higher deals on certain items.

It stays to be seen whether Dollar Tree will reach selling a lot of its more-than-$1 items this yr. In the intervening time, it looks like the corporate isn’t doing too badly, because it opened 219 latest stores in its fiscal fourth quarter; with that, the corporate’s total full-year new-store openings increased to 641.

Then again, Dollar Tree’s “portfolio optimization review” resulted in plans to shut roughly 600 Family Dollar stores in the primary half of fiscal 2024. As well as, Dollar Tree expects to shutter about 370 other stores (not necessarily of the Family Dollar brand) as their leases expire.

Dollar Tree Chairman and CEO Rick Dreiling proclaimed that his company is “accelerating our multi-price rollout at Dollar Tree and taking decisive motion to enhance profitability and unlock value at Family Dollar.” Again, that “multi-price rollout” appears to mean more-than-$1 product prices in response to inflation pressures.

As for the “decisive motion,” I believe that Dreiling is referring to the aforementioned Family Dollar store closures. After all, I don’t have an insider’s view of what’s occurring at Dollar Tree and Family Dollar. Generally speaking though, large-scale store closures aren’t an indication of success and confidence in a brand.

Earnings miss detracts from Dollar Tree’s value proposition

Prior to Dollar Tree’s fourth-quarter fiscal 2023 financial report, which was released this morning, the corporate’s GAAP trailing 12-month price-to-earnings (P/E) ratio was 28.36x. For comparison, the sector median P/E ratio was 20.67x.

Thus, judging by that metric, Dollar Tree didn’t have a bargain-level valuation. Nonetheless, DLTR stock is down sharply today, so the corporate’s valuation might improve somewhat through the next few trading sessions.

Nonetheless, even when Dollar Tree’s valuation multiple comes down, the bull case isn’t very compelling. Whereas analysts expected the retailer to have generated revenue of $8.67 billion during Q4 of FY2023, it fell short with revenue of $8.63 billion. Moreover, Dollar Tree’s quarterly adjusted earnings of $2.55 per share missed Wall Street’s call for earnings of $2.66 per share.

The near-term future isn’t particularly vibrant either, as Dollar Tree expects to generate current-quarter earnings of $1.33 to $1.48 share. That’s a pessimistic outlook in comparison to the analysts’ consensus estimate of $1.70 per share.

Short-term stock traders don’t prefer it when corporations release lower-than-anticipated forward guidance, in order that they’re punishing Dollar Tree today by dumping its shares. If the stock price drops low enough, perhaps there might be an irresistible bargain. In my estimation, $110 could be an excellent price for DLTR stock, although $100 could be even higher.

Nonetheless, even at those prices, Dollar Tree shares may not be value buying. Probably the most sensible strategy could be to attend one other quarter to see if Dollar Tree and Family Dollar expect to shut more stores and proceed specializing in higher-than-$1 items. In that case, then it’s probably not an amazing idea to take a position one’s dollars in Dollar Tree.