In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
I think Dollar Tree could collapse because many of its customers could have no money because of the Coronavirus Depression. For instance, Statista estimates 10.74 million Americans were unemployed in November 2020. That number rose from 5.81 million in November 2019 and fell from 23.08 million in April 2020.
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Even with a good holiday season, Dollar Tree may lack the resources to survive or even remain competitive. It reported revenues of just $21.52 billion in October 2017.
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Despite that Dollar Tree’s revenues are still growing, they went from $18.41 billion in April 2016 to $20.92 billion in April 2017. That made for an increase of $2.51 billion but most of that growth can be attributed to the Family Dollar acquisition.
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My take is that both Dollar Tree and Dollar General are overpriced stocks. Dollar Tree is a slightly safer investment because it has more cash but neither is a good long-term investment. The market they are in is simply too competitive and unstable to support their business models.
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Dollar Tree is in a little better shape, but it will still need several quarters of revenue growth to approach stability. The limited amount of float it carries; puts Dollar Tree in a vulnerable position in a rapidly changing retail environment.
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My take is that Dollar Tree is not going to make money anytime soon even if it experiences significant revenue growth. Those that want to profit from the dollar store boom should avoid Dollar Tree and its archrival Dollar General; instead, they should buy Berkshire Hathaway. Berk Hath and McLane are going to make money even if Dollar Tree goes down the death spiral.
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