Dollar Tree Stock Is Downgraded. Why Walmart Is Part of the Problem.

Jefferies cut its target for Dollar Tree’s stock price. (Joe Raedle/Getty Images)

Key Points

• Jefferies downgrades Dollar Tree stock to Underperform from Hold and lowers its price target to $70 from $110.
• Dollar Tree’s competitive advantage is eroding as Walmart offers lower prices on equivalent items, with 87% of Dollar Tree stores near a Walmart, according to Jefferies.
• Gross margins are pressured by tariffs, rising labor costs, and a new multi-price model, leading to a 6% cut in 2025 earnings forecast.

Shares of Dollar Tree were falling Tuesday after analysts at Jefferies downgraded the stock, citing a downbeat combination of tariff pressures, rising competition, and shrinking margins.

The firm cut Dollar Tree stock to Underperform from Hold and lowered its price target to $70 from $110 in a research note Tuesday. Shares were down 2.1% to $85.86 in Monday trading.

Dollar Tree didn’t immediately respond to a request for comment.

The stock had risen 17% this year as of Monday’s close, while the S&P 500 had climbed 14%.

Dollar Tree’s longstanding competitive advantage—simple bargain pricing—may have all but evaporated. Jefferies found that shopping bills at Walmart were lower than those at Dollar Tree when comparing equivalent items and pack sizes. To make matters worse, 87% of Dollar Tree stores nationwide have a Walmart within a five-mile radius, and 83% have a Dollar General .

At the same time, gross margins face pressure from tariff costs, rising labor expenses, and the rollout of a multi-price model that includes items costing between $3 and $7. The firm lowered its 2025 per-share earnings forecast by 6% and its 2026 estimate by 9%.

“Inflation, management decisions, and tariffs have turned a simple business model into a complex one,” wrote the Jefferies team.

Fellow discount retailers were also heading lower on Tuesday. Walmart stock was down 1%, Dollar General ticked down 0.4%, and Five Below fell 3.3%.

Write to Nate Wolf at nate.wolf@barrons.com