Tariffs, Management Makeover Could Make Dollar Tree’s 2025 Turnaround a Challenge

A Dollar Tree in Bowie, Md., on Nov. 23, 2021. Jim Watson/AFP via Getty Images

Analysis

A dollar saved is not always earned, especially if you are a discount retail chain trying to cut rising operational costs and struggling to attract bargain-hunting consumers back to local stores.

With its fourth-quarter earnings report on the horizon, Dollar Tree Inc. faces several post-pandemic challenges as Wall Street analysts and investors are concerned about the Chesapeake, Virginia-based retailer’s near-term financial results and long-term business model.

Among many uphill battles, the discount retailer was broadsided Friday by President Donald Trump’s plan to impose reciprocal tariffs against U.S. trading partners worldwide. That complicates Dollar Tree’s colossal supply chain exposure to China. According to its 10-K regulatory filings from December 2024, merchandise imported directly accounts for 41 percent to 43 percent of the company’s total retail purchases, with the “vast majority” coming from China.

In an email statement provided to The Epoch Times, the National Retail Federation (NRF) said the reciprocal tariffs will raise prices for most U.S. consumers and erode household spending power.

“While we support the president’s efforts to reduce trade barriers and imbalances, this scale of the undertaking is massive and will be extremely disruptive to our supply chains,” said David French, executive vice president of government relations for the NRF, which represents the nation’s largest brick-and-mortar and online retailers.

Dollar Tree is also undergoing a recent executive suite makeover and a “strategic review” of its $9 billion 2015 acquisition of former rival Family Dollar. In June, Dollar Tree announced that it is considering “a potential sale, spin-off, or other disposition” of the troubled business, nearly a decade after Wall Street cheered the deal.

Newly hired Dollar Tree CEO Mike Creedon also faces the difficult job of turning around the company while acclimating to a restructured board of directors and a new senior executive team following a slate of firings, promotions, and new hires.

Two months ago, Creedon replaced former company CEO and Chairman Rick Dreiling as interim chief executive and then permanently a month later. Ed Kelly, the company’s lead independent director and former Citigroup executive, took over the chairman’s role after Dreiling resigned, citing health concerns.

“Following a search, we are unanimous as a board in our belief that Mike is the right leader for Dollar Tree,” Kelly said in a statement.

Under Creedon’s brief tenure, Dollar Tree has bolstered and retooled several internal initiatives to improve its financial and operational performance. These programs range from updating pricing models, product mix, and store design to revamping the company’s supply chain network and embracing technology upgrades and mobile-friendly apps.

The company has also continued its controversial $1.25 pandemic price point promotion after dropping its famous “Everything’s a Dollar” marketing that drove traffic to Dollar Tree stores for 35 years. Shortly after that 2021 decision, which became an internet meme and was criticized by customers, key investors, and Wall Street analysts alike, former CEO Mike Mitynski stepped down after less than two years on the job and was replaced by Dreiling.

Overall, after longtime CEO Bob Asser resigned in 2017, Dollar Tree has seated five chief executives in eight years.

“Given how disappointing the company’s performance has been over the last few years, these management changes are hardly surprising,” Scot Ciccarelli, senior equity analyst at Truist Securities, told the Epoch Times via email.

However, Ciccarelli said that the debate on the company’s performance comes down to whether the Dollar Tree and Family Dollar brands are permanently impaired or can improve through ongoing self-help initiatives.

Although the nation’s largest discount retailer has seen a “string of [earnings] disappointments,” Ciccarelli’s four-quarter guidance shows sales improving as Dollar Tree benefits from the rollout of a multi-price point format and the ailing Family Dollar flag rebounds after closing its worst stores.

“While ‘24 was a hugely disappointing year, the stabilization in the business in 3Q suggests that ’25 may be a better year,” Ciccarelli wrote in a research note shared with The Epoch Times.

Ciccarelli warns, however, that retaliatory tariffs ahead and the “Walmart effect” could pressure Dollar Tree’s results, along with rivals Dollar General and Target. He said Walmart’s heavy investments over the past decade in advertising, store improvements, wage hikes, and e-commerce have allowed the retail giant to reassert its price leadership and build “price gaps” against smaller peers.

Also, Dollar Tree has made some slow progress following a settlement with activist investment firm Mantle Ridge in March 2022, including adding seven new board directors and executing a companywide review of operations. As part of that review, Dollar Tree identified nearly 1,000 underperforming locations for closure, relocation, or re-branding based on market conditions and other factors, such as local store sales, the company’s year-end 10-K filings show.

Today, Dollar Tree operates 16,590 local stores in 48 states and five Canadian provinces, including 8,868 of its namesake locations and 7,722 Family Dollar outlets, 10-K filings show. Company officials did not respond to a query from The Epoch Times concerning the timeline of the ongoing strategic review by J.P. Morgan and the Davis Polk and Wardwell law firm.

Over the past year, Dollar Tree’s stock price has plummeted from a high of $151.22 to $71.56 per share at the closing bell on Feb. 17 on the Nasdaq, down 52.7 percent from a year ago after the company’s disappointing year-end 2023 earnings report. The discount retailer is forecast to report its fourth-quarter and 2024 yearly results on March 13.