Why $DLTR Dropped

Turnaround Essay

I had predicted that Dollar Tree would miss the estimates and would probably also have to revise their forecast for the year even though I had previously decided to long two other companies in this sector. My prediction ended up being true and Dollar Store dropped by around 10%. The reason why I had decided to bet against them was the fact that they have a very strict pricing rule where most of the items are only around a Dollar so while other companies are constantly increasing their prices, Dollar Store has no other option but to keep them the same. Due to inflation and higher operating costs, their prices heavily affected their revenue and they had to revise their estimates. I believe one reason why they dropped this much was due to how overvalued they were. During the entire company’s history, they were at the highest value they have ever been at and it wouldn’t make sense for a retail company during a recession to reach its peak. This also caused many long-term investors to sell their shares as they had already reached maximum profit and the company will probably never be at this price again for a while.