DLTR

The headline event is structural, not cosmetic: on July 5, 2025 Dollar Tree completed the sale of Family Dollar to 1959 Holdings for ~$793M cash, and every period is now restated with Family Dollar as discontinued operations. That reframes the messy history — the -$998M (FY2024) and -$3.03B (FY2025) losses were driven by a ~$3.4B held-for-sale write-down plus a ~$407.7M loss on disposal, i.e. the unwinding of a value-destructive acquisition, not the core banner deteriorating. What remains is a focused Dollar Tree: FY2026 revenue $19.4B (+10.4%), operating income $1.65B (+13.1%), net income $1.28B, diluted EPS $6.22, on a 36.4% gross margin and 8.5% operating margin. A 34.2% ROE and $2.19B of operating cash flow against $1.13B capex (~$1.06B free cash flow) point to a genuinely profitable, self-funding retailer now that the anchor is cut loose.

Valuation is fair rather than cheap and that is the main governor on conviction. At $124.05 the stock trades at 19.9x FY2026 EPS and just 1.3x sales — a reasonable multiple for a variety-store chain growing revenue double digits with expanding margins and a strong return on capital. The capital-allocation signal is aggressive: buybacks jumped 287% to $1.55B and shares outstanding fell 8.3% to 197M, so per-share economics get a mechanical tailwind on top of operating growth. The balance sheet is clean enough to support it — $2.43B long-term debt, zero current debt, and no borrowings on the credit facilities or commercial paper at year-end. Applying ~22x to the $6.22 EPS base yields a ~$137 target, a modest premium that credits the simpler story and the buyback flywheel without assuming heroics.