Dollar Tree Stores (DLTR)

By its very nature, Dollar Tree Stores cannot pass on price increases to consumers because they cannot raise prices above $1. Any price increases stemming from increases in commodities' prices, labor costs, or inflation must be absorbed by the company.

Dollar Tree has reported quarter after quarter of increasing sales and net income growth throughout the economic downturn. As many retailers felt the effects of frugal consumers, Dollar Tree thrived as they came en masse to buy its $1 items. The question now is how will a recovering economy affect the consumers long-term preferences. Was their migration to Dollar Tree and other ultra discount retailers like Family Dollar and Dollar a temporary movement, or will these consumers, experiencing the savings and value of shopping at a discount retailer, remain loyal customers? If these customers do not return, Dollar Trees bottom line will surely not see the same level of rapid growth. Additionally, will Dollar Tree be able to keep up its stock price a recovering economy? If the company cannot continue to put up numbers better than analysts are expecting, the shares will fall. As of the end of the summer of 2010, Dollar Tree was trading at around $48 per share, 18 times its earnings, and near its 52 week high.