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Ask Matt: Can dollar stores keep cashing in?

Matt Krantz
USA TODAY

Q: Can dollar stores keep cashing in?

A Dollar Tree store is seen on July 28, 2014 in Miami, Florida.

A: Investors who own a piece of a dollar store must be wondering why they keep hearing about trouble in retail. In the discount retail segment, business is good and expected to stay that way.

In stark contrast to the disappointing results this week at high-end retailer Tiffany’s (TIF), Dollar Tree (DLTR) Thursday reported 25% higher adjusted profit in the quarter ended in April. The bottom line beat earnings expectations by nearly 10%, says S&P Global Market Intelligence. Revenue for the quarter essentially matched expectations, but that was a 134% gain from the same year-ago period. The big jump in revenue is due to the company’s acquisition of Family Dollar. Even so, sales at stores open at least a year were up 2.3%, which is exactly the kind of growth other retailers would love to have. Dollar Tree’s results pushed the stock up $10.01, or 13%, to $88.37 Thursday and set a 52-week high. The stock is up 17% already the past year, putting it close to the average analysts’ 18-month price target of $89.63. But while the stock might be played out for now, analysts are betting there’s plenty of growth left. Estimates are calling for 62% growth in adjusted profit this fiscal year as consumers continue to look for deals.

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.

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