Why Dollar Tree Stock Has Lost 21% in 2018

What happened

Discount retailer Dollar Tree (NASDAQ: DLTR) has trailed both the market and peers like Dollar General during the first half of 2018. It shed 21% compared to the 2% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts.

The chain remains a market beater over wider time periods, though, having quadrupled in the past decade compared to a 164% increase in the S&P 500.

So what

The underperformance this year came after the company disappointed investors with its fiscal first-quarter earnings report. The period brought declining profitability and slightly slower sales growth, just as it did for rival Dollar General. However, Dollar Tree lowered its sales and profit outlook for the full year while Dollar General left its forecasts in place.

A customer shops for cleaning supplies.

Image source: Getty Images.

Now what

Dollar Tree is still on pace to boost sales and earnings in 2018, which is a testament to its powerful value-based retailing strategy. Full-price rivals are enjoying better customer traffic in general today, but their earnings are being pressured by shifts toward e-commerce spending.

Though Dollar Tree isn't as exposed to the online sales threat, investors are still likely to demand consistently strong growth out of both its Dollar Tree and Family Dollar brands in order to keep its long-term stock price rally going.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.