Written by Brenda Nakalema

Dollar Tree Stock Rises After Agreement To Change Board

Dollar Tree stock is climbing after the news was released that the discounter has re-arranged its board as part of …

Dollar Tree stock is climbing after the news was released that the discounter has re-arranged its board as part of an agreement with investor Mantle Ridge. This situation highlights the continued pressure on retailers as they face a year of increasing difficulty ahead.

Dollar Tree (ticker: DLTR) announced that its expanding board would include a number of candidates suggested by Mantle Ridge, including a former chief executive of rival Dollar General (ticker: DG), Richard Dreiling, among other changes. The shares rose almost 4% to $145.90 in recent trading.

Mantle Ridge, the company’s third-largest shareholder, has been exerting pressure and pushing for changes at Dollar Tree since as early as 2021. Despite the steps in the right direction, the company is not getting its entire wish list- it originally demanded an overhaul of the entire board. However, Mantle Ridge’s involvement has had more than a few positive outcomes by providing a floor for the company’s stock. There is fear amongst the bull though, that failure for the company to execute well could potentially pivot certain strategic alternatives laid out by the firm.

Edward Kelly, a Wells Fargo analyst, set the company an Overweight rating and $175 target. Kelly says he isn’t surprised that the shares gained after the news, writing that the “near-term path remains favourable, as the next logical catalyst is the unveiling of the turnaround plan of Dreiling and Mantle Ridge. That being said, we acknowledge there is a lot of work to be done from here to create value.”

Jefferies’ Corey Tarlowe placed the company at a Hold rating but still went ahead to praise the news. “We believe Richard Dreiling is a strong retail leader, and this reconstitution of the board should help bring fresh perspectives to Dollar Tree, further enhancing value for stakeholders.”

The settlement comes at an interesting time when activist investors have been the talk behind a lot of the buzz within retail as they engineer change at various companies from Kohl’s (ticker: KSS) to Bed Bath & Beyond (ticker: BBBY)

Despite the fact that each of the companies is unique in its own way, retail has been the latest target for activist investors. These companies as a whole seem to have benefited from the Covid-19 pandemic- not only did consumers have stimulus checks to spend, but shopping also took on an entertaining role as options like vacations and concerts were not options during those times. Those retailers that failed to take advantage of the situation heavily missed the mark and risked additional shareholder enticement.