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Investing.com -- Dollar Tree’s price advantage over competitors is narrowing, according to Loop Capital, which maintains a Hold rating and below-consensus earnings estimates for the company. 

The firm cited results from its latest Dollar Tree (NASDAQ:DLTR) Plus pricing study, in which it compared Dollar Tree’s prices on items priced over $1.25 to those of nearby competing retailers.

They noted that it showed smaller price gaps between Dollar Tree and rival retailers.

“Dollar Tree’s average price and total basket price gaps both narrowed from March, marking the third time in our past four pricing studies in which the differentials declined sequentially,” Loop Capital analysts wrote. 

Dollar Tree Plus items were found to be 12.5% cheaper on average than comparable products at competitors like Jewel-Osco, Target (NYSE:TGT), and Walmart (NYSE:WMT), compared to a 16.1% difference in March.

The total basket price was 14.2% less expensive than competitors, down from an 18.3% gap previously. While Dollar Tree had lower prices on 73% of surveyed items, that figure also slipped from 77% in the prior study.

Despite still offering value, Loop Capital remains cautious. “We remain comfortable with our below consensus F2Q 2025 diluted EPS estimate given the fact management ‘lowered the bar’ significantly when the company reported F1Q 2025 results,” the analysts said.

The firm also believes the importance of the Dollar Tree Plus initiative will grow once the sale of Family Dollar is completed. 

“We think Dollar Tree customers will be more likely to embrace higher-priced items that are attractively priced relative to nearby alternatives,” they wrote.

With tightening price gaps and a “show me” narrative still in place, Loop Capital reiterated its $85 price target on the stock.

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