Retail stocks have done fairly well since April, as indicated by the “XRT” exchange-traded fund (ETF). Still, R5 Capital founder Scott Mushkin says the second half of 2025 will likely be a different story.
“We don’t like much in retail,” he told CNBC in a recent interview, citing widespread structural and competitive concerns across the sector. But there’s one exception: Dollar Tree Inc (NASDAQ: DLTR).
Dollar Tree shares are already up more than 50% versus the first week of April, but Scott Mushkin continues to see it as a rare bright spot within the retail space, poised for further upside ahead.
Why is Mushkin dovish on retail stocks
Mushkin is keeping bearish on retail stocks for the second half of 2025 because the sector faces a confluence of macro and competitive headwinds.
Inflation ticked up again in August, hitting its highest level since February – squeezing consumer wallets and shifting spending toward essentials.
That’s bad news for discretionary-heavy retailers like Best Buy, which Mushkin says is struggling with “empty stores” and a broken model.
Tariff pressures and the elimination of de minimis exemptions are also expected to raise import costs, especially for low-margin retailers. Meanwhile, Dollar General faces pricing erosion and intensifying competition from Walmart, Amazon, and Dollar Tree itself.
“We think there’s a lot of downward pressure on some of these products,” Mushkin warned, adding that Dollar General’s pricing surveys show it’s “well above Walmart” in key categories.
Why Mushkin likes Dollar Tree stock
Despite his bearish stance on retail, Mushkin is bullish on Dollar Tree stock – and not because of macro tailwinds.
“It really has nothing to do with the tariffs or the macro,” he said, adding his positive view is based primarily on the firm’s long-awaited success in rolling out its multi-price point strategy.
“They’ve stumbled on it until this year,” Mushkin noted, but now sees traction that could drive both traffic and sales.
The strategy allows DLTR to expand its product assortment and compete more effectively with rivals. As budget-conscious consumers seek value, Scott Mushkin believes Dollar Tree is uniquely positioned to benefit.
“That’s kind of the icing on top of the cake,” he added, forecasting rapid earnings growth over the next 12 months.
How to play DLTR shares heading into Q2 earnings
According to Mushkin, the discount retailer will come in ahead of Street estimates for its fiscal Q2 on September 3rd, which he believes will serve as the next near-term catalyst for DLTR shares.
Heading into the company’s earnings release, Wall Street analysts are keeping constructive on the Nasdaq-listed firm as well.
According to The Wall Street Journal, the consensus rating on Dollar Tree stock currently sits at “overweight” with price targets going as high as $143, indicating potential upside of another 30% from here.
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