Dollar Tree (Nasdaq: DLTR) is one stock that can thrive in a bad economy. As thriftier customers trade further down from even traditional discounters like Wal-Mart (NYSE: WMT) and Safeway (NYSE: SWY), the dollar stores pick up more market share and use the increased profit to grow their businesses. But as the economy begins recovering, can Dollar Tree keep that new market share?

Dollar Tree announced record revenue and earnings for the recently reported fourth quarter and full year and continuing positive same-store sales. The company expects to grow revenues and earnings in 2011 by about 11% and 18%, respectively. Unfortunately, this is slightly down from historic averages, and didn't jibe with some analysts, sending the stock down almost 7% yesterday.

Days sales of inventory also rose somewhat, although management explained in the conference call that this had to do with supplying its new acquisition and gearing up for Valentine's Day (the sales from which beat last year's record).

By some accounts, the recovery is in full swing. But it's important to discern which recovery we're talking about. The stock market may have doubled from its 2009 lows, but total unemployment (as measured by U6) still sits at a lofty 16%. As recently as September, Bill Simon, CEO of Wal-Mart U.S., gave a chilling description of sales trends, explaining how customers will stock up on essentials at the end of the month, then line up at the registers just before midnight, waiting for their government electronic benefits cards to be activated in the new month. These customers are unlikely to have benefited much from a rising stock market, record corporate profits, or strong gross domestic product numbers.

This helps to explain why even Wal-Mart has been struggling, while Dollar Tree is expanding its business with a Canadian acquisition and rival Family Dollar (NYSE: FDO) may itself be acquired at a 25% premium to its share price at the time of the offer.

If you believe, as I do, that everyone isn't out of the woods yet, then Dollar Tree should continue to perform well. And with the still-present possibility of the dreaded "double-dip," this is one stock you should at least have on your watchlist.

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