Shares of Dollar Tree (DLTR -0.91%) surged 14% on Monday after a respected investment firm took a large stake in the company.
Activist investor Mantle Ridge wants to drive changes at Dollar Tree that it believes will make the retailer's stock more valuable, according to The Wall Street Journal. To jump-start that process, Mantle Ridge acquired a $1.8 billion stake in Dollar Tree.
Mantle Ridge reportedly wants Dollar Tree to strengthen its lagging Family Dollar chain, which it purchased in 2015. To assist with strategy development, Mantle Ridge enlisted Richard Dreiling, who previously served as CEO of rival Dollar General.
Mantle Ridge is also said to want Dollar Tree to roll out its new higher-price strategy to more of its stores. The retailer announced in September that it would sell more items priced above $1 in some of its locations.
Selling some products at higher price points will make it easier for Dollar Tree to offer a broader selection of goods. This, in turn, could increase sales and help the retailer better manage its rising labor, shipping, and raw material costs.
Analysts applauded Mantle Ridge's reported plans, which are now more likely to be accelerated due to pressure from the activist investor. For one, UBS analyst Michael Lasser boosted his price forecast for Dollar Tree's shares from $120 to $130. He also reiterated his buy rating on the stock after Mantle Ridge disclosed its stake following the Journal's report.
Investors can expect to hear more about how Dollar Tree plans to work with Mantle Ridge to boost shareholder value during its third-quarter earnings conference call, which is scheduled for 9 a.m. EST on Nov. 23.