Billionaire hedge fund manager Carl Icahn is hoping to snag a bargain with a stake in America's biggest dollar-store chain, according to a report from The New York Post on Tuesday.
Investors Bullish on Activist's Experience with Discount Stores
The controversial activist investor, who formerly served as an advisor to President Donald Trump, is reportedly building a "significant stake" in beaten-down discount variety store chain Dollar Tree Inc. (DLTR), formerly known as "Only $1.00."
Shares of the Chesapeake, VA-based company are down 0.9% on Wednesday morning at $85.72, after jumping nearly 7% on Tuesday. The stock has sharply underperformed the broader market this year, losing over 20% of its value year-to-date (YTD), compared to the S&P 500's 4.7% growth over the same period.
While the Post indicated that Icahn's plans for Dollar Tree are not immediately clear, the investor boasts experience in managing struggling discount stores. In 2014, the hedge fund manager took an activist stake in Family Dollar, campaigning for the firm to sell itself. A resultant bidding war between Dollar Tree and Dollar General Corp. (DG) led to the $8.5 billion acquisition of Family Dollar by Dollar General and a $200 million profit for Icahn.
Dollar Tree has underperformed its rival in recent years, as Dollar General has managed to outperform the broader market with a 18.7% return in 2018.
It's likely that Icahn will push for cost-cutting, a management shakeup, or a new strategic initiative at Dollar Tree. Given that the firm is the only other mega dollar-store chain in the market alongside Dollar General, an all-out sale is highly improbable.
Whatever Icahn plans to do with the discount chain, however, investors may feel justified in putting confidence in the business mogul by looking at his track record, which includes a bet on now high-flying tech titan Netflix Inc. (NFLX) in 2012 and a high-profile battle against Herbalife Ltd. (HLF) short seller William Ackman. Despite his portfolio, Icahn has remained the center of some criticism, most recently denying insider trading allegations regarding a major sale of steel stocks days ahead of Trump's tariff announcement in March.