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Dollar Tree Jumps as Activist Mantle Ridge Is Said to Take a Stake

Activist investment group Mantle Ridge's reported stake represents about 5% of Dollar Tree.
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Shares of Dollar Tree  (DLTR) - Get Dollar Tree, Inc. Report jumped on Monday following a report that activist investor Mantle Ridge has taken a $1.8 billion stake in the discount retailer.

At last check shares of the Chesapeake, Va., company moved up 11% to $125.49. 

The New York investment firm is looking to push the discount retailer to take action to boost its share price by improving its Family Dollar chain and pricing strategy, The Wall Street Journal reported, citing sources familiar with the matter. 

Mantle Ridge is working with Richard Dreiling, the former chief executive of rival Dollar General,  (DG) - Get Dollar General Corporation Report as part of its strategy, the Journal reported. 

The Journal estimates that Mantle Ridge's stake represents more than 5% of Dollar Tree's shares outstanding, making it one of the company's top two investors. 

Mantle Ridge can start nominating board members when the one-month window to do so opens on Nov. 24. Dollar Tree's entire 11-member board is up for reelection. 

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Rupesh Parikh and Erica Eiler, analysts at Oppenheimer, on Monday affirmed a perform rating on Dollar Tree with no price target.

"We overall view the announced DLTR actions to date as a positive for the story vs. the status quo, and await more specifics," they said. "Near term, we still see a difficult fundamental backdrop and potentially one more negative earnings revision."

Inflation and Hiring Challenges Force Small Businesses to React

In September, the company said that it planned to add new price points to items across its stores. 

“We are a ‘test-and-learn’ organization, which is what we are doing with this new initiative," Chief Executive Michael Witynski said. "We listen to our customers and believe it will make shopping with us an even better experience."

UBS analysts recently said that the fixed price point had "become restrictive over the years as inflation has eroded the purchasing power of $1.”

At the end of September Dollar Tree also said it would add $1.05 billion to its share buyback program, bringing the total amount authorized to $2.5 billion.