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Activist Investing Today: R5’s Mushkin Talks Dollar Tree, Hain

Published: December 19th, 2021
Scott Mushkin, a consumer-focused researcher, discusses Mantle Ridge’s contest at Dollar Tree and compares the discount retailer’s new pricing strategy to Coca-Cola’s failed 'New Coke' endeavor.

Dollar Tree Inc.’s (DLTR) board “doesn’t have much of a leg to stand on” as it faces a total board takeover effort launched by Mantle Ridge LP, according to Scott Mushkin, founder of consumer-focused research firm R5 Capital LLC.

Mantle Ridge, run by Paul Hilal, “couldn’t have a better partner” than the one it struck with Richard Dreiling, a former Dollar General Corp. (DG) CEO, Mushkin said on the Activist Investing Today podcast.

On the podcast, Mushkin said he suspects Mantle Ridge will have some success with its efforts, especially as Dollar Tree has significantly underperformed its chief rival, Dollar General; the S&P 500 index; and other retailers.

Mantle Ridge wants to revamp Dollar Tree’s pricing strategy. After conducting surveys, Mushkin suggested that the discount retailer’s recent rollout of a price increase from $1 to $1.25 for many items could be comparable to Coca-Cola Co. (KO)’s problematic 1985 release of “New Coke.”

“Dollar Tree’s brand is so tied to ‘everything is a dollar,’ so you have to be careful about doing [multi-price] without destroying your brand,” he said.

Mushkin also discussed Engaged Capital LLC-targeted Hain Celestial Inc.’s (HAIN) M&A strategy, noting that it was unlikely that the organic foods maker will be sold to a large packaged foods company any time soon. “From our understanding, if there was an offer that was reasonable, they would definitely have considered it,” Mushkin said.

Mushkin, who was an analyst most recently at Wolfe Research, launched R5 Capital last year to provide research and strategic consulting advice to consumer-focused companies, including retailers.

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