We're switching to another sector of retail. Dollar Tree reporting earnings this morning, beating on the top and bottom line, but the stock is sinking, the discount store warning investors that a second quarter profit could be down as much as 50% from a year earlier due to tariffs. It's a theme we've been seeing across the sector this earning season. We're now getting how to find value among value retailers with the Yahoo Finance Playbook, joining us now is Arun Sundaram, a senior equity research analyst at CFRA Research. Arun, thank you so much for being with us. It's good to see you. Let's start with Dollar Tree there, and I guess perhaps contrasted versus Dollar General, which made a very different um, you know, had a different very different earnings report related to tariffs, it's commentary around tariffs. So, tell us what's going on with those two.

Yeah, yeah. I think, um, you know, overall, in the past two days, both companies had pretty um, uh, solid, uh, earnings. Uh, Q1, Q1 results are generally solid for both Dollar General and, and Dollar Tree. Uh, we got a positive surprise from Dollar General where they raised their full year, uh, sales and, and EPS outlook and, and, and, in this quarter actually we haven't seen many retailers raise their, raise their outlook given, you know, all the tariff uncertainties, but uh, uh, Dollar General was an exception here and they did raise their full year, uh, sales and EPS outlook. Uh, for Dollar Tree, um, you know, they had a solid quarter as well, but they did, they did call out that Q2 is going to be, uh, uh, exceptionally soft quarter, and a lot of that has to do with the fact that um, they did buy inventory from China when, when tariffs are 145%. So, they have to work through that inventory in Q2, um, and that's going to hurt margins, um, but the expectation is by Q3 and Q4 of this year, um, you know, they'll, they'll bounce back and, and they're still expecting to hit their, uh, their full year, uh, earnings outlook. So they really have it, they did raise their, Dollar Tree did raise their EPS outlook for the full year, but um, that was mostly due to share purchases more than, you know, really any fundamental change.

And so Arun, you got a hold on Dollar General and, and Dollar Tree. Let, let's talk about when you have a buy on, and that would be Walmart. How come, or how come you tell clients this one's a buy, this one's moving higher?

Yeah, I mean, I mean, I mean just there's a lot of, of good things to say about Walmart right now. You know, Walmart's a much more diversified company, they have uh, large presence in the US, they own a club business, Sam's Club. Uh, they also have a very large international presence. Um, you know, right now, I think Walmart is taking market share from, from most retailers, especially in, in the general merchandise space. Uh, Walmart we think is, is gaining more of those higher income households. Why? Because, uh, they have a pretty robust subscription program, Walmart Plus. Uh, and that's pairing really nicely with their growing e-commerce business. Um, and really Walmart's been, you know, kind of taking, taking a, a page from, from Amazon's Playbook and it's, and it's working out for them. Um, and, and, uh, another thing that we like about Walmart is that they're growing these new, new revenue streams at Walmart, things like advertising revenue, third-party fulfillment services. Um, uh, those, those revenue streams are much higher margin revenue streams and it allows Walmart to reinvest in the business in areas like lowering prices for its customers or increasing wages for his employees. Um, so they can really, you know, reward shareholders uh, as well as, you know, uh, uh, their customers as well. So we do, we do see Walmart, you know, expanding their operating margins over the next uh, few years. And um, you know, when you're a company with, you know, 500 billion plus in revenue that uh, you know, every basis point of operating margin expansion, you know, translates into, uh, to pretty decent earnings growth.

Arun again, um, maybe instructive here to sort of compare and contrast. You mentioned um, Sam's Club that Walmart owns, then you also have BJs, of course, trades as a standalone, you have Costco that trades as a standalone in terms of those warehouse clubs. So, among value uh, retailers, how do you think about those three and where investors maybe should be looking?

Yeah, I mean we really like the entire club channel. Uh, yeah, we have a buy rating on, on BJ's wholesale, we have a buy rating on Costco and we buy rating on Walmart who owns uh, Sam's Club. And all three of those club stores are a little bit differentiated. Uh, BJs is, you know, they focus more on, in the grocery space. In fact if you ask BJs, you know, they, they would probably say their number one competitor are, are, you know, traditional supermarkets. Uh, not necessarily Costco or Sam's Club. Um, because they don't, you know, they focus more in that, in the grocery space and in smaller pack sizes. Uh, then you have Costco, you know, which really is kind of dominating the club space with industry leading, you know, growth. They're, um, you know, they're, they're more exposed to more of that, you know, affluent higher income customer. They're growing their membership well. Um, and then you have Sam's Club as well, uh, who's also, you know, growing their membership. I think a lot right now, the, this generation, a lot of Millennials are, are, are going to that, the club model, especially as, you know, Millennials get married and have kids. Um, so I think that club channel has a lot of room for growth um, over the next, you know, several years. We, we see both, we see all three retailers, Costco, BJs, and Sam's Club all expanding their footprint uh, across the United States over the next several years.

Arun, always good to see you. Appreciate that your time and those picks. Thank you.

Thank you.