Dollar Tree (DLTR) delivered a better-than-expected performance in the first quarter.
Despite the positive report, investor optimism quickly soured after the retailer warned that tariffs could slash its second-quarter profit by nearly half. Shares of DLTR plunged more than 7% following the news, erasing recent gains and making it one of the biggest decliners in the S&P 500.
The company posted adjusted earnings per share (EPS) of $1.26, comfortably above analysts’ expectations of $1.19. Revenue rose to $4.64 billion, a roughly 11% year-over-year increase, beating forecasts despite the ongoing sale of Family Dollar, which has been reclassified as a discontinued operation. Same-store sales surged 5.4%, well above the high end of its guidance, driven by a mix of stronger traffic (+2.5%) and higher average ticket size (+2.8%).
But that positive momentum may not last. Dollar Tree warned that adjusted EPS in the current quarter could fall as much as 50% from a year ago due to tariffs on imported goods and related costs. Despite efforts to offset the impact—such as shifting suppliers and negotiating prices—the company acknowledged that near-term profitability would take a hit.
While Dollar Tree reaffirmed its full-year revenue forecast between $18.5 billion and $19.1 billion and nudged up its EPS guidance, the market zeroed in on the near-term headwinds. Management expects earnings to rebound in the second half of the year, but investors appeared unwilling to wait.
Dollar General’s Turnaround Gains Steam
In stark contrast, rival Dollar General (DG) surged more than 13% after blowing past earnings expectations and raising its full-year guidance. EPS jumped to $1.78, up nearly 8% from the prior year and the company’s biggest quarterly beat in four years. Revenue climbed to $10.44 billion, up 5.3%, helped by a wave of new store openings and inventory improvements.
Same-store sales increased 2.4%, and while customer traffic dipped slightly (-0.3%), the average transaction value rose 2.7%. CEO Todd Vasos, who returned to the helm in late 2023, is credited with engineering a swift turnaround. His playbook: cleaner stores, better assortments, and a remodel of 2,000 locations this year.
Gross margin rose 78 basis points, aided by reduced inventory shrinkage and higher markups. The company also reported robust cash flow, totaling $847 million for the quarter—a 27.6% jump. Dollar General lifted its full-year EPS guidance floor to $5.20 and expects same-store sales to grow between 1.5% and 2.5%.
While tariff-related uncertainty lingers, Dollar General expressed confidence in mitigating cost pressures and sustaining customer momentum. Traffic reportedly turned positive in May, and Vasos said he remains bullish on further gains, particularly in non-consumable categories like home goods and apparel.
The Value Shift: Higher-Income Shoppers Seek Bargains
What both Dollar Tree and Dollar General have in common is a noticeable shift in consumer behavior. Higher-income shoppers—once more likely to frequent big-box or specialty stores—are increasingly turning to discount chains. Dollar Tree reported the addition of 2.6 million new customers in Q1 alone, with notable growth from more affluent households. Social media trends like “Dollar Tree dinners” are also drawing new demographics.
The appeal lies in value. Both chains emphasize competitive pricing, and Dollar Tree’s flexible pricing strategy—once limited to $1 items—is helping attract a broader base. That strategy has helped the retailer outperform even Walmart in Q1 same-store sales growth.
Still, the road ahead looks bumpier for Dollar Tree. With tariffs threatening margins, the company’s ability to navigate sourcing and pricing pressures will be critical. Investors may need patience as the retailer works through a volatile summer. By contrast, Dollar General’s cleaner execution and stronger customer base could give it the edge—at least for now.
Outlook: Headwinds and High Hopes
Both Dollar Tree and Dollar General are navigating a new economic reality: sticky inflation, volatile input costs, and shifting customer expectations. For Dollar Tree, the second quarter will be a critical stress test. Tariffs have already forced a delay in shipments, and some higher-cost goods have slipped through, likely dragging on profits.
Yet the long-term strategy remains intact. Dollar Tree’s store expansion—148 new stores last quarter—and its broader customer appeal are key strengths. If the company can contain near-term cost shocks, it may still finish the year on stronger footing.
Dollar General, meanwhile, has momentum on its side. With over 150 stores opened last quarter and renewed confidence in leadership, the retailer is reaping the rewards of operational discipline and a more customer-friendly footprint. Tariff risks remain, but the company appears better insulated for now.
As inflation-weary consumers look for more bang for their buck, America’s dollar stores aren’t just surviving—they’re rewriting the rules of retail competition.
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