Business

Dollar Tree Gets Richer Shoppers but Squeezed by Tariffs
By Reuters | 03 Sep, 2025

The discount retail chain sees growth among more affluent consumers but suffers lower margins as it seeks to mitigate tariff impact.

A Dollar Tree sign is seen outside the store in Washington, U.S., June 1, 2021. REUTERS/Erin Scott/File Photo

Dollar Tree forecast current-quarter profit below estimates on Wednesday as tariffs drive up costs for the retailer, although it expects demand to be steady as Americans hunt for more affordable products at its stores.

Dollar Tree's shares, which have jumped about 50% this year, fell about 10% in early trading.

U.S. President Donald Trump's import tariffs have squeezed margins for retailers that are looking to keep prices low for value-seeking consumers, amplifying challenges for businesses navigating increased uncertainty and sticky inflation.

"Tariffs remain a source of ongoing volatility and operating in an environment where rates change frequently (and this) remains one of our largest challenges," CEO Mike Creedon said in a post-earnings call.

Creedon said the timing of the impact from tariffs on the company's costs had shifted to later in the year, but reiterated that it would mitigate most of the impact as Dollar Tree moves sourcing and raises some prices.

In the midst of a transition year after selling the Family Dollar business, the company is opening more stores under the Dollar Tree banner and converting stores to include multi-tiered price points.

With inflation and uncertainty squeezing budgets, more middle- and higher-income consumers were shopping at its stores, with households earning above $100,000 annually contributing meaningfully to its second quarter growth, Creedon said. 

Dollar Tree now expects 2025 net sales in the $19.3 billion to $19.5 billion range, compared with its prior forecast of between $18.5 billion and $19.1 billion.

"Dollar Tree plans to offset most of the tariff headwinds associated with current rates, yet it will need to be nimble, given the volatile geopolitical landscape," Evercore analyst Michael Montani said.

Comparable sales for the quarter were up 6.5%, beating an estimate of a 4.9% rise, helped by growth in traffic as well as amount spent per visit.

Consumers could come under increased pressure in the second half of the year as the duties lead to higher prices during the key holiday shopping season, rival Dollar General said last week after raising annual targets.

Dollar Tree expects third-quarter profit largely in line with the 57 cents reported in the three months ended August 2. Analysts expected third-quarter profit of $1.33, according to data compiled by LSEG.

It raised its adjusted annual earnings per share forecast by about 12 cents at the mid-point. Its second-quarter profit beat estimates by 16 cents per share.

(Reporting by Juveria Tabassum and Sanskriti Shekhar; Editing by Pooja Desai)