Key insights
- Dollar Tree raised its annual profit forecast due to resilient demand from budget-conscious shoppers and successful cost-offsetting strategies. The company's shift to a multi-price strategy and easing freight costs are contributing to improved margins. While facing tariff pressures, Dollar Tree's strong earnings and positive outlook suggest continued strength in the discount retail sector, potentially signaling broader consumer resilience amidst inflationary pressures.
May 28 (Reuters) - Dollar Tree raised its annual profit forecast on Thursday, buoyed by resilient demand for affordable essentials from budget‑conscious shoppers and its efforts to offset higher costs, sending its shares up about 12% in premarket trading.
The rising cost of living due to higher gasoline prices linked to the war in Iran has pushed customers to prioritize value, boosting sales at dollar-store operators, such as Dollar Tree.
The Chesapeake, Virginia-based company has also benefited from updated store layouts, improved product selection, and stronger seasonal displays.
The company has moved away from its historic $1 model to a "multi‑price" strategy, with items priced at $1.25, $3, $5 and higher. This, along with easing freight expenses, has helped Dollar Tree counter higher tariffs and supply chain costs.
The company maintained its annual net sales forecast and said it expected fiscal 2026 adjusted earnings of $6.70 to $7.10 per share, compared with its prior forecast of $6.50 to $6.90.
It said the forecast excluded the impact of tariff refunds, totaling about $110 million through May 26.
Dollar Tree, which sources a large portion of its imported merchandise from China, is still facing pressure from import tariffs that U.S. President Donald Trump introduced last year, even though they were later struck down by the Supreme Court.
For the first quarter, Dollar Tree posted quarterly sales of $4.97 billion, narrowly beating analysts' estimates of $4.96 billion, according to data compiled by LSEG.
Its quarterly profit of $1.74 per share beat market estimates of $1.54.
Dollar Tree's gross profit margin increased 120 basis points.
(Reporting by Neil J Kanatt in Bengaluru; Editing by Shinjini Ganguli)