- Dollar Tree keeps annual net sales forecast unchanged
- First-quarter sales narrowly beat analyst expectations
- Quarterly gross margin expanded by 120 basis points, helping hit record EPS
- Company excludes tariff refunds of $110 million so far from forecast
May 28 (Reuters) - Dollar Tree raised its annual profit forecast on Thursday, buoyed by resilient demand for affordable essentials from budget‑conscious consumers and efforts to offset higher costs, sending its shares up about 12% in early trading.
The company has been improving its product selection to attract value-focused shoppers already grappling with higher living costs.
Dollar Tree has also 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 it counter higher tariffs and supply chain costs.
For the first quarter, gross margins increased 120 basis points, helping the company post a 1% rise in net income and record per-share profit of $1.74 that beat market estimates of $1.54, according to data compiled by LSEG.
The company maintained its annual net sales forecast and said it expects fiscal 2026 adjusted earnings of $6.70 to $7.10 per share, compared with its prior forecast of $6.50 to $6.90.
"There's no question the low-income consumer is under pressure," CFO Stuart Clendening said, while CEO Mike Creeden added that customers are "shopping thoughtfully and closer to need."
Executives also said the company is benefiting from consumers trading down.
Recent U.S. retail earnings show higher-income Americans continue to spend despite rising fuel costs, with steady sales underscoring resilience.
"Dollar Tree's business remains solid and should continue to benefit from a stickier core consumer and gains from middle-to-upper-income consumers trading down as macro trends remain challenging," Telsey Advisory analyst Joseph Feldman said.
The company, which sources much of its imported merchandise from China, said its forecast excludes about $110 million in tariff refunds received through May 26 after the Supreme Court struck down tariffs that U.S. President Donald Trump had introduced last year.
First-quarter sales rose 7.2% to $4.97 billion, narrowly beating analysts' estimates of $4.96 billion.
Source: Reuters