Why You Might Consider an Investment in Dollar Tree Today
Key Points
In a challenging economy, higher-income shoppers are flocking to discount chains.
Dollar Tree has moved to reprice its merchandise to take advantage of this trend.
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This past Monday morning, Dollar Tree (NASDAQ: DLTR) released its fourth-quarter earnings, reporting solid revenue and earnings. Net sales rose 9% to $5.5 billion, and same-store sales rose 5%, while diluted earnings climbed 38% to $2.56 a share.
And the company opened 402 new Dollar Tree stores in 2025 while divesting its Family Dollar chain, which didn't perform as well. It now has more than 9,000 locations. Management said it expects net sales to rise to about $20.6 billion for full-year 2026, up slightly from $19.4 billion last year. And it plans to open an additional 400 stores this year while closing about 75.
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Dollar Tree stock jumped 6.4% after its earnings release. Could there be more upside for investors ahead?
Higher-income shoppers are flocking to Dollar Tree stores
The best news may be coming down the pike. The company is repricing its merchandise to sell more items in the $3-$5 range, especially toys and party supplies.
Why? Because its customer mix is changing, and these customers can afford more expensive items. Dollar Tree, like many discount chains, is seeing an influx of shoppers with higher incomes. And the company is moving into wealthier areas, too, as its popularity grows among customers who earn $100,000 or more. The company claims that last quarter, 60% of its customers had income that high.
Image source: Getty Images.
The increase in higher-income customers is not unique to Dollar Tree. Since prices soared during the bout of COVID-19 pandemic-related inflation a few years ago, lots more affluent Americans have drifted to retailers like Dollar Tree, Aldi, Five Below, and Walmart. They may not do all their shopping at these chains, but they are making them part of their broader shopping routines.
Wage gains have largely caught up with higher prices in recent years, and inflation has cooled from 9% a few years ago to just under 3% today. But I believe prices still feel high to Americans; hence, the growing popularity of discount retailers.
I expect that to remain the case for a while, as the lower inflation level doesn't mean prices are coming down; they're just rising more slowly. Until Americans get used to that, discounters like Dollar Tree will gain.
Dollar Tree's stock has languished this year, falling 13% until Monday. But it was up 64% in 2025, an impressive climb when the broader market rose about 18% for the year. I think 2026 could be another good year for Dollar Tree shareholders.
Should you buy stock in Dollar Tree right now?
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Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends Five Below. The Motley Fool has a disclosure policy.
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