Dollar Tree Raises Outlook on Q2 Growth

Dollar Tree(NASDAQ:DLTR) reported fiscal second quarter 2025 (ended Aug. 3, 2025) results on August 14, 2025, with net sales (GAAP) rising 12.3% year-over-year to $4.6 billion and comparable sales increasing 6.5%, led by strong discretionary and consumable demand. The company completed the Family Dollar sale, refocused its operations on the core Dollar Tree brand, and raised full-year fiscal 2025 guidance for comparable sales to 4%-6% and adjusted EPS (non-GAAP) to $5.32–$5.72, assuming current tariff rates.

Expanded assortment drives Dollar Tree traffic and ticket

Dollar Tree gained 2.4 million new customers on a trailing twelve-month basis as of fiscal second quarter 2025, with two-thirds from households earning over $100,000, highlighting a sustained shift in demographic reach. Comparable sales growth was balanced between transaction count and basket size, and the rollout of the updated "3.0" format reached 3,600 store conversions by the end of the quarter, supporting higher customer engagement and product discovery.

"Our dollar and unit share gains accelerated in Q2, providing additional evidence that our value proposition is resonating with customers. Our strong performance was led by seasonal items, party, balloons and personal items as customers find more items through our expanded assortment to help them live and celebrate their lives. As of the end of Q2, we have added 2.4 million new customers on a last 12 months basis, consistent with our pace in recent quarters. And nearly 2/3 of those new customers came from households earning $100,000 or more. Underscoring growing engagement, the number of shoppers visiting three or more times a month increased by 11% in Q2, a sequential improvement from the 9% growth we saw last quarter. While sales growth was strong across all income cohorts, we continue to see especially strong performance from middle and higher income customers, with households earning over $100,000 per year, providing a meaningful portion of our Q2 growth. The strength of these results reflects how our value, convenience and discovery proposition is resonating with more and more customers and leading to increased trade-in activity."
-- Michael Creedon, CEO

The successful appeal to higher-income and more frequent shoppers enhances Dollar Tree’s comparable sales growth and broadens market share.

Dollar Tree mitigates tariff headwinds through diversified pricing levers

Gross margin (GAAP) increased 20 basis points year-over-year to 34.4% as the company relied on five distinct mitigation tactics to combat persistent cost pressures, including unpredictable tariff shifts on goods from China, Vietnam, India, and Bangladesh. The quarter’s outperformance included earlier realization of benefits from mitigation strategies and timing differences in tariff impact, with selective pricing actions producing less negative volume impact than projected.

"As we demonstrated in Q2 and expect will be true over the balance of the year, these levers are effective mitigation techniques. Using all 5 levers helps us to achieve the lowest landed cost possible and keep delivering compelling value to our customers. As many of you saw in our stores, our price initiatives started in late Q2 and will continue rolling out across the balance of the year. Following the selective pricing actions that we've taken so far, we are pleased with the understanding and resilience of our customers and the effect on unit volume has been less than we initially expected. This again demonstrates the power of our value proposition and validates multi-price as a structural advantage as we navigate a challenging tariff landscape."
-- Michael Creedon, CEO

Dollar Tree’s ability to maintain robust unit sales with higher prices, even amid tariff headwinds, demonstrates high consumer acceptance and the flexibility of its multi-price strategy, strengthening its margin defense and pricing power.

Dollar Tree redeploys capital and operational focus after Family Dollar sale

The company generated $145 million in free cash flow year-to-date and repurchased $1 billion of shares (11.6 million shares at an average price of $86 each) year-to-date through fiscal second quarter 2025, supported by $668 million in proceeds from the divestiture in the quarter. Leadership has directed all investment and operational attention to Dollar Tree’s standalone stores, accelerating renovations, and expanding with 254 openings (including 42 Party City and 26 Family Dollar combo conversions year-to-date as of the quarter), and establishing new digital efforts like the Uber Eats partnership, which extends reach to younger, untapped demographics.

"With the Family Dollar divestiture complete, Dollar Tree is now a fully focused business. Every ounce of our leadership attention, capital investment and operating resources is now directed towards strengthening the core Dollar Tree brand. This sharper focus is already showing up in the pace of conversions, new openings, and faster decision-making on pricing, assortment and sourcing."
-- Michael Creedon, CEO

This streamlined focus and improved capital flexibility enable quicker strategic implementations and position Dollar Tree as a more agile, growth-oriented retailer in the evolving discount sector.

Looking ahead

Management raised fiscal 2025 guidance to 4%-6% comparable sales growth and adjusted EPS of $5.32–$5.72, with expected gross margin expansion of about 50 basis points and capital expenditures of $1.2 billion to $1.3 billion for 400 new store openings. The company plans to reach approximately 5,000 3.0 store conversions by year-end and continue rolling out multi-price assortment initiatives. An Investor Day in October 2025 will provide a refreshed long-term strategic roadmap and financial outlook for the standalone Dollar Tree business.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,042%* — a market-crushing outperformance compared to 183% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 25, 2025

This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.