(Reuters) -Dollar Tree raised its annual sales and profit forecasts on Wednesday as Americans across income brackets increasingly turn to its stores for cheaper products, even as the company tackles some tariff pressure on costs.
Dollar Tree’s shares, which have jumped about 50% this year, were down about 5% before the bell after the company said its current-quarter profit would be largely flat sequentially due to a hit from tariffs.
U.S. President Donald Trump’s import tariffs have squeezed margins for retailers who are looking to keep prices low for value-seeking consumers, amplifying challenges for businesses navigating increased uncertainty and sticky inflation in a fragile economic environment.
The company reported second-quarter profit of 57 cents, beating an estimate of 41 cents, according to data compiled by LSEG. Analysts expected third-quarter profit of $1.33.
Dollar Tree’s cost of sales rose to nearly $3 billion in the quarter, from $2.67 billion a year ago, due to tariffs and higher discounts on some items.
Still, it expects to mitigate most of the impact from duties and raised its adjusted annual earnings per share forecast to between $5.32 and $5.72, from an earlier target of $5.15 to $5.65 per share.
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.
Dollar Tree’s lower prices – about 85% of items at its stores are priced under $2 – and smaller pack sizes helped attract middle- and higher-income consumers, apart from its core lower-income consumers.
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.
The sales growth “against an increasingly challenging economic backdrop reinforces the unique position that Dollar Tree occupies in today’s retail landscape,” CEO Mike Creedon said.
Consumers could come under increased pressure in the back 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 now expects 2025 net sales in the range of $19.3 billion to $19.5 billion, compared with its prior forecast of between $18.5 billion and $19.1 billion.
(Reporting by Juveria Tabassum and Sanskriti Shekhar; Editing by Pooja Desai)
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