Dollar Tree is winning now, but investors think otherwise for the future

Alexangel Ventura
Sep 3
2 min read

Dollar Tree, one of the nation's leading convenience store chains focused on affordability, experienced a very positive earnings report in the second quarter, however investors reduced their outlook for the future vitality of the company as it faces heavy competition and rampant closures.

A Dollar Tree store, IMAGO / NurPhoto. — A Dollar Tree store, IMAGO/NurPhoto.

The chain just dropped their Q2 results, showing very strong performance compared to expectations. Net income rose 42.3% to around $188.4 million, adjusted earnings per share (EPS) came in at 77 cents, far above the analyst expectation if just 42 cents. This single metric was the company's singlehanded widest earnings beat in at minimum five years.

Dollar Tree's sales rose 12.3%, surpassing $4.57 billion, beating expectations. In addition, comparable-store sales grew 6.5%, including rises in average ticket size and customer traffic.

However, the company reduced their outlook for Q3, which they predict to be flat (earnings per share specifically) versus last year, despite analysts insisting of a 19% rise. Nevertheless, the company raised its YoY guidance, with a higher EPS of somewhere between $5.32 to $5.72, stronger sales at somewhere between $19.3-19.5 billion, and better same-store sales of somewhere between 4-6%.

In reaction to this news, the stock fell 4.5% in premarket trading Wednesday, with it falling more than most of the market, which rose following Google's antitrust lawsuit giving the Mag. Seven member a favorable ruling. Since August 7th, the stock fell 5%, reflecting a general decline since then, while rising 48.6% in the year.

Dollar Tree has faced very heavy competition in its field from other retailer such as Five Below and Dollar General, with the latter leading in new store listings and earnings. In addition, the company faced pressure from its selling of Family Dollar to Brigade Capital and Macellum Capital. Not to mention tariff pressures which continue to wreak havoc on consumer sentiment and willingness to purchase.