Most of Dollar Tree's new customers are making more than $100,000 a year

By Tomi Kilgore

The off-price retailer's stock rallies as quarterly results beat expectations for all key financial metrics and full-year profit outlook is raised

Dollar Tree's sales rose above expectations as the off-price retailer's assortment of products, most of which cost $2 or less, attracts higher-income shoppers looking for bargains.

Shares of Dollar Tree Inc. rallied Wednesday - and were on track for their best year since 2010 - after the off-price retailer beat Wall Street's expectations on all key financial metrics for the fiscal third quarter, with the company saying that its assortment of products is attracting more wealthy customers.

The company's (DLTR) upbeat results and raised full-year profit outlook come as stores offering the cheapest prices are having a moment in an economic and inflationary environment in which lower-income households are hurting and mid- to higher-income consumers are hunting for discounted goods.

That's good for Dollar Tree, which said at its recent investor day that the average item in its stores costs $1.40, compared with an average price of items within the same retail categories at other stores of more than $3, and that 85% of the products it sells cost $2 or less.

Dollar Tree maintained that its core customers are from "value-focused" households at the lower part of the income spectrum. But the company said its customer base is growing rapidly to include more wealthy consumers.

Chief Executive Mike Creedon said on the post-earnings call with analysts that 3 million more households shopped at Dollar Tree in the third quarter, compared with the same quarter last year.

And of the new shoppers, 60% came from upper-income households making more than $100,000 a year, while 30% came from middle-income households earning between $60,000 and $100,000 a year. The remaining 10% were those making less than $60,000 a year.

Dollar Tree's stock climbed 3% in recent midday trading and is headed for its highest close since Aug. 28. It has now soared 49.8% in 2025, putting it on track for its best yearly performance since it climbed 74.2% in 2010. In comparison, shares of rival Dollar General Corp. (DG), which reports results on Thursday, have run up 46.5% this year, while the S&P 500 index SPX has gained 16.4%.

Net sales for the quarter to Nov. 1 rose 9.4% to $4.75 billion, just above the average analyst estimate compiled by FactSet of $4.7 billion.

And comparable-store sales, or sales at stores open at least 15 months, grew 4.2% to beat Wall Street expectations of 4.1% growth, as a 4.5% increase in the average ticket offset a 0.3% decline in store traffic.

One interesting take from the increase in average ticket is that the growth is coming mainly from the company's more loyal and engaged core customers. CEO Creedon said the average per-household spending by higher-income customers is lower.

"This is a simple function of trip frequency, because many of our higher-income customers are still early in their relationship with Dollar Tree," Creedon said, according to an AlphaSense transcript.

"Over time, we believe that growing trip frequency among these higher-income customers, given their propensity to build bigger baskets, will be a powerful growth driver for Dollar Tree," Creedon added.

Separately, the company said net income increased 4.8% to $244.6 million, while adjusted earnings per share, which excludes nonrecurring items, grew to $1.21 from $1.08, topping the average analyst EPS estimate compiled by FactSet of $1.09.

Looking ahead, the company raised its fiscal 2025 guidance range for adjusted EPS to $5.60 to $5.80 from $5.32 to $5.72, and nudged up its comparable-store sales-growth outlook to 5% to 5.5% from 4% to 6%. For net sales, the company narrowed its outlook to between $19.35 billion and $19.45 billion from between $19.3 billion and $19.5 billion.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

12-03-25 1259ET