(Reuters) -Dollar Tree raised its annual sales and profit forecasts on Wednesday as Americans across income brackets increasingly turn to its stores for affordable groceries as well as apparel and home decor products.
Shares of the company, which have jumped nearly 50% this year, reversed early gains to fall about 7% in premarket trading as the discount retailer grapples with tariff costs.
Dollar Tree's lower price points - about 85% of items at its stores are priced under $2 - and smaller pack sizes
helped attract value-seeking middle- and higher-income consumers, apart from its core lower-income consumer.
In the midst of a transition year after selling the Family Dollar banner, the company is opening more stores under the Dollar Tree banner. It is also converting stores to include multi-tiered price points to tackle competition from big-box retailers such as Walmart as well as ecommerce platforms.
While its second-quarter adjusted profit of 57 cents beat an estimate of 41 cents, the company said its current-quarter profit would be largely flat sequentially due to the impact from tariffs.
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.
Comparable sales for the quarter at Dollar Tree 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 company'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.
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.
It expects adjusted annual earnings per share between $5.32 and $5.72, compared with its earlier target of $5.15 to $5.65 per share.
(Reporting by Juveria Tabassum and Sanskriti Shekhar; Editing by Pooja Desai)
