Dollar Tree Attracts Higher-Income Customers as Sales Climb 7%

Dollar Tree continues to attract middle-income and higher-income shoppers as consumers deal with inflation.

The discount retailer reported earnings Thursday (Aug. 27) showing its total sales for the second quarter climbing 7%.

“The consumer environment remains dynamic,” CEO Mike Creedon said during an earnings call. “Customers continue managing household budgets carefully, shopping with purpose and prioritizing value and affordability.”

He noted that while the “inflationary backdrop continues to pressure all household budgets, particularly for lower income consumers,” Dollar Tree’s expanding assortment is appealing to a broad customer base.

To stretch their dollars, shoppers are increasingly turning to Dollar Tree for everyday essentials and pack sizes that help them manage their budgets, management said.

In response to these changing behaviors, Dollar Tree is expanding its multi-price strategy, allowing the retailer to sell items above its traditional opening price points. Multi-price merchandise rose to 17% of total sales, a year-over-year increase of approximately 400 basis points.

“Ultimately, multi price is not about moving away from our heritage. It’s about giving us more flexibility to drive the value, convenience and discovery that has always been our heritage,” Creedon said.

The strain being felt by Dollar Tree’s shoppers can be seen in the latest PYMNTS Intelligence on paycheck-to-paycheck consumers, which showed significant numbers of Americans feeling pressured by everyday expenses. Groceries were cited by 53% of consumers surveyed, utilities by 45% and gas or transportation costs by 36%.

Elsewhere, Dollar Tree is focusing on store standards; the percentage of underperforming stores fell from approximately half last October to one-third of the fleet this quarter.

Creedon said that while this shift is encouraging, “we certainly don’t view getting from roughly half the chain to about a third of the stores from the opportunity bucket up as crossing the finish line, we view this as evidence that what we’re doing is working and gaining traction.”

Meanwhile, Dollar Tree received a tariff refund of $383 million, which the retailer plans to reinvest in the business, Creedon said.

“We are putting those funds to work in areas where we believe they can have the greatest and most lasting impact,” the CEO told analysts. “We are focusing those dollars on targeted pricing strategies, marketing, store operations and store conditions, areas that can benefit our customers today while strengthening the business for the long term.”