DOLLAR TREE, INC. (DLTR) Q1 2026 Earnings Summary

Executive Summary

• Q1 2026 delivered strong top-line and comps: net sales rose 11.3% to $4.64B, same-store sales +5.4% (traffic +2.5%, ticket +2.8%), gross margin expanded 20 bps to 35.6%; adjusted diluted EPS from continuing operations was $1.26, above the prior outlook range, while GAAP diluted EPS was $1.47 .
• Results beat Wall Street consensus: adjusted EPS $1.26 vs $1.206* and revenue $4.64B vs $4.53B*; Q4 2025 and Q2 2026 were also beats (see Estimates Context) .
• Guidance: FY2025 net sales reiterated at $18.5–$19.1B; adjusted EPS raised to $5.15–$5.65 (reflecting YTD repurchases); Q2 adjusted EPS expected down 45–50% YoY before re-accelerating in H2; Q2 comps trending toward the high end of +3–5% .
• Catalysts: completion of the Family Dollar sale (July 7) with ~$800M net proceeds and ~$375M cash tax benefits expected; over $500M YTD repurchases and $519.7M remaining under authorization at Q1-end .

What Went Well and What Went Wrong

What Went Well

• Balanced comp and category performance: “Dollar Tree's 5.4% comp was nicely balanced, with traffic up 2.5% and ticket up 2.8%… discretionary comp up 4.6%, our highest discretionary comp since Q4 of 2022” .
• Gross margin expanded on lower freight, improved mark-on, and occupancy leverage; adjusted operating income held despite higher SG&A .
• Store growth and format conversion: opened 148 new stores and ~500 3.0 multi-price conversions in Q1, with 3.0 outperforming other formats and driving traffic/ticket lift .

What Went Wrong

• SG&A deleverage: SG&A rate rose 100 bps to 27.3% due to wages, depreciation, liability claims, and utilities; operating margin contracted 90 bps to 8.3% .
• Near-term tariff headwinds: management flagged Q2 transitory cost timing, including ~$70M higher COGS (145% China tariff window) and ~$40M incremental SG&A, with mitigation benefits more H2-weighted .
• Elevated shrink/markdowns and general liability costs continue as industry-wide pressures; corporate SG&A partially offset later by TSA income after the Family Dollar sale .

Financial Results

Segment breakdown (continuing ops):

KPIs and cash flow:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Q1 comps and net sales both exceeded the high end of our outlook range… Adjusted EPS from continuing operations came in a penny above our outlook range at $1.26” – CEO Mike Creedon .
• “As a reminder, the five levers… negotiating with our suppliers, re-speccing products, moving country of origin, dropping non-economic items, and leveraging our expanded MultiPrice capabilities” – CEO Mike Creedon .
• “Today… our AUR is around $1.35, and 85% of the items in the store are still priced under $2” – CEO Mike Creedon .
• “Q2 adjusted EPS… could be down as much as 45–50% year-over-year before re-accelerating in the third and fourth quarters to meet our full-year earnings outlook” – CFO Stewart Glendinning .

Q&A Highlights

• Tariff timing and cost bubble: ~$70M incremental COGS from the brief 145% tariff window and ~$40M higher SG&A in Q2; mitigation benefits expected in H2 .
• Pricing approach: not a “break-the-dollar” moment; multi-price used surgically; $1.25 core remains, selective higher price points expanding assortment; balanced traffic/ticket .
• TSA reimbursement lower than initial plan but offset elsewhere; FY2025 SG&A guidance intact; 2026 SG&A gap has runway to solve .
• Liability costs rising industry-wide (settlement costs), with shrink/markdowns elevated; freight remains a tailwind .
• Category lift from multi-price: hardware example ($5 hammers outperform $1.25), demonstrating assortment-driven revenue gains .

Estimates Context

• Consensus vs actuals:

Values retrieved from S&P Global.*

• Q1 2026 beat: adjusted EPS $1.26 vs $1.206*; revenue $4.64B vs $4.53B*, reflecting stronger comps and favorable mix/pricing .
• Given Q2 EPS down 45–50% YoY guidance and tariff timing, street models may need to re-cut quarterly cadence while keeping FY EPS range intact per management .

Key Takeaways for Investors

• Near-term setup: Expect Q2 EPS down sharply YoY on tariff timing and stickering costs, then H2 recovery to reach FY EPS guidance ($5.15–$5.65) .
• Demand resilience: Balanced traffic/ticket and strongest discretionary comp since Q4’22 validate multi-price expansion and assortment strategy .
• Margin trajectory: Gross margin stability targeted via five levers; watch shrink/markdowns and liability costs against freight tailwinds .
• Capital allocation: Post-Family Dollar sale (~$800M net proceeds) and ongoing buybacks support EPS; capex peaks in 2025, lower in 2026–2027 .
• Structural focus: Standalone Dollar Tree with TSA income in H2 and medium-term corporate SG&A reduction plan (-100 bps) improves operating leverage outlook .
• Watch items: Tariff policy path (China ~30% currently, other origins evolving), unit elasticity to pricing, TSA amounts, and cadence of 3.0 conversions .
• Trading implications: Potential volatility around Q2 print; H2 re-acceleration and investor day (Oct 15) could reset long-term framework and multiple .

Additional notes:

• Non-GAAP adjustments in Q1 2026: adjusted EPS excludes a $61.8M non-operating insurance gain and $3.7M strategic review costs; tax effects net to $0.29 and $0.07 per share respectively .
• Family Dollar sale completed July 7; TSA reimbursement begins post-close and will offset corporate SG&A partially in H2 .