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DOLLAR TREE, INC. (DLTR) Q2 2026 Earnings Summary

Executive Summary

  • Dollar Tree delivered a solid quarter: net sales $4.57B (+12.3% YoY) with same-store sales +6.5% (traffic +3.0%, ticket +3.4%); gross margin expanded 20 bps to 34.4% and adjusted EPS was $0.77, including ~$0.20 of positive timing related to inventory mark-on and tariffs .
  • Versus consensus, Q2 EPS and revenue beat: Primary EPS consensus $0.41* vs actual $0.77, and revenue consensus $4.48B* vs actual $4.57B, aided by higher-than-expected mark-on and tariff timing shifts; management expects the ~$0.20 EPS timing benefit to reverse in Q3 .
  • FY2025 guidance raised: net sales to $19.3–$19.5B (from $18.5–$19.1B) and adjusted EPS to $5.32–$5.72 (from $5.15–$5.65); Q3 adjusted EPS expected to be similar to Q3 FY2024 as timing normalizes .
  • Strategic focus sharpened post Family Dollar divestiture; year-to-date share repurchases >$1.0B (5.0M shares in Q2; 0.6M post-quarter), authorization replenished to $2.5B, leaving $2.4B capacity at Q2-end .

Note: Values marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Balanced comp growth: consumables +6.7% and discretionary +6.1% with positive unit growth despite selective price actions; traffic and ticket both up, supporting broad-based demand .
  • Margin resilience: gross margin +20 bps to 34.4% on improved mark-on, lower freight, occupancy leverage, and favorable mix; adjusted operating income +7.4% to $236M .
  • Strategic execution and customer expansion: ~585 stores converted to 3.0 multi-price format YTD; added 2.4M new customers LTM, with nearly two-thirds from $100k+ households; Uber Eats partnership launched across ~8,500 stores to reach younger, incremental customers .

What Went Wrong

  • SG&A deleverage: adjusted SG&A rate +50 bps to 29.4% (Dollar Tree segment +50 bps to 26.3%) driven by wage increases, depreciation, incentive comp, repairs/maintenance, and stickering costs; corporate SG&A up on incentive comp and IT projects .
  • Elevated shrink and markdowns: partially offset gross margin gains; management called out higher markdown reserves and ongoing shrink pressure .
  • Tariff volatility: higher rates across China (30%) and elevated rates in Vietnam/India created timing shifts; ~$0.20 EPS positive impact in Q2 expected to reverse in Q3, adding near-term cadence uncertainty .

Financial Results

Headline Metrics vs Prior Periods and Estimates

MetricQ4 FY2024 (oldest)Q1 FY2025Q2 FY2025 (newest)
Total Revenue ($USD Billions)$5.00 $4.64 $4.57
Diluted EPS – Continuing Ops ($)$1.86 $1.47 $0.75
Adjusted Diluted EPS – Continuing Ops ($)$2.11 $1.26 $0.77
Gross Margin (%)37.6% 35.6% 34.4%
Operating Margin (%)10.7% 8.3% 5.1%
Same-Store Net Sales Growth (%)2.0% 5.4% 6.5%

Q2 vs Consensus (S&P Global):

MetricConsensusActual
Primary EPS ($)$0.41*$0.77
Revenue ($USD Billions)$4.48*$4.57

Note: Values marked with * retrieved from S&P Global.

Segment and Cost Structure

Segment MetricQ2 FY2024 (oldest)Q2 FY2025 (newest)
Dollar Tree Net Sales ($USD Billions)$4.07 $4.57
Dollar Tree Gross Margin (%)34.2% 34.4%
Dollar Tree SG&A Rate (%)25.8% 26.3%
Dollar Tree Operating Income ($USD Millions)$342.0 $367.0
Corporate SG&A ($USD Millions)$129.3 $147.6
TSA Income, Net ($USD Millions)$0.0 $8.0

KPIs and Balance Sheet

KPIQ1 FY2025Q2 FY2025
Traffic (%)+2.5% +3.0%
Ticket (%)+2.8% +3.4%
Store Count (Ending)9,016 9,148
New Stores (Quarter)148 106
3.0 Format Conversions (YTD)~500 ~585
Selling Sq Ft (Millions)79.6 81.2
Sales per Sq Ft (LTM, $)$235 $237
Cash & Equivalents ($USD Millions)$1,007 $666
Commercial Paper Outstanding ($USD Millions)$550 (as of 6/2) $300
Free Cash Flow ($USD Millions)$129.7 $15.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (Continuing Ops)FY2025$18.5–$19.1B $19.3–$19.5B Raised
Adjusted Diluted EPS (Continuing Ops)FY2025$5.15–$5.65 $5.32–$5.72 Raised
Comparable Store SalesFY20253%–5% (implied) 4%–6% Raised
Gross MarginFY2025+~50 bps (prior commentary) +~50 bps (maintained) Maintained
Adjusted SG&A – Dollar TreeFY2025N/A~+120 bps YoY deleverage New detail
Corporate SG&A (pre-TSA)FY2025N/A+11%–12% YoY; TSA $55–$60M New detail
Net Interest ExpenseFY2025N/A~$100M New detail
Effective Tax RateFY2025N/A~25% New detail
CapexFY2025$1.2–$1.3B $1.2–$1.3B (maintained) Maintained
Q3 Adjusted EPSQ3 FY2025N/ASimilar to Q3 FY2024 (timing reversal of ~$0.20) New commentary
Share Repurchase AuthorizationOngoing$2.5B (replenished) $2.5B; $2.4B remaining at Q2 end Replenished/updated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024, Q1 FY2025)Current Period (Q2 FY2025)Trend
Tariffs/MacroRaised tariff uncertainty; mitigation planning China 30%; higher in Vietnam/India; timing shifted benefits into Q2, headwinds to H2 Volatile but managed via five levers
Pricing/Multi-Price StrategyQ1 selective pricing; strong consumer acceptance Units up despite price actions; higher baskets in multi-price categories (e.g., $5 hardware) Acceptance improving; pricing flexibility validated
Supply Chain & FreightLower freight aided margins in Q4/Q1 Continued freight benefit; DC realignment improved efficiency Improving efficiency
Customer CohortsGrowing higher-income mix Two-thirds of new customers from $100k+ households; repeat visits up 11% Broadening customer base
SG&A/Liability CostsSG&A deleverage noted General liability settlements costlier industry-wide; stickering costs ~$115M for the year Persistent pressure
Digital/ConvenienceE-comm limited historically Uber Eats partnership across ~8,500 stores; strong early volumes New growth vector
TSA & SeparationTSA anticipated post sale TSA income ~$55–$60M; lower than earlier expectation; offsets in other costs Lower TSA, offset by cost actions

Management Commentary

  • “The strong sales growth, margin outperformance, and market share gains…reinforces the unique position that Dollar Tree occupies…With the Family Dollar sale complete, Dollar Tree is now a fully focused business…” — CEO Mike Creedon .
  • “Q2 comp sales increased 6.5% and adjusted EPS was $0.77…EPS outperformance reflected higher sales, earlier pricing actions, COGS timing, and payroll leverage.” — CFO Stuart Glendinning .
  • “Our five levers…negotiating with suppliers, respeccing products, shifting country of origin, dropping non-economic SKUs, and pricing…help us achieve the lowest landing cost possible.” — CEO Mike Creedon .
  • “We now expect comparable sales growth of 4%-6% and adjusted EPS of $5.32-$5.72…capital expenditures of $1.2-$1.3 billion…effective tax rate ~25%.” — CFO Stuart Glendinning .

Q&A Highlights

  • Pricing elasticity and comps: Management refuted consumer pushback concerns; comps remain balanced across income levels; 85% of stores priced at $2 or less supports value perception .
  • Back-half outlook: Wide comp range (2%–6%) reflects consumer volatility; higher general liability settlement costs and modest increases in shrink/markdowns flagged as headwinds .
  • “Normalized” EPS and one-time items: Stickering/resignage costs ~$115M; one-time benefits include inventory revaluation mark-on and lower-tariff inventory sold at higher price; timing to unwind through Q3/Q4 .
  • Assortment performance: Multi-price categories driving higher baskets; specific examples (e.g., $5 hammers) illustrating improved customer value and revenue lift .
  • Uber Eats launch: Rolling out to ~8,500 stores; early order volumes strong even pre-marketing; targets younger, incremental customers .

Estimates Context

  • Q2 FY2025 vs consensus: EPS $0.77 vs $0.41*; Revenue $4.57B vs $4.48B* — strong beats driven by higher-than-expected mark-on and tariff timing .
  • FY2025: Company raised guidance to $5.32–$5.72 adjusted EPS; consensus FY2025 EPS previously at ~$5.42* — outlook implies modest upside bias with execution on pricing and mitigation levers .

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Beat and raise quarter: Strong Q2 comp and margin execution, plus raised FY sales/EPS guidance, should support estimate revisions and near-term positive sentiment; watch Q3 as ~$0.20 timing benefit reverses .
  • Pricing power validated: Multi-price rollout is enhancing flexibility and margins while maintaining unit growth; balanced demand across discretionary/consumables reduces risk concentration .
  • Tariff volatility remains the key swing factor: The five mitigation levers are effective, but cadence will be uneven; management aims to maintain gross margin through H2 .
  • SG&A pressures to monitor: Liability settlements, wage and maintenance costs, and stickering expenses will weigh on SG&A; offsets from TSA and cost actions help, but deleverage persists in 2025 .
  • Capital allocation supportive: $2.5B repurchase authorization with $2.4B remaining and >$1.0B YTD buys at Q2-end; balance sheet flexibility intact post note redemption and Family Dollar sale .
  • New growth vectors: Uber Eats partnership expands reach to younger demographics; store growth (~400 openings in 2025) and continued 3.0 conversions underpin top-line momentum .
  • Trading setup: Into Q3, expect EPS normalization; focus on comp trajectory, shrink/markdown trends, and tariff updates. Medium-term thesis supported by format flexibility, pricing power, and share gains in value retail .

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