Key takeaways from Dollar Tree’s (DLTR) Q1 2025 earnings report

Shares of Dollar Tree, Inc. (NASDAQ: DLTR) were down 6% on Wednesday following the announcement of the company’s earnings results for the first quarter of 2025. Although the discount retailer beat expectations on revenue and earnings for the quarter, it warned of some near-term pressure on profits from various factors including tariffs. The outlook overshadowed the earnings beat, hurting the stock.

Better-than-expected results

In Q1 2025, Dollar Tree’s net sales increased 11.3% year-over-year to $4.6 billion, beating estimates of $4.5 billion. GAAP earnings per share increased 17% to $1.61 compared to last year. Adjusted EPS rose 2.4% to $1.26, surpassing projections of $1.20.  

Business performance

Dollar Tree’s same-store sales increased 5.4% in Q1, driven by increases in traffic and average ticket of 2.5% and 2.8% respectively. The consumables category saw a 6.4% rise in comps while comps in the discretionary category were up 4.6%.

Gross margin expanded 20 basis points to 35.6%, driven mainly by lower freight, improved mark-on and lower occupancy costs, partly offset by higher distribution, shrink, and markdown costs.

During the quarter, DLTR opened 148 new Dollar Tree stores and converted approx. 500 stores to its 3.0 multi-price format. The company ended the period with 9,016 open stores and 3,500 3.0 stores. The 3.0 stores have recorded meaningful increases in comps, ticket, and traffic compared to the other format stores.

Dollar Tree is in the process of selling its Family Dollar business to Brigade and Macellum for $1 billion. Net proceeds from the sale are estimated at approx. $800 million. The transaction is expected to close in the second quarter of 2025.

Revised outlook

For fiscal year 2025, Dollar Tree expects net sales from continuing operations to be $18.5-19.1 billion and comparable store sales growth to be 3-5%. The company raised its outlook for adjusted EPS from continuing operations to a range of $5.15-5.65 from the previous range of $5.00-5.50.

For the second quarter of 2025, DLTR expects comparable sales growth to be towards the higher end of its full-year range of 3-5%. In the near-term, the company anticipates some earnings volatility based on some inputs and outputs to its results. As such, it expects adjusted EPS from continuing operations for Q2 to fall as much as 45-50% YoY before picking up pace in Q3 and Q4 to meet the full-year earnings outlook.