Net sales increased by 0.7 percent to $5 billion in the fourth quarter of fiscal year 2025, which ended on Feb. 1. Same-store net sales increased by 2 percent, driven by a 0.7 percent increase in traffic and a 1.3 percent increase in average transaction tickets.
Dollar Tree opened 33 new stores in the quarter, bringing its total full-year openings to 525. By the end of the fiscal year, it had approximately 2,900 Dollar Tree multi-price-format stores, including 2,600 conversions and 300 new locations.
Elizabeth Lafontaine, director of research at Placer.ai, applauded Dollar Tree’s same-store sales rise.
“Dollar Tree’s comparable-store sales growth of 2 percent in the fourth quarter, with growth in comparable traffic, stands out among other dollar-store chains,” she told The Epoch Times via email. “Placer.ai’s data showed strong visitation performance, particularly at the end of December and into January.”
Lafontaine said the data suggest that Dollar Tree serves a wealthier consumer base than other chains.
“It could have supported its growth in visitation and may help bolster the chain even as consumers continue to look for value across the retail landscape,” she said. “The chain shared a generally positive outlook as it heads into 2025, which supports the notion that dollar chains are well-positioned to welcome consumers against the backdrop of uncertainty.”
The index’s expectations component, which monitors consumers’ short-term outlook for income, business, and labor market conditions, dropped by 9.6 points to 65.2.
That’s the lowest level in 12 years, but it is far below the 80-point cutoff that usually signals a recession ahead.
“Consumer confidence declined for a fourth consecutive month in March, falling below the relatively narrow range that had prevailed since 2022,” said Stephanie Guichard, senior economist of global indicators at The Conference Board.
“Of the Index’s five components, only consumers’ assessment of present labor market conditions improved, albeit slightly. Views of current business conditions weakened to close to neutral. Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low.”
Guichard said she is particularly concerned about the vanishing of consumers’ optimism, pointing out worries about the economy and labor market that have started to affect consumer confidence.
“March’s fall in confidence was driven by consumers over 55 years old and, to a lesser extent, those between 35 and 55 years old,” she said. “By contrast, confidence rose slightly among consumers under 35, as an uptick in their assessments of the present situation more than offset gloomier expectations. The decline was also broad-based across income groups, with the only exception being households earning more than $125,000 a year.”
Rising economic uncertainty is already affecting consumer spending. Sales by the nation’s retailers rose by 0.2 percent in February, following a downwardly revised 1.2 percent decline in January but well below forecasts of a 0.6 percent increase.
Still, the higher sales in dollar store chains translated into lower-than-high earnings, as these chains face multiple cost pressures that squeeze profit margins. For instance, Dollar Tree’s gross profit declined by 2.8 percent to $1.9 billion, with gross margin contracting 130 basis points to 37.6 percent, because of markdowns.
Operating profit declined by 26.5 percent for the quarter, with the operating margin contracting by 390 basis points to 10.7 percent because of higher operating expenses.
However, Dollar Tree shares had gained more than 10 percent as of the afternoon of March 27 as traders and investors focused more on the company’s unloading of its Family Dollar brand than on profit margins.
Quo Vandis President John Zolidis, a longtime follower of dollar-store chains, is bullish on Dollar Tree’s recent strategic move to sell Family Dollar and transition from a single-price retailer to a multi-price retailer.
“In our view, the sale of Family Dollar is positive on a going-forward basis for the company and the stock,” he told The Epoch Times via email.
“The remaining Dollar Tree retail business has a higher margin, higher return on invested capital (ROIC), and is more differentiated. However, it is transforming its model from a single-price retailer to a multi-price retailer and operating with the challenges of a volatile tariff regime.”
“The appointment of its relatively new CEO and the recently announced sale of Family Dollar shows that Dollar Tree is putting its best foot forward,” Patrizia Porrini, a professor of management at Long Island University, told The Epoch Times.
“Dollar Tree is strengthening its strategic position and tightening its focus on its core brand. The cash infusion expected from the sale of Family Dollar will benefit Dollar Tree’s ability to focus on operating at a low cost and delivering the promised value to its shareholders and other stakeholders.
“Although there will be numerous variables at play in the forthcoming months, Dollar Tree’s low-cost, value pricing is an asset to its strategic position in the current cost-focused economy.”
