Stocks of Dollar Tree Fall as Earnings Outlook is Negatively Affected by Tariffs

Shares of Dollar Tree Inc. dropped in early Wednesday trading following the company's warning that second-quarter earnings could suffer due to higher tariffs, even though the discount retailer posted better-than-expected results for the first quarter.

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In the first quarter, Dollar Tree reported net income of $343.4 million, or $1.47 per share, compared to $300.1 million, or $1.23 per share, during the same period last year. When excluding one-time items, the company earned $1.26 per share, surpassing analysts' expectations, which had called for $1.21 per share, according to FactSet.

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Revenue for the quarter came in at $4.64 billion, marking a year-over-year increase from $4.17 billion and also topping Wall Street’s estimate of $4.54 billion. Same-store sales rose 5.4%, beating the 4% growth anticipated by analysts surveyed by FactSet.

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Despite the strong quarterly performance, Dollar Tree cautioned that the current tariff environment is likely to weigh on near-term profits. The company projected that adjusted earnings per share in the second quarter could fall by as much as 45% to 50% from the previous year, as it grapples with higher input costs, including tariffs. However, the company remains optimistic that earnings growth will rebound in the second half of the year, aligning with its full-year earnings expectations.

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Analysts had expected the company to report second-quarter earnings per share of 66 cents, slightly below last year’s 67 cents. The larger potential decline in EPS suggested by Dollar Tree implies greater short-term challenges than previously anticipated.

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Despite this near-term pressure, Dollar Tree reaffirmed its full-year outlook. The company still expects net sales between $18.5 billion and $19.1 billion, based on projected same-store sales growth of 3% to 5%.

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In a statement, Dollar Tree emphasized that its outlook assumes the current tariff levels as of June 4, 2025, will remain unchanged through the rest of the fiscal year. The company also stated its belief that it can offset most of the additional cost burden stemming from tariffs and other expenses.

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In a sign of confidence, Dollar Tree raised its guidance for full-year adjusted earnings per share. The new forecast calls for EPS in the range of $5.15 to $5.65, up from a previous estimate of $5.00 to $5.50. This increase reflects the positive impact of recent stock repurchase activity.

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Buybacks had a noticeable effect on the company’s first-quarter performance. When excluding results from its Family Dollar operations, Dollar Tree's net income rose by 14.4%, but earnings per share increased by 16.7%. The difference in growth rates is due to a 1.9% reduction in the company’s diluted share count, driven by $436.8 million in share repurchases during the quarter. The company has also spent an additional $67.5 million on buybacks since the end of the quarter.

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Meanwhile, Dollar Tree’s main competitor, Dollar General Corp., acknowledged a similarly volatile tariff environment in its own recent earnings update. However, Dollar General took a more upbeat approach and raised its full-year guidance, indicating that not all discount retailers are being equally affected by shifting trade policies.

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Earlier in the year, Dollar Tree made a strategic decision to divest its struggling Family Dollar division. The business was sold to private equity firms Brigade Capital Management and Macellum Capital Management for $1 billion. The move was part of a broader effort by Dollar Tree to sharpen its focus and streamline operations.

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Despite the latest stock drop following the earnings outlook revision, Dollar Tree shares have seen strong gains overall in 2025. The stock is up 29.1% so far this year, significantly outperforming the broader S&P 500 index, which has risen just 1.5% over the same period.

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In summary, while Dollar Tree delivered solid first-quarter results and raised its full-year earnings forecast, investors reacted negatively to the company’s warning about short-term profit pressure due to tariffs. The company remains confident in its ability to navigate these headwinds and is leaning on cost mitigation strategies, share repurchases, and a refocused business strategy following the Family Dollar sale to meet its long-term financial goals.

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