Dollar Tree Inc. ( DLTR ) shares fell on Wednesday after the discount retailer posted stronger-than-expected second-quarter sales and earnings, as margin pressures from tariffs and a cautious profit outlook tempered investor sentiment.

The discount retailer’s second-quarter sales increased 12.3% to $4.567 billion, beating the consensus of $4.484 billion. Same-store net sales increased 6.5%, driven by a 3% increase in traffic and a 3.4% increase in average ticket.

Gross profit increased 12.9% to $1.6 billion and gross margin expanded 20 basis points to 34.4%, driven primarily by improved mark-on from pricing initiatives, lower domestic freight costs, lower occupancy costs due to sales leverage, and favorable mix, partially offset by higher tariff costs, markdowns, distribution costs, and shrink.

Also Read: Dollar Tree’s Q2 Outlook Looks Bright, Says Bullish Analyst

The company reported adjusted earnings of 77 cents per share, beating the analyst estimate of 41 cents.

Operating income increased 7.0% to $231.0 million, and operating margin contracted 20 basis points to 5.1%.

Adjusted operating income increased 7.4% to $236.0 million, and adjusted operating margin contracted 20 basis points to 5.2%.

“The strong sales growth, margin outperformance, and market share gains that Dollar Tree ( DLTR ) delivered in the second quarter against an increasingly challenging economic backdrop reinforces the unique position that Dollar Tree ( DLTR ) occupies in today’s retail landscape,” said Mike Creedon, Chief Executive Officer.

Dollar Tree ( DLTR ) reported a 6.7% comparable sales increase in consumables and a 6.1% gain in discretionary items, marking the strongest discretionary growth since the fourth quarter of 2022.

Outlook

Dollar Tree ( DLTR ) raised its fiscal 2025 adjusted earnings guidance from $5.15-$5.65 to $5.32-$5.72 compared to the consensus of $5.48, to reflect the current operating environment.

The retailer revised sales guidance from $18.5 billion-$19.1 billion to $19.3 billion-$19.5 billion compared to the consensus of $19.12 billion, based on comparable store net sales growth of 4% to 6%.

The company assumes that it can mitigate most of the incremental margin pressure from higher tariffs and other input costs.

Dollar Tree ( DLTR ) expects third-quarter 2025 adjusted earnings per share to be similar to those in the third quarter of 2024, of $1.12.

The company noted that it believes the positive timing impact of approximately 20 cents on adjusted diluted EPS from continuing operations in the second quarter will reverse in the third quarter of 2025, leading to year-over-year parity.

Price Action: DLTR stock is trading lower by 7.90% to $102.56 at last check Wednesday.

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