MW Low-income shoppers are feeling the pinch. It looms over Dollar Tree's earnings.

By James Rogers

The discount retail chain is expected to be pressured by pending tariffs

Dollar Tree Inc. reports fourth-quarter results before market open Wednesday, with the cash-strapped consumers expected to crimp sales and the issue of tariffs looming large over the discount retailer's outlook.

Truist Securities updated its Dollar Tree $(DLTR)$ estimates on Tuesday to account for potential tariff impacts, citing recent comments from teen-focused discount retailer Five Below Inc. (FIVE) Last week, Five Below said it would be raising prices for some items priced below $5 amid margin pressure caused by President Trump's tariffs.

The Trump administration has targeted China, in particular, in its wide-ranging tariff agenda and is also touting new taxes on imports that will be unveiled April 2. Speaking during the conference call to discuss Five Below's fourth-quarter results last week, Chief Financial Officer Kristy Chipman cited the significant "breadth and magnitude" of the recently announced tariffs, according to a FactSet transcript.

Related: Five Below says some prices will rise amid pinch from tariffs. Stock rallies anyway.

Set against this backdrop, Truist lowered its Dollar Tree 2025 earnings estimate to $5.50 from $6.15, and its 2026 estimate to $6 from $7, "to account for the tariff headwinds."

The analysts, led by Scot Ciccarelli, also lowered Dollar Tree's stock-price target to $76 from $83.

Tariffs could hurt the company's gross margins, according to BofA Securities, which noted that the core Dollar Tree brand imports around 41% to 43% of its total retail-value purchases, compared with 15% to 17% for the company's Family Dollar brand. However, the "tariff impact remains uncertain," wrote BofA Securities analyst Robert F. Ohmes.

Analysts surveyed by FactSet are looking for Dollar Tree to report earnings of $2.20 a share and total revenue of $8.240 billion. More specifically, core Dollar Tree stores are expected to bring in sales of $4.946 billion while the company's Family Dollar stores are expected to generate revenue of $3.287 billion.

The company posted earnings per share of $2.55 and revenue of $8.633 in the year-earlier period.

Related: Dollar General says lower-income customers shouldn't expect any relief from high prices this year

"Investor conversations have been focused on core [Dollar Tree] performance, which has been somewhat volatile," wrote Jefferies analyst Corey Tarlowe in a note Tuesday, "but concerns regarding tariffs have been an overhang." Around 40% of Dollar Tree's inventory is sourced from China, according to Tarlowe.

Dollar Tree's results could also offer additional insight into the state of consumer spending. Rival Dollar General Corp. $(DG)$ recently said that its core lower-income customers continue to feel the pressures of inflation. However, the company reported better-than-expected fourth-quarter sales, with fewer people visiting its stores but shoppers spending more.

Most retailers have highlighted the consumer's continued search for value and reluctance to spend on all but essentials.

Attention is also focused on the company's strategic review of Family Dollar, which began in June 2024. Last quarter, Dollar Tree said that the process is still on track and could include a potential sale, spinoff or "other disposition of the business," according to Chief Executive Michael Creedon.

Related: Here's what's clicking now for Dollar Tree after a tough year for its stock

The late earnings date for Dollar Tree, which is reporting its results after other retailers, "may enable the company to provide at least some update on their strategic review for [Family Dollar]," wrote Truist's Ciccarelli. However, the analyst added that the current environment may make it more difficult to finalize any kind of transaction.

"[Dollar Tree's] top priorities remain accelerating [core Dollar Tree] growth and completing the [Family Dollar] strategic review," wrote BofA analyst Ohmes. A sale could unlock value for Dollar Tree, he added, noting a recent Reuters report that three private-equity firms were among the bidders.

Dollar Tree acquired Family Dollar in 2015 for about $8.5 billion in cash and stock, but has struggled to integrate the chain.

Dollar Tree shares are down more than 47% in the last 12 months, compared with the S&P 500 index's SPX gain of nearly 11%.

-James Rogers

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March 25, 2025 14:58 ET (18:58 GMT)

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