By Juveria Tabassum and Anuja Bharat Mistry
Aug 27 (Reuters) – Dollar General and Dollar Tree surpassed quarterly sales estimates on Thursday as lower-priced essentials drove consumers to their stores at a time of economic uncertainty and tariff refunds provided an earnings boost.
Shoppers looking to stretch their budgets are hunting for cheaper groceries and everyday pantry items at discount and club stores as they wrestle with higher gas and food prices.
Dollar General’s shares jumped about 8% after the company raised its annual sales forecast and said it would resume stock buybacks in the second half of the year.
The retailer is also increasing its share of general merchandise as lower-income consumers look for cheaper apparel, home goods and toys, boosting margins for the company.
“In an environment with higher gas prices, we think DG is a concept that consumers are increasingly relying on,” said Corey Tarlowe, analyst at Jefferies.
Higher gas prices were forcing consumers to reduce trips and shop closer to home, helping traffic at Dollar General, executives said.
But fuel prices will be a drag on margins in the back half of the year, according to Dollar General and Dollar Tree executives.
Dollar Tree also posted its first rise in average traffic in four quarters, but stuck to its annual sales targets for a second time this year as it emerges from a transition period after selling its Family Dollar business.
Dollar Tree’s shares were down about 1% after it also forecast current-quarter profit below estimates.
Results from the dollar stores underscore a growing divide in the U.S. economy, with lower-income consumers trading down to more affordable options and putting off discretionary spending, even as higher-income households splurge on nice-to-have items.
Last week, retail bellwether Walmart reported a rare quarterly sales miss, highlighting weakness in consumer spending, while U.S. President Donald Trump warned that fuel prices could remain high as the war in Iran drags on.
The dollar stores joined retailers from Walmart to Target in investing a part of their tariff refunds on cutting prices on thousands of items across grocery and general merchandise in the hope that it would stimulate spending.
Dollar General’s quarterly same-store sales rose 3.5% from a year earlier with growth in categories such as seasonal, home products and apparel. It raised its annual same-store sales growth target to 2.5% to 2.9% from 2.2% to 2.7% earlier.
Both dollar store operators joined several consumer-facing companies in noting the benefits from tariff refunds, helping them lift their full-year profit targets.
Dollar General expects fiscal 2026 profit per share to be about $7.80 to $8.00, which includes an estimated benefit from tariff refunds, after related re-investments, of roughly 25 cents.
Dollar Tree raised its annual profit forecast to between $7.70 and $8.05 per share, including a roughly 60 cent benefit from tariff refunds.
(Reporting by Anuja Bharat Mistry, Juveria Tabassum and Shania S Thomas in Bengaluru; Editing by Jonathan Ananda and Devika Syamnath)
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