Adding to the evidence that dollar stores are facing increasing macroeconomic headwinds, Dollar Tree reported soft profit results for fiscal Q2 2024 and reduced its outlook for the year (as did Dollar General last week, which we discussed here). Traffic per location for the Dollar Tree banner decreased -2% and the Family Dollar banner was +2%. Both banners showed similar trends in August (unlike Five Below which experienced a +600-basis-point improvement). Dollar Tree’s comp-sales were +1.3%; whereas Family Dollar’s declined -0.1%.
Consumables sales were up for both banners, whereas general merchandise was down. With consumables, both banners’ market share gains have moderated, as shown in the chart below from their quarterly investor update.
Regarding Dollar Tree’s merchandise trends, management shared, “Consumable categories like candy, apparel, snacks and beverages were our best-performing areas in Q2, while higher-margin discretionary categories like crafts, floral and home decor underperformed." As shared in last week's analysis on Dollar General, Family Dollar's isn’t getting the trade-down consumer, Walmart is. Moreover, the Family Dollar core consumer is seeking out better value at Walmart, Aldi, and other chains that are rolling back prices. Lastly, Dollar Tree has been introducing and emphasizing more multi-price points at $3 and $5 (versus its $1.25 standard price point) which may be adversely influencing consumer perceptions of Dollar Tree as a place for good values. This is something that Five Below discovered, from which it is now walking back.
