Dollar Tree expects to take profit hit from tariffs, shares drop on outlook

USA Today

04-06-2025

Dollar Tree expects to take profit hit from tariffs, shares drop on outlook
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Gap shares tumble as retailer warns of tariff toll on profits
Gap shares fell 20% in early trading on Friday after the Old Navy owner warned that U.S. tariffs would squeeze this year's profit, even as the apparel maker aims to soften the blow by diversifying its supply chain and investing in U.S. cotton.
Dollar Tree cautioned investors that tariffs and price volatility could result in a profit decline of up to 50% in the current quarter.
The discount retail chain said on Wednesday, June 4, that adjusted profit during the second quarter, which ends Aug. 2, could be down as much as 45% to 50% compared to a year ago.
"Given the volatility of today's operating environment, it is challenging to predict with precision the near-term performance of the business in Q2, especially regarding tariff and other cost mitigation efforts," said Dollar Tree CEO Mike Creedon in a call with investment analysts Wednesday.
For the full year, Dollar Tree assumes it "will be able to mitigate most, if not all of the potential earnings impact from higher tariffs, assuming the current levels remain in place," he said.
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Dollar Tree was able to offset 90% of the first round of 10% tariffs, which President Donald Trump announced in April, during the first quarter, Creedon said.
However, some purchases made when tariffs on goods from China were 145% will be absorbed during the current quarter, chief financial officer Stewart Glendinning said during the call. Those tariffs will result in increased costs of about $70 million during the second quarter, he said.
Shares of the discount retail chain fell about 8% in early trading on Wednesday, June 4.
Dollar Tree: Tariff situation 'highly fluid'
To deal with tariffs, company said it is negotiating with suppliers, opting for new products or dropping products, buying them from other countries or raising prices – since its multi-price format, initiated in March 2024, allows for prices up to $7.
"The tariff landscape is highly fluid and changing week to week, so we are focused on agility and on improving that agility," Creedon said.
Dollar Tree also saw signs of consumer concerns about prices and volatility as the company reported an increase of 2.6 million new customers, a majority with household incomes of $100K or more, Creedon said.
"We believe we've got a unique opportunity here, as these new customers find us," he said. "We want to create a great first impression for that customer. We want to create a sticky relationship with that customer for years and years to come."
Dollar Tree said net sales increased 11.3% to $4.6 billion during the first quarter, which ended May 3. That surpassed the $4.5 billion expected by analysts polled by S&P Global Market Intelligence.
Same-store sales increased 5.4% during the period, with store traffic up 2.5% increase. Shoppers spent 2.8% more, on average, per transaction, the company said.
Dollar Tree opened a total of 148 new Dollar Tree stores during the quarter – including its 9,000th store, located in Plano, Texas – and finished the quarter with 9,016 open stores.
The company plans to open about 400 new Dollar Tree locations during the year, not including 57 Dollar Tree-Family Dollar combo stores that will be converted to Dollar Tree stores.
Contributing: Reuters.
Mike Snider is a reporter on USA TODAY's Trending team. You can follow him on Threads, Bluesky, X and email him at mikegsnider & @mikegsnider.bsky.social & @mikesnider & [e-mail]
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