Dollar stores are seizing the moment as American shoppers pinch their pennies

• Dollar store sales jumped this spring as customers looked for deals.
• Quarterly sales from Dollar General, Dollar Tree, and Five Below largely beat expectations.
• Shoppers, including ones with six-figure incomes, went to the chains as tariffs took effect.

Dollar stores won over a wide swath of shoppers this spring as many tried to save money in the face of sharp tariffs.

Dollar General, Dollar Tree, and Five Below each reported sales this week that beat analysts' expectations. Results for all three chains included the impact of President Donald Trump's "Liberation Day" tariffs on various countries, including China. Many of those duties have since been paused or reduced.

The three companies import a lot of products from China, which saw tariff rates as high as 145%, but they've managed to keep their prices relatively low so far.

That appears to have encouraged shoppers to turn to dollar stores for relief from high prices elsewhere.

"In the current environment, our low prices and smaller pack sizes are perfect for families trying to manage a tight household budget," Dollar Tree CEO Michael Creedon said on an earnings call this week.

The chains have also been attracting more customers with six-figure incomes as more affluent shoppers look to save money (and time).

Discount stores typically see sales boosts in difficult economic times — and that certainly could be a factor here — but the chains have also invested in sprucing up their stores, keeping inventories in stock, and staffing for better customer service.

Dollar General's delivery effort has helped bring in a "new and diverse" group of customers, CEO Todd Vasos said on his company's earnings call.

Rival Dollar Tree said it also saw more people with household incomes above $100,000 visit its stores during the quarter. "We want to make sure we delight them, exceed their expectations, and create a sticky relationship with them," Creedon said.

A successful start to a challenging year for dollar stores

Keeping those customers coming in could be hard for the discount chains, as import costs pressure profits, prices squeeze consumers, and competitors edge in.

While Trump's tariffs on many imports are now lower than those he announced in April, retailers took hits from short-term spikes in the duties — and it's not entirely clear where rates will go from here.

Dollar Tree's costs rose $70 million when the tariff on imports from China temporarily rose to 145%, the company said on Wednesday. The company warned that the costs could roughly cut its earnings per share in half next quarter.

Five Below partially dodged the blow by pausing imports from China when tariffs peaked at 145%, later resuming shipments when they were cut to 30%. The discount store — its name nods to products that cost $5 or less — also said Wednesday that it has reduced the share of goods it imports from China by 10 percentage points to about half.

A reliance on products made in China could create problems if tariffs go up again. Trump's 90-day pause on higher tariffs on imports from China is set to expire in mid-August.

"Our biggest concern remains the company's exposure to China," William Blair analyst Phillip Blee wrote in a research note after Five Below reported earnings.

These chains also face growing competition from Amazon and Walmart, both of which are expanding delivery services in smaller markets.

For now, at least, the tariff storm and general uncertainty that initially appeared to pose a serious threat to dollar stores' import-heavy business model seem to be helping drive sales and traffic growth.

"We've got a lot ahead of us in terms of potential and white space in the market, and with improvements in terms of our execution," Five Below CEO Winnie Park said Wednesday.

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