Analysts Say Dollar Tree Faces More Than Just Wealthier Customers Due to Tariffs

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Among its recent efforts, Dollar Tree Inc. is selling off its struggling Family Dollar chain , while also attracting higher-income shoppers looking to save money amid the ongoing tariff and inflation squeeze.

But after the discount chain’s latest quarterly earnings on Wednesday, some Wall Street analysts said the finer mechanics of the business were working, as well.

They noted that the chain, which tries to target more middle-income shoppers in the suburbs than its peers, stood to benefit from domestic sourcing for much of its merchandise, as well as flexibility on its pricing and store displays. And they said it had less exposure to lower-income shoppers hit harder by rising prices.

The assessment comes as retailers try to talk up their ability to dodge President Donald Trump’s tariffs, which have threatened to push costs higher and raise prices for consumers. However, some data show businesses have nonetheless begun charging more.

Shares of Dollar Tree rose 9% on Thursday. So far this year, the stock is up 29.1%, but it’s still down 13.9% over the past 12 months.

Truist analysts, in a note on Wednesday, said that around half of Dollar Tree’s items were consumables — things like food, personal-care products and basic home supplies. Virtually all of those items, they said, were sourced domestically.

They also pointed to other areas where the chain has flexibility, saying its “multi-price-point assortment” — or the items Dollar Tree sells that are generally priced above $1.25 — gives management more leeway to raise prices. And they added that Dollar Tree doesn’t have fixed merchandise displays, giving it more leeway to push the products it wants to sell.

Still, Truist noted: “The company is certainly not immune to the cost pressures from tariffs, as evidenced by the unexpected headwinds” seen so far in its second quarter.

During Dollar Tree’s earnings call on Wednesday, Chief Financial Officer Stewart Glendinning said that “we expect our second-quarter profits to be meaningfully lower than last year in light of higher tariff and other costs, including some costs we absorbed during the 145% window on China tariffs.”

Last month, the U.S. temporarily agreed to slash those tariffs on China to 30%. The steepest of the Trump administration’s duties on other nations are on pause for now , and the fate of U.S. tariffs overall could be shaped by a bigger battle in court .

UBS analyst Michael Lasser said Dollar Tree would have to raise prices to offset the costs of the tariffs, as well as the labor costs required to roll out higher-priced items and resticker prices in stores.

“Many of [Dollar Tree’s] products come prepriced at $1.25, which is printed on the packaging at the manufacturer,” he said. “As a result, it will need to incur manual labor to change those prices to mitigate the tariffs.”

But Lasser said renegotiated freight contracts would give the company cheaper shipping rates. And he said the chain was more insulated from any cuts to the low-income food-assistance program known as SNAP, which Republican lawmakers are trying to shrink.

The Truist analysts, meanwhile, said Dollar Tree had managed to negotiate with its suppliers and shift around sourcing and shipping to avoid a bigger hit from tariffs. They noted that other retailers have done a better job on that front than they initially anticipated.

In a note earlier this week, the Truist analysts wrote: “Our understanding is that many companies have become highly flexible and creative to reduce the cost impact of tariffs, but given the fluidity of the situation, it is hard to believe that there isn’t still risk on this front.”

A recent survey by the Federal Reserve Bank of New York, focused on businesses in New York and New Jersey, found that “most businesses passed on at least some of the higher tariffs to their customers.” That survey also found that a “significant share of businesses also reported raising the selling prices of their goods and services unaffected by tariffs.”

The survey took place earlier in May, before the steeper U.S. tariffs on goods from China were cut last month as part of the truce between the two nations.

Earlier this week, Business Insider reported that photos had appeared online showing price hikes at Target and Walmart. A Walmart representative told the outlet that the company would “keep prices as low as we can for as long as we can,” and said price changes are “a normal course of business and are influenced by a variety of factors.”