The news: Shoppers are leaning harder on value-oriented retailers as they look to stretch their budgets.

• Dollar Tree’s comparable sales rose 3.5% YoY in its fiscal Q1, ahead of expectations for a 3.3% increase.
• Burlington Stores’ comparable sales jumped 6% YoY, beating estimates for 4.6%, making it the latest off-price retailer to report healthy Q1 growth.

Zoom out: Stripping out one-time tailwinds—including Easter timing shifts and larger tax refunds—Dollar Tree and Burlington are benefiting from trade-down behaviors as consumers seek to offset higher gas, food, and housing costs.

• “Customers are shopping thoughtfully and closer to need, with a continued focus on affordability, convenience, and trip efficiency,” Dollar Tree CEO Michael Creedon said on the company’s earnings call, adding that they “value the ability to shop nearby and quickly” and are choosing smaller, more affordable pack sizes.
• Burlington CEO Michael O’Sullivan noted that the off-price sector is winning share from “traditional” full-price operators—a dynamic he expects will accelerate if the economic environment worsens.

Both retailers are increasing penetration among higher-income households while strengthening their hold on lower-income consumers. Burlington said that stores in lower-income trade areas outperformed the rest of its fleet, while Dollar Tree noted positive comparable sales growth across all income cohorts.

The big picture: Several recent reports point to sustained pressure on consumer finances.

Inflation is heating up. The personal consumption expenditures (PCE) index rose 0.4% MoM and 3.8% YoY in April, the largest increase in nearly three years, according to the US Commerce Department. That’s eating into buying power: Inflation-adjusted personal income declined 0.1% over the month. The pain is particularly acute for lower-income consumers, whose disposable income gains are being limited by higher energy costs and reduced government benefits. Goldman Sachs now expects disposable cash flow for the bottom income quintile to grow 0.8% in 2026, down from its January forecast of 3.2%.

Food insecurity is worsening. A report by the New York Fed found a “remarkable increase in food insecurity, particularly among lower-educated and lower-income households and households with young children,” corresponding with a decrease in sentiment among those same demographics. Stricter SNAP rules are exacerbating the trend, pushing consumers to embrace lower-cost retailers like Dollar Tree and Aldi and rely more on promotions, according to Numerator.

Households are tapping their savings. The personal saving rate fell to 2.6% in April, the lowest level since June 2022, and well below 4.5% at the start of the year. Fidelity Investments also noted a slight uptick in the percentage of workers taking 401(k) loans and hardship withdrawals in Q1, showing the toll that cost-of-living pressures are exerting on consumer finances.

Implications for retailers: Value is becoming the primary purchase consideration for consumers across income levels. That is good news for retailers like Dollar Tree and Burlington, which expect to continue gaining share as uncertainty continues. For other retailers, the challenge will be to attract price-sensitive shoppers who have fewer dollars to spend on discretionary goods.