The news: At its investor day, Dollar Tree projected earnings per share to rise at a compound annual rate of up to 15% over the next three years.

• That outlook reflects underlying annual EPS growth of 8% to 10%, further boosted by the absence of recent one-off costs tied to tariff mitigation, multiprice store conversions, lost distribution capacity, and the sale of Family Dollar.
• EPS is expected to increase by a high-teens percentage in fiscal 2026 due to the timing of certain cost benefits.
• The company also reaffirmed Q3 guidance for comparable-store sales growth of 3.8%.

The context: Amid persistent inflation and a challenging macro environment, higher-income consumers are increasingly trading down to Dollar Tree, driving a significant share of its recent growth.

• In Q2, the retailer reported strong performance among middle- and higher-income households, with those earning over $100,000 contributing meaningfully to quarterly gains.
• However, because Dollar Tree sources most of its imported goods from China, it is exposed to rising trade tensions.

The strategy: During the event, the retailer called its March sale of Family Dollar “a strategic milestone” that allows it to sharpen its focus on the Dollar Tree banner. It outlined a multipronged strategy to drive growth and strengthen customer loyalty by emphasizing value, convenience, and discovery.

• Building a more relevant, ever-changing assortment: Long known for its $1 price point, Dollar Tree has expanded its selection across multiple price tiers to spur discovery and broaden its appeal. The average item now costs $1.40, compared with more than $3 for similar products elsewhere, the retailer said.
• Making shopping more convenient: Dollar Tree is expanding its footprint—it opened its 9,000th store this year—to be closer to more shoppers. Stores are designed for quick trips averaging about 10 minutes, making them among the fastest visits in retail.
• Evolving its supply chain: The retailer is expanding its distribution network, including a new 1.25-million-square-foot facility near Phoenix, Arizona. It is also taking a multipronged approach to offset tariffs by negotiating supplier cost concessions, adjusting product and SKU specifications, and dropping non-economical items.

Our take: If Dollar Tree aims to evolve from a trade-down destination to a lasting stop for higher-income shoppers, it must meaningfully elevate the in-store experience. Mapping out a plan is one thing; executing it to deliver a top-tier experience is another.

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