Dollar Tree, Dollar General drove Q3 sales by leaning into essentials

The trend: Sales at Dollar Tree and Dollar General picked up in Q3 even as lower-income consumers continued to tighten their belts by focusing on essentials rather than discretionary purchases.

• Dollar Tree faced headwinds from lower-income consumers’ financial struggles as they pull back on discretionary spend, interim CEO Michael Creedon said during the company’s earnings call.
• But by emphasizing a “strong value proposition” across both the Dollar Tree and Family Dollar banners, the retailer drove consumables spending by adjusting its product mix to focus on value-oriented, high-frequency purchases.
• Dollar General similarly noted that strong consumables spending partially offset declines in its home, seasonal, and apparel categories.

The numbers:

• Dollar Tree and Family Dollar sales grew 3.6% YoY to $7.57 billion in Q3, ahead of analyst projections of $7.45 billion. Same-store sales rose 1.8%.
• Dollar Tree’s sales increased 8.3% YoY to $4.34 billion, and same-store sales grew 1.8%.
• Family Dollar’s sales fell 2.5% YoY to $3.22 billion, and same-store sales rose 1.9%.
• Dollar General’s sales increased 4.2% YoY to $10.18 billion, ahead of the $10.15 billion analysts expected. Same-store sales grew 0.5%.

But while both companies reported top-line growth, their bottom-line results diverged.

• Dollar Tree grew its adjusted earnings by 15.5% to $1.12 a share, beating analysts’ expectations by 5 cents.
• But Dollar General’s diluted earnings per share fell 29.4% YoY to 89 cents, 5 cents short of analysts’ forecasts.

Looking ahead: The two companies are taking markedly different approaches to revamping their in-store experiences to spur growth.

• The Dollar Tree banner is in the midst of a large-scale program to convert stores to a more vibrant, multiprice format that features tailored product assortments, additional coolers, and expanded seasonal offerings.
• In Q3 alone, it converted 720 stores to its multiprice format, bringing its total number of converted stores to about 2,300 locations. Those stores accounted for an outsize share—about 30%—of its total net sales in Q3.
• The retailer continues to review its Family Dollar business, which could result in either a sale or a spinoff.
• Meanwhile, Dollar General’s “Back to Basics” strategy involves eliminating about 1,000 SKUs by the end of the year and removing half of the off-shelf displays, which aims to simplify employees’ work and keep store shelves neater and easier to navigate.

Our take: With roughly 2 in 5 low-income households finding it difficult to manage financially, per Ipsos, Dollar Tree and Dollar General should continue leaning into value-oriented everyday goods.

This article is part of EMARKETER’s client-only subscription Briefings—daily newsletters authored by industry analysts who are experts in marketing, advertising, media, and tech trends. To help you finish 2024 strong, and start 2025 off on the right foot, articles like this one—delivering the latest news and insights—are completely free through January 31, 2025. If you want to learn how to get insights like these delivered to your inbox every day, and get access to our data-driven forecasts, reports, and industry benchmarks, schedule a demo with our sales team.