Dollar Tree Inc. (DLTR) has posted strong second-quarter results for 2025, reporting net sales of $4.6 billion, a 12.3% increase from the same period last year.

Adjusted earnings per share (EPS) reached $0.77, significantly surpassing analyst expectations of $0.40. Same-store sales grew by 6.5%, supported by a rise in both customer traffic and average transaction values.

Despite these gains, the company’s shares fell 7.9% to $102.56 on 3 September 2025 amid concerns over tariffs and cost pressures affecting margins.

Operational strengths and strategic focus

Dollar Tree’s performance highlights its ability to navigate a challenging retail environment. Same-store sales growth of 6.5% was driven by a 3.0% increase in store traffic and a 3.4% rise in average ticket size.

The company strengthened its balance sheet through the $1 billion divestiture of Family Dollar, allowing for reinvestment in its core Dollar Tree operations.

Expansion efforts continued with 106 new store openings and the conversion of 585 locations to the 3.0 multi-price format, demonstrating a commitment to enhancing customer experience and diversifying pricing options.

Near-term challenges: tariffs and margin pressures

Despite positive sales momentum, Dollar Tree faces immediate challenges. A $0.20-per-share benefit from inventory timing and tariff adjustments in Q2 is expected to reverse in Q3, potentially flattening earnings growth.

Gross margins increased by 20 basis points to 34.4% in the quarter, but higher tariff costs and inventory shrinkage have limited these gains.

Analysts and investors remain cautious as the company navigates ongoing supply chain volatility and pricing pressures.

Valuation and analyst sentiment

Dollar Tree’s stock has experienced marked volatility, with a three-month gain of 25.65% but a one-month decline of 2.94% as of late August 2025. The current price-to-earnings (P/E) ratio stands at 20.24, reflecting optimism about long-term growth.

Analysts have maintained an overall “Overweight” rating, with an average price target of $116.10, implying potential upside of nearly 18% from the recent close.

Concerns remain over contracting profit margins and elevated debt levels, tempering confidence among some long-term investors.

Dollar Tree’s second-quarter results demonstrate resilience in a competitive retail market, yet the recent share price drop underscores the impact of tariff-related costs and margin pressures.

While the company’s strategic initiatives, including store expansion and format innovation, provide a foundation for growth, investors must carefully weigh these opportunities against near-term operational risks.