By Connor Hart

Dollar Tree remains optimistic about its long-term prospects, but tariffs will pressure the discount-retail chain in the near term.

"We expect our second-quarter profits to be meaningfully lower than last year in light of higher tariffs and other costs," Chief Financial Officer Stewart Glendinning said Wednesday on a call with analysts.

The company incurred about $70 million in additional costs during the period in which the Trump administration placed a 145% tariff on Chinese goods. These costs will run through the business during the current quarter, Glendinning said, adding that mitigation efforts will materialize in the business later in the year.

As a result, Dollar Tree guided for adjusted per-share earnings from continuing operations to fall by up to 50% year over year in its fiscal second quarter, before accelerating in the back-half of the year.

The stock fell 2.5%, to $94.61, in pre-market trading. Through Tuesday's close, shares have lost 15% of their value in the past year, despite having gained 38% in the past three months.

Dollar Tree is managing cost inflation in part by negotiating with suppliers and moving the country of origin for certain products. With these actions, the company offset about 90% of the first round of tariffs, Chief Executive Mike Creedon said. It is currently working through addressing the latest round.

The company notched higher profit and revenue in the recent quarter, as new customers and increasing trip frequency drove market share gains. It continues to attract customers from other retail channels, particularly higher-income shoppers, Creedon said.

"Dollar Tree is resonating with its customers in the current environment," he said. "Our low prices and smaller pack sizes are perfect for families trying to manage a tight household budget, and our expanded assortment is attractive to all customers across every income level."

Other discount retailers have experienced a similar boost. Dollar General on Tuesday reported strong sales in its latest quarter, raising its outlook for the year as the company said it stands to benefit from tariff-related price increases that could pressure consumer spending.

For its three months ended May 3, Dollar Tree posted a profit of $343.4 million, or $1.61 a share, up from $300.1 million, or $1.38 a share, a year earlier.

Adjusted per-share earnings came in at $1.26, topping the $1.21 that analysts polled by FactSet expected.

Revenue increased 11% to $4.64 billion. Analysts modeled sales of $4.54 billion.

Same-store sales, which account for store openings and closings, increased 5.4%. Wall Street expected comparable sales growth of 4%.

Dollar Tree's sale of its Family Dollar banner recently received U.S. antitrust approval and is on track to close in the second quarter of fiscal 2025. The company guided for net proceeds of about $800 million, while the economic impact of tax benefits from losses on the sale is expected to be about $350 million.

Family Dollar's results were presented in Dollar Tree's financials as discontinued operations.

For its fiscal 2025, Dollar Tree now expects adjusted per-share earnings from continuing operations of $5.15 to $5.65, compared with a prior outlook of $5 to $5.50. The change reflects recent share repurchases, the company said.

Dollar Tree backed its sales outlook of $18.5 billion to $19.1 billion, based on comparable store net sales growth of 3% to 5%. Wall Street expects adjusted earnings of $5.28 on sales of $19.58 billion, as well as same-store sales growth of 3.9%.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

June 04, 2025 09:18 ET (13:18 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.