Dollar Tree stock plunges as it warns tariffs will squeeze margins despite demand for its cheap goods

Core Viewpoint - Dollar Tree's shares fell 7.8% due to concerns over tariff costs impacting profit margins, despite strong demand for its low-price goods [1][6] Financial Performance - The company forecasted a current-quarter profit of 57 cents, missing Wall Street expectations of $1.33 [1] - Dollar Tree reported a profit of $188.4 million, or 91 cents per share, in the second quarter, up from $132.4 million, or 62 cents, the previous year [11] - Adjusted earnings per share were 77 cents, exceeding expectations of 42 cents [11] - Annual net sales are now expected to be between $19.3 billion to $19.5 billion, an increase from the prior forecast of $18.5 billion to $19.1 billion [8] Market Dynamics - The impact of tariffs is anticipated to affect Dollar Tree later in the year, with potential price pressures during the holiday shopping season [2] - The company plans to mitigate tariff costs by shifting sourcing and raising prices on some items [2][8] - More middle- and high-income shoppers are turning to Dollar Tree due to inflation, contributing to growth [5] Competitive Landscape - Dollar General and Five Below have also recently increased their forecasts, indicating a trend among dollar stores performing well in economically challenging times [9] - Comparable sales for Dollar Tree rose 6.5%, surpassing estimates of a 4.9% increase, driven by growth in customer traffic and spending per visit [9] Strategic Initiatives - Dollar Tree has opened over 100 new stores and converted about 585 locations to include more price points [12] - The company is undergoing a transition following the sale of the Family Dollar business for approximately $1 billion [11]