Financial Performance - Adjusted diluted EPS from continuing operations was $0.77, including a $0.20 positive impact from tariff timing[6] - Dollar Tree segment gross margin expanded by 20 bps, but adjusted operating margin contracted by 20 bps[7] - Q2 2025 Dollar Tree GAAP operating margin was 8.0%, a decrease of 40 bps year-over-year; Non-GAAP operating margin was 8.1%, a decrease of 30 bps year-over-year[19, 20] - Dollar Tree sales per square foot reached $237 in Q2 2025[17] Sales and Comparable Store Sales - Dollar Tree comparable store sales increased by 6.5%, driven by a 3.0% increase in traffic and a 3.4% increase in average ticket[9] - Consumables comp increased by 6.7% and discretionary comp increased by 6.1%, the highest discretionary comp growth since Q4 2022[9] - Dollar Tree sales are projected to be between $19.3 billion and $19.5 billion for fiscal year 2025, with comparable sales growth of 4% to 6%[23] Real Estate and Store Operations - 106 new Dollar Tree stores were opened, bringing the total to 9,148 open stores[9] - 26 Family Dollar Combo stores were converted to full Dollar Tree stores, with the remaining 31 to be converted by year-end[9] - Approximately 400 new store openings are planned for fiscal year 2025[23] Capital Allocation and Balance Sheet - $145 million of YTD free cash flow from continuing operations and $666 million of cash and cash equivalents at quarter end[9] - 5.0 million shares were repurchased in Q2 for approximately $501 million, including excise tax, with an additional 0.6 million shares purchased for approximately $71 million after quarter end[9] - $1.0 billion of maturing May 2025 4.00% senior notes were paid off with cash on hand and commercial paper borrowings[9] - The sale of the Family Dollar business was completed for a purchase consideration of $1.0 billion, resulting in net proceeds of $800 million after adjustments[9]

Core Insights - Dollar General and Dollar Tree, while categorized as dollar stores, have significant differences in their business models and customer demographics, leading to distinct stock performance trajectories [2][6][21] Company Overview - Dollar General operates 20,594 stores across the U.S. and generated $40.6 billion in sales last year, focusing on a wide range of price points typical for discount retailers [4] - Dollar Tree consists of 8,881 Dollar Tree stores and 7,622 Family Dollar stores, with total sales of $17.6 billion last fiscal year; however, the Family Dollar chain is set to be sold, which will reduce Dollar Tree's footprint [5][6] Customer Demographics - Dollar General has a higher concentration of stores in rural areas (42%) compared to Dollar Tree (30%), while Dollar Tree has a stronger urban presence (32% vs. 19%) [8] - The income demographics show that both companies serve similar lower and middle-income customers, but Dollar General has a slightly higher average annual spend per customer at $522 compared to Dollar Tree's $290 [8][9] Sales Mix - Dollar General's sales are heavily weighted towards consumables (82.7%), while Dollar Tree has a more balanced mix with 48.8% in consumables and 51.2% in discretionary items [10][11] - The upcoming sale of Family Dollar is expected to shift Dollar Tree's sales mix further towards discretionary goods, which may impact its competitive positioning [11] Economic Environment Impact - Dollar General's reliance on consumables poses a risk in high-inflation environments, as consumers may cut back on spending, affecting sales growth [12][13] - Conversely, Dollar Tree's focus on discretionary items may provide a competitive edge during inflationary periods, as consumers seek affordable alternatives for non-essential purchases [15][17] Future Outlook - An improving economy could favor Dollar General, as higher household incomes may enhance its customer base, but Dollar Tree's urban exposure and unique product offerings may still sustain its performance [19][20] - Current underperformance of Dollar Tree shares is partly attributed to the ongoing issues with Family Dollar, but if economic conditions remain challenging, Dollar Tree may present a more attractive investment opportunity [22][23]