LOGINBy Thomas Paulson, Head of Market Insights
Dollar Tree reported an improvement in its comp-store sales trend due to an improvement in its discretionary business (as did Dollar General, Walmart, and Target). The discretionary comp increased by +0.4%, the first positive number of the year; moreover, its 2- and 3-year trend also improved. The earnings release quotes CEO Mike Creedon saying, “2024 [finished] on a high note with strong execution at Dollar Tree as growing customer acceptance of our expanded assortment drove sales momentum.” We read this to mean that units-per-transaction (UPTs) improved which demonstrates strong retail fundamentals – something that we also noticed and commented on in our review of DG’s results. As expected, Dollar Tree comp-traffic slowed -80 bps to a +0.7% increase and in-line with Advan’s estimate (-70 bps), reflecting the hurricane noise and the highly competitive intensity of the category. The intensity is also evident in Dollar Tree’s gross margin where the mark-up* was less.
“Back-to-basics” is also giving management the confidence to guide 2025 comp-sales at a robust +3-5% rate. Advan sees support for that confidence as traffic during March has improved +300 bps from FQ4’s rate and been quite consistent for the month. Additionally, Creedon also shared, “We’ve made some investments in [store labor] hours and we've made investments in wages.” Those should allow for better service levels, in-stocks, and store conditions, all of which should yield improvement in conversion rate, UPTs, basket size, and traffic; that’s what the data and commentary show.
In addition to Dollar Tree getting the assortment right, in stock, and at the right value, going back-to-basics also means disposing of Family Dollar which is being sold to private equity. Creedon said, “Dollar Tree and Family Dollar are two different businesses with limited synergies, and each is at a very different stage of its journey. Separating them will enable each banner to be led and managed by a dedicated team that can focus exclusively on that banner's distinct needs and on realizing each banner's full potential.” The transaction is expected to close within three months.
The 2025 plan also includes 2000 locations converted to “3.0 stores” by the end of 2025 and 300 new stores. That would put the 3.0 portfolio at 5,200, out of a total of 9,600. On the performance of the 3.0 conversions, Creedon said, “3.0 stores saw a 220-basis point comp lift compared to other formats... Our merchandising team worked tirelessly to improve and refine execution around our expanded assortment, especially in holiday categories. Across seasonal merchandise broadly, our 3.0 stores saw a 10-percentage point comp lift over other formats, including 30 points in Thanksgiving and 15 points in Christmas. In everyday categories like textiles, electronics, apparel and toys, we saw comp lifts in the low to mid-teens. Toys, in particular, was a big winner this season.”
in retailer lingo this is “mark-on” vs. “mark-up” and it refers to the retail price listed vs. the cost of the product from the vendor.
Thomas has been Head of Market Insights for Advan Research since January 2025. Previously, he served as Director of Research and Business Development at Placer.ai, where he was instrumental in providing actionable insights derived from location analytics and the path for expansion into new verticals. His extensive background also includes two decades as a Wall Street analyst and portfolio manager in asset management at Alliance Bernstein, Cornerstone, and others. Linkedin profile.
