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Wealthier households are flocking to dollar stores, chains whose core customers are America’s poor, as Donald Trump’s tariffs darken US consumer sentiment.
The two biggest operators, Dollar Tree and Dollar General, revealed this week rising inbound traffic from middle- and higher-income households in the first quarter of the year.
Dollar Tree said 2.6mn new customers visited its 9,000 stores in the first quarter, a majority of them from higher income brackets. “We saw a meaningful traffic increase from customers with household incomes of more than $100,000,” chief executive Mike Creedon told analysts on Wednesday.
US retailers have been challenged to maintain attractive prices as Trump’s tariffs raise the cost of imported goods. Consumers have been rattled by the levies, with sentiment falling, fears of inflation widespread and concerns rising over income prospects, according to a University of Michigan survey.
Dollar Tree’s comments echoed those of Dollar General, which has more than 20,000 stores.
“During our recent customer survey work, 25 per cent of Dollar General customers reported having less income than they did a year ago and nearly 60 per cent of our core customers noted that they felt the need to sacrifice some necessities in the coming year,” Todd Vasos, Dollar General chief executive, told analysts on Tuesday.
But Vasos added its share of “trade-in” customers from better-off households was the highest in four years.
“While our core customer remains financially constrained, we have seen increased trade-in activity from both middle- and higher-income customers,” said Vasos.
Dollar stores’ financial results helped to illustrate shifts under way in the US retail landscape. Walmart, the largest retailer with consistently low prices, said sales had grown across all income cohorts at its US business in the first quarter. Walmart warned that tariffs were forcing it to raise prices this year.
Target, whose customers have higher average incomes than Walmart or the dollar stores, reported a drop in same-store sales, citing in part dreary consumer sentiment and worries over US tariffs.
Creedon said Dollar Tree was attracting customers from retailers outside the dollar store category. More affluent consumers liked its wider assortment of merchandise increasingly listed for more than the chain’s $1.25 opening price point.
Dollar Tree consumers are 9 per cent more likely to have low incomes than all US consumers, according to market research firm Numerator, while Dollar General’s shoppers are 14 per cent more likely to have low incomes.
Virginia-based Dollar Tree warned that tariffs would increase its costs by $200mn this year, or 1 per cent of forecast net sales of about $19bn. As a result of factors including tariffs, the company said second-quarter adjusted profit could fall by as much as half. Shares of Dollar Tree were down 8.4 per cent on Wednesday.
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To offset tariff costs, Creedon said options included negotiating with manufacturers, obtaining goods from different countries and leaning on prices above $1.25.
The company, which is in the process of divesting its troubled Family Dollar division, said net sales rose 11.3 per cent $4.6bn in the first quarter — above expectations — while net income surged 14.4 per cent to $343.4mn. Same-store sales rose 5.4 per cent.
Dollar General, based in Tennessee, reported net sales of $10.4bn and net profit of $391.9mn in the first quarter and a better than expected 2.4 per cent rise in same-store sales.
