Dollar Tree's Q1 earnings report was impressive, and its stock price soared. Analysts said it benefited from the addition of high-income customers

Dollar Tree (Dollar Tree, NASDAQ ticker DLTR) saw its stock price surge by 8.72% last Friday, closing at $94.5. Dollar Tree previously announced impressive Q1 financial results, with the company raising multiple performance profit indicators. The well-known discount chain store added up to 2.6 million new customers, with high-income households driving primary performance growth, indicating that inflation and economic pressures are pushing affluent consumers to purchase affordable goods. Pure market observation, not any investment advice.

Dollar Tree Q1 Financial Report Impressive, Benefiting from High-Income Consumers and Slightly More Expensive Goods

Dollar Tree's first-quarter performance was outstanding, with adjusted earnings per share of $1.26, far exceeding Wall Street analysts' expectations of $1.21. Dollar Tree added 2.6 million new customers this quarter, with CEO Michael Creedon attributing performance growth to expanded product variety. Currently, 85% of Dollar Tree's products are priced at $2 or below, but not all products are uniformly cheap, with the most expensive items approaching $7.

The number of customers visiting at least three times per month increased by 9%, with performance primarily driven by everyday consumables like candy, snacks, and beverages, which attract customers to return.

Morgan Stanley Raises Dollar Tree Target Price

Wall Street advisory firms have raised Dollar Tree's target price. Morgan Stanley raised the target price from $80 to $96, maintaining an Equalweight Rating and predicting 2026 EPS will reach $6.39, with a price-to-earnings ratio of about 15 times; Truist raised the target price from $100 to $109 and gave a buy rating; Goldman Sachs raised its target price from $86 to $94. Analysts predict comparable sales growth rates of 4.6% and 4.0% for Dollar Tree in 2025 and 2026, respectively, with EBIT growth rates of 5% and 13%.

High-Income Consumers Driving Performance Growth

The most significant trend in Dollar Tree's performance is the influx of high-income consumers as new primary customers, with annual incomes of at least six figures. Dollar Tree's product diversification and multi-price strategy successfully attracted these high-income consumers, who prefer affordable and small-package goods amid reduced consumption budgets. This shift in consumer power also signals broader economic warnings, with affluent families increasingly prioritizing value over luxury in uncertain economic scenarios.

Dollar Tree's current PE Ratio is 19.01, with a market capitalization of $20.114 billion and a year-to-date return of +28.61% (compared to the S&P 500's +1.94%).