Dollar Tree’s Margin Trap

What They Gained in Shoppers, They Lost in Profit

Note: This newsletter contains information for educational purposes only, and the content below should not be considered financial advice to readers. We published a brand new short recommendation for our clients. If you would like to become our client, email laks@unicusresearch.com

**Sharing earnings summary on some stocks does not mean we recommend the stock. Note that to access our short recommendations, you have to be a client of Unicus Research.

The year-over-year decline in gross margin rate was primarily driven by increased shrink, higher markdowns, and the sales mix shift to lower-margin consumables.”- CEO

Dollar Tree posted a decent top-line beat.

Consumers who make $100K shop at Dollar Tree, which is NOT good news.

Dollar Tree posted a decent top-line beat in Q1 2025, with revenue up 4.2% and EPS exceeding expectations. But behind that clean print, cracks are spreading. Gross margin compression, rising shrinkage, and a shifting customer base point to structural stress.

While the company added 2.6 million new customers, many from affluent households, it also lowered guidance, announced the closure of 970 Family Dollar stores, and warned of continued margin pressure. Meanwhile, SNAP benefit reforms loom over its low-income base. The surface is clean, but the margin is cracking.

In this edition of Earnings Pro, we focus on the financials, the balance sheet, and why the market may be missing a silent unraveling beneath the surface.

Full breakdown, red flags, and SNAP-linked downside analysis below the line…