Dollar Tree Says Higher Fuel Prices Are Becoming a ‘Very, Very Meaningful’ Headwind

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Dollar Tree Inc. stock fell Thursday after the company reported second-quarter results.

Dollar Tree reported adjusted diluted earnings of $2.70 per share, including a $1.31 benefit from the net impact of tariff refunds. Excluding that benefit, underlying earnings were $1.39 per share, topping the $1.14 consensus estimate.

Sales rose 7% year over year to $4.89 billion, topping the $4.86 billion estimate.

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Comparable-store net sales increased 3.7%, driven by a 3.3% increase in average ticket and 0.4% traffic growth.

Gross margin expanded 850 basis points to 42.9%. Tariff refunds contributed 680 basis points of that increase. Lower tariff rates, favorable shrink trends and improved occupancy leverage also supported the gain.

Adjusted operating margin expanded 890 basis points, including a 650-basis-point benefit from tariff refunds.

Dollar Tree returned $605 million to shareholders through share repurchases during the quarter. As of Aug. 1, the company had $2.5 billion remaining under its repurchase authorization.

Operating cash flow totaled $922 million, while free cash flow reached $675 million.

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The company opened 75 stores and converted or added about 710 locations to its multiprice format. Dollar Tree ended the quarter with about 6,600 multiprice locations and 9,436 stores across the U.S. and Canada.

During the earnings call, Chief Financial Officer Stuart Glendinning said elevated fuel prices are driving a "very, very meaningful" increase in freight surcharges. He warned that the pressure will persist as long as fuel costs remain high, contributing to an expected decline in fourth-quarter gross margin.

Dollar Tree raised its fiscal 2026 adjusted earnings outlook to $7.70 to $8.05 per share from $6.70 to $7.10. The forecast, which includes an estimated 60-cent tariff refund benefit, topped the $7.04 consensus estimate.

The company maintained its annual sales forecast of $20.5 billion to $20.7 billion, compared with the $20.65 billion estimate.

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For the third quarter, Dollar Tree expects adjusted earnings of 80 cents to 95 cents per share. The outlook includes a 50-cent impact from reinvesting tariff refunds and trails the $1.40 consensus estimate.