Revenue and Margin Trends
- Q2 2025 net sales: $4.57B, up 12.3% YoY; comp sales +6.5% (traffic +3% and ticket +3.4%). Non-comp store contributions exceeded expectations due to new openings and $0.99-only conversions.
- Gross margin: 34.4% in Q2, up 20 bps YoY, aided by higher inventory mark-on, lower freight, and favorable pricing mix shifts away from lower-margin categories. Tariff headwinds persisted but mitigated largely via the company’s five levers.
- Operating income and margin: Q2 adjusted operating income $236M, up 7.4% YoY; operating margin 5.2% (down ~20 bps YoY) as SG&A leverage and timing benefits offset higher payroll, depreciation, and maintenance costs.
- Profitability: Net income $155.5M; net margin ~3.40%; EPS $0.91 (diluted). One-time TSA benefit of $8M contributed to the period.
- Cash flow and balance sheet: Operating cash flow $160M; capex $245M; free cash flow negative $85M for the quarter; cash balance $757.3M; total debt $4.913B; net debt $4.247B. Inventory rose 4.4% to support store growth and expanded assortment.
- Capital allocation: 5Q leverage on tariffs used; share repurchases totaling $501M in Q2, with ~11.6M shares repurchased year-to-date at an average price of $86.00, plus an additional 0.6M shares post-quarter end.
- Guidance: FY2025 comp 4%–6%; adjusted EPS $5.32–$5.72; capex guidance $1.2–$1.3B, ~400 new Dollar Tree store openings; gross margin ~+50 bps; TSA proceeds anticipated at $55–$60M; 2026 cost trajectory remains contingent on tariff evolution and ongoing SG&A management.
- Strategic highlights: closed Family Dollar sale, executed accelerated store conversions (3,600 store conversions to Dollar Tree 3.0 format by Q2 end; on track for ~5,000 by year-end), opened 254 stores YTD (including 42 Party City conversions), and launched Uber Eats to reach a younger, more diverse customer base (~8,500 stores eligible at roll-out).