Dollar Tree Lures Affluent Shoppers in Downshift

Dollar Tree said wealthier shoppers are increasingly driving sales as consumers hunt bargains.

The discount retailer released second-quarter earnings Wednesday (Sept. 3), showing a 6.5% uptick in same-store net sales, fueled by a growing number of shoppers who come from the $100,000 income bracket.

“If you look at what we’re adding last quarter in Q1, 50% of the customers we added came from the higher $100,000 price point, salary point,” CEO Mike Creedon told analysts during an earnings call. “If you look [at] this quarter, that was two-thirds … so we think we’re resonating very well with the customer.”

“Our customers are walking in … and they’re seeing value,” he added. “We still have 85% of our stores at $2 or less.”

Later during the call, Creedon said all income brackets are helping drive sales.

“Yes, we saw the strongest performance from the higher income, but what was interesting was we still saw very strong performance from our lower-income customer,” Creedon said. “So, really, the pack sizes that we have the ability to help them kind of stretch their budget and make it to that next paycheck.”

Where the two groups differ is in the types of items they buy. Low-income shoppers are driven by “everyday essentials” and things they might have to pay more for if they visited a larger mass merchant.

“And then you have that thrill of the hunt customers that tend to skew higher income, they’re coming into our stores,” Creedon said during the call. “They’re targeting the seasons, the holiday, the back to school, all that. And they’re saying, ‘Wow, I can’t get over that I can get Dixie plates for $3.’”

The $75,000 to $100,000 annual income bracket has, by historic standards, suggested relative stability, allowing for the ability to save for college, own a home and take summer vacations.

However, many people in this group now live paycheck to paycheck, according to the PYMNTS Intelligence August edition of the New Reality Check: The Paycheck-to-Paycheck Report, “Financial Fragility in the Middle: How Income and History Shape Consumer Risk.”

The report found that more than 70% of consumers in the United States said they live paycheck to paycheck, with middle-income households making up a rapidly increasing share.

“This paradox is what we might call the middle-class mirage, a condition in which rising incomes no longer guarantee stability,” PYMNTS wrote Monday (Sept. 1). “The illusion of prosperity persists, but the lived reality is far more fragile.”