Q2 FY2026
Filed Aug 27, 2026Dollar Tree Reports Strong Second Quarter Results
Net sales increased 7.0%, comparable store net sales increased 3.7%, operating income increased 198.7%, and diluted EPS increased 260.0%. Profitability benefited materially from tariff refunds, which contributed a $1.31 benefit to diluted EPS and 650 basis points to operating income margin expansion.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $4,886.5 million | – | 7.0% |
| Other revenueGAAP | $4.7 million | – | – |
| Total revenueGAAP | $4,891.2 million | – | – |
| Comparable store net sales growthother | 3.7% | – | – |
| Average ticket changeother | 3.3% increase | – | – |
| Traffic changeother | 0.4% increase | – | – |
| Gross profit marginGAAP | 42.9% | – | increased 850 basis points |
| Selling, general and administrative expensesGAAP | $1,426.6 million | – | – |
| Selling, general and administrative expense rateGAAP | 29.2% | – | decreased 40 basis points |
| Transition services agreement income, netGAAP | $17.7 million | – | – |
| Operating incomeGAAP | $690.1 million | – | 198.7% |
| Operating income marginGAAP | 14.1% | – | expanded 900 basis points |
| Adjusted operating incomenon-GAAP | $690.1 million | – | 192.4% |
| Adjusted operating income marginnon-GAAP | 14.1% | – | expanded 890 basis points |
| Income from continuing operations before income taxesGAAP | $686.4 million | – | – |
| Effective tax rateGAAP | 25.0% | – | – |
| Income from continuing operationsGAAP | $514.5 million | – | – |
| Net incomeGAAP | $514.5 million | – | – |
| Diluted earnings per share from continuing operationsGAAP | $2.70 | – | 260.0% |
| Diluted earnings per shareGAAP | $2.70 | – | – |
| Adjusted diluted earnings per share from continuing operationsnon-GAAP | $2.70 | – | 250.6% |
| Net cash provided by operating activities of continuing operationsGAAP | $921.5 million | – | – |
| Capital expenditures of continuing operationsGAAP | $246.3 million | – | – |
| Free cash flow from continuing operationsnon-GAAP | $675.2 million | – | – |
| Year-to-date net salesGAAP | $9,857.0 million | – | 7.1% |
| Year-to-date comparable store net sales growthother | 3.6% | – | – |
| Year-to-date gross profitGAAP | $3.9 billion | – | 21.9% |
| Year-to-date gross profit marginGAAP | 39.8% | – | expanded 480 basis points |
| Year-to-date operating incomeGAAP | $1.16 billion | – | 89.1% |
| Year-to-date operating income marginGAAP | 11.8% | – | expanded approximately 510 basis points |
| Year-to-date diluted earnings per share from continuing operationsGAAP | $4.44 | – | – |
| Year-to-date adjusted diluted earnings per share from continuing operationsnon-GAAP | $4.42 | – | – |
Fiscal 2026 and third quarter fiscal 2026 outlook
- RevenueFiscal 2026 net sales from continuing operations of $20.5 billion to $20.7 billion, based on comparable store net sales growth of 3% to 4%; third quarter net sales from continuing operations of $5.0 to $5.1 billion, based on comparable store net sales growth of 3.0% to 4.0%.
- NoteFiscal 2026 adjusted diluted EPS of $7.70 to $8.05, including an approximate $0.60 benefit related to the net impact of tariff refunds.
- NoteThird quarter diluted EPS of $0.80 to $0.95, including an approximate $0.50 impact related to tariff refund reinvestments.
- NoteApproximately 400 new store openings and 75 closings for fiscal 2026.
Capital returns
- Repurchased 5.6 million shares of common stock during the second quarter of fiscal 2026 for $605 million, excluding applicable excise tax.
- Repurchased 11.1 million shares for $1.2 billion year to date, excluding applicable excise tax.
- Q3 quarter-to-date share repurchases totaled $5.3 million.
- Had $2.5 billion remaining under its share repurchase authorization as of August 1, 2026.
What drove it
- Comparable store net sales growth was driven by a 3.3% increase in average ticket and a 0.4% increase in traffic.
- Gross profit margin included 680 basis points related to the net impact of tariff refunds.
- The remaining gross-margin-rate improvement was primarily driven by lower tariff rates, favorable shrink, and occupancy leverage, partially offset by sales mix.
- The remaining SG&A rate decrease primarily reflected lower payroll expenses, partially offset by higher marketing and depreciation.
- Transition services agreement income, net was $18 million for services provided between Dollar Tree and Family Dollar following the sale.
- The company opened 75 new Dollar Tree stores and converted or added about 710 stores to the Dollar Tree multi-price format, ending with approximately 6,600 multi-price stores.
- The company ended the quarter with 9,436 stores across the Dollar Tree U.S. and Dollar Tree Canada banners.
Concerns
- The net impact of tariff refunds contributed a $1.31 benefit to second-quarter diluted EPS and 650 basis points to operating income margin expansion.
- Third-quarter diluted EPS is expected to include an approximate $0.50 impact related to tariff refund reinvestments.
- Sales mix partially offset the remaining gross-margin-rate improvement.
- SG&A included 30 basis points of tariff-refund-related reinvestment and faced higher marketing and depreciation expenses.
- Year-to-date comparable store net sales growth included a 0.3% decrease in traffic, partially offset by a 3.9% increase in average ticket.
What to watch
- Third-quarter comparable store net sales growth guidance of 3.0% to 4.0%.
- Third-quarter net sales guidance of $5.0 to $5.1 billion and diluted EPS guidance of $0.80 to $0.95.
- The extent to which tariff refund reinvestments affect third-quarter EPS and the approximate $0.60 full-year benefit from the net impact of tariff refunds.
- Execution of approximately 400 new store openings, 75 closings, and further Dollar Tree multi-price format conversions or additions.
- Sustainability of traffic growth, gross margin drivers excluding tariff refunds, payroll savings, and marketing and depreciation expense.
Balance sheet and cash flow
- Cash and cash equivalents were $1.1 billion, or $1,058.1 million in the balance sheet, as of August 1, 2026.
- No commercial paper was outstanding and there were no borrowings under the revolving credit facility as of August 1, 2026.
- Long-term debt, net was $2,933.5 million as of August 1, 2026, compared with $2,431.7 million as of January 31, 2026.
- Net cash provided by operating activities of continuing operations was $1,565.5 million for the 26 weeks ended August 1, 2026, compared with $639.2 million in the prior-year period.
- Year-to-date capital expenditures were $498.8 million, compared with $493.9 million in the prior-year period.
- Year-to-date free cash flow from continuing operations was $1,066.7 million, compared with $145.3 million in the prior-year period.
- The company received $500.0 million of proceeds from long-term debt year to date.
Analysis
Dollar Tree reported a strong second quarter on a continuing-operations basis. Net sales increased 7.0% to $4,886.5 million, while comparable store net sales increased 3.7% on top of 6.5% in the prior-year quarter. The comparable-sales gain was supported by both a 3.3% increase in average ticket and a 0.4% increase in traffic. The company also opened 75 stores, converted or added about 710 stores to the multi-price format, and ended with 9,436 stores.
Profitability expanded sharply. Gross profit margin increased 850 basis points to 42.9%, operating income rose 198.7% to $690.1 million, and operating income margin expanded 900 basis points to 14.1%. The results included a substantial benefit from the net impact of tariff refunds: 680 basis points of gross margin improvement, 650 basis points of operating-margin expansion, and a $1.31 benefit to diluted EPS. Excluding that effect, management identified lower tariff rates, favorable shrink, and occupancy leverage as gross-margin supports, while sales mix was a partial offset.
Expense performance also aided the quarter. SG&A expense rate decreased 40 basis points to 29.2% of total revenue, with lower payroll expenses more than offsetting higher marketing and depreciation. SG&A included 30 basis points of tariff-refund-related reinvestment. Transition services agreement income, net was $17.7 million in the quarter, compared with $8.0 million a year earlier. Adjusted operating income was $690.1 million and adjusted diluted EPS was $2.70, because the current quarter had no reported non-GAAP adjustments while the prior-year period included strategic review costs.
Cash generation and repurchases were significant. Second-quarter operating cash flow from continuing operations was $921.5 million and free cash flow was $675.2 million. Dollar Tree repurchased 5.6 million shares for $605 million during the quarter and 11.1 million shares for $1.2 billion year to date. Cash and cash equivalents were $1,058.1 million, the company had no commercial paper outstanding or revolving-credit-facility borrowings, and $2.5 billion remained under the repurchase authorization. Long-term debt, net was $2,933.5 million.
The company increased its fiscal 2026 adjusted diluted EPS outlook to $7.70 to $8.05, including an approximate $0.60 benefit from the net impact of tariff refunds. It expects fiscal-year net sales from continuing operations of $20.5 billion to $20.7 billion and comparable store net sales growth of 3% to 4%. For the third quarter, Dollar Tree expects net sales of $5.0 to $5.1 billion, comparable store net sales growth of 3.0% to 4.0%, and diluted EPS of $0.80 to $0.95, including an approximate $0.50 impact related to tariff refund reinvestments. The central items for the next quarter are comparable-sales execution, the durability of traffic gains, and the degree to which reinvestment of tariff refunds affects earnings.
Management, verbatim
Positive traffic trends helped drive strong comparable sales growth and EPS exceeded the high end of our outlook. Our strategies are unlocking a better assortment in better-run stores, while allowing us to engage customers in more relevant and compelling ways.
Mike Creedon, Chief Executive Officer
Not in the filing
stated, not guessed- Previous-quarter outlook was not provided, so comparison of actual results with prior guidance is unavailable.
- No revenue, operating income, or profit metrics were reported separately for Dollar Tree U.S. and Dollar Tree Canada.
- Quarterly gross profit dollars were not explicitly reported.
- No dividend amount or dividend declaration was reported.
- No quarterly cash-flow statement beyond the free-cash-flow reconciliation metrics was provided for prior-quarter comparison.
- No GAAP reconciliation for projected adjusted diluted EPS was provided, which the company stated could not be provided without unreasonable effort.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.