DLTR 10-Q Analysis: Strong Sales Meet Rising Costs in Q2 2025

In the world of discount retail, every penny counts—not just for the customer, but for the company's bottom line. To understand how one of the industry's leaders is faring, we're diving into the latest quarterly report from DOLLAR TREE, INC. (DLTR). This filing, for the quarter ending August 2, 2025, provides a detailed look at the company's financial health and operational performance. You can view the full document on the SEC's website.

For the second quarter, Dollar Tree reported a total revenue of $4.57 billion, translating into a net income of $188.4 million. This performance reflects a period of significant growth and transition for the retailer.

To better visualize how the company's revenue flows through its costs and expenses to arrive at its final profit, the following diagram breaks down the key components of the income statement.

Strong Sales Meet Rising Costs

Dollar Tree's top-line growth was impressive. The company's revenue climbed by over 12% compared to the same period last year, driven by a healthy 6.5% increase in comparable store sales—a metric that tracks sales in stores open for at least a year. This suggests that Dollar Tree is successfully attracting more customers and encouraging them to spend more. The sales mix from its core "Dollar Tree Segment" was nearly evenly split between Consumable goods (like food and cleaning supplies) at 50.6% and Variety items at 49.0%.

However, this strong sales performance was met with rising operational costs. While the company’s gross margin—the profit left after accounting for the cost of goods sold—held steady and even slightly improved to 34.4%, its operating expenses grew at a faster pace.

Specifically, Selling, General, and Administrative (SG&A) expenses rose to $1.35 billion. As a percentage of revenue, these costs ticked up from 29.0% to 29.6%. This increase ultimately squeezed the operating margin, which dipped slightly from 5.3% to 5.1%. This dynamic highlights a common challenge for retailers: even as sales grow, managing overhead and store-level costs is critical to improving profitability.

A Clearer Picture Post-Divestiture

A key factor in Dollar Tree's recent financial story is the divestiture of its Family Dollar business. This quarter's results include an $8.0 million boost from a "Transition services agreement," where Dollar Tree is providing support services to the now-separate Family Dollar entity.

More significantly, the income statement separates the performance of the ongoing business from the sold-off portion.

• Income from continuing operations was $155.5 million.
• Income from discontinued operations (related to the Family Dollar sale) added another $32.9 million.

This separation gives investors a clearer view of the core Dollar Tree banner's standalone profitability. The final diluted earnings per share (EPS) of $0.91 marked a substantial improvement from $0.62 in the same quarter of the previous year, reflecting the stronger performance of the continuing business.

What's Next for Dollar Tree?

Dollar Tree's latest report paints a picture of a company executing well on its growth strategy in a favorable environment for discount retailers. The robust increase in same-store sales indicates strong consumer demand for its value-priced merchandise.

The primary challenge remains managing the expense side of the ledger. While the company's gross margins are healthy, controlling SG&A expenses will be crucial for translating top-line growth into bottom-line profit expansion. As Dollar Tree moves forward with a more focused business model, its ability to manage these operational costs will be a key storyline for investors to follow.