A retail chain running about nine thousand U.S. stores plus hundreds in Canada, Dollar Tree stocks household goods, food, health items, seasonal decor, and party supplies at low prices, with same-day delivery via Instacart and Uber Eats. The chain began in 1986, when former toy-store executives Macon Brock, Doug Perry, and Ray Compton opened their first "Only $1.00" stores in Virginia, Georgia, and Tennessee. It took the Dollar Tree name in 1993 — partly to keep future pricing flexible — and the ever-changing shelves are often described as a "treasure hunt."
Dollar Tree Q2 gross margin hit 42.9% on $369M in tariff refunds, lifting operating income 199%.
A $369 million tariff refund reshaped Dollar Tree's quarter. rose 7.0% to $4.89 billion and reached 42.9%, driving up 198.7% to $690.1 million. The company is now channeling those refund proceeds into pricing and marketing, setting up a cost-heavy second half.
Key takeaways
expanded 8.6 points to 42.9%, driven almost entirely by a 7.6-point benefit from $368.7 million in recorded in cost of sales.
rose 198.7% to $690.1 million and reached 14.1%, reflecting the tariff refunds, lower ongoing tariff costs, and $17.7 million in transition services agreement income from .
rose 7.0% to $4.89 billion, with a 3.7% increase and $225.9 million from non-comparable stores.
Section summaries
Management's Discussion and Analysis
Q2 FY2026 net sales rose 7.0% to $4.9B and gross margin surged to 42.9% driven by $369M in tariff refunds.
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increased 7.0% to $4,886.5 million, driven by a 3.7% increase and $225.9 million from non-comparable stores.
expenses leveraged 40 to 29.2% of , as lower payroll and consulting fees more than offset higher marketing investments.
The company began reinvesting tariff refund proceeds into pricing, marketing, and store initiatives, and stated it expects additional markdowns and expenses in the second half of fiscal 2026.
rose 196.7% to $2.70, and rose 173.1% to $514.5 million.
What changed
The Q1 FY2026 watch item on as tariff costs met lower freight relief was resolved by an extraordinary $368.7 million IEEPA tariff refund, which single-handedly drove the 6.0-point sequential gross margin increase to 42.9%.
expense rate rose to 29.2% from 27.8% in Q1, as higher marketing investments outweighed lower payroll and consulting fees, a shift from the prior quarter's payroll-driven pressure.
growth decelerated to 3.7% from 3.5% in Q1, with the filing not breaking out the traffic and ticket components that showed a 1.0% traffic decline last quarter.
remained essentially flat sequentially at $2,933.5 million, after the 20.6% increase to $2,932.6 million flagged in Q1, with no borrowings outstanding under the or commercial paper program at quarter-end.
What to watch
Q3 FY2026 as the company laps the 35.8% Q3 FY2025 level without a repeat of the $369M tariff refund, while management guides for additional markdowns and expenses from reinvesting the refund proceeds.
expense rate trajectory after the 29.2% Q2 level, as marketing investments rise and the company absorbs the cost of pricing and store initiatives funded by the tariff refunds.
growth sustaining above 3% as the standalone Dollar Tree moves past the initial pricing-initiative lift and laps a 4.2% comp from Q3 FY2025.
Realization and deployment of the remaining ~$425M cash tax benefit from the sale loss, with no update provided in this filing.
expanded 850 to 42.9%, primarily due to a 755 benefit from $368.7 million in IEEPA tariff refunds recorded in cost of sales.
leveraged 40 to 29.2% of total , helped by lower payroll and consulting fees, partially offset by higher marketing investments.
rose 900 to 14.1%, reflecting the tariff refunds, lower tariff costs, and transition services agreement income of $17.7 million from .
The company began reinvesting tariff refund proceeds into pricing, marketing, and store initiatives, with additional markdowns and expenses expected in the second half of fiscal 2026.
Liquidity remained strong with $1.5 billion available under the and no borrowings outstanding under the facility or at quarter-end.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, diesel fuel cost changes and inflation. We may enter into interest rate or diesel fuel swaps to manage exposure to interest rate and diesel fuel pr…
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We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes, diesel fuel cost changes and inflation. We may enter into interest rate or diesel fuel swaps to manage exposure to interest rate and diesel fuel price changes. We do not enter into derivative instruments for any purpose other than cash flow hedging and we do not hold derivative instruments for trading purposes.
Interest Rate Risk
Our exposure to interest rate risk relates to our Five-Year Credit Facility, our Term Loan, and borrowings under our commercial paper program. At August 1, 2026, we had no borrowings outstanding under our Five-Year Credit Facility or our commercial paper program. A hypothetical increase of one percentage point on our $500.0 million Term Loan would not materially affect our results of operations or cash flows.
Inflation Risk
The primary inflationary factors impacting our business include changes to the costs of merchandise, transportation (including the cost of diesel fuel), store construction-related costs, and labor. If these inflationary pressures become significant, we may not be able to fully offset such higher costs through adjustments to our product assortment, improvements in operational efficiencies or increases in our comparable store net sales. Our inability or failure to do so could harm our business, financial condition and results of operations.
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For information regarding legal proceedings in which we are involved, please see Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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For information regarding legal proceedings in which we are involved, please see Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
There have been no material changes to the risk factors described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, other than as set forth in the discussion of certain items that have impacted or could impact our business o…
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There have been no material changes to the risk factors described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, other than as set forth in the discussion of certain items that have impacted or could impact our business or results of operations during 2026 or in the future as disclosed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.