Discount retailers posted strong earnings in 2025, but expect sales to slow

On one busy block in East Baltimore, there’s pretty much every kind of discount store imaginable: a bunch of pawn shops, a store advertising cut-rate liquor, and a Dollar Tree, where Damien Edmonds popped in to get a bottle of juice.

“You go to a regular market, you're gonna spend $3, $4. In here, you’re only spending a dollar and a quarter,” he said.

Edmonds is retired and on a fixed income. He also likes nice shoes, and he’d rather put his money toward Jordans than juice. So, he takes the bus to the dollar store to get deals.

“Let me get out, get some of this fresh air, stretch my legs — it's the way to do it,” he said. “You got to learn how to save and work this city accordingly.”

Dollar Tree reported earnings this week, announcing that its comparable store sales — that's basically a way of comparing one store's sales in one time period to its sales in another — rose 5.3% in fiscal year 2025. However, the outlook for 2026 was a bit more subdued; the company expects same-store sales growth to slow to 3% to 4%. Five Below reports results on Wednesday.

One thing working in the favor of discount retailers? In the last couple of years, shopping at dollar stores has become cool for people of all income levels.

“There was a removal of stigma, frankly,” said Katie Thomas, who studies consumer behavior at the consulting firm Kearney. “That went away as inflation really peaked coming out of COVID.”

But low-income consumers remain the core customers for dollar stores, Thomas said. And when an essential item like gas goes up in price, they have less to spend on everything else. In the past, they might have substituted a cheaper version of something they needed.

“Now, we're seeing people just decide if they really need the thing at all,” she said.

So, consumers are prioritizing essentials but may be skipping a treat, even if it only costs a dollar.