Dollar Stores Have Been On a Tear — Here’s What Could Spoil the Party

In uncertain times, Americans across income brackets flock to cheaper shopping options, and Dollar Store profits soar. Or at least that’s how it’s usually gone — including as recently as 2025 and into this year. 

That could soon change. 

After earlier earnings dips resulting from inflation, e-commerce competition, and shoplifting on an organized crime scale, Dollar General, Dollar Tree and five below all finished 2025 with positive quarterly results. During fourth-quarter earnings calls in March, each discount retailer shared plans to expand their U.S. footprints in 2026 and capture new shoppers with in-store enhancements. 

Leaders of the discount retail sector all echoed the same message: High- and middle-income Americans are more willing than ever to “trade down,” or buy cheaper products, while low-income consumers remain loyal customers. Even Family Dollar, sold at a loss by Dollar Tree to a private entity in July 2025, reported end-of-year improvements.

Just as the final shockwaves of the COVID-19 pandemic and Liberation Day tariff announcements were receding, however, American wallets were hit once again. In late February, the U.S. ignited a war with Iran, creating a domino effect that landed squarely at American gas pumps. Resilient retail figures in March were driven, in part, by gas station spending.

“Consumers, at least at the start of the energy price spike, were hanging in there,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. “Now we don’t expect that to persist for too long. We think budgets are going to be under intense pressure.”

The haves and have-nots have all been shopping at the dollar store, but experts say souring retail sentiment could shake up even this sturdy sector’s equilibrium.

Dollar General and Dollar Tree for now remain two of the largest drivers of store openings in the retail market, according to Brandon Svec, national director of retail analytics at CoStar.

The sector’s major brands differ in their traditional shopper demographics. Dollar Tree and Five Below are known for seasonal, discretionary items and boast strong presences in urban markets. Dollar General, the country’s largest dollar-store chain, is known for selling necessities in rural areas that often have limited retail options. 

Despite their differences, they all share low price tags that attract a wide range of shoppers. 

“Such a large portion of the American consumer base is seeking out value, not just lower-income folks,” Svec said. “Folks making $100,000-plus a year are now shopping at Dollar Tree, at Dollar General, at Walmart, as everybody looks to try and make their dollars stretch more.”

Both Dollar General and Dollar Tree have reported disproportionate customer base growth from high-income households in recent quarters, prompting store renovations en masse and new, multi-price store formats.

After ending 2025 with 581 new U.S. stores and deepening its presence in rural America, Dollar General plans to spend up to $1.6 billion in the first phase of a multiyear plan to significantly renovate stores. Remodels of over 4,000 stores and 450 new locations are planned in 2026. 

Dollar Tree, having long ago abandoned its $1 price limit, is straying even further from its discount reputation by expanding into higher-earning markets. The brand opened 402 new stores last year, and approximately 400 are planned for 2026. Company leadership reported in March that 5,300 of its more than 9,000 locations have been converted to its so-called 3.0 multi-price format to capitalize on higher-income visitors.

In the past six years, nearly half of new Dollar Trees opened in wealthier areas, according to Bloomberg, and more than half of its customer base growth in the fourth quarter last year was thanks to shoppers with incomes over $100,000. The brand also cut the ribbon in May on a 1.25 million-square-foot distribution center outside of Phoenix, Ariz., adding to 16 distribution centers nationwide.

“Value has outperformed,” Svec said. “It’s definitely been the case for the last couple years, and we continued to see that strength in the quarter four earnings of both Dollar Tree and Dollar General.”

Five Below, which ended 2025 with 1,921 total stores and a 23 percent increase in net sales, is forging ahead with its ambitious goal of more than 3,500 stores by 2030. Similar to Dollar Tree’s multi-price format, its “Five Beyond” concept introduces
higher-priced items up to $25 to its impulse-driven, budget-
conscious shoppers.

The economic headwinds that typically favor this sector have the potential to turn sour, however, and analysts are waiting to see whether the good times will keep rolling — for customers and retailers — now that gas is approaching a historically high nationwide average of $5 a gallon. 

Foot traffic at Dollar Tree, Dollar General and Five Below saw year-over-year growth almost every month last year, according to Placer.ai data shared with Commercial Observer. That unity has broken down in recent months, however, revealing an uneven split between essential and discretionary spending. 

Dollar Tree foot traffic went into the negative for seven of the last eight months, accelerating downwards to negative 6.9 percent in April. Foot traffic at Dollar General, which has long served as a mini-Walmart in otherwise under-retailed rural areas, has held steady in low single-digit positives. Visitation patterns at Dollar General’s more than 20,000 locations are more habitual than Dollar Tree, with 28 percent of visits originating from within one mile, according to a May report.

“In 2026, there has been a deceleration in traffic growth for some chains, but others focusing on general merchandise offerings, like Five Below, have maintained momentum,” said Elizabeth Lafontaine, director of research at Placer.ai, a foot-traffic analytics firm.

Five Below visitations indeed climbed, up 21.9 percent last month. The Placer.ai data also tracked foot traffic at Ollie’s Bargain Outlet, the largest closeout merchandise retailer in the U.S. that has been rapidly expanding to 660 stores nationwide, including former Big Lots locations. High foot traffic there through 2025 slowed to a sudden snail’s pace in March and April of this year.

It is possible that the full weight of gas prices hasn’t yet landed on U.S. consumers, or that the pressure is offset by shoppers’ willingness to trade down. Higher gas prices historically boost dollar stores’ popularity in the near term, but cause pain once there is less disposable income and consumers make fewer shopping trips.

“The margin squeeze at this level of retail is really quite profound,” said Kate Newlin, a retail brand consultant and president of Kate Newlin Consulting. “They don’t have any wiggle room. If they’re going to get growth, it’s about getting new customers.”

Oil prices post a twofold problem for the retail world.

“Not only are they worried about a more discerning consumer and less discretionary cash to go around, but they’re also concerned with their own margins and their own transportation cost,” Svec said.

Retailers like Dollar General and Dollar Tree generally pay anywhere from 3 percent to 6 percent of gross sales solely toward transportation costs. Lower energy prices last year were among the few saving graces for retailers amid tariff pressures. Now, they are having to do the hard math on $6-a-gallon diesel. 

“If we see those transportation costs go up by 40 percent, that can be a 100 or 150 basis point hit to retailer margins, and that really does matter,” Svec said. 

It matters for these retailers’ shoppers, too. 

Americans are contending with higher prices, declines in real post-tax income due to cuts to welfare benefits, persistently low hiring rates compared with a couple of years earlier, and elevated delinquency rates for credit card debt, according to a recent Oxford Economics report. U.S. household debt hit a record high of $18.8 trillion in the first quarter of 2026. Consumer sentiment dropped in tandem, down to a record low of 48.2 in May 2026, according to the University of Michigan’s survey of consumer sentiment. 

“Our customers continue to report that their financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation,” Todd Vasos, CEO of Dollar General, said in a March earnings call. “Many of our customers report they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities.”

The bottom half of Americans financially are continuing to spend on necessities, Svec said. Meanwhile, wealthier Americans, still riding high on relentless stock market gains, are making the big-ticket purchases that keep the consumer engine going. Svec called the current retail market balance a fragile one. 

“It wouldn’t take a big shift in the labor market or in the overall economy to cause a pullback in consumer spending,” he said. 

Building more stores worked for dollar store brands last year, Newlin pointed out, but it now matters a whole lot more whether they are located along traffic corridors, in a convenient shopping center or near a gas station. 

“What is true for all of [the chains] is that you’ve got genuinely stressed-out consumers juggling an enormous calculus among what they must buy in order to live and what they want,” Newlin said. “The spread has never been wider. The discomfort is escalating.” 

The National Retail Federation’s March forecast for 2026 predicted that retail sales would grow by 4.4 percent over 2025 to $5.6 trillion, but acknowledged that the market is bifurcated between high- and low-income consumers, and geopolitical disruptions can’t be ignored.

“Their core customer base, the low-income customers, are under significant stress,” Hoyt said. “They spend a higher percentage of their budgets on energy than do higher-income consumers, and so they’re going to be severely stressed.”

First-quarter earnings calls coming in late May will reveal just how detrimental gas price spikes were for the discount retail sector, which stands to lose some of the margin expansions celebrated late last year.

“Higher oil and gas prices are not going to be the death knell for retail,” Svec said. “There’s not going to be all of a sudden mass store closures. But it’s just another straw on the camel’s back that’s going to lead to greater weight on the consumer and less discretionary cash to go around.”

Emily Davis can be reached a edavis@commercialobserver.com.