Dollar Tree Inc. shares dropped despite posting strong second-quarter sales and earnings, with margin pressures and a cautious profit outlook affecting investor sentiment. Sales rose 12.3% to $4.567 billion, surpassing expectations, driven by a 6.5% increase in same-store net sales. Gross profit increased 12.9% to $1.6 billion, with a gross margin of 34.4%.

Adjusted earnings came in at 77 cents per share, beating the analyst estimate of 41 cents. Operating income rose 7.0% to $231.0 million, with an operating margin of 5.1%. Dollar Tree reported a 6.7% increase in consumables and a 6.1% gain in discretionary items, marking strong growth.

Dollar Tree raised its fiscal 2025 adjusted earnings guidance to $5.32-$5.72 from $5.15-$5.65, reflecting the current environment. Sales guidance was also revised to $19.3 billion-$19.5 billion from $18.5 billion-$19.1 billion. The company believes it can offset most of the margin pressure from higher tariffs and input costs.

The retailer expects third-quarter 2025 adjusted earnings per share to be similar to the third quarter of 2024, at $1.12. Dollar Tree noted a positive timing impact in the second quarter that will reverse in the third quarter, resulting in year-over-year parity. CEO Mike Creedon praised the company’s performance in a challenging economic backdrop.

Read more at Yahoo Finance: Dollar Tree Raises Outlook But Tariff Pressures Spark Investor Selloff