Dollar Tree (DLTR) shares plunged 5.94% in pre-market trading on Wednesday after the discount retailer warned of a significant earnings decline in the upcoming quarter due to tariff-related pressures. Despite reporting better-than-expected first-quarter results, the company's gloomy near-term outlook overshadowed its positive performance.

For the first quarter, Dollar Tree posted adjusted earnings per share of $1.26, surpassing analysts' expectations of $1.21. Revenue also beat forecasts, coming in at $4.6 billion compared to the estimated $4.54 billion. The company's same-store sales growth was impressive at 5.4%, outpacing the projected 4% growth.

However, the retailer's second-quarter forecast cast a shadow over its solid Q1 results. Dollar Tree warned that its Q2 adjusted earnings per share from continuing operations could drop by as much as 45% to 50% year-over-year. The company cited higher tariffs and other cost pressures as the primary reasons for the expected decline.

"Over the balance of fiscal 2025, the company expects to mitigate the earnings impact of the cost pressures it faces, including higher tariffs," Dollar Tree stated in its earnings release. "In the near-term, it does expect to see some earnings volatility based on the timing of the various inputs and outputs to the company's financial results."

Despite the near-term challenges, Dollar Tree maintained its full-year 2025 net sales outlook of $18.5-$19.1 billion and raised its adjusted EPS guidance to a range of $5.15-$5.65, up from the previous $5.00-$5.50. The company's outlook assumes that current tariff levels will remain in effect for the rest of the fiscal year and that it will be able to mitigate most of the incremental margin pressure from higher tariffs and other input costs.

The stock's sharp decline comes after a strong year-to-date performance, with shares having risen 29% before Wednesday's pre-market drop. Investors will be closely watching how Dollar Tree navigates these tariff-related headwinds and whether it can successfully mitigate the projected earnings pressure in the coming quarters.