MW More people earning over $100,000 are doing their back-to-school and holiday shopping at Dollar General and Dollar Tree these days. Here's why.

By James Rogers

Rich people are seeking more bargains at deep-discount stores, but that's not a bad omen for the economy - they're just being careful, and not extravagant

Higher-income customers are boosting the performance of discount retailers Dollar Tree and Dollar General.

Higher-income customers have been seeking out value for a while, but one theme of the latest earnings season is that they are increasingly looking for even deeper discounts, as evidenced by recent earnings results from the lowest-priced retailers.

But investors shouldn't be too concerned that this may be signaling a slowing economy. The trend is not necessarily growing out of need, but because even wealthier consumers have been trained to look for lower prices.

On Wednesday, Dollar Tree Inc. $(DLTR)$ said that, similar to last quarter, middle- and higher-income customers are boosting its performance. Households earning over $100,000 a year provided a "meaningful portion" of the company's second-quarter growth, according to Chief Executive Mike Creedon.

Creedon explained that, during the first quarter, 50% of the customers that Dollar Tree added came from the $100,000 salary point, a number that rose to two-thirds in the second quarter.

The CEO said that the company's traditional lower-income customer is driven by everyday essentials and pack sizes as they try to stretch a budget between paychecks, while others are searching for bargains.

"[Y]ou have that thrill-of-the-hunt discovery customer that tends to skew more higher income, they're coming into our stores, they're targeting the seasons, the holiday, the back-to-school, all that," he added, according to a FactSet transcript of the earnings call with analysts.

This echoed recent comments from discount retailer Dollar General Corp. $(DG)$, which reported second-quarter results last week. The Tennessee-based company continues to see trade-in growth among middle- and higher-income customers, according to CEO Todd Vasos, who said that this is boosting the performance of its nonconsumable categories.

"Ultimately, customers across all income brackets are coming to Dollar General as they seek value," he added, and also noted that trade-in has been accelerating over the last few quarters.

Vasos described the performance of Dollar General's back-to-school offerings as solid and in good shape, with its harvest and Halloween programs off to a great start. "It really shows, and what we see in our data is not only our existing customers, but those new customers coming in," he added. "And those new customers coming in have a little extra money in their pocket to spend on that nonconsumable categories."

And Wall Street has recognized this new behavior. Dollar General's stock has soared 44.7% in 2025 through Wednesday and Dollar Tree shares have run up 36.2%, while SPDR S&P Retail ETF XRT has gained 6.5% and the S&P 500 index SPX has advanced 9.6%.

Retail giant Walmart Inc. $(WMT)$ has also noticed a similar trend. "If you look at the middle to upper income levels, we're seeing strong demand," Chief Executive Doug McMillon said Wednesday during the Global Sachs Global Retailing Conference. "And if you look at middle to lower, there's been a little bit of stress. And we've seen behavioral change on items that have gone up in cost because of tariffs, where they're switching from one item to the other," he added, according to a FactSet transcript.

Walmart's U.S. comparable sales grew 4.6% in its recent second-quarter results, which it attributed to ongoing share gains across key categories and all income cohorts. However, upper-income households contributed the largest gains, according to the company's CFO John David Rainey, who spoke during a conference call to discuss the results.

Walmart shares have rallied 10.1% in 2025.

Art Hogan, chief market strategist at B. Riley Wealth, stressed this behavior isn't necessarily a bad omen for the economy, because it's not something borne out of desperation - "Consumers are being careful, versus being extravagant," Hogan said.

While Hogan acknowledged that this is a sign of the times, he believes it's more a reflection of an overarching change in consumer behavior that has been happening for a while. Walmart said in 2022, when inflation had reached its peak, that higher-income customers were shopping there more frequently.

More recently, the trend has spread to include the dollar stores.

"It makes sense that the behavior has migrated to other [deep] discount propositions," Hogan said. "Consumers have been trained not to pay full price."

Jeff Buchbinder, chief equity strategist at LPL Financial, noted that Target Corp. (TGT), which is often positioned as a slightly more upscale retailer than peers such as Walmart, has identified a shift in consumer behavior, with shoppers becoming increasingly cost-conscious in the post-tariff environment.

"This shift has led to a greater focus on essentials and discounted goods, potentially challenging Target's appeal to its core demographic, which traditionally favors a discretionarily focused consumer," he wrote in a recent note.

Buchbinder noted that, despite Target's recent second-quarter earnings beat, same-store sales declined, as did transaction volume, indicating underlying softness in consumer engagement.

Deep-discount retailers such as TJX Cos. $(TJX)$ and Ross Stores Inc. $(ROST)$ fared slightly better than some of their higher-end competitors as sales increased mid-single digits year over year on strong consumer demand for off-price merchandise, according to Buchbinder.

"While [Ross Stores] was unable to mitigate some of the tariff-related costs that TJX was able to navigate, both discount retailers are cautiously optimistic as their value pricing strategies hope to benefit a more cost-conscious consumer," he wrote.

Tomi Kilgore contributed.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 04, 2025 08:27 ET (12:27 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.