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Pain Is Dollar Stores' Gain By Jinjoo Lee
This is Heard on the Street writer Jinjoo Lee filling in for Spencer Jakab. Stock futures are pointing to tepid gains this morning and Nvidia's shares are down in premarket trading following its earnings report. Markets continue to shrug off the showdown between President Trump and the Federal Reserve.
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Middle and high-income consumers have been flocking to dollar stores this year, helping catapult those retailers' year-to-date stock gains above Nvidia's.
Dollar Tree and Dollar General, the latter of which reports earnings today, have each gained close to 50% so far this year, making them the top two brick-and-mortar retail stocks in the S&P 500. This partly reflects a rebound from 2024, when both stocks reeled from weak demand from low-income consumers. But both chains have posted better-than-expected same-store sales in recent quarters.
Driving those sales are middle and high-income consumers looking for a bargain. Dollar General said in its June earnings call that it saw the highest percentage of trade-down customers in the past four years. Dollar Tree said it saw a "meaningful traffic increase" from households making more than $100,000.
Is this a warning about consumer health? Another time dollar stores saw a spike in sales from wealthier customers was in 2008 during the Great Recession. But while nationwide retail sales tanked back then, they're still growing at a healthy clip this year.
More likely, consumers need other places to find cheap tchotchkes or essentials on the go as bankrupt or struggling retailers such as Big Lots, Rite Aid, Walgreens and Party City shutter stores. Share gains could also be coming at the expense of Chinese bargain e-commerce platform Temu after the Trump administration stopped allowing tariff-free imports of goods valued at $800 or less. Truist Securities estimates that Temu U.S. sales are down over 30% versus a year earlier.
Combined, Morgan Stanley estimates retailers selling overlapping items with dollar stores lost about $3 billion of sales in the first quarter compared with a year earlier. The two dollar-store chains collectively gained about $1 billion. The bank forecasts even more declines from competitors ahead, peaking at $5.9 billion in the fourth quarter before moderating in 2026.
Tariffs are likely to hit smaller retailers hardest, so perhaps more market share will come up for grabs beyond 2026. But dollar stores will have to work hard for it: Bigger competitors such as Walmart and Amazon have the wherewithal to keep prices low through higher-margin sources of profit like membership fees and advertising. Amazon said in April it is investing $4 billion in rural America-a Dollar General stronghold-to expand its delivery network.
Meanwhile, the pie for retailers selling to low-income families could start shrinking next year due to the tax-and-spending bill that passed in July. Morgan Stanley estimates an about $150 billion cut in food-stamp benefits over the next decade, starting with about $10 billion in 2026.
Dollar stores are the ones doing the eating now. They are at risk of getting devoured, too.
Stocks I'm Watching
Nvidia : The chip maker's shares fell roughly 1.5% in premarket trading after its lackluster outlook stoked worries about future demand.
TSMC : Shares in Taiwan Semiconductor Manufacturing, a key Nvidia supplier, slipped 1.9% in Taipei, while Chinese semiconductor stocks gained after the world's most valuable company flagged its continuing issues selling chips in China.
HP : Growing demand for AI-enabled personal computers helped HP beat revenue forecasts , while adjusted per-share earnings met estimates. Shares retreated premarket in thin trading.
Pernod Ricard : The French distiller said it expects sales to improve in the second half of fiscal 2026, following a period of weak Chinese demand and tough conditions due to tariffs. The Jameson whiskey maker's shares rallied, as did shares of Hennessy cognac owner LVMH .
Snowflake : Shares in the cloud-software company, which runs an AI platform, jumped over 14% premarket after it reported forecast-topping revenue.
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About Me
Jinjoo Lee is a writer for The Wall Street Journal's Heard on the Street column, covering the energy and retail sectors.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
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August 28, 2025 06:42 ET (10:42 GMT)
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