Dollar Tree Inc reported better-than-expected quarterly results on Tuesday, as the discount store operator benefited from robust demand for cheaper home decor, kitchenware and clothing during a coronavirus-induced economic downturn.
The company also said it had made a good start to its holiday quarter, with same-store sales at both its labels tracking above their third-quarter levels, sending its shares 12% higher.
"We're seeing our discretionary side grow with both new and old customers," chief executive officer Michael Witynski said on an earnings call.
Americans have turned to economy packs of consumables and cheaper non-essentials as COVID-19 cases surge across the country and household income declines due to the lack of a second stimulus check.
Dollar Tree said customers were stocking up items at its Family Dollar stores at nearly one-third of the pace seen at the panic-buying stage of lockdowns, as Americans look for budget-friendly ways to celebrate Thanksgiving and Christmas at home.
The company also announced the expansion of its higher-priced offering, Dollar Tree Plus, into about 500 stores starting from the spring of 2021, after an initial test in more than 100 stores.
The move came after rival Dollar General launched Popshelf stores, which are aimed at consumers spending more on non-essential items priced at $5 or less.
Same-store sales at Dollar Tree's eponymous business increased 4%, the most in the past 10 quarters, while they rose 6.4% at Family Dollar stores.
It earned $1.39 per share in the quarter ended 31 October, higher than analysts' average estimate of $1.15 per share, Refinitiv IBES data showed.
Net sales rose 7.5% to $6.18 billion (€5.2 billion), beating expectations of $6.13 billion(€5.2 billion).