When times are tight, people trade down. They might take a local vacation or even a staycation instead of getting on a plane, and they may opt for a less nice restaurant, or even cooking for themselves when it comes to meals.
That’s a trend both McDonald’s and Dollar General’s CEOs have noted in recent earnings calls.
“In the U.S., we continue to see a bifurcated consumer base, with QSR traffic from lower-income consumers declining nearly double digits in the third quarter, a trend that’s persisted for nearly two years. In contrast, traffic growth among higher-income consumers remained strong, increasing nearly double digits in the quarter,” said McDonald’s CEO Christopher Kempczinski during the chain’s third-quarter earnings call.
Dollar General’s CEO, Todd Vasos, shared his thoughts on similar behavior during his company’s first-quarter earnings call.
“While our core customer remains financially constrained, we have seen increased trade-in activity from both middle- and higher-income customers. Our data shows that new customers this year are making more trips and spending more with us compared to new customers from last year, while also allocating more of their spend to discretionary categories,” he shared.
He suggested a reason behind this trend.
“We believe these behaviors suggest that we are continuing to attract higher-income customers who are looking to maximize value while still shopping for items they want and need,” he added.
McDonald’s and Dollar General found new customers
Both McDonald’s and Dollar General have managed to grow, despite losing some of their core customers.
- McDonald’s reported U.S. same‑store sales up 2.4% in its most recent (third) quarter.
- Dollar General reported U.S. comparable store sales in Q2 were up 1.2% year over year in its most recent disclosed quarter.
Not all brands have followed the same trajectory, however. Dollar Tree, for example, has struggled, and it made the decision last year to close 1,000 locations, mostly stores under its Family Dollar brand, which it also planned to sell (and has since sold).
Dollar Tree has closed over 600 stores
Family Dollar first shared plans to close about 1,000 stores in its fourth-quarter 2023 earnings report.
“We plan on closing approximately 600 Family Dollar stores in the first half of fiscal 2024. Additionally, approximately 370 Family Dollar and 30 Dollar Tree stores will close over the next several years at the end of each store’s current lease term,” the company shared in the release.
The chain has since made a deal to sell the Family Dollar Brand.
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Dollar Tree reached an agreement with Brigade Capital Management and Macellum Capital Management, which will partner to purchase the Family Dollar business segment. The purchase price for Family Dollar, under the terms of the agreement, is just over $1 billion, subject to customary closing adjustments.
“This is a major milestone in our multi-year transformation journey to help us fully achieve our potential,” said Dollar Tree CEO Mike Creedon in a press release. “We will continue to grow and optimize our Dollar Tree business to maximize value for Dollar Tree associates, customers, and shareholders.”
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Dollar Tree closed stores in 2025
While it’s not known whether Family Dollar’s new owners will continue shutting down locations, Dollar Tree closed roughly 95 more stores across both brands in the earlier part of 2025.
“As of February 1, 2025, we had closed approximately 695 stores identified under the portfolio optimization review,” Dollar Tree shared in an annual report.
The chain did not mention any closures in its second-quarter earnings release, but did open some new locations and remodeled others.
The chain “opened 106 new Dollar Tree stores and converted approximately 585 stores to our 3.0 multi-price format,” it shared.
Zach’s Equity Research likes the new store format and upgrades.
“Dollar Tree’s 3.0 multi-price strategy has been working excellently. The 3.0 stores are new or converted, offering expanded multi-price assortments. In the most recent quarter, the company opened 33 Dollar Tree stores, bringing fiscal 2024 store openings to 525. At the end of fiscal 2024, it had approximately 2,900 Dollar Tree 3.0 multi-price format stores, including 2,600 conversions and 300 new stores,” it shared.
Dollar Tree seems to be back on track
While the chain still plans to close select stores, its second-quarter results suggest that its turnaround plan has succeeded.
- Dollar Tree same-store net sales +6.5% on +3% traffic and +3.4% ticket
- Diluted earnings per share (EPS) from continuing operations of $0.75
- Adjusted diluted EPS from continuing operations of $0.77, including $0.20 of positive impact, relative to expectations, related to tariff timing
- Completed over $1 billion of share repurchases year to date
- Increasing full-year fiscal 2025 net sales outlook range to $19.3 to $19.5 billion, based on comparable store net sales growth in the range of 4% to 6%
Dollar Tree has made progress
Dollar Tree CEO Michael Creedon shared thoughts on his company’s results during its second-quarter earnings call.
“So let’s walk through the Q2 highlights. Net sales increased 12.3% to $4.6 billion, driven by a 6.5% comp sales growth, which is a solid result in a quarter without major traffic driving events or holidays. Importantly, comp growth was nicely balanced between traffic and ticket and between consumables and discretionary,” he said.
Putting up a good number was not his chief goal, however.
“Our Q2 performance was not just about exceeding a set of earnings expectations. It was about gaining share, expanding our relevance to a broader base of customers, and proving once again that Dollar Tree thrives when customers focus on value,” he added.
Analysts comment on Dollar Tree’s progress
Ouside analysts seem happy with the results, too.
PYMNTS.com believes that its shift from being a true dollar store has helped the chain.
“One of the most noteworthy initiatives is the rollout of Dollar Tree’s multi-price format. This new strategy, which has been implemented in 1,600 stores, aims to diversify the product range with items priced between $1.50 and $7,” according to the website. “The goal is not to raise prices on existing products, but to introduce new items at higher price points, in a bid to enhance the shopping experience and attract more customers.”
TipRank’s Stephen Ayers thinks that not having Family Dollar will benefit the chain.
“A closer look at the discount retail giant’s financial performance without Family Dollar reveals that DLTR may run a bit lighter without its slower half. This makes me cautiously optimistic about DLTR despite some notable challenges ahead, like competition, inflation, and tariffs. I remain neutral on the stock while I wait for the next developments,” he wrote.
Related: Another convenience store chain closing all locations
