Why shoppers making six figures are giving Dollar Tree a boost

Customers earning more than $100,000 make up most of Dollar Tree’s new customers.

Dollar Tree CEO Michael Creedon said this week that the chain continues to see a significant boost in traffic with 3 million more households shopping at its stores during the three-month period ending Nov. 1 compared with the same period a year earlier.

Approximately 60% of those new customers were higher-income households – those earning over $100,000 – according to Creedon. About 30% were middle-income households – earning between $60,000 to $100,000 – and the rest were lower-income households, or those earning under $60,000. 

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“Today, we serve an increasingly broad spectrum of shoppers, from core value-focused households to middle- and higher-income shoppers who are making deliberate choices about how and where they spend,” Creedon said, adding that the data “demonstrates that Dollar Tree isn’t just for tough times or for those with limited resources.” 

He said higher-income households are trading down to Dollar Tree while lower-income households are relying on the company more than ever as economic pressures force consumers across the board to cut back on discretionary spending.

The average spending for lower-income households grew more than twice as fast in the three-month period as the average spending for higher-income households, underscoring how those households remain “loyal and deeply engaged.” 

The chief executive is aiming to create that same loyalty among its newer, higher-income customers, who are earlier in their customer life cycle with the company and spend more during each trip. 

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‘While the average per household spend for our higher income customers is currently lower, even given their higher income, larger average basket size and ability to spend more, this is a simple function of trip frequency,” Creedon said, adding, “because many of our higher income customers are still early in their relationship with Dollar Tree, their purchase frequency has significant room to grow.” 

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However, this trend of gaining higher earners isn’t unique to Dollar Tree. Rather, it’s part of a broader consumer shift driven by higher inflation. 

The elevated cost of essentials like groceries and household items has forced even affluent households to look for ways to stretch their budgets. Many of them have traded down to stores known for their heavy discounting or everyday low-price models. Companies like Dollar Tree, Dollar General, Walmart and Aldi continue to benefit. 

In June, Dollar General said its new customers are shopping more often and spending more per visit compared with new customers last year. They are also allocating more of their spending to discretionary categories. Its CEO, Todd Vasos, told analysts during a June earnings call that these behaviors suggest that the company is continuing to attract higher-income customers who are looking to maximize value.

Walmart has reported on back-to-back earnings calls that its share of high-income shoppers continues to grow. In its latest quarter, which ended on Oct. 31, the company said customers earning over $100,000 accounted for roughly 75% of its share gains.