Dollar General vs. Dollar Tree: A Closer Look at Financial Dynamics
At first glance, Dollar Tree (NASDAQ: DLTR) and Dollar General (NYSE: DG) may seem similar, both categorized as dollar stores competing for consumer spending. However, they differ significantly, influencing how their stock prices may move in the future. Here’s what investors should consider.
Distinct Operations
Dollar General dominates the discount store sector with 20,594 locations across the U.S. This includes experimental pOpshelf stores, but most operate under the Dollar General brand. Last year, the company reported $40.6 billion in sales, with products priced across a typical range for discount retailers.
Dollar Tree, by contrast, comprises 8,881 Dollar Tree stores and 7,622 Family Dollar outlets. However, a significant portion of Family Dollar will soon be sold to a private equity firm, potentially halving Dollar Tree’s retail presence. This move might ultimately benefit Dollar Tree, as the integration of Family Dollar has not produced the expected efficiencies since their merger in 2015. Instead, Family Dollar has struggled against competition not only from Dollar General but also from others like Ollie’s and Big Lots.
Despite this, Dollar Tree itself generated $17.6 billion in sales last fiscal year, providing enough scale and market presence to compete effectively with Dollar General.
Key Comparisons Between Dollar General and Dollar Tree
Market research firm Numerator provided most of the comparative data below, while the companies supplied some additional figures. Note that the sales data for Dollar Tree excludes contributions from Family Dollar.
| Metric | Dollar General | Dollar Tree |
|---|---|---|
| Locations | ||
| Rural | 42% | 30% |
| Suburb | 38% | 38% |
| Urban | 19% | 32% |
| Demographics | ||
| Lower Income (<$40K) | 27% | 26% |
| Middle Income ($40K-$125K) | 49% | 48% |
| Higher Income (>$125K) | 24% | 26% |
| Penetration/Reach | ||
| Average Annual Spend | $522 | $290 |
| Household Penetration | 60% | 79% |
| Purchase Frequency (annual) | 20x | 27x |
| Repeat Rate | 85% | 80% |
| Sales Mix | ||
| Consumables | 82.7% | 48.8% |
| Discretionary (seasonal, home, etc.) | 17.3% | 51.2% |
Sales mix data from each respective company. All other statistics from Numerator.
Much of this information was previously understood. Dollar General often highlights that around three-fourths of its stores are in towns with populations below 20,000. These rural customers, while shopping less frequently, tend to spend more per trip, contributing to Dollar General’s revenue.
The income breakdown by Numerator likely underestimates the number of lower-income consumers who rely on Dollar General. With a higher proportion of stores in rural areas with lower incomes, the average Dollar General customer earns around the $40,000 mark, which aligns with Numerator’s definition of lower income.
One significant finding is the difference in consumables sold. More than 80% of Dollar General’s sales come from consumables, while just under half of Dollar Tree’s do. Once Family Dollar’s sales are removed from Dollar Tree’s mix, its focus on discretionary items will likely increase even more.
Adapting to Market Conditions
What does this mean for current and potential investors in either stock?
Although it may seem counterintuitive, Dollar General’s reliance on consumables poses challenges amid persistent inflation, which has remained high since 2021. Increased costs on already low-margin goods lead some consumers to reduce spending rather than look for cheaper options. As CEO Todd Vasos noted last August following a disappointing second-quarter report, “this lower-end consumer continues to be very much financially strapped, especially as it relates to her ability to feed her families and support her families.” This sentiment was reiterated in March of this year.
The graphic below illustrates Vasos’ viewpoint. Dollar General’s same-store sales growth in 2022 was primarily a rebound from a steep decline in 2021, but this growth has stagnated in 2023.
Data source: Dollar General Corp. Chart by author. (Note that Dollar General’s same-store sales growth reflects the challenges posed by inflation.)
# Dollar Tree Outpaces Dollar General in Inflationary Environment
Dollar Tree’s recent sales performance reflects a significant rebound compared to 2021’s weaker figures, largely due to the low bar set by the previous year’s numbers.
Competitive Advantage Amid Inflation
In today’s economy, Dollar Tree’s focus on discretionary products gives it a competitive edge as inflation reduces consumers’ purchasing power. While typically shoppers might select decor or kitchenware from retailers like Walmart, Target, or Amazon, they are increasingly turning to Dollar Tree for affordable options starting at $1.25.
Essentially, Dollar Tree fulfills the role of a spending alternative that Dollar General cannot match. This trend is evidenced by Dollar Tree’s consistently higher same-store sales growth compared to Dollar General since inflation surged in 2021. Notably, Dollar Tree has managed to thrive while Dollar General has struggled, largely due to ongoing inflationary pressures.
Data source: Dollar General Corp. and Dollar Tree Inc. Chart by author. Note that Dollar Tree’s same-store sales growth data does not include Family Dollar’s same-store sales figures.
Market Dynamics and Future Outlook
The relationship between economic conditions and consumer behavior plays a key role in shaping the fortunes of these two retailers. If inflation subsides and economic conditions improve, Dollar General may benefit due to a more affluent customer base, particularly in rural areas.
However, this shift wouldn’t immediately disadvantage Dollar Tree. With a stronger presence among urban consumers who have slightly higher incomes, Dollar Tree can maintain steady sales. Its unique appeal of offering an affordable “treasure hunt” experience could continue driving demand.
As the economy improves, changes in competitive dynamics between these two chains might influence stock performance. Market trends suggest that investors are anticipating such a shift, as evidenced by Dollar General’s recent rise in stock value.
Currently, Dollar Tree’s shares are lagging, partly due to challenges related to its Family Dollar segment. Although plans to divest this troublesome unit are in motion, the current transition is disruptive. Investors may also be sensing the potential for economic recovery despite challenges from new tariffs, which impact Dollar Tree more significantly than Dollar General.
If your outlook on the U.S. economy remains cautious, particularly regarding consumer spending, Dollar Tree shares might still present an attractive investment. Despite Dollar General’s lower vulnerability to tariffs, its reliance on lower-margin consumables could hinder long-term growth.
Investment Considerations for Dollar Tree
Before investing in Dollar Tree, keep the following in mind:
The Motley Fool’s analyst team recently identified the 10 best stocks for investors to consider, and Dollar Tree is not on that list. The chosen stocks have strong growth potential.
For context, when Netflix was recommended on December 17, 2004, a $1,000 investment would now be worth $614,911!* Similarly, if you had invested in Nvidia after its recommendation on April 15, 2005, you would see an investment of $1,000 grow to $714,958!*
It’s important to note that Stock Advisor has seen an average return of 907% — significantly outpacing 163% for the S&P 500. Make sure to check out the latest top 10 list when you join Stock Advisor.
*Stock Advisor returns as of May 5, 2025
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Target, and Walmart. The Motley Fool recommends Ollie’s Bargain Outlet. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
