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Dollar store chains have seen an influx of higher-income shoppers in recent months as economic uncertainty surges and households look to save.
"Higher-income customers have been a meaningful growth driver for us," Dollar Tree (DLTR) CEO Michael Creedon told investors, specifically noting the chain saw an increase in customers with household incomes of more than $100,000. The company reported that same-store sales rose 5.4% in the first quarter, with improvement across all income levels.
Earlier this week, Dollar General (DG) told investors it "saw the highest percent of trade-in customers" in the last four years during the first quarter. Its CEO, Todd Vasos, said the company saw increased trade-in activity, or consumers who would typically shop at higher-cost competitors, from middle- and high-income consumers, who came to Dollar General instead. Its same-store sales grew 3.4% in the quarter.
Data from Placer.ai shows that foot traffic to both retailers surged in April as some tariffs went into effect.
Read more: What Trump's tariffs mean for the economy and your wallet
The rise in shoppers turning to dollar stores and other discount retailers comes as evolving trade policy has created heightened economic anxiety among both consumers and businesses.
A new report from ADP out Wednesday showed US private payrolls slowed significantly last month. "The weak numbers we're seeing now does not point to a labor market that's collapsing, but there is hiring hesitancy," ADP chief economist Nela Richardson told reporters on a call.
Consumer confidence has also waned in recent months. It rose in May for the first time all year.
PwC's Ali Furman told Yahoo Finance that while consumers showed "some resilience" month over month, they made more "discerning purchases."
Dollar General expects its momentum to continue, as Vasos told investors, "Depending on where the macro environment goes, it should be very conducive to further trade-in, possibly as we move forward."
Both dollar store chains tend to outperform when a weaker consumer and overall economy persist.
When inflation hit 40-year highs in 2022, Dollar General and Dollar Tree stocks surged. Dollar Tree shares reached a record in April of that year, while Dollar General shares topped out in November.
Year to date, Dollar General and Dollar Tree shares have handily outperformed the S&P 500 (^GSPC) — rising 45% and 18%, respectively — as well as larger rivals like Walmart (WMT) and Target (TGT), with the former calling out higher-income shoppers visiting more frequently in recent quarters.
