SKN | Wells Fargo Sees Diverging Dollar Store Earnings Outlooks as Retailers Approach Results

Key Takeaways

• Wells Fargo expects Dollar Tree, Five Below and Dollar General to deliver relatively strong second-quarter results, with potential guidance increases supported by same-store sales and improving tariff conditions.
• Dollar Tree and Five Below are viewed most favorably, while Wells Fargo raised Dollar Tree’s price target to $155 from $145 and sees post-earnings weakness at Five Below as a potential buying opportunity.
• Dollar General faces a more cautious outlook despite expected comparable-sales acceleration, while Ollie’s Bargain Outlet remains the weakest name in the group after Wells Fargo reduced its earnings estimates and price target.

Wells Fargo’s latest sector outlook suggests that upcoming dollar-store earnings could produce meaningful differences between retailers, despite several common tailwinds.

The firm expects Dollar Tree, Five Below and Dollar General to benefit from same-store sales growth, tariff developments and company-specific factors. However, investor expectations are already elevated in some cases, creating a higher bar for companies to deliver upside.

The contrast is particularly clear when comparing the more constructive outlook for Dollar Tree and Five Below with the cautious stance on Dollar General and the weaker expectations for Ollie’s Bargain Outlet.

Dollar Tree Has Room for a Guidance Increase

Wells Fargo expects Dollar Tree to report second-quarter earnings per share of approximately $1.15, at the high end of management’s existing guidance.

The forecast assumes same-store sales growth of 3.3% alongside expansion in gross profit margins. Wells Fargo also expects the retailer to raise its full-year guidance.

Several factors support that view, including easier traffic comparisons, lower tariff rates during the second half of the year and accelerated share repurchases.

The firm has consequently raised its Dollar Tree price target to $155 from $145.

For investors, the combination of improving margins and capital returns could provide additional support if the company converts its expected sales improvement into stronger earnings.

Five Below Offers the Strongest Potential Earnings Surprise

Wells Fargo is even more optimistic about Five Below’s upcoming results.

The firm expects second-quarter earnings per share to exceed $1.55, compared with company guidance of between $1.17 and $1.29. Same-store sales are also expected to outperform the retailer’s 7% to 9% guidance range.

Even if Five Below raises its full-year outlook, Wells Fargo believes additional upside could remain, particularly if lower year-over-year tariff rates provide a margin benefit during the second half.

The firm’s stance is sufficiently constructive that it would view weakness in the shares following earnings as a potential buying opportunity.

For sophisticated investors, that positioning suggests Wells Fargo sees the risk-reward profile as favorable even if the market initially responds negatively to the results.

Dollar General Faces a Higher Bar

Dollar General is expected to show acceleration in comparable sales during the second quarter, with Wells Fargo modeling growth of approximately 3%.

The firm also sees potential for a full-year guidance increase. However, its investment stance is more restrained than its view on Dollar Tree and Five Below.

Wells Fargo expects increasing investment in grocery operations to constrain the potential for further margin expansion. It also sees delivery benefits becoming more modest as the company approaches 2027.

As a result, Wells Fargo would use any significant share-price strength following the earnings report to reduce exposure.

The distinction is important: strong operating results do not automatically translate into attractive investment returns when expectations and valuation already reflect substantial improvement.

Ollie’s Bargain Outlet Has the Most Difficult Setup

Ollie’s Bargain Outlet faces a materially weaker earnings outlook.

Wells Fargo has reduced its second-quarter earnings estimate to $1.04, based on an expected 2% decline in same-store sales.

The firm also lowered its full-year earnings estimates to $4.35 for fiscal 2026 and $4.90 for fiscal 2027.

Its price target has been reduced to $100 from $115.

The revisions indicate that Wells Fargo sees a less favorable combination of sales momentum and earnings potential at Ollie’s compared with the other retailers under coverage.

Tariffs Could Become a More Important Margin Variable

One common factor across the sector is the expected impact of tariffs.

Wells Fargo anticipates lower second-half tariff rates to provide some relief for retailers, potentially supporting gross margins and full-year earnings revisions.

That benefit will not necessarily be distributed equally. Companies with stronger sales momentum and greater operating leverage may be better positioned to translate lower costs into earnings growth.

This helps explain why the firm is more constructive on Dollar Tree and Five Below while remaining cautious on Dollar General and Ollie’s.

What Investors Should Watch After Earnings

The most important signals will be comparable-sales growth, gross margins and changes to full-year guidance.

For Dollar Tree and Five Below, stronger-than-expected sales combined with guidance increases could reinforce Wells Fargo’s bullish positioning. Dollar General will need to demonstrate that sales acceleration can offset the pressure created by additional grocery investment and moderating delivery benefits.

For Ollie’s, the focus will be whether the anticipated same-store sales decline confirms Wells Fargo’s more cautious estimates or whether management identifies a path toward renewed growth.

Closing Insights: The Dollar Store Trade Is Becoming More Selective

Wells Fargo’s outlook suggests that the dollar-store sector should not be treated as a single investment theme.

Dollar Tree and Five Below enter earnings with the strongest expectations for upside, supported by sales momentum, potential guidance increases and improving tariff conditions. Dollar General offers a more complicated setup, where stronger sales may be offset by investment and margin considerations. Ollie’s faces the clearest earnings pressure.

For investors, the distinction is increasingly important. As retail earnings become more sensitive to tariffs, consumer traffic and margin management, the opportunity may lie less in broad exposure to discount retail and more in identifying which operators can convert sales growth into sustainable earnings and cash-flow improvement.

For a confidential discussion regarding retail banking strategy, insurance distribution models, customer loyalty ecosystems, digital financial services, or cross-border financial innovation opportunities, contact our senior advisory team.