CHESAPEAKE, Va. — Dollar Tree Inc. surpassed Wall Street’s expectations for both the top and bottom lines in the second quarter of fiscal 2023. In response, management has raised its full-year sales outlook and tightened its earnings per share projection.

“At our June Investor Conference we shared the details of our strategy to transform the company and unlock the true value of our business, and our second-quarter results show us making solid progress against these objectives,” said chairman and chief executive officer Rick Dreiling in a statement. “Both the Dollar Tree and Family Dollar segments reported strong same-store sales trends, driven by increased traffic and accelerated market share gains.”

Net income for the 13 weeks ended July 29 plunged 44.3% to $200.4 million, or 91 cents per diluted share, which was enough to beat the Zacks Consensus Estimate of 88 cents per share. Net sales for the enterprise rose 8.2% to $7.32 billion, driven by an impressive 6.9% surge in same-store sales. Analysts had been looking for $7.22 billion.

Both the Dollar Tree chain and Family Dollar contributed to the top-line growth, as Dollar Tree sales climbed 8.5% to $3.87 billion, propelled by same-store sales that expanded 7.8%. The comp-store gain was driven by a 9.6% jump in customer traffic that was offset by a 1.6% downturn in the average transaction. Family Dollar sales, meanwhile, advanced 7.9% to $3.45 billion, reflecting a 5.8% increase in same-store results that was driven by a 3.4% uptick in customer traffic coupled with a 2.3% rise in the average transaction.

“You have heard me say many times that retail is all about growing units, growing transactions and growing sales per square foot,” Dreiling told analysts during a conference call. “When these retail fundamentals move in the right direction, everything else follows. I am pleased to report that all three are heading in the right direction for us.”

Operating income for the quarter, though, slid 43.1% to $287.8 million as gross margin contracted by 220 basis points to 29.2%, while selling, general and administrative (SG&A) expense escalated 132 basis points to 25.3% of sales. The drop in gross margin was driven by lower initial markups, unfavorable sales mix, elevated shrink and wage investments in distribution center payroll, partially offset by lower freight costs. The increase in SG&A expense was attributed mainly to wage investments in store and field payroll, higher incentive compensation, and investments in improving store standards, among other factors.

Based on first-half results, management has raised its full-year sales guidance to a range of $30.6 billion to $30.9 billion, assuming mid-single-digit same-store sales growth at both banners. Its previous forecast ranged from $30 to $30.5 billion. Earnings, meanwhile, are now expected to come in between $5.78 and $6.08 per diluted share.