Deep discounters Dollar General, Five Below and Dollar Tree in the third quarter continued to grow sales and collectively opened more than 1,000 stores. 

Below, we break down the retailers' performance in Q3. 

Dollar General

Net Sales: $7 billion | YoY: +8.9%

Comps: +4.6%

Operating income: $491.4 million | YoY: +11.1%

Net income: $365.6 million | YoY: +9.4%

Net stores opened: 724

Highlights: Dollar General CEO Todd Vasos said in a statement that Q3 was "highlighted by our best customer traffic and same-store sales increases in nearly five years." The quarter and the two preceding it were so strong that he said management was raising guidance for its fiscal year.

The spike in top-line sales came from new stores the deep discounter has opened as well as the increase in comp sales, with store closures offsetting the increase somewhat. Buoying comps was growth in the retailer's consumables, seasonal, home and apparel categories.

Dollar General's comps beat already-high analyst expectations, according to Wells Fargo analysts, who called the dollar store's performance "very solid." The analysts added, "The flat gross margin was a touch lighter than expected as many were hoping for some YoY improvement, but it's hard to criticize the result after what we saw from some peers."

Analysts with Telsey Advisory Group highlighted Dollar General's ongoing investments, including its self-distribution of fresh and frozen products, "DG Fresh," and its "Fast Track" initiative meant to boost labor productivity and customer convenience. "Overall, [it's] encouraging to see Dollar General's strategic investments drive market share gains and bolster the operating model," the analysts said in an emailed note. 

Moody's analyst Mickey Chadha added that Dollar General "has been able to handle increased tariffs very well through its diversified supply chain and cost control. Moreover, the 'treasure hunt' shopping that its stores offer can't be replicated by e-commerce, as average ticket for a dollar store is around $10 and it is uneconomical for e-commerce vendors to compete given cost of shipping."

Five Below

Sales: $377.4 million | YoY: +20.7%

Comps: +2.9%

Operating income: $12.7 million | YoY: -18.1%

Net income: $10.2 million | YoY: -24.4%

Net stores opened: 61

Highlights: The company said in a press release that operating profits were down primarily, and expectedly, because of unmitigated tariff costs and "the timing of certain merchandise costs."

CEO Joel Anderson told analysts Wednesday that the 61 stores Five Below opened during the period (in "diverse markets" including Fresno, California, and Tulsa, Oklahoma) represents a company record and a highlight of Q3, with new stores outperforming, according to a Seeking Alpha transcript. For the year, the company opened the planned 150 stores it announced earlier.

Also giving the retailer a boost in Q3 was back-to-school and merchandise tied to the Disney movie "Frozen 2." Leading sales in the period — which saw comps beat analyst predictions — were Five Below's style, tech, candy and room categories, Anderson said.

Going into the holiday sales blitz, the CEO noted Five Below's tests of higher price points in its "Ten Below Gift Shop," now in about 25 stores, that highlights its toys and games assortment, which Anderson said "reinforces Five Below as the go-to destination for amazing holiday gifts and stocking stuffers and unbeatable values." 

He also called out the company's new collaboration with e-sports specialist "Nerd Street Gamers." Anderson said the tie-up with Nerd Street would provide space connected to Five Below locations "for gamers to play on pro-level equipment and will also include an assortment of relevant Five Below products for sale such as gaming headphones and snacks."

Despite the strong quarter, tariffs still cast a cloud over Five Below's profit and sales potential. Telsey Advisory Group analysts said in an emailed note that "our enthusiasm on FIVE remains tempered by rising tariffs (still List 4B on way to impact 2020) and the potential risk related to raising retail prices to the point that it could alter the value proposition."

Dollar Tree Inc.

Sales: $5.7 billion | YoY: +3.7%

Comps: +2.5%

Operating income: $358.4 million | YoY -7.6%

Net income: $255.8 million | YoY: -9.2%

Net stores opened*: 256

*excludes re-banners and relocations

Highlights: While profits fell short of analyst estimates, Dollar Tree's comparable sales got a lift from both of the company's banners, its name sake Dollar Tree (comps up 2.8%) and Family Dollar (up 2.3%). In a November call with analysts, CEO Gary Philbin attributed the growth to the retailer's store and sales initiatives, according to a Seeking Alpha transcript.

To date, the company has remodeled more than 1,150 Family Dollar stores in the "H2" format and re-bannered another 200 stores. In Q3 alone, Dollar Tree renovated 247 Family Dollar stores and added snack sections to 512 stores. The company has added snack sections in 1,000 locations, and now has freezers and coolers at 6,000 stores. Adding to its merchandising efforts, it has launched its "Dollar Tree Plus" pilot to test higher price points (increments of $2, $3, $4 and $5) at 115 stores. Philbin said the moves have pushed up top-line sales and transaction counts at both his company's banners. ​​

The retailer is also getting into the crafting category, with "Crafters Square" sections now at more than 600 stores.

Philbin called 2019 a "unique" year, citing the acceleration of its Family Dollar optimization, which includes closures and re-banners to Dollar Tree, as well as a widespread helium shortage (that has also taken a toll on Party City) and tariffs imposed by the Trump Administration.

In its 10-Q filing, the company noted 2,100 recent wage and hour arbitration claims filed by a law firm, which said it planned to file an additional 4,200 claims, as well as Food and Drug Administration allegations that Dollar Tree improperly sold potentially unsafe over-the-counter drugs manufactured abroad.