Dollar Tree (NASDAQ:DLTR) has joined the long list of retail stores that are experiencing tremendous demand over the last month amid the COVID-19 outbreak.

On Wednesday, CEO Gary Philbin told CNBC that Dollar Tree's supply chains have been under strain, but more inventory is on the way. Like many retailers, Dollar Tree has struggled to keep essential items like paper towels and hand sanitizer on shelves. Philbin said there is "$1 billion in the pipeline somewhere" and that more supplies will arrive over the next few weeks. 

The demand is pushing Dollar Tree to hire 25,000 employees at stores and distribution centers. The company operates more than 15,000 stores across the Dollar Tree and Family Dollar brands. 

A young woman shopping in a grocery store.

Image source: Getty Images.

Higher sales will be tied to higher costs

On Tuesday, Dollar Tree updated investors on the COVID-19 impact. Through March 29, quarter-to-date same-store sales were up 7.1% for Dollar Tree and 14.4% for Family Dollar. However, sales have moderated in recent days due to lower demand for the Easter season, with same-store sales dropping 19.4% in the week ending March 29 at Dollar Tree, while Family Dollar comps were up 8.8%.

Empty shelves could also be to blame for the moderation in sales recently. The company warned in the update on Tuesday that "sales for the remainder of the first quarter could be impacted by uncertainties related to the company's ability to secure and restock certain products in high demand." Shelter-in-place orders could also negatively impact consumer shopping patterns. 

Also, Dollar Tree warned that merchandise mix will pressure gross margin for the quarter. There will also be higher costs associated with pay and benefits, distribution and transportation to meet demand volume increases in consumables, and additional hours for cleaning stores and distribution centers.

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