Most people think of big-name tech giants when they look at the Nasdaq Composite (NASDAQINDEX:^IXIC). That makes sense, because it's been high-performing companies in the technology sector that have contributed so much of the Nasdaq's performance, throughout the index's history and particularly in 2020.

Yet the Nasdaq has more than just technology stocks, and sometimes, it's companies outside the tech sector that end up making the biggest contributions. That was the case today, as discount retailer Dollar Tree (NASDAQ:DLTR) wowed Nasdaq investors by posting gains of more than 10%. That led the high-profile stocks in the Nasdaq-100 Index, but it also gave some insight into how investors feel about the current state of the U.S. economy.

Hands holding a wallet and pulling $1 bills out.

Image source: Getty Images.

Dollars growing on trees

Dollar Tree released its third-quarter financial report early Tuesday. Investors generally liked what they saw.

Fundamentally, Dollar Tree is firing on all cylinders. Net revenue was higher by 7.5% from year-ago levels, led by a 5.1% rise in same-store sales across its store network. The Family Dollar concept performed extremely well, with positive comps of 6.4% as compared to 4% for the namesake Dollar Tree store chain. Margin levels improved at Dollar Tree, pointing to the company's efforts to turn that part of its store network around.

Earnings climbed 29% year over year, and Dollar Tree kept growing, opening 143 new stores while closing just 16. Moreover, renovation, expansion, and relocation efforts continued apace.

The success has given Dollar Tree enough capital to return some to shareholders. Stock repurchases amounted to 2.15 million shares, with $200 million spent toward the buy-backs. That still leaves Dollar Tree with $600 million more for authorized future repurchases.

Going beyond discount?

Dollar Tree has been excited at the progress it's made toward revamping its brand. Renovations and new stores have allowed the company to freshen up its image, and Dollar Tree said that renovated locations get about a 10% lift in comps compared to those that haven't yet been part of renovation efforts.

But more important to Dollar Tree's long-term success might be its experiment in stocking items at a wider range of price points. For a long time, the discount retailer was true to its name, focusing largely on $1 items. However, with what the company calls Dollar Tree Plus!, it added more items at the $3 and $5 price points, and it generally tried to deemphasize $1 merchandise in favor of higher-cost items.

Dollar Tree said that its initial tests in 100 markets in the U.S. Southwest have been extremely favorable. As a result, the company expects to expand the initiative beyond that region, using it in 500 stores starting next spring.

An enviable position

Dollar Tree has also strengthened its balance sheet, with $1.12 billion in cash against falling levels of debt. Dollar Tree paid down the last $500 million on its revolving line of credit, and it's looking to pay off a note maturing next February for $300 million.

Most retail stocks are struggling a lot more than that, and that points to the success of the Dollar Tree strategy. It also shows that U.S. consumers are far from secure in their financial condition, and they're looking to economize with discount bargains rather than moving up to higher-priced competitors. As hopeful as investors are that the end of the coronavirus crisis could get the economy back to normal, they need to keep in mind that the process might not be as fast or comprehensive as they might hope.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.