What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-20 compared with 2025-03-21 · 112 added, 148 removed, 265 unchanged (50% of the section changed)

5 unchanged sentences

states and Mexico as of February 27, 2026, with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States.

Our first stores in Mexico opened in 2023.

We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel.

Our merchandise includes national brands from leading manufacturers, as well as our own private brand selections with prices often at substantial discounts to national brands.

We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) from our convenient small-box locations.

We believe our convenient store formats, locations, and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years and through a variety of economic cycles.

1 unchanged sentence

As a result, we are intensely focused on helping our customers make the most of their spending dollars.

The primary macroeconomic factors that affect our core customers include unemployment and underemployment rates, inflation, wage growth, changes in U.S.

and global trade policy, and changes in U.S.

government policy and assistance programs (including cost of living adjustments), such as SNAP, unemployment benefits, and economic stimulus programs.

The primary macroeconomic factors that affect our core customers include unemployment and underemployment rates, inflation, wage growth, changes in federal and state tax policies, interest rates, changes in U.S.

and global trade policy (including price increases resulting from tariffs), and changes in U.S.

government policy and assistance programs (including cost of living adjustments and work requirements), such as SNAP, unemployment benefits, and economic stimulus programs.

Finally, significant unseasonable or unusual weather patterns or extreme weather can impact customer shopping behaviors.

Uncertainty remains regarding the potential impact of tariffs on consumer behavior and our business.

Tariff rates on both direct imports and domestic purchases did not materially impact our financial results in 2025.

The tariff environment remains dynamic, and the specific tariffs applicable to goods imported by us and our suppliers into the U.S.

may continue to evolve.

Currently announced tariff rates, as well as any rate increases or expansions of tariff coverage affecting the products that we sell, could have a significant impact on our business and on our customers’ budgets.

Further, on February 20, 2026, the United States Supreme Court invalidated the tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

Significant uncertainty exists regarding potential tariff refunds and replacement tariffs under other statutes.

We continue to monitor developments and to evaluate and implement mitigation strategies to address the potential sales and margin impact of current and potential future tariffs, as well as to take various actions designed to minimize price increases for our customers.

There can be no assurance we will be successful in our efforts, or that price increases will not adversely affect customer behavior.

Our core customers are often among the first to be affected by negative or uncertain economic conditions and among the last to feel the effects of improving economic conditions, particularly when trends are inconsistent and of an uncertain duration.

Our customers continue to feel constrained in the current macroeconomic environment and to experience elevated expenses that generally comprise a large portion of their household budgets, such as rent, healthcare, energy and fuel prices, as well as cost inflation in frequently purchased household products (including food), which we expect will continue to pressure our customers’ spending overall and particularly in our non-consumables categories.

This pressure contributed to a heavier promotional environment in the second half of 2024 compared to the prior year, and we expect a promotional environment in 2025 similar to that in 2024.

We remain committed to our long-term operating priorities as we consistently strive to improve our performance while retaining our customer-centric focus.

2 unchanged sentences

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction amount.

Historically, sales in our consumables category, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales in our non-consumables categories, which tend to have higher gross margins, have been the key drivers of more profitable sales growth and average transaction amount.

Our sales mix has continued to shift toward consumables, which currently constitutes a historically high proportion of our sales mix.

Certain of our initiatives are intended to address this sales mix trend;

Historically, sales in our consumables category, which tend to have lower gross margins, have been key drivers of net sales and customer traffic, while sales in our non-consumables categories, which tend to have higher gross margins, have been key drivers of more profitable sales growth and average transaction amount.

Our sales mix remains heavily weighted towards consumables, although we saw slight improvement in our sales mix in 2025 compared to the prior year.

Certain of our initiatives are intended to better optimize our sales mix;

however, there can be no assurances that these efforts will be successful.

As we work to provide everyday low prices and meet our customers’ affordability needs, we remain focused on enhancing our margins through inventory shrink and damage reduction initiatives, as well as pricing and markdown optimization, effective category management and inventory reduction efforts, distribution and

transportation efficiencies, private brands penetration and global sourcing.

Several of our strategic and other sales-driving initiatives are also designed to capture growth opportunities and are discussed in more detail below.

Throughout 2024, we continued to experience significant levels of inventory shrink and damages.

While we anticipate that both shrink and damages will remain elevated in 2025, particularly when compared to fiscal years immediately preceding fiscal year 2023, we continue to take actions designed to reduce their impact and believe we will make progress in reducing our shrink and damages levels in 2025.

We continue to implement and invest in certain strategic initiatives that we believe will help drive profitable sales growth with both new and existing customers and capture long-term growth opportunities.

Such opportunities include providing our customers with a variety of shopping access points and even greater value and convenience by leveraging and developing digital tools and technology, such as our Dollar General app, which contains a variety of tools to enhance the in-store shopping experience.

As we work to provide everyday low prices and meet our customers’ affordability needs, we remain focused on enhancing our margins through inventory shrink and damage reduction initiatives, as well as pricing and markdown optimization, the DG Media Network (our platform that connects brand partners with our customers), effective category management and inventory reduction efforts, distribution and transportation efficiencies, private brands penetration and global sourcing strategies.

Several of our strategic and other sales-driving initiatives are also designed to capture growth opportunities.

Inventory shrink has significantly improved from prior elevated levels, and although damages remain elevated, we made progress reducing damages in 2025.

We continue to implement actions designed to drive sustained improvement in both shrink and damages.

We continue to implement and invest in certain strategic initiatives intended to drive profitable sales growth with both new and existing customers and capture long-term growth opportunities.

Such initiatives include providing our customers with a variety of shopping access points and even greater value and convenience by leveraging and developing digital tools and technology, such as our Dollar General app, which contains a variety of tools to enhance the shopping experience.

We remain focused on enhancing both the in-store and digital shopping experience, while driving operational efficiency.

Our partnership with a third-party delivery service is available in the majority of our stores, providing added convenience and incremental sales.

Additionally, in September 2024, we partnered with the same third-party provider to fully execute a same-day home delivery offering through our DG app and website in a limited number of stores.

We believe we can significantly expand this offering to additional stores in 2025.

Furthermore, we believe these efforts will contribute to the continued to growth of our DG Media Network, our platform that connects brand partners with our customers.

In 2025, we are expanding our efforts to improve the performance and profitability of our mature stores through the rollout of an incremental remodel program, Project Elevate.

This partial-remodel initiative is designed to refresh and optimize the merchandising in our stores, and in turn, enhance the shopping experience for our customers, while also mitigating future repairs and maintenance expense.

The delivery component of our digital initiatives is becoming a meaningful contributor to our comparable store sales performance.

Third-party delivery services and myDG® Delivery are available in the majority of our stores, providing added convenience and incremental sales.

We believe these digital efforts will contribute to the continued growth of our DG Media Network.

In 2025, we expanded our efforts to improve the performance and profitability of our mature stores through the rollout of an incremental remodel program, Project Elevate.

Project Elevate remodels are incremental to our full-remodel program, Project Renovate.

We also remain focused on capturing growth opportunities.

In 2024, we opened a total of 725 new stores, including five stores in Mexico, remodeled 1,621 stores, and relocated 85 stores.

In 2025, we plan to open approximately 575 new stores (as well as up to 15 stores in Mexico), fully remodel approximately 2,000 stores through Project Renovate, partially remodel 2,250 stores through Project Elevate, and relocate approximately 45 stores, for a total of 4,885 real estate projects.

During the fourth quarter of 2024, we initiated a store portfolio optimization review of our Dollar General and pOpshelf bannered stores, which involved identifying stores for closure or re-bannering based on an evaluation of individual store performance, expected future performance, and operating conditions, among other factors.

As a result of this review, we plan to close 96 Dollar General stores and 45 pOpshelf stores, and convert an additional six pOpshelf stores to Dollar General stores in the first quarter of 2025.

See Note 12 to the consolidated financial statements for more detail on the store portfolio optimization, impairment and related charges.

pOpshelf is a unique retail concept focused on categories such as seasonal and home décor, health and beauty, home cleaning supplies, and party and entertainment goods.

In light of the softer discretionary sales environment, we previously converted certain pOpshelf stores to Dollar General stores, and do not believe opening new stores in 2025 is a prudent use of capital.

In 2025, we opened a total of 589 new stores, including 8 stores in Mexico, remodeled 2,000 stores through Project Renovate and 2,254 stores through Project Elevate, relocated 47 stores and closed 290 stores.

In 2026, we plan to open approximately 450 new stores (as well as approximately 10 stores in Mexico), remodel approximately 2,000 stores through Project Renovate, remodel approximately 2,250 stores through Project Elevate, and relocate approximately 20 stores, for a total of 4,730 real estate projects.

pOpshelf, our unique retail concept focused on categories such as seasonal and home décor, health and beauty, home cleaning supplies, and party and entertainment goods, represents an additional potential growth opportunity.

At the end of 2025, we operated 180 standalone pOpshelf stores.

Following the completion of the pOpshelf store closures and conversions discussed above, we will operate 180 pOpshelf stores.

In addition, we recorded a significant impairment expense to reflect the updated fair value of pOpshelf assets.

We are taking focused action in 2025 to improve the performance of pOpshelf stores, and will continue to evaluate the brand and whether we are seeing the desired impact of these activities and optimization, although there can be no assurances that our efforts will be successful.

We continue to take focused actions designed to improve the performance of pOpshelf stores, although there can be no assurances that our efforts will be successful.

We expect store format innovation to allow us to capture additional growth opportunities as we continue to utilize the most productive of our various Dollar General store formats based on the specific market opportunity.

In 2025 we expect the significant majority of the stores to be predominantly in one of our 8,500 square foot formats.

This format allows for expanded high-capacity-cooler counts, an extended queue line, and a broader product assortment, including an enhanced non-consumable offering, a larger health and beauty section, and produce in select stores.

We are always seeking ways to reduce or control costs that do not affect our customers’ shopping experiences.

We plan to continue enhancing this position over time while employing ongoing cost discipline to reduce certain expenses as a percentage of sales.

In 2025, we began utilizing store formats averaging approximately 8,500 square feet of selling space for the significant majority of new stores.

These formats allow for expanded high-capacity-cooler counts, an extended queue line, and a broader product assortment, including an enhanced non-consumable offering, a larger health and beauty section, and produce in select stores.

We always seek ways to reduce or control costs that do not affect our customers’ shopping experiences.

We plan to continue enhancing our position as a low-cost operator over time while employing ongoing cost discipline to reduce certain expenses as a percentage of sales.

Nonetheless, we seek to maintain flexibility to invest in the business as necessary to enhance our long-term competitiveness and profitability.

From time to time, our strategic initiatives, including without limitation those discussed above, have required and may continue to require us to incur upfront expenses for which there may not be an immediate return in terms of sales or enhanced profitability.

Certain of our operating expenses, such as wage rates, occupancy costs and depreciation and amortization, have continued to increase in recent years, due primarily to market forces such as labor availability, increases in minimum wage rates, inflation and increases in property rents and interest rates.

Certain of our operating expenses, such as wage rates and occupancy costs have continued to increase in recent years, due primarily to market forces such as labor availability, increases in minimum wage rates, inflation, property rents and interest rates.

Significant or rapid increases to federal, state or local minimum wage rates or salary levels could significantly adversely affect our earnings if we are not able to otherwise offset these increased labor costs elsewhere in our business.

While the overall growth rate of inflation moderated over the second half of 2024, we believe ongoing inflationary pressures could continue to affect our operating results and our vendors and customers.

Moreover, increases in market interest rates have had a negative impact on our interest expense.

Both inflation and higher interest rates have significantly increased new store opening costs and occupancy costs, and while we continue to have strong new store returns and plan to grow our store base significantly in 2025, these increased costs have negatively impacted our projected new store returns and influenced our new store growth plans.

We believe ongoing inflationary pressures could continue to affect our vendors and customers and our operating results.

Both inflation and higher interest rates have significantly increased new store opening costs and occupancy costs in recent years and, while new store returns remain strong, these increased costs have negatively impacted our projected new store returns and influenced our new store growth plans.

Our teams are a competitive advantage, and we proactively seek ways to continue investing in their development.

Our goal is to create an environment that attracts, develops, and retains talented personnel, particularly at the store manager level, as employees who are promoted from within our company generally have longer tenures and are greater contributors to improvements in our financial performance.

We are taking actions designed to reduce our higher than targeted store manager turnover, including through budgeting and allocation of labor hours, simplifying in-store activities, and reducing excess inventory.

To further enhance shareholder returns, we pay a quarterly cash dividend.

The declaration and amount of future dividends are subject to Board discretion and approval, although we currently expect to continue paying quarterly cash dividends.

As planned, to preserve our investment grade credit rating and maintain financial flexibility, we did not repurchase any shares during 2024 under our share repurchase program and do not plan to repurchase shares during 2025.

We are taking actions designed to continue reducing our higher than targeted store manager turnover, including through budgeting and allocation of labor hours and simplifying in-store activities.

Key Performance Indicators

We utilize key performance indicators, which are defined below, in the management of our business including same-store sales, average sales per square foot, and inventory turnover.

1 unchanged sentence

Each of these measures is commonly used by investors in retail companies to measure the health of the business.

Same-store sales.

Same-store sales are calculated based upon our stores that were open at least 13 full fiscal months and remain open at the end of the reporting period.

3 unchanged sentences

As a result, our calculation of same-store sales is not necessarily comparable to similarly titled measures reported by other companies.

Same-store sales

Average sales per square foot is calculated based on total sales for the preceding four quarters as of the ending date of the reporting period divided by the average selling square footage as of the end of the most recent five quarters.

Average sales per square foot

Average sales per square foot is calculated based on total sales for the preceding 12 months as of the ending date of the reporting period divided by the average selling square footage during the period, including the end of the fiscal year, the beginning of the fiscal year, and the end of each of our three interim fiscal quarters.

Inventory turnover is calculated based on total cost of goods sold for the preceding four quarters as of the ending date of the reporting period divided by the average inventory balance as of the end of the most recent five quarters.

Inventory turnover

Inventory turnover is calculated based on total cost of goods sold for the preceding four quarters divided by the average inventory balance as of the ending date of the reporting period, including the end of the fiscal year, the beginning of the fiscal year, and the end of each of our three interim fiscal quarters.

A continued focus on our four operating priorities as discussed above, and other impacts as discussed below, resulted in the following overall operating and financial performance in 2024 as compared to 2023.

Basis points, as referred to below, are equal to 0.01% as a percentage of net sales.

● Net sales in 2024 increased 5.0%.

Sales in same-stores increased 1.4%, primarily due to an increase in customer traffic.

Average sales per square foot in 2024 and 2023 were $263 and $264, respectively .

● The gross profit rate decreased by 70 basis points due primarily to increased inventory markdowns, a greater proportion of sales coming from the consumables category and increased inventory damages.

● SG&A as a percentage of sales increased by 140 basis points primarily due to impairment charges totaling $214.2 million related to the store portfolio optimization review and increases in retail labor, depreciation and amortization and store occupancy costs.

● Operating profit decreased 29.9% to $1.71 billion in 2024 compared to $2.45 billion in 2023.

● Interest expense, net decreased by $52.5 million in 2024 primarily due to higher average cash balances and the repayment of long-term debt.

● The change in the effective income tax rate to 21.8% in 2024 from 21.6% in 2023 was primarily due to a higher state effective tax rate and a decreased benefit from stock-based compensation partially offset by the effect of certain rate-impacting items on lower earnings before taxes compared to 2023.

● We reported net income of $1.13 billion, or $5.11 per diluted share, for 2024 compared to net income of $1.66 billion, or $7.55 per diluted share, for 2023.

● We generated approximately $2.996 billion of cash flows from operating activities in 2024, an increase of 25.3% compared to 2023.

● Inventory turnover was 4.1 times, and inventories decreased 6.9% on a per store basis compared to 2023.

Readers should refer to the detailed discussion of our operating results below for additional comments on financial performance in the current year as compared with the prior years presented.

Results of Operations

Accounting Periods.

The following text contains references to years 2024, 2023, and 2022, which represent fiscal years ended January 31, 2025, February 2, 2024, and February 3, 2023, respectively.

The following text contains references to years 2025, 2024, and 2023, which represent fiscal years ended January 30, 2026, January 31, 2025, and February 2, 2024, respectively.

Our fiscal year ends on the Friday closest to January 31.

Fiscal years 2024 and 2023 were 52-week accounting periods and fiscal year 2022 was a 53-week accounting period.

Fiscal years 2025, 2024 and 2023 were 52-week accounting periods.

Seasonality .

The nature of our business is somewhat seasonal.

Primarily because of sales of Christmas-related merchandise, operating profit in our fourth quarter (November, December and January) has historically been higher than operating profit achieved in each of the first three quarters of the fiscal year.

However, more recently, and in particular fiscal years 2023 and 2024, this has not been the case.

Expenses, and to a greater extent operating profit, vary by quarter.

4 unchanged sentences

per share amounts)

Net sales by category:

% of net sales

Home products

% of net sales

Cost of goods sold

% of net sales

Selling, general and administrative expenses

% of net sales

Operating profit

% of net sales

Interest expense, net

% of net sales

Other (income) expense

% of net sales

Income before income taxes

% of net sales

Income tax expense

% of net sales

Diluted earnings per share

The net sales increase in 2024 was primarily due to sales from new stores and an increase in same-store sales of 1.4% compared to 2023, partially offset by the impact of store closures.

(Percent of Net Sales)

Cost of goods sold

Selling, general and administrative expenses

Operating profit

Interest expense, net

Other (income) expense

Income before income taxes

Income tax expense

Net sales in 2025 increased 5.2% primarily due to an increase in same-store sales of 3.0% compared to 2024 and sales from new stores, partially offset by the impact of store closures.

The increase in same-store sales reflects a 1.6% increase in customer traffic and a 1.4% increase in average transaction amount.

The increase in average transaction amount was driven by higher average item retail prices and an increase in items per transaction.

Same-store sales increased in the consumables category and declined in the home products, seasonal and apparel categories.

The increase in average transaction amount reflects higher average item retail prices and flat items per transaction.

store sales increased in the consumables, seasonal, home products and apparel categories.

In 2025, our 20,268 same-stores accounted for sales of $41.2 billion.

The net sales increase in 2023 was primarily due to sales from new stores and an increase in same-store sales of 0.2% compared to 2022, partially offset by the impact of store closures.

Net sales for the 53rd week of fiscal 2022 were $678.1 million.

The increase in same-store sales reflects an increase in customer traffic, partially offset by a decrease in the average transaction amount.

The decrease in average transaction amount was driven by a decline in items per transaction, partially offset by higher average item retail prices.

Net sales in 2024 increased 5.0% primarily due to sales from new stores and an increase in same-store sales of 1.4% compared to 2023, partially offset by the impact of store closures.

The increase in same-store sales reflects a 1.1% increase in customer traffic and a 0.3% increase in average transaction amount.

The increase in average transaction amount was driven by higher average item retail prices and an increase in items per transaction.

Same-store sales increased in the consumables category and declined in the home products, seasonal and apparel categories.

In 2024, our 19,633 same-stores accounted for sales of $38.8 billion.

The amount of net sales represented by each of our product categories for fiscal years 2025, 2024 and 2023, as well as the percentage change between such periods, were as follows:

(amounts in millions)

Net sales by category:

Home products

The percentage of net sales represented by each of our product categories for fiscal years 2025, 2024 and 2023, were as follows:

Net sales by category:

Home products

Gross Profit.

In 2025, gross profit increased by 9.0%, and as a percentage of net sales increased by 107 basis points to 30.7%, compared to 2024, primarily driven by lower shrink, higher inventory markups and lower inventory damages, partially offset by an increased LIFO provision.

In 2024, gross profit increased by 2.5%, and as a percentage of net sales decreased by 70 basis points to 29.6%, compared to 2023, primarily driven by increased markdowns, a greater proportion of sales coming from the consumables category and increased inventory damages, partially offset by decreased transportation costs.

In 2023, gross profit decreased by 0.9%, and as a percentage of net sales decreased by 94 basis points to

30.3% compared to 2022, primarily driven by increased shrink and inventory markdowns, lower inventory markups, a higher proportion of lower margin consumables sales, and increased damages.

Partially offsetting the factors which decreased our overall gross profit rate were a lower LIFO provision and decreased transportation costs.

SG&A as a percentage of net sales was 25.5% in 2025 compared to 25.4% in 2024, an increase of 13 basis points.

The increase reflects fourth quarter impairment charges totaling $214.2 million related to the store portfolio optimization review as discussed above in the Executive Summary and Note 12 to the consolidated financial statements.

Other expenses that were higher as a percentage of net sales in 2024 were retail labor, depreciation and amortization, store occupancy costs and incentive compensation.

The primary expenses that were higher as a percentage of net sales in 2025 were incentive compensation and repairs and maintenance, partially offset by lower impairment charges primarily due to the store portfolio optimization review completed in 2024 as discussed in Note 12 to the consolidated financial statements.

SG&A as a percentage of net sales was 25.4% in 2024 compared to 24.0% in 2023, an increase of 140 basis points.

The primary expenses that were higher as a percentage of net sales in 2023 were retail labor, store occupancy costs, depreciation and amortization, repairs and maintenance, and other services purchased, including debt and credit card transaction fees, which were partially offset by a decrease in incentive compensation.

The increase reflects fourth quarter impairment charges totaling $214.2 million related to the store portfolio optimization review as discussed in Note 12 to the consolidated financial statements.

Other expenses that were higher as a percentage of net sales in 2024 were retail labor, depreciation and amortization, store occupancy costs and incentive compensation.

Interest Expense, net .

Interest expense, net decreased $43.8 million to $230.6 million in 2025 compared to 2024 primarily due to lower average debt balances from the repayment of long-term debt.

Interest expense, net, decreased $52.5 million to $274.3 million in 2024 compared to 2023 due to higher average cash balances and the repayment of long-term debt.

Interest expense, net increased $115.5 million to $326.8 million in 2023 compared to 2022, primarily due to higher outstanding borrowings and higher interest rates.

See the detailed discussion under “Liquidity and Capital Resources” regarding the financing of various long-term obligations.

See the detailed discussion under “Liquidity and Capital Resources” regarding the

financing of various long-term obligations.

Income Taxes .

The effective income tax rate for 2025 was 23.0% compared to a rate of 21.8% for 2024 which represents a net increase of 1.2 percentage points.

The effective tax rate was higher in 2025 primarily due to a higher state effective tax rate, enactment of Pillar Two minimum tax, and a decreased benefit from jobs-based tax credits due to higher earnings before taxes diluting the rate impact of the credits.

We receive a significant income tax benefit from wages paid to certain newly hired employees who qualify for federal jobs credits, principally the Work Opportunity Tax Credit (“WOTC”).

The WOTC program previously authorized under the Consolidated Appropriations Act of 2021 expired for employees hired after December 31, 2025.

For 2025, the expiration of the WOTC program had an immaterial impact on our effective tax rate.

Absent reauthorization, we will experience a significant negative impact to the effective tax rate in future years.

The effective income tax rate for 2024 was 21.8% compared to a rate of 21.6% for 2023 which represents a net increase of 0.2 percentage points.

The effective tax rate was higher in 2024 primarily due to a higher state effective tax rate and a decreased benefit from stock-based compensation partially offset by the effect of certain rate-impacting items on lower earnings before taxes.

The effective income tax rate for 2023 was 21.6% compared to a rate of 22.5% for 2022 which represents a net decrease of 0.9 percentage points.

The effective tax rate was lower in 2023 primarily due to the effect of certain rate-impacting items (such as federal tax credits) on lower earnings before taxes and a lower state effective rate resulting from increased recognition of state tax credits.

Effects of Inflation

In 2024 and 2023, we experienced moderate increases in product costs due to lower rates of inflation.

In 2025, 2024 and 2023, we experienced increases in product costs due to modest inflationary pressure.

In addition, we continued to experience elevated but relatively stable costs of building materials and certain of our other capital costs.

In 2022, we experienced higher rates of inflation affecting product costs, the costs of building materials and certain of our other capital costs.

Liquidity and Capital Resources

2 unchanged sentences

During that period, we expanded the number of stores we operate by 1,789, representing store growth of approximately 9%, and we remodeled or relocated 8,143 stores, or approximately 43% of the stores we operated as of the beginning of the three-year period.

In 2025, we intend to pursue accelerated growth in remodels, including Project Elevate, with slower growth for new stores and fewer relocations.

In 2026, we intend to pursue accelerated growth in remodels, including Projects Elevate and Renovate, with slower growth for new stores and fewer relocations.

At January 30, 2026, we had a $2.375 billion unsecured revolving credit agreement (the “Revolving Facility”), $4.5 billion aggregate principal amount of senior notes, and a commercial paper program that may provide borrowing availability of up to $2.0 billion.

1 unchanged sentence

All of our material borrowing arrangements are described in greater detail below.

Our borrowing availability under the Revolving Facility may be effectively limited by our commercial paper notes (“CP Notes”) as further

described below.

Our borrowing availability under the Revolving Facility may be effectively limited by our commercial paper notes (“CP Notes”) as further described below.

The information contained in Note 5 to the consolidated financial statements contained in Part II, Item 8 of this report is incorporated herein by reference.

4 unchanged sentences

Revolving Facility

On September 3, 2024, we entered into an amended and restated credit agreement which provides for a $2.375 billion unsecured five-year revolving credit facility (the “Revolving Facility”) and allows for a subfacility for letters of credit of up to $100 million, of which $70 million is currently committed and $30 million is currently uncommitted.

On September 3, 2024, we entered into an amended and restated credit agreement which provides for a $2.375 billion unsecured five-year revolving credit facility and allows for a subfacility for letters of credit of up to $100 million, of which $70 million is currently committed and $30 million is currently uncommitted.

The Revolving Facility also includes a subfacility with an available borrowing capacity of up to $50 million for short-term borrowings referred to as swingline loans.

11 unchanged sentences

The credit agreement governing the Revolving Facility also contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio.

As of January 31, 2025, we were in compliance with all such covenants.

On March 11, 2025, we amended the credit agreement governing the Revolving Facility to increase the maximum leverage ratio and decrease the minimum fixed charge ratio until January 30, 2026, or earlier at our option upon achieving certain financial covenant milestones (“Covenant Relief Period”).

During the Covenant Relief Period, we are restricted from repurchasing shares of our common stock and the ability to incur certain additional liens and subsidiary debt is reduced.

On March 11, 2025, we amended the credit agreement governing the Revolving Facility to increase the maximum leverage ratio and decrease the minimum fixed charge ratio through January 30, 2026, or earlier at our option upon achieving certain financial covenant milestones (“Covenant Relief Period”).

During the Covenant Relief Period, we were restricted from repurchasing shares of our common stock and the ability to incur certain additional liens and subsidiary debt was reduced.

The credit agreement governing the Revolving Facility also contains customary events of default.

As of January 30, 2026, we were in compliance with all such covenants.

As of January 30, 2026, we had no outstanding borrowings, no outstanding letters of credit, and borrowing availability of $2.375 billion under the Revolving Facility that, due to our intention to maintain borrowing availability related to the commercial paper program described below, could contribute liquidity of $2.18 billion.

In addition, we had outstanding letters of credit of $58.2 million which were issued pursuant to separate agreements.

364-Day Revolving Facility

The Company had a 364-day $750 million unsecured revolving credit facility (the “364-Day Revolving

Facility”) which expired on January 30, 2024.

Commercial Paper

6 unchanged sentences

(In millions)

November 2025

May 1 and November 1

April 15 and October 15

November 2027

September 2022

May 1 and November 1

January 5 and July 5

11 unchanged sentences

Upon the occurrence of a change of control triggering event, which is defined in the Senior Indenture, each holder of our Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

We have provided notice to the trustees of our $500.0 million senior unsecured notes scheduled to mature on November 1, 2025, that we intend to redeem the entire principal amount of such notes on April 29, 2025.

We expect to use cash on hand for the redemption.

In April 2025, we redeemed the $500.0 million aggregate principal amount of outstanding 4.15% senior notes due November 2025.

In September 2025, we redeemed the $600.0 million aggregate principal amount of the outstanding 3.875% senior notes due April 2027.

In December 2025, we redeemed the $550.0 million aggregate principal amount of the outstanding 4.625% senior notes due November 2027.

The Senior Indenture contains covenants limiting, among other things, our ability (subject to certain exceptions) to consolidate, merge, or sell or otherwise dispose of all or substantially all of our assets;

10 unchanged sentences

Commercial paper rating

Negative outlook

Stable outlook

Standard & Poor’s

Negative outlook

Stable outlook

Future Cash Requirements

22 unchanged sentences

The repurchase program may be modified or terminated from time to time at the discretion of our Board of Directors.

To preserve our investment grade credit rating and maintain financial flexibility, we did not repurchase any shares under this program in 2024 and do not plan to repurchase shares during fiscal 2025.

Although we have not repurchased shares under this program since 2022, it remains an important part of our broader capital allocation strategy, and we anticipate resuming share repurchases at the appropriate time.

For more detail, see Note 11 to the consolidated financial statements.

2 unchanged sentences

We paid quarterly cash dividends of $0.59 per share in 2025.

Although the Board currently expects to continue regular quarterly cash dividends, the declaration and amount of future cash dividends are subject to the Board’s sole discretion and will depend upon, among other factors, our results of operations, cash requirements, financial condition, contractual restrictions, excess debt capacity and other factors that our Board may deem relevant in its sole discretion.

The Board expects to continue regular quarterly cash dividends, although the declaration and amount of future cash dividends ultimately are subject to the Board’s sole discretion and will depend upon, among other factors, our results of operations, cash requirements, financial condition, contractual restrictions, excess debt capacity and other factors that our Board may deem relevant in its sole discretion.

Our inventory balance represented approximately 44% of our total assets exclusive of operating lease assets, goodwill, and other intangible assets as of January 30, 2026.

6 unchanged sentences

Cash flows from operating activities were $3.6 billion in 2025, which represents a $638.4 million increase compared to 2024.

Net income increased to $1.5 billion in 2025 as compared to $1.1 billion in 2024.

Changes in income taxes resulted in a $199.2 million increase in 2025 compared to a $15.4 million decrease in 2024 primarily due to the increase in pre-tax earnings in 2025 and the timing of payments for income taxes.

Changes in accrued expenses resulted in a $250.0 million increase in 2025 compared to a $91.8 million increase in 2024, due primarily to an increase in accrued incentive compensation.

Changes in accounts payable resulted in a $185.3 million increase in our working capital in 2025 compared to a $302.9 million increase in 2024, due primarily to the timing of inventory receipts and related payments.

Changes in merchandise inventories resulted in a $178.5 million increase in our working capital in 2025 compared to the increase of $230.2 million in 2024 as described in greater detail below.

Cash flows from operating activities were $2.996 billion in 2024, which represents a $604.3 million increase compared to 2023.

Changes in merchandise inventories resulted in a $230.2 million increase in our working capital in 2024 compared to the decrease of $299.1 million in 2023 as described in greater detail below.

4 unchanged sentences

Changes in income taxes paid in 2024 compared to 2023 are primarily due to the decrease in pre-tax earnings in 2024 and the timing of payments for income taxes.

Cash flows from operating activities were $2.4 billion in 2023, which represents a $407.2 million increase compared to 2022.

Changes in merchandise inventories resulted in a $299.1 million decrease in our working capital in 2023 compared to the decrease of $1.7 billion in 2022 as described in greater detail below.

Changes in accounts payable resulted in a $36.9 million increase in our working capital in 2023 compared to a $194.7 million decrease in 2022, due primarily to the timing of inventory receipts and related payments.

Net income decreased to $1.7 billion in 2023 as compared to $2.4 billion in 2022.

Changes in other noncash losses resulted in a $89.0 million increase as compared to a $530.5 million increase in 2022 primarily due to a lower LIFO provision in 2023.

Changes in income

taxes including a decrease in cash paid for income taxes in 2023 compared to 2022 are primarily due to the decrease in pre-tax earnings in 2023.

On an ongoing basis, we closely monitor and manage our inventory balances, and they may fluctuate from period to period based on new store openings, the timing of purchases, and other factors.

Merchandise inventories decreased by 4% in 2024 and increased by 3% in 2023 and 20% in 2022.

The decrease in the 2024 period primarily reflects a decrease in the consumables and home products categories due to inventory reduction efforts and core SKU reductions.

Offsetting the inventory decrease in consumables and home products were increases in the seasonal and apparel categories primarily due to an increase in overall store count.

Merchandise inventories decreased by 6% in 2025, decreased by 4% in 2024 and increased by 3% in 2023.

The decrease in the 2025 period primarily reflects a decrease in the consumables, seasonal and home products categories due to inventory reduction efforts and core SKU reductions.

Offsetting the inventory decreases was an increase in the apparel category primarily due to an increase in overall store count and improvements to inventory in-stock.

Percent and dollar changes in our four inventory categories for the past three years were as follows:

2 unchanged sentences

Home products

On a per store basis, inventories at January 30, 2026, decreased by 7.0% compared to the balances at January 31, 2025.

Cash flows from investing activities .

7 unchanged sentences

Total purchases of property and equipment

Remodeled or relocated

Remodeled or relocated (a)

(a) Remodeled store counts include 2,000 stores through Project Renovate and 2,254 stores through Project Elevate.

Capital expenditures during 2026 are projected to be in the range of $1.4 billion to $1.5 billion.

1 unchanged sentence

existing cash balances, cash flows from operations, availability under our Revolving Facility and/or the issuance of additional CP Notes.

We plan to continue to invest in store growth and development with approximately 575 new stores in the United States and up to 15 new stores in Mexico and approximately 4,295 remodels or relocations, including fully remodeling approximately 2,000 stores through Project Renovate, remodeling approximately 2,250 through Project Elevate, and relocating approximately 45 stores.

We plan to continue to invest in store growth and development with approximately 450 new stores in the United States and approximately 10 new stores in Mexico and approximately 4,270 remodels or relocations, including remodeling approximately 2,000 stores through Project Renovate, remodeling approximately 2,250 through Project Elevate, and relocating approximately 20 stores.

Capital expenditures in 2026 are anticipated to support our store growth as well as our remodel and relocation initiatives, including capital outlays for leasehold improvements, fixtures and equipment;

4 unchanged sentences

Cash flows from financing activities .

During the 2025 period, we had repayments of long-term obligations of $1.7 billion.

We paid cash dividends of $519.5 million and did not repurchase shares of our common stock.

During the 2024 period, we had repayments of long-term obligations of $770.2 million.

3 unchanged sentences

We paid cash dividends of $518.0 million and did not repurchase shares of our common stock.

In 2022, we received proceeds from the issuance of long-term debt of $2.3 billion, and our repayments of long-term debt totaled $911.3 million.

Net commercial paper borrowings increased by $1.4 billion, and we had no borrowings or repayments under the Revolving Facility or the 364-Day Revolving Facility.

We repurchased 11.6 million shares of our common stock at a total cost of $2.7 billion and paid cash dividends of $493.7 million.

Critical Accounting Policies and Estimates

27 unchanged sentences

In contrast, interim LIFO calculations are based on management’s annual estimates of sales, the rate of inflation or deflation, and year-end inventory levels.

We also perform analyses for determining obsolete inventory, adjusting inventory on a quarterly basis to an LCM value based on various

management assumptions including estimated below cost markdowns not yet recorded, but required to liquidate such inventory in future periods.

We also perform analyses for determining obsolete inventory, adjusting inventory on a quarterly basis to an LCM value based on various management assumptions including estimated below cost markdowns not yet recorded, but required to liquidate such inventory in future periods.

Impairment of Long-lived Assets.

8 unchanged sentences

We retain a significant portion of the risk for our workers’ compensation, employee health, general liability, property loss, auto liability and certain third-party landlord claim exposures.

These represent significant costs primarily due to our large employee base and number of stores.

These represent significant costs primarily due to our large employee base and number of stores and fleet vehicles.

Provisions are made for these liabilities on an undiscounted basis.

18 unchanged sentences

Improvements of leased properties are amortized over the shorter of the life of the applicable lease term or the estimated useful life of the asset.

Share-Based Payments .

Our stock option awards are valued on an individual grant basis using the Black-Scholes-Merton closed form option pricing model.

We believe that this model fairly estimates the value of our stock option awards.

The application of this valuation model involves assumptions that are judgmental in the valuation of stock options, which affects compensation expense related to these options.

These assumptions include the term that the options are expected to be outstanding, the historical volatility of our stock price, applicable interest rates and the dividend yield of our stock.

Other factors involving judgments that affect the expensing of share-based payments include estimated forfeiture rates of share-based awards.

Historically, these estimates have been materially accurate;

however, if our estimates differ materially from actual experience, we may be required to record additional expense or reductions of expense, which could be material to our future financial results.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis