What changed in this filing

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Item 1A. Risk Factors

2020-08-27 compared with 2020-05-28 · 50 added, 34 removed, 5 unchanged (94% of the section changed)

1 unchanged sentence

This section supplements and updates certain of the information found under Part I, Item 1A.

“Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 filed with the Securities and Exchange Commission on March 20, 2020 (the “2019 Form 10-K”), and is based on the information currently known to us and recent developments since the date of the 2019 Form 10-K filing.

The matters discussed below should be read in conjunction with the risk factors set forth in the 2019 Form 10-K.

However, the risks and uncertainties that we face are not limited to those described below and those set forth in the 2019 Form 10-K.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock, particularly in light of the fast-changing nature of the COVID-19 pandemic, containment measures and the related impacts to economic and operating conditions.

The impact of the COVID-19 pandemic and the measures implemented to contain or mitigate the spread of the virus have had, and are expected to continue to have, a material adverse impact on our business and results of operations.

The emergence of the COVID-19 pandemic and the resulting public health measures have caused economic and financial disruptions that have adversely affected, and are expected to continue to materially adversely affect, our business and results of operations.

The extent to which the pandemic will continue to materially adversely affect our business and results of operations will depend on numerous evolving factors and future developments that we are not able to predict, including the duration, spread and severity of the outbreak, the nature, extent and effectiveness of containment and mitigation measures, the extent and duration of the effect on the economy, unemployment, consumer confidence and consumer and business spending and how quickly and to what extent normal economic and operating conditions can resume.

The COVID-19 pandemic and public health measures have contributed to, among other things:

Significant increases in the cost of operating our stores and distribution centers, including higher wages and bonuses paid to associates, enhanced cleaning protocols and the cost of personal protection equipment.

Disruptions in the patterns of consumer demand, which has led to, among other things, decreased demand for Easter, party, and certain other merchandise, and an increase in demand for online sales (which is an insignificant part of our business) and home or curbside deliveries (which we do not offer).

Widespread changes to, and significant and rapid reductions in, household and business activity and consumer and business spending, as well as economic contraction, the risk of a significant recession, and a record rise in unemployment.

Decreasing foot traffic in our stores as a result of the promotion of social distancing, the adoption of shelter-in-place and similar governmental orders and consumer attitudes with respect to in-person shopping.

Adverse impacts on the implementation of our business plans, including delays in new store openings, the conversion of Family Dollar stores to the H2 format and the introduction of Snack Zones and alcohol sales in certain of our retail stores.

Increased risks of disruptions in our supply chain that could result in lost sales or increase costs.

If consumer demand for discretionary holiday, seasonal, party, and other products does not return to more normal levels, our merchandise and profit margin will be negatively impacted, especially in the later part of the year.

We cannot predict when or if this will occur.

The above impacts of the COVID-19 pandemic and public health measures are likely to continue and in some cases, may worsen if infections increase.

Although we have been classified as an essential business, and have been allowed to remain open, we have closed impacted stores and distribution centers temporarily for enhanced cleaning and reduced store hours.

If the pandemic worsens in some portions of the country, we may also be forced to close for other reasons such as the health of our associates or because of disruptions in the continued operation of our supply chain and sources of supply.

It is possible facility closures for health reasons could also impact our distribution centers or our store support center in Chesapeake, Virginia.

The pandemic and public health measures have caused us to modify our strategic plans and business practices and take further actions that we determine are in the best interests of our associates, customers and business partners.

If we do not respond appropriately to the pandemic, or if customers or other stakeholders do not perceive our response to be adequate, we could suffer damage to our reputation and our brand, which could materially adversely affect our business.

Governmental authorities have adopted certain measures, and additional measures have been proposed, to provide economic assistance to individual households and businesses and support economic growth which we believe has materially benefited our sales.

The extent to which these measures are continued is unknown and they may not be sufficient to mitigate the negative impact of the pandemic in the future.

If the pandemic is prolonged, severe and/or worsens, it could amplify the negative impacts on our business and results of operations and may also heighten many of the other risks described in the “Risk Factors” section of our 2019 Form 10-K.

It is also possible that any adverse impacts of the pandemic and public health measures may continue once the pandemic is controlled and those measures are lifted.

If the pandemic creates disruptions or turmoil in the credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which cannot be predicted.

We do not yet know the full extent of how COVID-19 and the containment and mitigation measures will affect our customers, associates, suppliers, vendors, other business partners or our business, results of operations and financial condition.

However, the continuing effects may have a material adverse impact on our business and results of operations.

Our supply chain may be disrupted by changes in United States trade policy with China or as a result of the COVID-19 pandemic.

“Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 filed with the Securities and Exchange Commission on March 20, 2020, and under Part II, Item 1A.

“Risk Factors” of our Quarterly Report on Form 10-Q for the period ended May 2, 2020 filed with the Securities and Exchange Commission on May 28, 2020, and is based on the information currently known to us and recent developments since the dates of those filings.

The matters discussed below should be read in conjunction with the risk factors included in those filings.

However, the risks and uncertainties that we face are not limited to those described below and those set forth in our SEC filings.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock, particularly in light of the changing nature of the COVID-19 pandemic and related economic disruptions.

If the COVID-19 pandemic worsens and new, more restrictive public health measures are implemented, there could be a material adverse impact on our business and results of operations.

The continuing COVID-19 pandemic and related public health measures have caused economic disruptions that have adversely affected, and are expected to continue to adversely affect, elements of our business.

We have, however, been classified as an essential business and been allowed to remain open but our operational costs have increased.

To date, we have not experienced a sustained decline in overall sales, although the sales of certain categories, such as higher margin Easter merchandise at the Dollar Tree banner, were materially and adversely impacted.

If the pandemic worsens, governments may reinstate or extend business or personal restrictions, and we could be forced to curtail or restrict operations.

We might also experience new disruptions in our supply chain and sources of supply or suffer facility closures.

These circumstances, if applicable for an extended duration or across significant parts of our operating footprint, could have a material adverse effect on our business and results of operations.

The COVID-19 pandemic and public health measures have already contributed to, among other things:

Increases in the cost of operating our stores and distribution centers, including temporarily higher wages and bonuses paid to associates, enhanced cleaning protocols and the cost of personal protection equipment.

Disruptions in the patterns of consumer demand, which has led to, among other things, decreased demand for Easter and party merchandise in the Dollar Tree segment, and an increase in consumer demand for household cleaning supplies and corresponding

difficulty in our ability to maintain those items in stock, and an increase in demand for online sales (which is an insignificant part of our business) and home or curbside deliveries (which we do not offer).

Decreasing foot traffic in our stores as a result of the promotion of social distancing, the adoption of various governmental restrictions on personal and business activities and changing consumer attitudes with respect to in-person shopping and changes in shopping patterns.

Reduced consumer demand for holiday, seasonal, party, and other discretionary products that generally carry a higher margin may have a negative impact on our gross profit margin, especially in the later part of the year when they typically form a larger part of our merchandise mix.

It is uncertain what effect the COVID-19 crisis will have on upcoming holiday merchandise sales such as Christmas.

Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of a deepening pandemic-related recession or political uncertainties, for example because government stabilization efforts terminate or are reduced prematurely.

Governmental authorities have adopted substantial measures, including fiscal and monetary stimulus, to provide economic assistance to individual households and businesses and support economic stability during the pandemic and the related recession and increase in unemployment.

We believe the economic intervention has materially benefited our sales.

Some of these measures have been exhausted and replaced with lesser measures and we anticipate others will eventually be modified, reduced or discontinued in whole or in part.

There can be no assurance that any on-going efforts to stabilize the economy will be sufficient to mitigate the economic crisis.

If consumer spending on the goods we sell declines as a result, there could be a material adverse impact on our business and results of operations.

To date, the pandemic has not created material disruptions in the functioning of the credit or financial markets or impacted our credit ratings.

However, we can provide no assurances that material disruptions in the credit or financial markets will not occur in the future or that such disruptions would not adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.

We are unable to predict the full extent to which COVID-19 and the resulting recession, or the timing or extent of any economic recovery, will affect our customers, associates, suppliers, vendors, other business partners or our business, results of operations and financial condition.

If the pandemic-related recession is prolonged and/or worsens, it could amplify many of the other risks described in the “Risk Factors” section of our most recent Form 10-K.

Our supply chain may be disrupted by changes in United States trade policy with China.

We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices.

1 unchanged sentence

A disruption in the flow of our imported merchandise from China or an increase in the cost of those goods may significantly decrease our profits.

The United States recently scaled back punitive Section 301 tariffs on certain Chinese imports based on an agreement reached with China, which represents a material benefit to us.

While US and Chinese senior officials have stated that they are committed to implementing the agreement, President Trump has recently questioned whether China is living up to its obligations and has further alluded to possible action against China for its role in the COVID-19 crisis.

New US tariffs or other actions against China, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise.

This would have a material adverse impact on our business and results of operations.

The United States has scaled back punitive Section 301 tariffs on certain Chinese imports based on an agreement reached with China, which represents a material benefit to us.

and Chinese senior officials have stated that they are committed to implementing the agreement, President Trump has questioned whether China is living up to its obligations and has further alluded to possible action against China for its role in the COVID-19 crisis.

Recently, the U.S.

and Chinese governments have taken certain actions that appear to indicate worsening relations between the two countries.

Such actions include:

The signing of an Executive Order by President Trump revoking Hong Kong’s preferential trade status with the U.S.;

The closing of the Chinese diplomatic consulate in Houston, Texas and of the U.S.

consulate in the city of Chengdu, China and the imposition of sanctions by the U.S.

on officials of China and Hong Kong and by the Chinese government on certain U.S.

Steps by the U.S.

government to restrict access by Chinese companies to U.S.-developed semiconductor technology and to require a Chinese digital company to divest operations in the United States.

There is a risk that these actions will further escalate trade tensions between the U.S.

and China, resulting in a weakening or disruption in trade relations between the two countries, which could adversely affect our ability to source merchandise from our Chinese suppliers in a timely manner and at a favorable cost.

The imposition of any new U.S.

tariffs on Chinese imports or the taking of other actions against China in the future, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a material adverse impact on our business and results of operations.

Unregistered Sales of Equity Securities and Use of Proceeds.

We did not repurchase any shares of common stock on the open market in the 13 weeks ended August 1, 2020 .

As of August 1, 2020 , we had approximately $800.0 million remaining under Board repurchase authorization.

Defaults Upon Senior Securities.

Mine Safety Disclosures.

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-Q

Item 1A. Risk Factors