What changed in this filing

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Item 1A. Risk Factors

2021-08-26 compared with 2021-05-27 · 52 added, 1 removed, 3 unchanged (95% of the section changed)

1 unchanged sentence

There have been no material changes to the risk factors described in “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, other than as set forth in the discussion of risk factors in the “Cautionary Note Regarding Forward-Looking Statements” section and in the discussion of certain items that have impacted or could impact our business or results of operations during 2021 or in the future as set forth in the “Other Items” section within “Item 2.

Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, other than as set forth below and in the discussion of risk factors in the “Cautionary Note Regarding Forward-Looking Statements” section and in the discussion of certain items that have impacted or could impact our business or results of operations during 2021 or in the future as set forth in the “Additional Considerations” section within “Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

We are experiencing higher costs and disruptions in our distribution network, which have had and could have an adverse impact on our sales, margins and profitability.

Our success is dependent on our ability to import or transport merchandise to our distribution centers and then truck merchandise to our stores in a timely and cost-effective manner.

We rely heavily on third parties including ocean carriers and truckers in that process.

We may not anticipate, respond to or control all of the challenges of operating our distribution network.

Additionally, when a shipping or trucking line fails to deliver on its commitments or our distribution centers fail to operate effectively, we could experience increased freight costs or merchandise shortages that could lead to lost sales.

We are experiencing ocean shipping disruptions, trucking shortages, increased ocean shipping rates and increased trucking and fuel costs.

In the last several years, we have incurred higher distribution costs due to a variety of factors.

Some of the factors that have had and could have an adverse effect on our distribution network or costs in 2021 are:

• Shipping disruptions .

There is currently a shortage of shipping capacity from China and other parts of Asia, and as a result we are experiencing significant delays in importing our goods.

We are also experiencing issues with port congestion and pandemic-related port closings and ship diversions.

Our receipt of imported merchandise has been and may be further disrupted or delayed as a result of these or other factors.

Delays could potentially have a material adverse impact on future product availability, product mix and sales, especially at Dollar Tree, if the delays do not improve.

These and other disruptions related to the global COVID-19 pandemic have adversely impacted Trans-Pacific shipping in 2021 and are expected to continue to affect shipping from China, where we buy a significant portion of our merchandise, and we cannot predict when the disruptions will end.

In addition, our supply chain may be disrupted as a result of other international events such as war or acts of terrorism.

• Shipping costs .

We are experiencing unprecedented increases in shipping rates from the Trans-Pacific ocean carriers due to various factors, including a continued increase in spot market rates and the limited availability of shipping capacity.

As a result of the inability or unwillingness of the ocean carriers with whom we have carriage contracts to execute annual contracts for all of our shipping needs or to completely fulfill their contractual commitments to us, we have found it necessary to rely on an increasingly expensive spot market and other alternative sources to make up the shortfall in our

shipping needs during fiscal 2021.

Freight costs for fiscal 2021 are now expected to be $1.50 to $1.60 per diluted share higher than fiscal year 2020.

Changes in import duties, import quotas and other trade sanctions could also increase our costs.

• Efficient operations and management .

Distribution centers and other aspects of our distribution network are difficult to operate efficiently, and we have experienced and could continue to experience a reduction in operating efficiency as a result of high turnover and challenges in attracting and retaining an adequate and reliable workforce.

Although we have begun offering sign-on bonuses, enhanced wages and other inducements in certain markets to address the shortage of labor at our distribution centers, such measures are expected to increase our costs and could have an adverse effect on our margins and profitability.

There can be no assurances that such measures will be adequate to attract and retain the workforce necessary for the efficient operation of our distribution centers.

• Trucking costs .

We have experienced significant increases in trucking costs due to the truck driver shortage and other factors, and our trucking costs are expected to increase in the future.

• Diesel fuel costs .

We have experienced volatility in diesel fuel costs and are expecting increases to continue this fiscal year.

• Vulnerability to natural or man-made disasters, including climate change .

A fire, explosion or natural disaster at a port or any of our distribution facilities could result in a loss of merchandise and impair our ability to adequately stock our stores.

Some facilities are vulnerable to earthquakes, hurricanes, tornadoes or floods, and an increase in the severity and frequency of extreme weather events may increase our operating costs or disrupt our supply chain.

• Labor disagreement .

Labor disagreements, disruptions or strikes, for example at ports, may result in delays in the delivery of merchandise to our distribution centers or stores and increase costs.

• Direct-to-store deliveries .

In fiscal 2020, we purchased and delivered approximately 13% of our merchandise for our Family Dollar segment through our relationship with McLane Company, Inc., which distributes consumable merchandise from multiple manufacturers.

We also rely on third parties to deliver frozen and refrigerated product, as well as chocolate in the summer, to our Dollar Tree stores.

A disruption in our relationship with or in service levels from McLane Company, Inc.

or other providers could have a significant near-term impact on our operations.

We may not be successful in implementing important strategic initiatives, which may have an adverse impact on our business and financial results.

We have adopted important strategic initiatives that are designed to create growth, improve our results of operations and drive long-term shareholder value, including:

• the testing and implementation of a multi-price initiative in Dollar Tree stores referred to as Dollar Tree Plus ;

• the introduction of selected Dollar Tree merchandise into Family Dollar stores;

• the testing and roll-out of the Combo Store format that combines a Dollar Tree store and Family Dollar store in a single location;

• the renovation of Family Dollar stores to the H2 format;

• our plans relating to new store openings for Dollar Tree and Family Dollar generally;

• the continued integration of the operations of Family Dollar with Dollar Tree.

The implementation and timing of these strategic initiatives are subject to various risks and uncertainties, including consumer acceptance of new store concepts and merchandise offerings, construction and permitting delays relating to new and renovated stores, the success of our integration strategies, the availability of desirable real estate locations for lease at reasonable rates, the impact of the COVID-19 pandemic and other factors beyond our control.

In addition, several of these initiatives depend on the availability of adequate levels of the appropriate domestic and imported merchandise, our ability to execute on our plans and expectations with respect to those initiatives and the continued success of our integration of Family Dollar merchandising, supply chain and operations with those of Dollar Tree.

To the extent that shipping delays, supply chain disruptions and other distribution logistics adversely affect the availability of merchandise necessary to implement our strategic initiatives, we may delay or reduce our planned rate of implementation of one or more of those initiatives.

There can be no assurance that we will be able to implement important strategic initiatives in accordance with our expectations or that they will generate expected returns, which may result in an adverse impact on our business and 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-Q

Item 1A. Risk Factors