What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-29 compared with 2023-08-24 · 193 added, 150 removed, 157 unchanged (69% of the section changed)

10 unchanged sentences

• Our expectations regarding the implementation and impact of investments in supply chain, distribution facilities, store delivery and equipment, and technology initiatives, store appearance, wage investments and other workforce investments and goals;

• The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations (including U.S.

Food and Drug Administration and Department of Justice matters), and the availability of indemnification or insurance with respect to such matters;

• The design and implementation of internal controls around our multi-year technology transformation;

• The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations (including FDA and DOJ matters), our plans regarding these matters, and the availability of indemnification or insurance with respect to such matters;

• Our expectations regarding the impact of inflation on our business;

• Our expectations regarding our commercial paper program, including our expected use of proceeds and repayment sources;

• Our expectations regarding our commercial paper program, including our expected use of proceeds and repayment sources, and supply chain finance program;

• Our cash needs, including our ability to fund our future capital expenditures and working capital requirements.

5 unchanged sentences

• Our profitability is vulnerable to increases in merchandise, shipping, freight and fuel costs, wage and benefit costs and other operating costs.

• Our profitability is affected by the mix of products we sell.

• 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.

• We may stop selling or recall certain products for safety-related or other issues.

• Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of consumer concerns about the quality and safety of our products or our brand standards.

• Our business and results of operations could be materially harmed if we experience damage to our reputation or brand image or a decline in consumer confidence and spending as a result of consumer concerns about the quality and safety of our products or our brand standards, associate relations, and expectations regarding environmental and social responsibility.

• Inflation or other adverse change or downturn in economic conditions could impact our sales or profitability.

• Risks associated with our domestic and foreign suppliers could adversely affect our financial performance.

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

• Our global supply chain may be disrupted by geopolitical events, natural disasters, weather conditions or other events, including changes in United States trade policy with China.

• Our growth is dependent on our ability to increase sales in existing stores and to expand our square footage profitably.

• Our profitability is affected by the mix of products we sell.

• Pressure from competitors may reduce our sales and profits.

• Our business could be adversely affected if we fail to attract and retain qualified associates and key personnel.

• Our business could be adversely affected if we fail to attract, retain and develop qualified associates and key personnel.

• We may not be successful in implementing or in anticipating the impact of important strategic initiatives, we may fail to realize our desired sales, operational efficiencies or other anticipated benefits of those initiatives, and our plans for implementing such initiatives may be altered or delayed due to various factors, any of which may have an adverse impact on our business and financial results.

• Customers may not accept or respond to changes in our product assortment, store layouts and formats, and other results of our strategic initiatives.

• Our business could be adversely affected by internal or external retail theft or operational safety concerns.

• We could incur losses due to impairment of long-lived assets, goodwill and intangible assets.

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• The potential unauthorized access to customer information may violate privacy laws and could damage our business reputation, subject us to negative publicity, litigation and costs, and adversely affect our results of operations or business.

• Our reliance on third party vendors and suppliers could negatively impact our business if we are unable to effectively manage these third parties.

• Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations.

8 unchanged sentences

Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements.

We do not undertake to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events, or otherwise.

We do not undertake to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, or otherwise.

Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information.

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We refer to this as a change in comparable store net sales, because we include only those stores that are open throughout both of the periods being compared, beginning after the first fifteen months of operation.

We include sales from stores expanded or remodeled during the period in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales.

The term ‘expanded’ also includes stores that are relocated.

We include sales from stores expanded, relocated or remodeled during the period in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales.

Stores that have been re-bannered are considered to be new stores and are not included in the calculation of the comparable store net sales change until after the first fifteen months of operation under the new brand.

Sales that are excluded from the calculation of comparable store net sales are referred to as non-comparable store sales and consist of sales from new stores open fifteen months or less and stores that are closed permanently or expected to be closed for more than 90 days.

At July 29, 2023, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces.

The average size of stores opened during the 26 weeks ended July 29, 2023 was approximately 9,310 selling square feet for the Dollar Tree segment and 9,515 selling square feet for the Family Dollar segment.

A breakdown of store counts and square footage by segment for the 26 weeks ended July 29, 2023 and July 30, 2022 is as follows:

Quarterly Results

Financial highlights for the 13 weeks ended October 28, 2023, as compared to the 13 weeks ended October 29, 2022, include:

• Net sales increased 5.4% to $7,309.1 million, primarily due to a 3.9% enterprise-wide comparable store net sales increase, and $245.8 million of net sales at non-comparable stores.

• Gross profit, as a percentage of net sales, decreased 20 basis points to 29.7%, primarily due to higher shrink, distribution and markdown costs, partially offset by lower freight costs.

• Selling, general and administrative expenses, as a percentage of total revenues, increased 130 basis points to 25.7%, primarily due to higher store-based payroll expenses, information technology systems costs, and depreciation and amortization.

• Operating income, as a percentage of total revenues, decreased 140 basis points to 4.1%.

• The effective tax rate decreased 160 basis points to 21.8% primarily due to higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year, and lower net state taxes.

• Net income was $212.0 million, or $0.97 per diluted share, compared to $266.9 million, or $1.20 per diluted share.

At October 28, 2023, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces.

The average size of stores opened during the 39 weeks ended October 28, 2023 was approximately 9,385 selling square feet for the Dollar Tree segment and 9,390 selling square feet for the Family Dollar segment.

A breakdown of store counts and square footage by segment for the 39 weeks ended October 28, 2023 and October 29, 2022 is as follows:

39 Weeks Ended

July 29, 2023 July 30, 2022

October 28, 2023 October 29, 2022

Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total

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Stores are included as re-banners when they close or open, respectively.

The percentage change in comparable store net sales for the 13 and 26 weeks ended July 29, 2023, as compared with the preceding year, is as follows:

13 Weeks Ended July 29, 2023

26 Weeks Ended July 29, 2023

Subsequent to the 13 weeks ended October 28, 2023, we initiated a comprehensive review of the Family Dollar portfolio.

This will involve, among other things, identifying stores as candidates for closure, re-bannering, or relocation.

The percentage change in comparable store net sales for the 13 and 39 weeks ended October 28, 2023, as compared with the preceding year, is as follows:

13 Weeks Ended October 28, 2023

39 Weeks Ended October 28, 2023

Sales Growth Change in

6 unchanged sentences

Family Dollar Segment 2.0% 1.4% 0.7% 4.8% 3.0% 1.7%

Comparable store net sales are positively affected by our expanded and relocated stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores.

Comparable store net sales are positively affected by our expanded, relocated and remodeled stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores.

Net sales per selling square foot is calculated based on total net sales for the preceding 12 months as of the end of the reporting period divided by the average selling square footage during the period.

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We believe that net sales per selling square foot more accurately depicts the productivity and operating performance of our stores as it isolates that portion of our footprint that is dedicated to selling merchandise.

Net sales per selling square foot is calculated for stores open throughout the period presented.

Net sales per selling square foot for the 52 weeks ended July 29, 2023 and July 30, 2022 is as follows:

Net sales per selling square foot for the 52 weeks ended October 28, 2023 and October 29, 2022 is as follows:

52 Weeks Ended

July 29, 2023 July 30, 2022

October 28, 2023 October 29, 2022

Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total

1 unchanged sentence

Strategic Initiatives

In recent years, we have pursued and executed a number of strategic initiatives across the Dollar Tree and Family Dollar banners, including the $1.25 price point at Dollar Tree, implementation of Dollar Tree Plus , increased frozen and refrigerated products in our stores, and implementation of new store formats at Family Dollar.

During our 2023 Investor Conference on June 21, 2023, we outlined updated strategies and plans to build upon these initiatives and drive productive sales growth, improve operating efficiency, invest in technology, and expand our culture of service to our associates.

We continue to execute on a number of strategic initiatives across the Dollar Tree and Family Dollar banners to drive productive sales growth, improve operating efficiency, invest in technology, and expand our culture of service to our associates.

These initiatives include, among others, the following.

Dollar Tree Merchandising.

We completed our $1.25 price point initiative with the rollout to all Dollar Tree stores during the first quarter of fiscal 2022.

This allowed us to re-introduce products and expand our brand assortment at the new $1.25 price point to provide greater value for our customers and increase customer traffic and store productivity.

We continue to expand our brand assortment at the $1.25 price point to provide greater value for our customers and increase customer traffic and store productivity.

We are also continuing to implement our Dollar Tree Plus initiative, which introduces products priced at the $3 and $5 price points and provides our customers with extraordinary value in select discretionary categories.

As of July 29, 2023, we have approximately 3,630 Dollar Tree Plus stores.

As of October 28, 2023, we have approximately 4,500 Dollar Tree Plus stores.

We are planning the continued expansion of our multi-price product assortment, both through the addition of $3, $4 and $5 frozen and refrigerated product, as well as other consumable and discretionary product.

As of July 29, 2023, approximately 5,580 stores had $3, $4 and $5 frozen and refrigerated products.

Within these stores, we also plan to transition some of our existing $1.25 freezer and cooler doors to multi-price products.

As of October 28, 2023, approximately 6,500 stores had $3, $4 and $5 frozen and refrigerated products.

We are currently taking actions to improve operating efficiencies and prepare for expanded multi-price products within our stores, including raising shelf heights, implementing space productivity, and rightsizing assortments.

Family Dollar Merchandising.

During the past several years, we have been implementing store design initiatives at Family Dollar with significantly improved merchandise offerings and establishing a minimum number of cooler doors.

We are building upon these formats to further tailor space and assortment to local demographics with emerging formats including H2.5, our new primary store format (generally 6,700 to 8,700 square feet) with optimized layout and expanded frozen and refrigerated doors;

rural stores, which are an evolution of our Combo format, generally contain more square footage (8,700+ square feet) and have assortments that may include Dollar Tree product;

and XSB (Extra Small Box), which generally contain less square footage (less than 6,700 square feet) and add elements of H2.5 optimized to our smaller stores, particularly in urban markets.

As of July 29, 2023, we have approximately 830 H2.5 stores, and in the quarter we opened or converted 90 stores into our rural Combo format.

Actions taken in recent months have improved Family Dollar’s price position relative to competition, which we believe has positively impacted customer traffic and average ticket.

Building on this momentum, we plan to improve our product assortment across all of Family Dollar’s formats by expanding our SKUs, continuing to add cooler doors, increasing our standard shelf profile from 72 inches to 78 inches, and implementing planogram and category resets.

Our store design initiatives at Family Dollar provide significantly improved merchandise offerings and establish a minimum number of cooler doors.

We tailor space and assortment to local demographics with emerging formats including H2.5, our primary store format with optimized layout and expanded frozen and refrigerated doors;

larger rural stores where assortments may include Dollar Tree product;

and XSB (Extra Small Box), which adds elements of H2.5 optimized to our smaller stores, particularly in urban markets.

As of October 28, 2023, we have approximately 1,600 across these three formats.

Across all of Family Dollar’s formats we are expanding our SKUs, continuing to add cooler doors, increasing our standard shelf profile, and implementing planogram and category resets.

We continue to introduce new private brands at Family Dollar, convert control brands to private brands and align our “Family” brand message across key categories.

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Across both of our banners, we are investing in our talent, including initiatives to provide competitive pay and benefits, enhanced training, and attractive career opportunities to deliver an enhanced associate experience, reduce turnover, and improve our store standards and efficiencies and ultimately the customer experience.

Additional initiatives include accelerating new store openings and expanding renovations and other projects to optimize and modernize our stores.

We are continuing to implement our G.O.L.D.

(Grand Opening Look Daily) initiative to improve store appearance, deliver consistent experiences across all stores, and drive positive sales trends.

Additional initiatives include projects to optimize and modernize our stores, with a focus on improving store appearance, delivering consistent experiences across all stores, and driving positive sales trends.

Supply Chain Optimization .

Our supply chain initiatives include enhancing our distribution and transportation network to support store growth and merchandising programs, including investments in building a Dollar Tree Fleet Ownership Program, modernizing the existing Family Dollar fleet, transportation management systems, a new co-bannered distribution center to increase capacity and

improve efficiency, and a new rotacart delivery process that is expected to, among other things, streamline the truck unloading and store delivery process, improve associate and driver utilization and improve operational efficiencies.

Our supply chain initiatives include enhancing our distribution and transportation network, including investments in our trucking fleet, transportation management systems, a new co-bannered distribution center to improve efficiency, and a new rotacart delivery process to streamline the truck unloading and store delivery process.

Technology Investment.

Over the next several years, we are planning significant investment in our technology, including next-gen applications, data and analytics capabilities, and enhanced user experience across our business, including our store network and point-of-sale, merchandising and supply chain.

We continue our multi-year plan for significant investment in our technology across our business, including our store network and point-of-sale, merchandising and supply chain.

We believe these improvements can promote operational efficiencies and deliver an elevated customer experience.

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Note that gross profit margin is calculated as gross profit (i.e., net sales less cost of sales) divided by net sales.

The selling, general and administrative expense rate and operating income margin are calculated by dividing the applicable amount by total revenue.

The selling, general and administrative expense rate, operating income margin and net income margin are calculated by dividing the applicable amount by total revenue.

The following table contains results of operations data for the 13 and 39 weeks ended October 28, 2023 and October 29, 2022:

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(in millions, except percentages)

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Net sales $ 7,309.1 $ 6,936.6 $ 21,948.7 $ 20,602.0

Other revenue 5.7 3.3 15.2 9.0

Total revenue 7,314.8 6,939.9 21,963.9 20,611.0

Cost of sales 5,136.1 4,865.1 15,410.6 14,065.6

Selling, general and administrative expenses 1,877.0 1,693.5 5,544.1 4,927.2

Operating income 301.7 381.3 1,009.2 1,618.2

Interest expense, net 30.4 32.7 80.5 97.3

Other expense, net

0.2 0.2 0.2 0.3

Income before income taxes 271.1 348.4 928.5 1,520.6

Provision for income taxes 59.1 81.5 217.1 357.4

Net income $ 212.0 $ 266.9 $ 711.4 $ 1,163.2

Gross profit margin

29.7 % 29.9 % 29.8 % 31.7 %

Selling, general and administrative expense rate

25.7 % 24.4 % 25.2 % 23.9 %

Operating income margin 4.1 % 5.5 % 4.6 % 7.9 %

Interest expense as a percentage of total revenue

0.4 % 0.5 % 0.4 % 0.5 %

Income before income taxes as percentage of total revenue 3.7 % 5.0 % 4.2 % 7.4 %

Effective tax rate

21.8 % 23.4 % 23.4 % 23.5 %

Net income margin 2.9 % 3.8 % 3.2 % 5.6 %

13 Weeks Ended 39 Weeks Ended

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Net sales $ 7,309.1 $ 6,936.6 5.4 % $ 21,948.7 $ 20,602.0 6.5 %

Comparable store net sales change 3.9 % 6.5 % 5.2 % 5.3 %

The increase in net sales in the 13 weeks ended July 29, 2023 was a result of the comparable store net sales increases in the Dollar Tree and Family Dollar segments and net sales of $233.1 million at non-comparable stores.

Enterprise comparable store net sales increased 6.9% in the 13 weeks ended July 29, 2023, as a result of a 7.1% increase in customer traffic, partially offset by a 0.2% decrease in average ticket.

The increase in net sales in the 13 weeks ended October 28, 2023 was a result of the comparable store net sales increases in the Dollar Tree and Family Dollar segments and net sales of $245.8 million at non-comparable stores.

Enterprise comparable store net sales increased 3.9% in the 13 weeks ended October 28, 2023, as a result of a 4.7% increase in customer traffic, partially offset by a 0.8% decrease in average ticket.

Comparable store net sales increased 5.4% in the Dollar Tree segment and increased 2.0% in the Family Dollar segment.

The increase in net sales in the 26 weeks ended July 29, 2023 was a result of the comparable store net sales increases in the Dollar Tree and Family Dollar segments and net sales of $495.0 million at non-comparable stores.

Enterprise comparable store net sales increased 5.9% in the 26 weeks ended July 29, 2023, as a result of a 6.1% increase in customer traffic, partially offset by a 0.2% decrease in average ticket.

Comparable store net sales increased 6.2% in the Family Dollar segment and increased 5.6% in the Dollar Tree segment.

The increase in net sales in the 39 weeks ended October 28, 2023 was a result of the comparable store net sales increases in the Dollar Tree and Family Dollar segments and net sales of $790.9 million at non-comparable stores.

Enterprise comparable store net sales increased 5.2% in the 39 weeks ended October 28, 2023, as a result of a 5.7% increase in customer traffic, partially offset by a 0.4% decrease in average ticket.

Comparable store net sales increased 5.6% in the Dollar Tree segment and increased 4.8% in the Family Dollar segment.

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Gross profit $ 2,173.0 $ 2,071.5 4.9 % $ 6,538.1 $ 6,536.4 — %

Gross profit margin 29.7 % 29.9 % (0.2) % 29.8 % 31.7 % (1.9) %

The decrease in gross profit margin in the 13 weeks ended July 29, 2023 was a result of the net of the following:

• Merchandise cost, which includes freight, increased 145 basis points resulting from lower initial mark-on due to the prior year benefiting from the $1.25 rollout whereas the current year reflects product value re-investments at Dollar Tree and cost increases as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Shrink costs increased 60 basis points in the current year resulting from unfavorable physical inventory results.

• Distribution costs increased 40 basis points due to a higher amount of costs capitalized in the prior year quarter resulting from increasing inventory levels in the prior year quarter and higher distribution center payroll costs in the current year quarter, primarily on the Dollar Tree segment.

• Occupancy costs decreased 25 basis points due to leverage from the comparable store net sales increase.

The decrease in gross profit margin in the 26 weeks ended July 29, 2023 was a result of the net of the following:

• Merchandise cost, which includes freight, increased 215 basis points resulting from lower initial mark-on due to the prior year benefiting from the $1.25 rollout whereas the current year reflects product value re-investments at Dollar Tree and cost increases as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Shrink costs increased 60 basis points in the current year resulting from unfavorable physical inventory results.

• Distribution costs increased 50 basis points due to a higher amount of costs capitalized in the prior year resulting from increasing inventory levels on both the Dollar Tree and Family Dollar segments in the prior year and higher distribution center payroll costs in the current year on the Dollar Tree segment.

• Markdown costs decreased 10 basis points due to the prior year including higher clearance markdowns resulting from a transition to a higher value assortment at the $1.25 price point on the Dollar Tree segment and shipping delays of seasonal merchandise and slow moving inventory on the Family Dollar segment, partially offset by higher seasonal markdowns on the Dollar Tree segment in the current year.

• Occupancy costs decreased 25 basis points due to leverage from the comparable store net sales increase.

The decrease in gross profit margin during the 13 weeks ended October 28, 2023 was a result of the net of the following:

• Shrink costs increased approximately 65 basis points primarily due to unfavorable physical inventory results.

• Distribution costs increased approximately 45 basis points primarily due to a higher amount of costs capitalized during the prior year quarter resulting from increasing inventory levels in both the Dollar Tree and Family Dollar segments during that period;

as well as higher distribution center payroll costs recognized during the current year quarter, primarily in the Dollar Tree segment.

• Markdown costs increased approximately 15 basis points primarily due to a voluntary retail-level product recall in the Family Dollar segment.

• Merchandise cost, which includes freight, decreased approximately 105 basis points primarily due to lower freight costs, partially offset by higher sales of lower margin consumable merchandise, and cost increases due to inflation, primarily in the Dollar Tree segment.

The decrease in gross profit margin during the 39 weeks ended October 28, 2023 was a result of the net of the following:

• Merchandise cost, which includes freight, increased approximately 105 basis points primarily due to re-investment in value-product assortments during the current year after transitioning to the $1.25 price point during the prior year at Dollar Tree, and cost increases due to inflation;

as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Shrink costs increased approximately 60 basis points primarily due to unfavorable physical inventory results.

• Distribution costs increased approximately 45 basis points primarily due to a higher amount of costs capitalized during the prior year resulting from increasing inventory levels in both the Dollar Tree and Family Dollar segments during that period, and higher distribution center payroll costs recognized during the current year in the Dollar Tree segment.

• Occupancy costs decreased approximately 20 basis points primarily due to leverage from the comparable store net sales increase.

We expect continued pressure on gross profit margin due to unfavorable shrink results in the near term.

Selling, General and Administrative Expenses

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Selling, general and administrative

2 unchanged sentences

expense rate 25.7 % 24.4 % 1.3 % 25.2 % 23.9 % 1.3 %

The increase in the selling, general and administrative expense rate in the 13 weeks ended July 29, 2023 was the result of the net of the following:

• Payroll expenses increased 65 basis points primarily due to wage investments and minimum wage increases in store payroll, and higher incentive compensation expense, partially offset by lower stock compensation expense and leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased 45 basis points primarily due to unfavorable development of general liability insurance claims, increases in professional fees, and higher information technology system costs.

• Store facility costs increased 25 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Depreciation and amortization expense decreased 5 basis points primarily due to leverage from the comparable store net sales increase, partially offset by capital expenditures related to store renovations and improvements.

The increase in the selling, general and administrative expense rate in the 26 weeks ended July 29, 2023 was the result of the net of the following:

• Payroll expenses increased 60 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by lower stock compensation expenses and leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased 60 basis points primarily due to increases in professional fees and legal costs, partially offset by higher costs in the prior year in connection with long-lived asset impairments at the Family Dollar West Memphis, Arkansas distribution center.

The increase in the selling, general and administrative expense rate in the 13 weeks ended October 28, 2023 was the result of the following:

• Payroll expenses increased approximately 70 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased approximately 30 basis points primarily due to higher information technology system costs and higher travel and related costs.

• Depreciation and amortization expense increased approximately 25 basis points primarily due to capital expenditures related to store renovations and improvements, partially offset by leverage from the comparable store net sales increase.

• Store facility costs increased approximately 5 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

The increase in the selling, general and administrative expense rate in the 39 weeks ended October 28, 2023 was the result of the following:

• Payroll expenses increased approximately 65 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by lower stock compensation expenses and leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased approximately 45 basis points primarily due to increases in professional fees, legal costs, and higher information technology system costs, partially offset by higher costs in the prior year in connection with long-lived asset impairments at DC 202.

The increase in legal costs was primarily due to a $30.0 million accrual for DC 202-related legal matters, partially offset by legal fees in the prior year related to the reconstitution of the Board of Directors.

• Store facility costs increased approximately 15 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Depreciation and amortization expense increased approximately 5 basis points primarily due to capital expenditures related to store renovations and improvements, partially offset by leverage from the comparable store net sales increase.

Operating Income

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Operating income $ 301.7 $ 381.3 (20.9) % $ 1,009.2 $ 1,618.2 (37.6) %

Operating income margin 4.1 % 5.5 % (1.4) % 4.6 % 7.9 % (3.3) %

Operating income margin decreased to 3.9% for the 13 weeks ended July 29, 2023 compared to 7.5% for the same period last year, resulting from the decrease in gross profit margin and the increase in the selling, general and administrative expense rate, as described above.

Operating income margin decreased to 4.8% for the 26 weeks ended July 29, 2023 compared to 9.0% for the same period last year, resulting from the decrease in gross profit margin and the increase in the selling, general and administrative expense rate, as described above.

Operating income margin decreased to 4.1% for the 13 weeks ended October 28, 2023 compared to 5.5% for the same period last year, resulting from the decrease in gross profit margin and the increase in the selling, general and administrative expense rate, as described above.

Operating income margin decreased to 4.6% for the 39 weeks ended October 28, 2023 compared to 7.9% for the same period last year, resulting from the decrease in gross profit margin and the increase in the selling, general and administrative expense rate, as described above.

Interest Expense, Net

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Interest expense, net $ 30.4 $ 32.7 (7.0) % $ 80.5 $ 97.3 (17.3) %

Interest expense, net decreased $6.4 million in the 13 weeks ended July 29, 2023 compared to the same period last year, resulting from higher interest income on investments.

Interest expense, net decreased $14.5 million in the 26 weeks ended July 29, 2023 compared to the same period last year, resulting from higher interest income on investments.

Interest expense, net decreased $2.3 million in the 13 weeks ended October 28, 2023 compared to the same period last year, resulting from higher interest income on investments.

Interest expense, net decreased $16.8 million in the 39 weeks ended October 28, 2023 compared to the same period last year, resulting from higher interest income on investments.

Provision for Income Taxes

13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Provision for income taxes $ 59.1 $ 81.5 (27.5) % $ 217.1 $ 357.4 (39.3) %

Effective tax rate 21.8 % 23.4 % (1.6) % 23.4 % 23.5 % (0.1) %

The effective tax rate was 24.0% for the 13 weeks ended July 29, 2023 compared to 24.2% for the comparable prior year period, resulting from higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year, offset partially by higher non-deductible expenses.

The effective tax rate was 24.0% for the 26 weeks ended July 29, 2023 compared to 23.5% for the comparable prior year period, resulting from lower stock-based compensation deductions and higher non-deductible expenses, offset partially by higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year.

The effective tax rate was 21.8% for the 13 weeks ended October 28, 2023 compared to 23.4% for the comparable prior year period, resulting from higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year and lower net state taxes, offset partially by higher non-deductible expenses.

The effective tax rate was 23.4% for the 39 weeks ended October 28, 2023 compared to 23.5% for the comparable prior year period, resulting from higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year, offset partially by lower stock-based compensation deductions and higher non-deductible expenses.

Segment Information

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13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Net sales $ 4,003.8 $ 3,756.1 6.6 % $ 11,808.9 $ 11,109.0 6.3 %

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Operating income margin 12.1 % 13.3 % (1.2) % 12.0 % 16.3 % (4.3) %

Net sales for the Dollar Tree segment increased $302.3 million, or 8.5%, for the 13 weeks ended July 29, 2023 compared to the same period last year.

The increase was due to an increase in comparable store net sales of 7.8% and $78.4 million of non-comparable store sales.

Net sales for the Dollar Tree segment increased $247.7 million, or 6.6%, during the 13 weeks ended October 28, 2023 compared to the same period last year.

The increase was primarily due to an increase in comparable store net sales of 5.4% and $97.4 million of non-comparable store sales.

Customer traffic increased 7.0% and average ticket decreased 1.5%.

Net sales for the Dollar Tree segment increased $452.2 million, or 6.1%, for the 26 weeks ended July 29, 2023 compared to the same period last year.

The increase was due to an increase in comparable store net sales of 5.6% and $177.8 million of non-comparable store sales.

Net sales for the Dollar Tree segment increased $699.9 million, or 6.3%, during the 39 weeks ended October 28, 2023 compared to the same period last year.

The increase was primarily due to an increase in comparable store net sales of 5.6% and $287.9 million of non-comparable store sales.

Customer traffic increased 7.5% and average ticket decreased 1.8%.

Gross profit margin for the Dollar Tree segment decreased to 33.4% for the 13 weeks ended July 29, 2023 compared to 37.4% for the same period last year as a result of the net of the following:

• Merchandise cost, which includes freight, increased 275 basis points due to the prior year benefiting from the $1.25 rollout whereas the current year reflects lower initial mark-on resulting from product value re-investments and cost increases as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Distribution costs increased 75 basis points due to a higher amount of costs capitalized in the prior year quarter resulting from increasing inventory levels in the prior year quarter and higher distribution center payroll costs in the current year quarter.

• Shrink costs increased 75 basis points in the current year resulting from unfavorable physical inventory results.

• Occupancy costs decreased 35 basis points due to leverage from the comparable store net sales increase.

Gross profit margin for the Dollar Tree segment decreased to 34.4% for the 26 weeks ended July 29, 2023 compared to 39.0% for the same period last year as a result of the net of the following:

• Merchandise cost, which includes freight, increased 350 basis points due to the prior year benefiting from the $1.25 rollout whereas the current year reflects lower initial mark-on resulting from product value re-investments and cost increases as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Distribution costs increased 80 basis points due to a higher amount of costs capitalized in the prior year resulting from increasing inventory levels in the prior year and higher distribution center payroll costs in the current year.

• Shrink costs increased 65 basis points in the current year resulting from unfavorable physical inventory results.

• Markdown costs decreased 10 basis points resulting from higher clearance markdowns in the prior year due to a transition to a higher value assortment at the $1.25 price point.

• Occupancy costs decreased 20 basis points due to leverage from the comparable store net sales increase.

Operating income margin for the Dollar Tree segment decreased to 10.3% for the 13 weeks ended July 29, 2023 from 15.4% for the same period last year as a result of the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 23.1% in the 13 weeks ended July 29, 2023 compared to 22.0% for the same period last year as a result of the net of the following:

• Payroll expenses increased 60 basis points primarily due to wage investments and minimum wage increases in store payroll, and higher incentive compensation expense, partially offset by leverage from the comparable store net sales increase.

• Store facility costs increased 40 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased 20 basis points primarily due to unfavorable development of general liability insurance claims.

Operating income margin for the Dollar Tree segment decreased to 12.0% for the 26 weeks ended July 29, 2023 from 17.9% for the same period last year as a result of the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 22.4% in the 26 weeks ended July 29, 2023 compared to 21.1% for the same period last year as a result of the following:

• Payroll expenses increased 70 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

• Store facility costs increased 45 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased 10 basis points primarily due to unfavorable development of general liability insurance claims.

Gross profit margin for the Dollar Tree segment decreased to 34.8% during the 13 weeks ended October 28, 2023 compared to 35.4% during the same period last year as a result of the net of the following:

• Distribution costs increased approximately 70 basis points primarily due to a higher amount of costs capitalized during the prior year quarter resulting from increasing inventory levels during that period and higher distribution center payroll costs recognized during the current year quarter.

• Shrink costs increased approximately 60 basis points primarily due to unfavorable physical inventory results.

• Occupancy costs decreased approximately 15 basis points primarily due to leverage from the comparable store net sales increase.

• Merchandise cost, which includes freight, decreased approximately 55 basis points primarily due to lower freight costs, partially offset by cost increases due to inflation and higher sales of lower margin consumable merchandise.

Gross profit margin for the Dollar Tree segment decreased to 34.5% during the 39 weeks ended October 28, 2023 compared to 37.8% during the same period last year as a result of the net of the following:

• Merchandise cost, which includes freight, increased approximately 215 basis points primarily due to re-investment in value-product assortments during the current year after transitioning to the $1.25 price point during the prior year and cost increases due to inflation;

as well as higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Distribution costs increased approximately 75 basis points primarily due to a higher amount of costs capitalized during the prior year resulting from increasing inventory levels during that period, and higher distribution center payroll costs recognized during the current year.

• Shrink costs increased approximately 65 basis points primarily due to unfavorable physical inventory results.

• Markdowns decreased approximately 5 basis points primarily due to higher clearance markdowns during the prior year in connection with the transition to a higher value assortment at the $1.25 price point.

• Occupancy costs decreased approximately 20 basis points primarily due to leverage from the comparable store net sales increase.

Operating income margin for the Dollar Tree segment decreased to 12.1% during the 13 weeks ended October 28, 2023 from 13.3% during the same period last year as a result of the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 22.8% during the 13 weeks ended October 28, 2023 compared to 22.1% during the same period last year as a result of the following:

• Payroll expenses increased approximately 60 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

Operating income margin for the Dollar Tree segment decreased to 12.0% during the 39 weeks ended October 28, 2023 from 16.3% during the same period last year as a result of the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 22.5% during the 39 weeks ended October 28, 2023 compared to 21.5% during the same period last year as a result of the following:

• Payroll expenses increased approximately 65 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

• Store facility costs increased approximately 30 basis points primarily due to higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased approximately 5 basis points primarily due to unfavorable development of general liability insurance claims.

• Depreciation and amortization expense was unchanged as a percentage of total revenue, as leverage from the comparable store net sales increase offset capital expenditures related to store renovations and improvements.

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13 Weeks Ended 39 Weeks Ended

(dollars in millions) July 29, 2023 July 30, 2022 Percentage Change July 29, 2023 July 30, 2022 Percentage Change

(dollars in millions) October 28, 2023 October 29, 2022 Percentage Change October 28, 2023 October 29, 2022 Percentage Change

Net sales $ 3,305.3 $ 3,180.5 3.9 % $ 10,139.8 $ 9,493.0 6.8 %

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Gross profit margin 23.6 % 23.4 % 0.2 % 24.3 % 24.6 % (0.3) %

Operating income $ 11.8 $ 55.0 (78.5) % $ 20.6 $ 144.5 (85.7) %

Operating income margin 0.3 % 1.7 % (1.4) % 0.3 % 2.3 % (2.0) %

Net sales for the Family Dollar segment increased $252.5 million, or 7.9%, for the 13 weeks ended July 29, 2023 compared to the same period last year.

The increase was due to a comparable store net sales increase of 5.8% and $154.7 million of non-comparable store sales.

For the 13 weeks ended July 29, 2023, customer traffic increased 3.4% and average ticket increased 2.3%.

Net sales for the Family Dollar segment increased $522.0 million, or 8.3%, for the 26 weeks ended July 29, 2023 compared to the same period last year.

The increase was due to a comparable store net sales increase of 6.2% and $317.2 million of non-comparable store sales.

For the 26 weeks ended July 29, 2023, customer traffic increased 3.9% and average ticket increased 2.3%.

Gross profit margin for the Family Dollar segment decreased to 24.4% for the 13 weeks ended July 29, 2023 compared to 24.7% for the same period last year.

The decrease is due to the net of the following:

• Shrink costs increased 45 basis points in the current year resulting from unfavorable physical inventory results.

• Merchandise cost, which includes freight, decreased 5 basis points resulting from lower freight costs, partially offset by lower initial mark-on and higher sales of lower margin consumable merchandise.

• Occupancy costs decreased 15 basis points primarily due to leverage from the comparable store net sales increase.

Gross profit margin for the Family Dollar segment decreased to 24.6% for the 26 weeks ended July 29, 2023 compared to 25.3% for the same period last year.

Operating income (loss)

$ (66.3) $ (18.4) 260.3 % $ (45.7) $ 126.1 (136.2) %

Operating margin

(2.0) % (0.6) % (1.4) % (0.5) % 1.3 % (1.8) %

Net sales for the Family Dollar segment increased $124.8 million, or 3.9%, during the 13 weeks ended October 28, 2023 compared to the same period last year.

The increase was primarily due to a comparable store net sales increase of 2.0% and $148.5 million of non-comparable store sales.

For the 13 weeks ended October 28, 2023, customer traffic increased 1.4% and average ticket increased 0.7%.

Net sales for the Family Dollar segment increased $646.8 million, or 6.8%, during the 39 weeks ended October 28, 2023 compared to the same period last year.

The increase was primarily due to a comparable store net sales increase of 4.8% and $503.0 million of non-comparable store sales.

For the 39 weeks ended October 28, 2023, customer traffic increased 3.0% and average ticket increased 1.7%.

We continue to expect pressure on comparable store net sales growth and weakness in sales of discretionary products in the near term.

Gross profit margin for the Family Dollar segment increased to 23.6% during the 13 weeks ended October 28, 2023 compared to 23.4% during the same period last year.

The increase is due to the net of the following:

• Merchandise cost, which includes freight, decreased approximately 140 basis points primarily due to lower freight costs, partially offset by higher sales of lower margin consumable merchandise.

• Shrink costs increased approximately 70 basis points primarily due to unfavorable physical inventory results.

• Markdowns increased approximately 35 basis points primarily due to a voluntary retail-level product recall during the current quarter.

• Distribution costs increased approximately 15 basis points primarily due to a higher amount of costs capitalized in the prior year resulting from increasing inventory levels during that period.

Gross profit margin for the Family Dollar segment decreased to 24.3% during the 39 weeks ended October 28, 2023 compared to 24.6% during the same period last year.

The decrease is due to the net of the following:

• Shrink costs increased 55 basis points in the current year resulting from unfavorable physical inventory results.

• Merchandise cost, which includes freight, increased 40 basis points resulting from lower initial mark-on and higher sales of lower margin consumable merchandise, partially offset by lower freight costs.

• Distribution costs increased 10 basis points due to a higher amount of costs capitalized in the prior year resulting from increasing inventory levels during the prior year.

• Markdown costs decreased 15 basis points primarily due to higher clearance markdowns in the prior year as a result of shipping delays of seasonal merchandise and slow moving inventory items, and lower promotional markdowns in the current year.

• Occupancy costs decreased 30 basis points primarily due to leverage from the comparable store net sales increase.

Operating income margin for the Family Dollar segment decreased to 0.3% for the 13 weeks ended July 29, 2023 from 1.7% for the same period last year resulting from the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 24.1% in the 13 weeks ended July 29, 2023 compared to 23.0% for the same period last year as a result of the net of the following:

• Payroll expenses increased 65 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

• Store facility costs increased 40 basis points primarily due to an increase in repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased 10 basis points primarily due to increases in professional fees and advertising costs.

• Depreciation and amortization expense decreased 10 basis points primarily due to leverage from the comparable store net sales increase, partially offset by capital expenditures related to store renovations and improvements.

Operating income margin for the Family Dollar segment decreased to 0.3% for the 26 weeks ended July 29, 2023 from 2.3% for the same period last year resulting from the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 24.4% in the 26 weeks ended July 29, 2023 compared to 23.0% for the same period last year as a result of the net of the following:

• Other selling, general and administrative expenses increased 50 basis points primarily due to increases in legal costs, professional fees and advertising costs, partially offset by higher costs in the prior year in connection with long-lived asset impairments at the West Memphis, Arkansas distribution center.

• Shrink costs increased approximately 55 basis points primarily due to unfavorable physical inventory results.

• Distribution costs increased approximately 10 basis points primarily due to a higher amount of costs capitalized in the prior year resulting from increasing inventory levels during that period.

• Occupancy costs decreased approximately 15 basis points primarily due to leverage from the comparable store net sales increase.

• Merchandise cost, which includes freight, decreased approximately 20 basis points primarily due to lower freight costs, partially offset by cost increases and higher sales of lower margin consumable merchandise.

Operating margin for the Family Dollar segment decreased to negative 2.0% during the 13 weeks ended October 28, 2023 from negative 0.6% during the same period last year resulting from an increase in the selling, general and administrative expense rate, partially offset by the gross profit margin increase noted above.

The selling, general and administrative expense rate increased to 25.6% during the 13 weeks ended October 28, 2023 compared to 24.0% during the same period last year as a result of the following:

• Payroll expenses increased approximately 80 basis points primarily due to wage investments and minimum wage increases in store payroll.

• Store facility costs increased approximately 40 basis points primarily due to an increase in repairs and maintenance expenses as we focus on store conditions for our customers and associates, higher utility costs, and costs associated with the removal of product from certain Family Dollar stores in connection with a voluntary retail-level product recall in the current quarter.

• Depreciation and amortization expense increased approximately 40 basis points primarily due to capital expenditures related to store renovations and improvements.

• Other selling, general and administrative expenses were primarily unchanged as a percentage of total revenue as an increase in advertising costs was offset by a decrease in legal costs.

Operating margin for the Family Dollar segment decreased to negative 0.5% during the 39 weeks ended October 28, 2023 from 1.3% during the same period last year resulting from the gross profit margin decrease noted above and an increase in the selling, general and administrative expense rate.

The selling, general and administrative expense rate increased to 24.8% during the 39 weeks ended October 28, 2023 compared to 23.3% during the same period last year as a result of the following:

• Payroll expenses increased approximately 75 basis points primarily due to wage investments and minimum wage increases in store payroll, partially offset by leverage from the comparable store net sales increase.

• Other selling, general and administrative expenses increased approximately 35 basis points primarily due to increases in legal costs and advertising costs, partially offset by higher costs in the prior year in connection with long-lived asset impairments at DC 202.

The increase in legal costs was primarily due to a $30.0 million accrual for DC 202-related legal matters recorded in the first quarter of the current year.

• Store facility costs increased 25 basis points primarily due to an increase in repairs and maintenance expenses as we focus on store conditions for our customers and associates, and higher utility costs, partially offset by leverage from the comparable store net sales increase and higher costs in the prior year associated with a product recall.

• Store facility costs increased approximately 30 basis points primarily due to an increase in repairs and maintenance expenses as we focus on store conditions for our customers and associates, partially offset by leverage from the comparable store net sales increase and higher costs in the prior year associated with a product recall related to issues at DC 202.

• Depreciation and amortization expense increased approximately 10 basis points primarily due to capital expenditures related to store renovations and improvements, partially offset by leverage from the comparable store net sales increase.

Liquidity and Capital Resources

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Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October.

Historically, we have satisfied our seasonal working capital requirements for existing and new stores and have funded our distribution network programs and other capital projects from internally generated funds and borrowings under our credit facilities.

The following table compares cash flow-related information for the 26 weeks ended July 29, 2023 and July 30, 2022:

We have satisfied our seasonal working capital requirements for existing and new stores and have funded our distribution network programs and other capital projects from internally generated funds and borrowings under our credit facilities and commercial paper program.

The following table compares cash flow-related information for the 39 weeks ended October 28, 2023 and October 29, 2022:

39 Weeks Ended

(in millions) July 29, 2023 July 30, 2022

(in millions) October 28, 2023 October 29, 2022

Net cash provided by (used in):

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Financing activities (301.9) (337.8)

Net cash provided by operating activities increased $403.2 million primarily due to lower inventory levels, partially offset by lower current year earnings, net of non-cash items, lower accounts payable, and lower accrued liability balances.

Net cash provided by operating activities increased $695.5 million primarily due to lower inventory levels, partially offset by lower current year earnings, net of non-cash items.

Net cash used in investing activities increased $396.4 million due to higher capital expenditures.

Net cash used in financing activities decreased $11.1 million due to lower taxes paid on exercises/vesting of stock-based compensation.

At July 29, 2023, our long-term borrowings were $3.45 billion and we had $1.5 billion available under our Revolving Credit Facility, less amounts outstanding for standby letters of credit totaling $4.3 million.

We also have $425.0 million in trade letters of credit with various financial institutions, under which $232.8 million was committed to letters of credit issued for routine purchases of imported merchandise as of July 29, 2023.

Additionally, in July 2023, we established a commercial paper program to issue unsecured commercial paper notes with maturities up to 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1.5 billion.

Net cash used in financing activities decreased $35.9 million due to lower payments for stock repurchases, offset partially by $229.1 million of net short-term borrowings in the current year compared to $350.0 million of net short-term borrowings in the prior year.

At October 28, 2023, our long-term borrowings were $3.45 billion and we had $1.5 billion available under our Revolving Credit Facility, less amounts outstanding for standby letters of credit totaling $4.1 million.

We also have $425.0 million in trade letters of credit with various financial institutions, under which $132.6 million was committed to letters of credit issued for routine purchases of imported merchandise as of October 28, 2023.

Additionally, in July 2023, we established a commercial paper program to issue

unsecured commercial paper notes with maturities up to 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1.5 billion.

Our Revolving Credit Facility will serve as a liquidity backstop for the repayment of notes outstanding under the program.

As of July 29, 2023, no notes have been issued under the program.

As of October 28, 2023, $230.0 million of notes were outstanding under the program.

For additional details regarding our commercial paper program, please see Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We repurchased 1,728,713 and 1,754,496 shares of common stock on the open market during the 26 weeks ended July 29, 2023 and July 30, 2022, respectively, for $250.0 million and $250.0 million, respectively.

At July 29, 2023, we had $1.6 billion remaining under our Board repurchase authorization.

We repurchased 3,905,599 and 4,613,696 shares of common stock on the open market during the 39 weeks ended October 28, 2023 and October 29, 2022, respectively, for $504.3 million and $647.5 million, respectively.

At October 28, 2023, we had $1.35 billion remaining under our Board repurchase authorization.

Critical Accounting Estimates and Assumptions

Our condensed consolidated financial statements have been prepared in accordance with U.S.

To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities.

Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable.

It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

Actual results could be significantly different from these estimates.

Refer to Note 1 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023, for a summary of our significant accounting policies and our assessment of recently issued accounting standards.

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 2. Management’s Discussion and Analysis