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Item 8. Financial Statements and Supplementary Data

2024-03-20 compared with 2023-03-10 · 457 added, 315 removed, 530 unchanged (59% of the section changed)

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Income Statements

Consolidated Statements of Comprehensive Income

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

Note 1 - Description of Business and Basis of Presentation

Note 2 - Summary of Significant Accounting Policies

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Note 5 - Commitments and Contingencies

Note 5 - Long-Term Debt

Note 6 - Short-Term Borrowings and Long-Term Debt

Note 7 - Leases

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Note 9 - Shareholders’ Equity

Note 9 - Employee Benefit Plans

Note 10 - Stock-Based Compensation Plans

Note 11 - Net Income (Loss) Per Share

Note 12 - Employee Benefit Plan

Note 13 - Segments and Disaggregated Revenue

Note 14 - Supply Chain Finance Program

Note 15 - Goodwill and Nonamortizing Intangible Assets

Note 16 - Store Portfolio Optimization Review

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc.

and subsidiaries (the Company) as of January 28, 2023 and January 29, 2022, the related consolidated income statements, statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 28, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 28, 2023 and January 29, 2022, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 28, 2023, in conformity with U.S.

and subsidiaries (the Company) as of February 3, 2024 and January 28, 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended February 3, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the years in the three‑year period ended February 3, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 10, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 20, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimated self‑insurance liability

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of estimated self-insurance liability

As discussed in Note 2 to the consolidated financial statements, the Company considers actuarial assumptions to estimate its self-insurance liability.

As of January 28, 2023, the Company recorded an estimated liability of $318 million.

As of February 3, 2024, the Company recorded an estimated liability of $363.5 million.

We identified the evaluation of the estimated self-insurance liability as a critical audit matter.

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• evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data and trends.

Trade name intangible asset and goodwill impairment

As discussed in Notes 2 and 15 to the consolidated financial statements, the Company performs trade name intangible asset and goodwill impairment testing on an annual basis and when events and changes in circumstances indicate possible impairment of these assets.

To estimate the fair value of the Family Dollar trade name intangible asset (Family Dollar trade name), the Company uses the relief-from-royalty method.

To estimate the fair value of the Family Dollar reporting unit for its impairment testing of goodwill (Family Dollar goodwill), the Company uses a combination of a market multiple method and a discounted cash flow method.

The impairment charges for the year ended February 3, 2024 were $950.0 million for the Family Dollar trade name and $1,069.0 million for the Family Dollar goodwill.

We identified the evaluation of the Company’s impairment testing of the Family Dollar trade name and goodwill as a critical audit matter.

Subjective auditor judgment and specialized skills and knowledge were required to evaluate the key assumptions used to estimate the fair value of the Family Dollar trade name, specifically the revenue growth rates, discount rate, and company-specific royalty rate, as well as the fair value of the Family Dollar reporting unit, specifically the revenue growth rates and discount rate.

Minor changes to these assumptions could have had a significant effect on the fair values determined and the resulting assessment of the carrying value of the Family Dollar trade name and goodwill.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the goodwill and intangible asset impairment process, including controls related to the determination and development of the identified assumptions.

We assessed the Company’s ability to forecast by comparing the Company’s historical forecasts to actual results.

We evaluated the revenue growth rates by comparing them to historical results and performing sensitivity analyses.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the revenue growth rates by comparing them to publicly available market data for comparable companies

• assessing the discount rates by comparing them to a range of discount rates developed using publicly available market data for comparable companies

• assessing the company-specific royalty rate by comparing it to publicly available market data for comparable licensing agreements.

We have served as the Company’s auditor since 1987.

Norfolk, Virginia

Virginia Beach, Virginia

March 20, 2024

DOLLAR TREE, INC.

CONSOLIDATED INCOME STATEMENTS

January 28, January 29, January 30,

(in millions, except per share data) 2023 2022 2021

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data) February 3, 2024 January 28, 2023 January 29, 2022

Net sales $ 30,581.6 $ 28,318.2 $ 26,309.8

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Selling, general and administrative expenses,

Operating income 2,236.3 1,811.4 1,887.9

excluding Goodwill impairment 9,144.6 6,699.1 5,925.9

Goodwill impairment 1,069.0 — —

Selling, general and administrative expenses 10,213.6 6,699.1 5,925.9

Operating income (loss) ( 881.8 ) 2,236.3 1,811.4

Interest expense, net 106.8 125.3 178.9

Other expense, net 0.1 0.4 0.3

Income before income taxes 2,110.6 1,632.2 1,739.8

Income (loss) before income taxes ( 988.7 ) 2,110.6 1,632.2

Provision for income taxes 9.7 495.2 304.3

Net income $ 1,615.4 $ 1,327.9 $ 1,341.9

Basic net income per share $ 7.24 $ 5.83 $ 5.68

Diluted net income per share $ 7.21 $ 5.80 $ 5.65

Net income (loss) $ ( 998.4 ) $ 1,615.4 $ 1,327.9

Basic net income (loss) per share of common stock $ ( 4.55 ) $ 7.24 $ 5.83

Diluted net income (loss) per share of common stock $ ( 4.55 ) $ 7.21 $ 5.80

Weighted average common shares outstanding:

Basic 219.5 223.2 227.9

Diluted 219.5 224.1 229.0

See accompanying Notes to Consolidated Financial Statements

DOLLAR TREE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

January 28, January 29, January 30,

(in millions) 2023 2022 2021

Net income $ 1,615.4 $ 1,327.9 $ 1,341.9

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Net income (loss) $ ( 998.4 ) $ 1,615.4 $ 1,327.9

Foreign currency translation adjustments ( 2.4 ) ( 6.0 ) —

Total comprehensive income $ 1,609.4 $ 1,327.9 $ 1,346.5

Total comprehensive income (loss) $ ( 1,000.8 ) $ 1,609.4 $ 1,327.9

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data) January 28, 2023 January 29, 2022

(in millions, except share and per share data) February 3, 2024 January 28, 2023

Current assets:

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Total current assets 6,132.7 6,367.1

Restricted cash 72.3 68.5

Property, plant and equipment, net of accumulated depreciation of $ 6,631.4 and $ 6,025.4 ,

6,144.1 4,972.2

Restricted cash 68.5 53.4

Operating lease right-of-use assets 6,488.3 6,458.0

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600,000,000 shares authorized, 217,907,206 and

225,100,198 shares issued and outstanding at January 28, 2023 and January 29, 2022,

221,222,984 shares issued and outstanding at February 3, 2024 and January 28, 2023,

Additional paid-in capital 229.9 667.5

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

YEARS ENDED JANUARY 28, 2023, JANUARY 29, 2022, AND JANUARY 30, 2021

YEARS ENDED FEBRUARY 3, 2024, JANUARY 28, 2023, AND JANUARY 29, 2022

(in millions) Common

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Earnings Shareholders’

Balance at February 1, 2020 236.7 $ 2.4 $ 2,454.4 $ ( 39.8 ) $ 3,837.8 $ 6,254.8

Balance at January 30, 2021

233.4 $ 2.3 $ 2,138.5 $ ( 35.2 ) $ 5,179.7 $ 7,285.3

Net income — — — — 1,327.9 1,327.9

Total other comprehensive income — — — 4.6 — 4.6

Issuance of stock under Employee Stock

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Balance at January 29, 2022

225.1 2.2 1,243.9 ( 35.2 ) 6,507.6 7,718.5

Net income — — — — 1,615.4 1,615.4

Total other comprehensive loss — — — ( 6.0 ) — ( 6.0 )

Issuance of stock under Employee Stock

Purchase Plan 0.1 — 9.3 — — 9.3

Exercise of stock options 0.1 — 7.4 — — 7.4

Stock-based compensation, net 0.6 — 61.8 — — 61.8

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Balance at January 28, 2023

Net income — — — — 1,615.4 1,615.4

221.2 2.2 667.5 ( 41.2 ) 8,123.0 8,751.5

Net income (loss) — — — — ( 998.4 ) ( 998.4 )

Total other comprehensive loss — — — ( 2.4 ) — ( 2.4 )

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Purchase Plan — — 9.9 — — 9.9

Exercise of stock options — — 0.1 — — 0.1

Stock-based compensation, net 0.6 — 56.7 — — 56.7

Repurchase of stock ( 3.9 ) — ( 500.0 ) — — ( 500.0 )

Balance at January 28, 2023 221.2 $ 2.2 $ 667.5 $ ( 41.2 ) $ 8,123.0 $ 8,751.5

Excise tax on repurchase of stock — — ( 4.3 ) — — ( 4.3 )

Balance at February 3, 2024

217.9 $ 2.2 $ 229.9 $ ( 43.6 ) $ 7,124.6 $ 7,313.1

See accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

January 28, January 29, January 30,

(in millions) 2023 2022 2021

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Cash flows from operating activities:

Net income $ 1,615.4 $ 1,327.9 $ 1,341.9

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 998.4 ) $ 1,615.4 $ 1,327.9

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Goodwill impairment 1,069.0 — —

Depreciation and amortization 841.0 767.9 716.0

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Stock-based compensation expense 96.7 110.4 79.9

Amortization of debt discount and debt-issuance costs 4.6 8.9 4.0

Other non-cash adjustments to net income 59.1 11.2 19.0

Impairments, excluding goodwill 1,461.5 40.0 4.4

Other non-cash adjustments to net income (loss) 20.7 23.7 15.7

Loss on debt extinguishment — — 43.8

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Proceeds from governmental grant — — 2.9

Proceeds from (payments for) fixed asset disposition ( 5.0 ) ( 1.6 ) 9.1

Payments for fixed asset disposition ( 6.3 ) ( 5.0 ) ( 1.6 )

Net cash used in investing activities ( 2,107.6 ) ( 1,253.8 ) ( 1,019.9 )

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Repayments of revolving credit facility — ( 555.0 ) —

Proceeds from commercial paper notes 1,067.9 — —

Repayments of commercial paper notes ( 1,067.9 ) — —

Proceeds from stock issued pursuant to stock-based compensation plans 10.0 9.3 17.8

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

Note 1 - Description of Business and Basis of Presentation

Description of Business

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We are a leading operator of discount retail stores in the United States and Canada.

Below are those accounting policies that we consider to be significant.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the financial statements of Dollar Tree, Inc., and its wholly-owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Segment Information

At January 28, 2023, we operate more than 16,300 retail discount stores in 48 states and five Canadian provinces.

Our operations are conducted in two reporting business segments:

Dollar Tree and Family Dollar.

We define our segments as those operations whose results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.

The Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $ 1.25 .

The Dollar Tree segment includes our operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 15 distribution centers in the United States and two distribution centers in Canada.

The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores.

The Family Dollar segment consists of our operations under the “Family Dollar” brand and ten distribution centers.

Refer to Note 11 for additional information regarding our operating segments.

Foreign Currency

The functional currencies of certain of our international subsidiaries are the local currencies of the countries in which the subsidiaries are located.

Foreign currency denominated assets and liabilities are translated into U.S.

dollars using the exchange rates in effect at the consolidated balance sheet date.

Results of operations and cash flows are translated using the average exchange rates throughout the period.

The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss.

Gains and losses from foreign currency transactions, which are included in “Other expense, net” have not been significant.

Basis of Presentation

The accompanying consolidated financial statements include the financial statements of Dollar Tree, Inc., and its wholly-owned subsidiaries and were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

All intercompany balances and transactions have been eliminated in consolidation.

All amounts stated herein are in U.S.

Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31.

References to “2022” or “fiscal 2022,” “2021” or “fiscal 2021,” and “2020” or “fiscal 2020” relate to the 52-week fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

“2023” or “fiscal 2023” refers to the 53-week fiscal year ending February 3, 2024.

References to “fiscal 2023” relate to the 53-week fiscal year ended February 3, 2024.

References to “fiscal 2025,” “fiscal 2024,” “fiscal 2022,” and “fiscal 2021” relate to the 52-week fiscal years ended January 31, 2026, February 1, 2025, January 28, 2023, and January 29, 2022, respectively.

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents at January 28, 2023 and January 29, 2022 includes $ 317.2 million and $ 680.6 million, respectively, of investments primarily in money market securities which are valued at cost, which approximates fair value.

We consider all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents.

Cash and cash equivalents at February 3, 2024 and January 28, 2023 includes $ 304.2 million and $ 317.2 million, respectively, of investments primarily in money market securities which are valued at cost, which approximates fair value.

In accordance with Accounting Standards Codification (“ASC”) Topic 305 “Cash and Cash Equivalents,” we consider all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents.

The majority of payments due from financial institutions for the settlement of debit card and credit card transactions process within three business days, and therefore are classified as cash and cash equivalents.

Merchandise Inventories

Merchandise inventories at our distribution centers are stated at the lower of cost or net realizable value, determined on a weighted-average cost basis.

In accordance with ASC Topic 330 “Inventory,” merchandise inventories at our distribution centers are stated at the lower of cost or net realizable value, determined on a weighted-average cost basis.

Cost is assigned to store inventories using the retail inventory method on a weighted-average basis.

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Costs directly associated with warehousing and distribution are capitalized as merchandise inventories.

Total warehousing and distribution costs capitalized into inventory amounted to $ 298.6 million and $ 203.2 million at January 28, 2023 and January 29, 2022, respectively.

Total warehousing and distribution costs capitalized into inventory amounted to $ 299.8 million and $ 298.6 million at February 3, 2024 and January 28, 2023, respectively.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets as follows:

In accordance with ASC Topic 360 “Property, Plant and Equipment,” property, plant and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets as follows:

Buildings 39 to 40 years

Furniture, fixtures and equipment 3 to 15 years

Leasehold improvements are amortized over the shorter of the estimated useful lives of the respective assets or the related lease terms.

Amortization is included in “Selling, general and administrative expenses” in the accompanying consolidated income statements.

Costs incurred related to software developed for internal use are capitalized and amortized, generally over three years .

Building improvements 20 years

Furniture, fixtures and equipment, software 3 to 15 years

Leasehold improvements Shorter of remaining lease term or related asset life

Depreciation is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations, with the exception of depreciation related to our merchandising and distribution-related assets which are included in “Cost of sales” in the accompanying Consolidated Statements of Operations.

Capitalized Interest

We capitalize interest on borrowed funds during the construction of certain property and equipment.

We capitalized $ 3.8 million, $ 1.1 million and $ 3.2 million of interest costs in the years ended January 28, 2023, January 29, 2022 and January 30, 2021, respectively.

We capitalize interest on borrowed funds during the construction of certain property and equipment based on our weighted average borrowing rates in place while the projects are in progress.

We capitalized $ 5.9 million, $ 3.8 million and $ 1.1 million of interest costs in the years ended February 3, 2024, January 28, 2023 and January 29, 2022, respectively.

Insurance Reserves and Restricted Cash

We utilize a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks, including workers’ compensation, general liability and automobile liability.

Liabilities associated with the risks that are retained by us are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors and other actuarial assumptions.

Dollar Tree Insurance, Inc., a South Carolina-based wholly-owned captive insurance subsidiary of ours, charges the operating subsidiary companies premiums to insure the retained workers’ compensation, general liability and automobile liability exposures.

Liabilities associated with the risks that are retained by us are not discounted and are estimated, in part, by considering claims experience, exposure and severity factors, historical loss development factors, and other actuarial assumptions.

Our self-insurance liabilities associated with workers’ compensation, general liability and auto are recorded within “Other current liabilities” and “Other liabilities” in the accompanying Consolidated Balance Sheets and amounted to $ 363.5 million and $ 318.2 million at February 3, 2024 and January 28, 2023, respectively.

Pursuant to South Carolina insurance regulations, Dollar Tree Insurance, Inc.

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We also maintain certain cash balances related to our insurance programs which are held in trust and restricted as to withdrawal or use.

These amounts are reflected in “Restricted cash” in the accompanying consolidated balance sheets.

These amounts are reflected in “Restricted cash” in the accompanying Consolidated Balance Sheets and amounted to $ 72.3 million and $ 68.5 million at February 3, 2024 and January 28, 2023, respectively.

Lease Accounting

Our lease portfolio primarily consists of leases for our retail store locations and we also lease vehicles and trailers, as well as distribution center space and equipment.

We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset.

Our lease portfolio primarily consists of leases for our retail store locations, vehicles and trailers, as well as distribution center space and equipment.

In accordance with ASC Topic 842 “Leases,” we determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.

We recognize expense for these leases on a straight-line basis over the lease term.

For leases with an initial term in excess of 12 months, operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future lease payments over the committed lease term at the lease commencement date.

For leases with an initial term in excess of 12 months, we determine the initial classification and measurement of the right-of-use (“ROU”) assets and lease liabilities at the lease commencement date and thereafter if modified.

ROU assets represent our right to control the underlying assets under lease, over the contractual term.

ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of future lease payments.

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Operating lease expense for lease payments not yet paid is recognized on a straight-line basis over the lease term.

The operating lease right-of-use asset is reduced by lease incentives, which has the effect of

lowering the operating lease expense.

Operating lease right-of-use assets are periodically reviewed for impairment losses.

We use the long-lived assets impairment guidance in ASC Subtopic 360-10, “Property, Plant, and Equipment - Overall,” to determine whether a right-of-use asset is impaired, and if so, the amount of the impairment loss to recognize.

The operating lease ROU asset is reduced by lease incentives, which has the effect of lowering the operating lease expense.

Operating lease ROU assets are periodically reviewed for impairment losses.

We use the long-lived assets impairment guidance in ASC Subtopic 360-10 “Property, Plant, and Equipment - Overall,” to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

We have real estate leases that typically include payments related to non-lease components, such as common area maintenance, as well as payments for real estate taxes and insurance which are not considered components of the lease.

These payments are generally variable and based on actual costs incurred by the lessor.

These costs are expensed as incurred as variable lease costs and excluded for the purpose of calculating the right-of-use asset and lease liability.

These costs are expensed as incurred as variable lease costs and excluded for the purpose of calculating the ROU asset and lease liability.

A smaller number of real estate leases contain fixed payments for common area maintenance, real estate taxes and insurance.

These fixed payments are considered part of the lease payment and included in the right-of-use asset and lease liability.

These fixed payments are considered part of the lease payment and included in the ROU asset and lease liability.

In addition, certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

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Our lease agreements do not contain any material residual value guarantees or material restrictive financial covenants.

Purchased leases with terms which were either favorable or unfavorable as compared to prevailing market rates at the date of acquisition are amortized over the remaining lease terms, including, in some cases, an assumed renewal.

Amortization expense, net of $ 29.9 million, $ 38.5 million and $ 48.1 million was recognized in “Selling, general and administrative expenses” in 2022, 2021 and 2020, respectively, related to these lease rights.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

We review our long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In accordance with ASC Topic 360, we review our long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset.

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Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In fiscal 2022, 2021 and 2020, we recorded charges of $ 39.9 million, $ 4.4 million and $ 4.6 million, respectively, to write down certain assets, including $ 20.1 million, $ 3.9 million and $ 3.8 million in fiscal 2022, 2021 and 2020, respectively, to write down Operating lease right-of-use assets.

Included in 2022 is $ 14.0 million for West Memphis distribution center asset impairments.

These charges are recorded as a component of “ Selling, general and administrative expenses ” in the accompanying consolidated income statements.

In fiscal 2023, fiscal 2022 and fiscal 2021, we recorded charges of $ 511.5 million, $ 39.9 million and $ 4.4 million, respectively, to write down certain assets, including $ 358.7 million, $ 20.1 million and $ 3.9 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, to write down operating lease ROU assets.

The fiscal 2023 impairment charges include $ 152.2 million of store asset impairment charges and $ 351.7 million of operating lease ROU asset impairment charges recorded in connection with the store portfolio optimization review as discussed further in Note 16 .

Fiscal 2022 includes $ 14.0 million for West Memphis distribution center asset impairments.

These charges are recorded as a component of “ Selling, general and administrative expenses ” in the accompanying Consolidated Statements of Operations.

Goodwill and Nonamortizing Intangible Assets

Goodwill and nonamortizing intangible assets, including the Family Dollar trade name, are not amortized, but rather tested for impairment at least annually.

In addition, goodwill and nonamortizing intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

In addition, goodwill and nonamortizing intangible assets are tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

For both goodwill and nonamortizing intangible assets, we have the option to initially perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.

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If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.

Our annual impairment evaluation of the Family Dollar trade name did not result in impairment charges during fiscal 2022, 2021 or 2020.

Subsequent to the evaluation of the Family Dollar trade name for impairment, we evaluate goodwill for impairment.

Subsequent to the evaluation of the Family Dollar trade name for impairment, we evaluate the Family Dollar goodwill for impairment.

When a quantitative test is performed, we estimate the fair value of the reporting unit using a combination of a market multiple method and a discounted cash flow method.

We recognize goodwill impairment for the amount by which the reporting unit’s carrying amount exceeds its estimated fair value, not to exceed the total carrying amount of goodwill allocated to the reporting unit.

The annual goodwill impairment evaluations in 2022, 2021 and 2020 did not result in impairment.

We have recorded cumulative goodwill impairment charges totaling $ 3,040.0 million, all of which relate to the Family Dollar reporting unit.

During the fourth quarter of fiscal 2023, we recorded a non-cash goodwill impairment charge of $ 1,069.0 million and a non-cash trade name impairment charge of $ 950.0 million, both related to the Family Dollar reporting unit.

Refer to Note 15 for additional information on the results of the trade name and goodwill impairment tests.

Revenue Recognition

We recognize sales revenue, net of estimated returns and sales tax, at the time the customer tenders payment for and takes control of the merchandise.

Taxes Collected

We report taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (i.e., sales tax) on a net (excluded from revenue) basis.

We recognize revenue in accordance with ASC Topic 606 "Revenue from Contracts with Customers." Net sales consist of the net sales of merchandise in our stores.

Revenue transactions associated with the sale of merchandise comprise a single performance obligation, which consists of the sale of products to customers.

Revenue is recognized when we satisfy our performance obligations by transferring control of promised products to our customers, which occurs at a point in time.

Sales taxes imposed on our revenues from product sales are presented on a net basis in the accompanying Consolidated Statements of Operations.

Gift cards that we issue to customers are recorded as contract liabilities until they are redeemed, at which point revenue is recognized.

We record reductions to revenue for discounts and estimated customer returns.

Historically, our customer returns have not been material.

Cost of Sales

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We have agreements with vendors setting forth the specific conditions for each allowance or payment.

We either recognize the allowance as a reduction of current costs or defer the payment over the period the related merchandise is sold.

In accordance with ASC Subtopic 705-20 “Accounting for Consideration Received from a Vendor,” we either recognize the allowance as a reduction of current costs or defer the payment over the period the related merchandise is sold.

If the payment is a reimbursement for costs incurred, it is offset against those related costs;

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Pre-Opening Costs

We expense pre-opening costs for new, expanded, relocated and re-bannered stores and for distribution centers, as incurred.

We capitalize certain internal labor costs related to new, expanded, renovated, relocated and re-bannered stores after the project becomes probable and only when the costs are directly attributable to the preparation of the store-related assets for their intended use.

We expense all other pre-opening costs related to our stores and distribution centers, as incurred.

Advertising Costs

We expense advertising costs as they are incurred and they are included in “Selling, general and administrative expenses” within the accompanying consolidated income statements.

Advertising costs, net of co-op recoveries from vendors, were $ 99.5 million, $ 93.9 million and $ 80.8 million in fiscal 2022, 2021 and 2020, respectively.

Income taxes are accounted for under the asset and liability method.

We expense advertising costs as they are incurred and they are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations.

Advertising costs, net of cooperative advertising recoveries from vendors, were $ 109.6 million, $ 99.5 million and $ 93.9 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively.

In accordance with ASC Topic 740 “Income Taxes,” income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

We recognize a financial statement benefit for a tax position if we determine that it is more likely than not that the position will be sustained upon examination.

Deferred tax assets are reduced by valuation allowances when necessary.

Assessing whether deferred tax assets are realizable requires significant judgment.

We consider all available positive and negative evidence, including historical operating performance and expectations of future operating performance.

The ultimate realization of deferred tax assets is often dependent upon future taxable income and therefore can be uncertain.

To the extent we believe it is more likely than not that all or some portion of the asset will not be realized, valuation allowances are established against our deferred tax assets, which increase income tax expense in the period when such a determination is made.

Income taxes include the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position.

Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions or obtaining new information on particular tax positions may cause a change to the effective tax rate.

We have made the policy election to record any liability associated with Global Intangible Low Tax Income ("GILTI") in the period in which it is incurred.

We include interest and penalties in the provision for income tax expense and income taxes payable.

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Stock-Based Compensation

We recognize expense for all share-based payments to employees and non-employee directors based on their fair values.

Total stock-based compensation expense for 2022, 2021 and 2020 was $ 110.4 million, $ 79.9 million and $ 83.9 million, respectively.

We recognize expense related to the fair value of restricted stock units (RSUs) and stock options over the requisite service period on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs is determined using the closing price of our common stock on the date of grant.

The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model.

We account for forfeitures when they occur.

Net Income Per Share

Basic net income per share has been computed by dividing net income by the weighted average number of shares outstanding.

Diluted net income per share reflects the potential dilution that could occur assuming the inclusion of dilutive potential shares and has been computed by dividing net income by the weighted average number of shares and dilutive potential shares outstanding.

Dilutive potential shares include all outstanding stock options and unvested RSUs after applying the treasury stock method.

We account for stock-based compensation in accordance with ASC Topic 718 “Compensation - Stock Compensation,” which requires all stock-based compensation awards granted to be measured at fair value and recognized as an expense in the financial statements over the service period.

In addition, this guidance requires that excess tax benefits related to stock-based compensation awards be reflected as operating cash flows.

We use the Black-Scholes option pricing model to estimate the fair market value of stock option awards and grant date fair value for restricted stock units.

We use the "simplified method" to estimate the expected life of options, as permitted by accounting guidance.

The "simplified method" calculates the expected life of a stock option equal to the time from grant to the midpoint between the vesting date and contractual term, taking into account all vesting tranches.

The risk-free interest rate is based on the yield for the U.S.

Treasury bill with a maturity equal to the expected life of the stock option.

Expected volatility is based on our historical average.

Compensation expense is recognized net of forfeitures on a straight-line basis over the total vesting period, which is the implied requisite service period, or a shorter period based on the retirement eligibility of the grantee.

Compensation expense for performance-based awards is recorded over the implied requisite service period when achievement of the performance target is deemed probable.

We issue new shares upon exercise of stock options and upon vesting of restricted stock units.

Total stock-based compensation expense for fiscal 2023, fiscal 2022 and fiscal 2021 was $ 96.7 million, $ 110.4 million and $ 79.9 million, respectively.

Refer to Note 10 for further details on stock-based compensation.

Net Income (Loss) Per Share

In accordance with ASC Topic 260 “Earnings Per Share,” basic net income (loss) per share has been computed by dividing net income (loss) by the weighted average number of shares outstanding.

Diluted net income (loss) per share reflects the potential dilution that could occur assuming the inclusion of dilutive potential shares and has been computed by dividing net income (loss) by the weighted average number of shares and dilutive potential shares outstanding.

Dilutive potential shares include all outstanding stock options and unvested restricted stock units after applying the treasury stock method.

Foreign Currency

The functional currencies of certain of our international subsidiaries are the local currencies of the countries in which the subsidiaries are located.

In accordance with ASC Topic 830 “Foreign Currency Matters,” foreign currency denominated assets and liabilities are translated into U.S.

dollars using the exchange rates in effect at the consolidated balance sheet date.

Results of operations and cash flows are translated using the average exchange rates throughout the period.

Capital accounts are translated at historical foreign currency exchange rates.

The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of shareholders’ equity in accumulated other comprehensive loss.

Adjustments that arise from foreign currency exchange rate changes on transactions, primarily driven by intercompany transactions, denominated in a currency other than the functional currency are included in “Other expense, net” in the accompanying Consolidated Statements of Operations.

These adjustments have not historically been significant.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50)" ("ASU 2022-04") which requires entities to disclose the key terms of supplier finance programs used in connection with the purchase of goods and services along with information about their obligations under these programs, including a rollforward of those obligations.

We adopted ASU 2022-04 for fiscal 2023 on a retrospective basis, except for the amendments relating to the rollforward requirement, which are required to be adopted for fiscal 2024 on a prospective basis.

The adoption did not have a material impact on our consolidated financial statements.

Refer to Note 14 for a discussion of our supply chain finance program.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) which requires disclosure of incremental segment information on an annual and interim basis, including enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

ASU 2023-07 also requires entities to disclose the title and position of the CODM and explain how the CODM uses the reported measures of segment profit or loss in assessing performance and allocating resources.

Further, it requires that all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 be provided in interim periods.

ASU 2023-07 is effective on a retrospective basis for annual periods beginning in fiscal 2024 and for interim periods beginning in fiscal 2025.

We are currently evaluating the impact of this standard to our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”) which requires entities to disclose specific categories and greater disaggregation of information in the effective tax rate reconciliation, as well as disaggregated disclosure of income taxes paid, pretax income and income tax expense by jurisdiction.

The standard also removes certain disclosure requirements that currently exist under Topic 740.

ASU 2023-09 is effective on a prospective basis for annual periods beginning in fiscal 2025, with retrospective application permitted.

We are currently evaluating the impact of this standard to our consolidated financial statements.

Note 3 - Supplemental Balance Sheet Information

Property, Plant and Equipment, Net

Property, plant and equipment, net, as of January 28, 2023 and January 29, 2022 consists of the following:

January 28, January 29,

(in millions) 2023 2022

Property, plant and equipment, net, as of February 3, 2024 and January 28, 2023 consists of the following:

(in millions) February 3, 2024 January 28, 2023

Land $ 247.9 $ 242.6

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Total property, plant and equipment, net $ 6,144.1 $ 4,972.2

Depreciation expense was $ 737.4 million, $ 672.0 million, and $ 631.1 million for the years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

Depreciation expense was $ 819.1 million, $ 737.4 million, and $ 672.0 million for the years ended February 3, 2024, January 28, 2023, and January 29, 2022, respectively.

Other Current Liabilities

Other current liabilities as of January 28, 2023 and January 29, 2022 consist of the following:

January 28, January 29,

(in millions) 2023 2022

Other current liabilities as of February 3, 2024 and January 28, 2023 consist of the following:

(in millions) February 3, 2024 January 28, 2023

Taxes (other than income taxes) $ 292.3 $ 253.7

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The provision for income taxes consists of the following:

January 28, January 29, January 30,

(in millions) 2023 2022 2021

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Current taxes:

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Provision for income taxes $ 9.7 $ 495.2 $ 304.3

On August 16, 2022, the Inflation Reduction Act of 2022 (“2022 Tax Act”) was enacted into law.

A key provision of the 2022 Tax Act is a 15% minimum tax on adjusted financial statement income.

We do not expect any impact to our effective tax rate as a result of the new 15% minimum tax under the 2022 Tax Act.

A reconciliation of the statutory U.S.

federal income tax rate and the effective tax rate follows:

January 28, 2023 January 29, 2022 January 30, 2021

February 3, 2024 January 28, 2023 January 29, 2022

Statutory U.S.

federal income tax rate 21.0 % 21.0 % 21.0 %

Goodwill impairment ( 22.7 ) — —

State and local income taxes, net of federal income tax benefit ( 1.0 ) 3.7 3.7

Non-deductible executive compensation 0.7 0.4 0.4

State tax reserve release ( 0.3 ) ( 0.4 ) ( 0.5 )

Incremental tax expense (benefit) of exercises/vesting of equity-based

compensation ( 0.6 ) ( 0.5 ) 0.2

Non-deductible expenses ( 1.0 ) 0.1 0.1

Work Opportunity Tax Credit 3.0 ( 1.4 ) ( 1.8 )

Deferred tax rate change — 0.7 ( 3.8 )

Change in valuation allowance ( 0.3 ) — —

Other, net ( 0.3 ) ( 0.6 ) ( 0.6 )

Effective tax rate ( 1.0 ) % 23.5 % 18.6 %

Foreign Taxes

United States income taxes have not been provided on accumulated but undistributed earnings of our foreign subsidiaries as we intend to permanently reinvest earnings.

We do not consider the tax on the mandatory deemed repatriation of undistributed foreign earnings and profits to be material.

Goodwill Impairment

In the fourth quarter of fiscal 2023, we recorded a goodwill impairment charge of $ 1,069.0 million related to Family Dollar goodwill, as further discussed in Note 15 .

The purchase of Family Dollar was a stock acquisition, and carryover basis applied for tax purposes.

The goodwill impairment charge is not deductible for federal or state tax purposes and therefore there is no tax benefit related to the impairment.

Reinvestment of Unremitted Earnings

Substantially all of our current year foreign cash earnings in excess of working capital and cash needed for strategic investments are not intended to be indefinitely reinvested offshore.

Therefore, the tax effects of repatriation for applicable state taxes and foreign withholding taxes of such cash earnings have been provided for in the accompanying Consolidated Statements of Operations.

We have the intent and ability to reinvest substantially all of the non-cash unremitted earnings of our non-U.S.

subsidiaries indefinitely.

Accordingly, no provision for state taxes or foreign withholding taxes was recorded on these unremitted earnings in the accompanying Consolidated Statements of Operations.

Deferred Income Taxes

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Significant components of our net deferred tax assets (liabilities) follow:

(in millions) January 28,

(in millions) February 3,

2024 January 28,

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Accrued compensation expense 39.3 33.9

Inventory — 24.4

State tax election 13.1 14.3

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Deferred tax liabilities:

Operating lease right-of-use assets ( 1,630.9 ) ( 1,578.4 )

Operating lease ROU assets ( 1,639.7 ) ( 1,630.9 )

Other intangibles ( 529.1 ) ( 760.4 )

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Deferred income taxes, net $ ( 832.1 ) $ ( 1,090.7 )

At January 28, 2023, we had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling $ 69.3 million.

Some of these carryforwards will expire, if not utilized, beginning in 2023 through 2042 .

At February 3, 2024, we had certain state tax credit carryforwards, net operating loss carryforwards and capital loss carryforwards totaling $ 72.8 million.

Some of these carryforwards will expire, if not utilized, beginning in fiscal 2024 through fiscal 2043 .

A valuation allowance of $ 17.3 million, net of federal tax benefits, has been provided principally for certain state credit carryforwards and net operating loss carryforwards.

Since January 29, 2022, the valuation allowance has been decreased to reflect state credits and net operating losses expected to be utilized over the carryforward period.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred taxes will not be realized.

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This program accelerates the examination of key transactions with the goal of resolving any issues before the tax return is filed.

Our federal tax returns have been examined and all issues have been settled through the fiscal 2019 tax year, as well as the fiscal 2021 tax year.

In fiscal 2020, we participated in the CAP under the IRS’s bridge year program and as a result, the IRS will not be completing an audit on the 2020 tax return at this time.

Our federal tax returns have been examined and all issues have been settled through the fiscal 2021 tax year.

In fiscal 2020, we participated in the CAP under the IRS’s bridge year program and as a result, the IRS will not be completing an audit on the fiscal 2020 tax return at this time.

Several states completed their examinations during fiscal 2023.

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The statute of limitations is still open prior to fiscal 2020 for some states.

The balance for unrecognized tax benefits at January 28, 2023 was $ 17.4 million.

The total amount of unrecognized tax benefits at January 28, 2023 that, if recognized, would affect the effective tax rate was $ 13.8 million (net of the federal tax benefit).

The balance for unrecognized tax benefits at February 3, 2024 was $ 22.0 million.

The total amount of unrecognized tax benefits at February 3, 2024 that, if recognized, would affect the effective tax rate was $ 17.4 million (net of the federal tax benefit).

The following is a reconciliation of our total gross unrecognized tax benefits:

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

(in millions) February 3, 2024 January 28, 2023

Beginning Balance $ 17.4 $ 20.9

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Ending balance $ 22.0 $ 17.4

We believe it is reasonably possible that $ 2.5 million to $ 3.5 million of the reserve for uncertain tax positions may be reduced during the next 12 months principally as a result of the effective settlement of outstanding issues.

It is also possible that state tax reserves will be reduced for audit settlements and statute expirations within the next 12 months.

It is possible that tax reserves will be reduced for audit settlements and statute expirations within the next 12 months.

At this point it is not possible to estimate a range associated with the resolution of these audits.

We do not expect any change to have a material impact to our consolidated financial statements.

As of January 28, 2023, we have recorded a liability for potential interest and penalties of $ 1.5 million.

As of February 3, 2024, we have recorded a liability for potential interest and penalties of $ 2.5 million.

Note 5 – Commitments and Contingencies

Purchase Obligations

At January 28, 2023, we have commitments totaling $ 300.5 million related to ocean shipping contracts and commitments of $ 243.5 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.

We also have commitments totaling $ 105.4 million related to software agreements that we entered into subsequent to January 28, 2023.

At February 3, 2024, we have commitments totaling $ 190.9 million through fiscal 2025 related to ocean shipping contracts and commitments of $ 364.2 million through fiscal 2034 related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.

Letters of Credit

We have $ 425.0 million in trade letters of credit with various financial institutions, under which $ 150.6 million was committed to these letters of credit issued for routine purchases of imported merchandise at January 28, 2023.

We have $ 425.0 million in trade letters of credit with various financial institutions, under which $ 133.2 million was committed to these letters of credit issued for routine purchases of imported merchandise at February 3, 2024.

We have issued various surety bonds that primarily serve as collateral for utility payments at our stores and self-insured insurance programs.

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Contingencies

We are defendants in legal proceedings including the class, collective, representative and large cases as well as individual claims in arbitration.

We are defendants in ordinary, routine litigation or proceedings incidental to our business, including employment-related matters;

infringement of intellectual property rights;

personal injury/wrongful death claims;

real estate matters;

environmental and safety issues;

and product safety matters.

Legal proceedings may also include class, collective, representative and large cases and arbitrations, including those described below.

We will vigorously defend ourselves in these matters.

We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition.

We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business, financial condition, or liquidity.

We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the quarter or year in which they are reserved or resolved.

We assess our legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated.

For matters that have settled, we reserve the estimated settlement amount.

Many, if not substantially all, of our legal proceedings are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment.

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Active Matters

On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related sale and distribution of adulterated product, as well as other processes and procedures that require remediation.

DC 202-related Matters

On February 11, 2022, the U.S.

Food and Drug Administration (“FDA”) issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related distribution of adulterated product, as well as other processes and procedures that required remediation.

In connection therewith, we initiated a retail-level product recall of FDA and U.S.

Department of Agriculture-regulated products stored and shipped from DC 202 from January 1, 2021 through February 18, 2022 (the

“Recall”), temporarily closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, ceased the direct shipment of FDA-regulated products from DC 202, and initiated corrective actions.

In June 2022, we stopped shipping to stores from DC 202 and have since disposed of all of the inventory that was in the facility.

On November 9, 2022 we received an FDA Warning Letter (“Warning Letter”) in connection with the DC 202 inspection.

The conditions and issues detailed in the Warning Letter are generally the same as those described in the Form 483 observations or were otherwise observed during the inspection.

The Warning Letter acknowledged certain remedial actions we have taken in response to the Form 483 observations, including conducting the recall and decommissioning the facility.

We continue to cooperate with the FDA.

Since February 22, 2022, Family Dollar has been named in 14 putative class action complaints primarily related to issues associated with DC 202 described above.

The lawsuits are proceeding in federal court in Tennessee using the federal court’s multi-district litigation process.

An amended consolidated complaint seeking class action status was filed October 17, 2022 alleging violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception and unjust enrichment related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions.

Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of, money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.

We have filed a motion to dismiss the amended consolidated complaint.

Department of Agriculture-regulated products stored and shipped from DC 202 from January 1, 2021 through February 18, 2022 (the “Recall”), temporarily closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, ceased the direct shipment of FDA-regulated products from DC 202, and initiated corrective actions.

In June 2022, we stopped shipping to stores from DC 202 and have since disposed of all of the subject inventory that was in the facility.

Beginning in February 2022, 14 putative class actions were filed against us primarily related to issues associated with DC 202 described above.

The lawsuits are proceeding in federal court in Tennessee using the federal court’s multi-district litigation process, sought class action status, and allege violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception and unjust enrichment related to the sale of products that were alleged to be contaminated by virtue of rodent infestation and other unsanitary conditions at DC 202.

Plaintiffs sought damages, attorney fees and costs, punitive damages and replacement or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.

As a result of a mediation held in April 2023, the parties reached a claims made settlement whereby one class member per household may receive a $ 25 Family Dollar gift certificate.

On October 27, 2023, the court granted preliminary approval of the settlement.

Notice of the settlement and how to submit a claim was given beginning November 10, 2023.

The period for filing a claim, opting out of the settlement or filing an objection to the settlement ended on January 9, 2024.

A hearing on final approval of the settlement is scheduled for April 5, 2024.

On March 1, 2022, a federal grand jury subpoena was issued to us by the Eastern District of Arkansas requesting the production of information, documents and records pertaining to pests, sanitation and compliance with law regarding certain of our procedures and products.

In connection with this matter, we have been investigating the condition of FDA-regulated product shipped from DC 202.

We are cooperating fully with the U.S.

Department of Justice investigation, including having produced documents and provided additional information.

As part of this cooperation, we may engage in discussions with the government in an effort to reach a negotiated resolution.

Due to the inherent uncertainties associated with this matter, no assurance can be given as to the timing or outcome of this matter, which could include penalties and company undertakings.

On April 28, 2022, the State of Arkansas filed a complaint in state court alleging violations of the Arkansas Deceptive Trade Practices Act, gross negligence and negligence, strict liability in tort, unjust enrichment and civil conspiracy related to the sale of products that may have been contaminated by virtue of rodent infestation and other unsanitary conditions.

In connection with this matter, we investigated the condition of FDA-regulated product shipped from DC 202 and related matters and cooperated fully with the U.S.

Department of Justice (“DOJ”) investigation, including producing documents and providing additional information.

As previously reported by the company on its Current Report on Form 8-K filed February 26, 2024, Family Dollar Stores, LLC (“Family Dollar”), a wholly-owned subsidiary of the company, has entered into a Plea Agreement (the “Plea Agreement”) in connection with the DOJ investigation.

Subject to the terms and conditions of the Plea Agreement, Family Dollar pled guilty to a one count misdemeanor violation of the Food, Drug and Cosmetics Act for causing FDA-regulated products to become adulterated while such articles were held in DC 202.

Under the Plea Agreement, Family Dollar agreed to pay $ 200,000 in fines and a forfeiture money judgment in the amount of $ 41,475,000 , which relates to the value of the adulterated FDA-regulated products that were held in DC 202.

The Plea Agreement was approved by the United States District Court for the Eastern District of Arkansas at a hearing on February 26, 2024, and resolves the federal criminal investigation of Family Dollar.

Subject to Family Dollar’s compliance with the terms and conditions of the Plea Agreement, the U.S.

Attorney for the Eastern District of Arkansas and the DOJ have agreed not to bring further criminal charges against Family Dollar for any acts or conduct arising out of the events covered by the Plea Agreement.

No criminal charges were brought against Dollar Tree in connection with this matter.

As part of the Plea Agreement, Dollar Tree and Family Dollar agreed to adopt a new or to modify their existing compliance program as it relates to the warehousing and distribution to stores of food, drugs, devices and cosmetics.

In addition, the company has agreed to make certain reports to the DOJ in connection with its compliance program during the three-year term.

On April 28, 2022, the Attorney General for the State of Arkansas filed a complaint in state court alleging violations of the Arkansas Deceptive Trade Practices Act, gross negligence and negligence, strict liability in tort, unjust enrichment and civil conspiracy related to the sale of products that may have been contaminated by virtue of rodent infestation and other unsanitary conditions at DC 202.

The State of Arkansas is seeking injunctive relief, restitution, disgorgement, damages, civil penalties, punitive damages and suspension or revocation of our authorization to do business in Arkansas.

Seven personal injury lawsuits are pending in state court in Illinois, New York, Massachusetts, Texas, and New Jersey against Dollar Tree, Family Dollar or both alleging that certain talc products that we sold caused cancer.

We filed a motion to dismiss the State's claims, and it is too early to determine a likely outcome in the matter.

As previously disclosed, we recorded a charge of $ 30.0 million in the first quarter of fiscal 2023 with respect to DC 202-related matters which included a proposed settlement of 14 putative consumer class actions and a potential resolution of the DOJ investigation.

As a result of Family Dollar entering into the Plea Agreement, we recorded an additional charge of $ 26.7 million in the fourth quarter of fiscal 2023 bringing the accrual to $ 56.7 million.

At the present time, we are unable to estimate the amount of additional incremental loss, if any, which may result when the remaining matters are finally resolved.

However, we do not believe the resolution of the State of Arkansas complaint or the final settlement of private civil litigation related to DC 202 will have a material adverse effect on our business, financial condition, or liquidity.

Talc Product Matters

Multiple personal injury lawsuits are pending in state court in Illinois, New York, Texas, and New Jersey against Dollar Tree, Family Dollar or both alleging that certain talc products that we sold caused cancer.

The plaintiffs seek compensatory, punitive and exemplary damages, damages for loss of consortium, and attorneys’ fees and costs.

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In addition, although we have indemnification rights against our vendors in several of these cases, it is uncertain whether the vendors will have the financial ability to fulfill their obligations to us.

Since August 2022, six personal injury cases have been filed in federal court in California, Missouri, North Carolina and Minnesota against Dollar Tree, Family Dollar, or both, on behalf of minors alleging that their mothers took acetaminophen while pregnant, that the acetaminophen interfered with fetal development such that plaintiffs were born with autism and/or ADHD, and that we knew or should have known of the danger, had a duty to warn and failed to include appropriate warnings on the product labels.

Acetaminophen Matters

Since August 2022, more than 50 personal injury cases have been filed in federal court against Dollar Tree, Family Dollar, or both, on behalf of minors alleging that their mothers took acetaminophen while pregnant, that the acetaminophen interfered with fetal development such that plaintiffs were born with autism and/or ADHD, and that we knew or should have known of the danger, had a duty to warn and failed to include appropriate warnings on the product labels.

The plaintiffs seek compensatory, punitive and/or exemplary damages, restitution and disgorgement, economic damages, and attorneys’ fees and costs.

These cases, along with other cases against many other defendants, have been consolidated in multi-district court litigation in the Southern District of New York.

Resolved Matters

All personal injury cases that were filed in state court in Pennsylvania against both Dollar Tree and Family Dollar alleging that both sold Zantac and generic ranitidine products containing N-Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen, have been dismissed.

Note 5 - Long-Term Debt

Long-term debt at January 28, 2023 and January 29, 2022 consists of the following:

January 28, 2023 January 29, 2022

(in millions) Principal Unamortized Debt Discount and Issuance Costs Principal Unamortized Debt Discount and Issuance Costs

$ 1.5 billion Revolving Credit Facility, interest

payable at 5.79 % at January 28, 2023

$ — $ 5.1 $ — $ 6.4

These cases, which originated in Alabama, California, Florida, Georgia, Louisiana, Minnesota, Missouri, North Carolina, Kentucky, Tennessee and Texas, along with other cases against many other defendants, were consolidated into multi-district court litigation in the Southern District of New York.

Recently, the court disqualified all of plaintiffs’ experts and, on that basis dismissed all the cases which had been filed at the time of that decision, including all cases currently filed against us.

Note 6 - Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at February 3, 2024 and January 28, 2023 consist of the following:

(in millions) February 3, 2024 January 28, 2023

Short-Term Borrowings:

Unsecured commercial paper notes $ — $ —

$ 1.5 billion Revolving Credit Facility

Total Short-Term Borrowings $ — $ —

Long-Term Debt:

4.00 % Senior Notes, due 2025

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2.65 % Senior Notes, due 2031

800.0 8.6 800.0 9.5

3.375 % Senior Notes, due 2051

400.0 5.0 400.0 5.0

Total $ 3,450.0 $ 28.4 $ 3,450.0 $ 33.0

Debt discount and issuance costs ( 23.7 ) ( 28.4 )

Total Long-Term Debt $ 3,426.3 $ 3,421.6

Current portion $ — $ —

Non-current portion of long-term debt $ 3,426.3 $ 3,421.6

Maturities of long-term debt are as follows (in millions):

(in millions)

Thereafter 1,200.0

$ — $ — $ 1,000.0 $ — $ — $ 2,450.0

Total $ 3,450.0

Commercial Paper Program

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.

We expect to use the net proceeds of note issuances for general corporate purposes.

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

The notes rank pari passu with all of our other unsecured and unsubordinated indebtedness.

We issued $ 1,070.5 million principal amount of notes during fiscal 2023 and incurred interest expense of $ 2.6 million related to these notes.

As of February 3, 2024, no notes were outstanding under the program.

Revolving Credit Facility

On December 8, 2021, we entered into a credit agreement (the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as agent, and the financial institutions from time to time party thereto, providing for a $ 1.5 billion revolving credit facility (the “Revolving Credit Facility”), of which up to $ 350.0 million is available for letters of credit.

At February 3, 2024 and January 28, 2023, we had letters of credit outstanding under the Revolving Credit Facility of $ 4.1 million and $ 4.4 million, respectively.

The Revolving Credit Facility matures on December 8, 2026, subject to extensions permitted under the Credit Agreement.

Loans under the Revolving Credit Facility bear interest at the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus 1.125 %, subject to adjustment based on (i) our public debt rating and (ii) our leverage ratio.

At January 28, 2023, the Revolving Credit Facility bore interest at 5.79 %.

At February 3, 2024, the Revolving Credit Facility bore interest at 6.55 %.

We pay certain commitment fees in connection with the Revolving Credit Facility.

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Fiscal 2018 Offering

On April 19, 2018, we completed the registered offering of $ 750.0 million aggregate principal amount of Senior Floating Rate Notes due 2020 (the “Floating Rate Notes”), $ 1.0 billion aggregate principal amount of 3.70 % Senior Notes due 2023 (the “2023 Notes”), $ 1.0 billion aggregate principal amount of 4.00 % Senior Notes due 2025 (the “2025 Notes”) and $ 1.25 billion aggregate principal amount of 4.20 % Senior Notes due 2028 (the “2028 Notes” and together with the 2023 Notes and the 2025 Notes, the “Fixed Rate Notes”;

and the Fixed Rate Notes together with the Floating Rate Notes, the “Notes”).

On April 19, 2018, we completed the registered offering of $ 1.0 billion aggregate principal amount of 3.70 % Senior Notes due 2023 (the “2023 Notes”), $ 1.0 billion aggregate principal amount of 4.00 % Senior Notes due 2025 (the “2025 Notes”) and $ 1.25 billion aggregate principal amount of 4.20 % Senior Notes due 2028 (the “2028 Notes” and together with the 2023 Notes and the 2025 Notes, the “Notes”).

The Notes were issued pursuant to an indenture, dated as of April 2, 2018 (the “Indenture”), between us and U.S.

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The Notes are unsecured, unsubordinated obligations of ours and rank equal in right of payment to all of our existing and future debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the Notes.

The Floating Rate Notes matured on April 17, 2020 and bore interest at a floating rate, reset quarterly, equal to LIBOR plus 70 basis points.

The 2023 Notes were scheduled to mature on May 15, 2023 and bore interest at the rate of 3.70 % annually.

We redeemed the 2023 Notes in the fourth quarter of 2021 as discussed in “Repayments of Long-Term Debt” below.

The 2025 Notes mature on May 15, 2025 and bear interest at the rate of 4.00 % annually.

The 2028 Notes mature on May 15, 2028 and bear interest at the rate of 4.20 % annually.

We are required to pay interest on the Fixed Rate Notes semiannually, in arrears, on May 15 and November 15 of each year to holders of record on the preceding May 1 and November 1, respectively.

We may redeem (or may have redeemed) the Fixed Rate Notes of each series in whole or in part, at our option, at any time and from time to time prior to (i) in the case of the 2023 Notes, April 15, 2023, (ii) in the case of the 2025 Notes, March 15, 2025 and (iii) in the case of the 2028 Notes, February 15, 2028 (the date with respect to each such series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the First Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

In addition, on or after the Applicable Par Call Date, we may redeem the Fixed Rate Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100 % of the principal amount thereof.

We are required to pay interest on the Notes semiannually, in arrears, on May 15 and November 15 of each year to holders of record on the preceding May 1 and November 1, respectively.

We may redeem the Notes of each series in whole or in part, at our option, at any time and from time to time prior to March 15, 2025 in the case of the 2025 Notes and February 15, 2028 in the case of the 2028 Notes (the date with respect to each such series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the First Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

In addition, on or after the Applicable Par Call Date, we may redeem the Notes of the applicable series, at any time in whole or from time to time in part, at a redemption price equal to 100 % of the principal amount thereof.

In the event of a Change of Control Triggering Event, as defined in the Indenture, with respect to any series, the holders of the Notes of such series may require us to purchase for cash all or a portion of their Notes of such series at a purchase price equal to 101 % of the principal amount of such Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

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The 2051 Notes mature on December 1, 2051 and bear interest at the rate of 3.375 % per annum.

We are required to pay interest on the New Notes semi-annually, in arrears, on June 1 and December 1 of each year to holders of record on the preceding May 15 and November 15, respectively.

We are required to pay interest on the New Notes semiannually, in arrears, on June 1 and December 1 of each year to holders of record on the preceding May 15 and November 15, respectively.

We may redeem the New Notes of each series in whole or in part at any time and from time to time prior to (i) in the case of the 2031 Notes, September 1, 2031, and (ii) in the case of the 2051 Notes, June 1, 2051 (the date with respect to each such series, the “Applicable Par Call Date”), in each case, at a “make-whole” price described in the Second Supplemental Indenture plus accrued and unpaid interest to, but excluding, the date of redemption.

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Repayments of Long-term Debt

In the first quarter of 2020, we repaid the remaining $ 250.0 million outstanding under our $ 750.0 million Floating Rate Notes.

In the fourth quarter of 2020, we repaid the $ 300.0 million 5.00 % Senior Notes that we assumed upon the acquisition of Family Dollar in 2015.

In the fourth quarter of 2021, we used the proceeds from the offering of the New Notes discussed above to redeem the $ 1.0 billion 2023 Notes.

We incurred a redemption premium of $ 43.8 million in connection with the early redemption of the 2023 Notes and

accelerated the expensing of $ 2.7 million of amortizable non-cash deferred financing and original issue discount costs, which are reflected in “Interest expense, net” within the accompanying consolidated income statements for the year ended January 29, 2022.

In the fourth quarter of fiscal 2021, we used the proceeds from the offering of the New Notes discussed above to redeem the $ 1.0 billion 2023 Notes.

We incurred a redemption premium of $ 43.8 million in connection with the early redemption of the 2023 Notes and accelerated the expensing of $ 2.7 million of amortizable non-cash deferred financing and original issue discount costs, which are reflected in “Interest expense, net” within the accompanying Consolidated Statements of Operations for the year ended January 29, 2022.

Debt Covenants

As of January 28, 2023, we were in compliance with our debt covenants.

As of February 3, 2024, we were in compliance with the debt covenants for both our short-term borrowings and long-term debt.

Note 7 - Leases

The lease cost for operating leases that was recognized in the accompanying consolidated income statements was as follows:

(in millions) January 28, 2023 January 29, 2022 January 30, 2021

Our lease portfolio primarily consists of leases for our retail store locations, vehicles and trailers, as well as distribution center space and equipment.

The lease cost for operating leases that was recognized in the accompanying Consolidated Statements of Operations was as follows:

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Operating lease cost $ 1,713.0 $ 1,652.8 $ 1,602.8

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*Excludes sublease income, which is immaterial

As of January 28, 2023, maturities of lease liabilities were as follows:

There are no residual value guarantees that exist, and there are no restrictions or covenants imposed by leases.

As of February 3, 2024, maturities of lease liabilities were as follows:

(in millions)

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Present value of lease liabilities $ 6,960.6

The future lease payments above exclude $ 502.3 million of legally binding minimum lease payments for leases signed but not yet commenced as of January 28, 2023.

The future lease payments above exclude $ 415.7 million of legally binding minimum lease payments for leases signed but not yet commenced as of February 3, 2024.

Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases is as follows:

January 28, 2023 January 29, 2022 January 30, 2021

February 3, 2024 January 28, 2023 January 29, 2022

Weighted-average remaining lease term (years) 5.7 5.7 5.9

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The following represents supplemental information pertaining to our operating lease arrangements:

(in millions) January 28, 2023 January 29, 2022 January 30, 2021

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 1,852.1 $ 1,559.7 $ 1,579.8

Distribution Center Lease and Related Bonds

In May 2017, we entered into a long-term property lease (“Missouri Lease”) which includes land and the construction of a 1.2 million square foot distribution center in Warrensburg, Missouri (“Distribution Center Project”).

The Distribution Center Project was completed in 2018 and our investment in the project of $ 88.4 million as of January 28, 2023 is reflected in “Property, plant and equipment, net.” The Missouri Lease commenced upon its execution in May 2017 and expires on December 1, 2032.

We have two options to extend the Missouri Lease term for up to a combined additional ten years .

Following the expiration of the lease, the property reverts back to us.

In addition to being a party to the Missouri Lease, we are also the owner of bonds which were issued in May 2017, are secured by the Missouri Lease and expire December 1, 2032 (“Missouri Bonds”).

The Missouri Bonds are debt issued by the lessor in the Missouri Lease.

Therefore, we hold the debt instrument pertaining to our Missouri Lease obligation.

Because a legal right of offset exists, we are accounting for the Missouri Bonds as a reduction of our Missouri Lease obligation in the accompanying consolidated balance sheets.

Note 8 - Fair Value Measurements

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Level 3 - Unobservable inputs in which there is little or no market data which require the reporting entity to develop its own assumptions.

As required, financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement.

Financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

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These measures of fair value, and related inputs, are considered a Level 3 approach under the fair value hierarchy.

Refer to Note 1 under the caption “Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” for information regarding the impairment charges recorded in fiscal 2022, 2021 and 2020.

Refer to Note 2 under the caption “Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” and Note 16 for further information regarding the impairment charges recorded in fiscal 2023, fiscal 2022 and fiscal 2021.

Our indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level 3 inputs.

Refer to Note 1 under the caption “Goodwill and Nonamortizing Intangible Assets” for further information regarding the process of determining the fair value of these assets.

Refer to Note 2 under the caption “Goodwill and Nonamortizing Intangible Assets” and Note 15 for further information regarding the process of determining the fair value of these assets and the impairment charges recorded in fiscal 2023, fiscal 2022 and fiscal 2021.

Fair Value of Financial Instruments

The carrying amounts of “Cash and cash equivalents,” “Restricted cash” and “Accounts payable” as reported in the accompanying Consolidated Balance Sheets approximate fair value due to their short-term maturities.

The carrying value of our Revolving Credit Facility approximates its fair value.

The carrying values of our Revolving Credit Facility and borrowings under our commercial paper program approximate their fair values.

The aggregate fair values and carrying values of our long-term borrowings were as follows:

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

(in millions) Fair Value Carrying Value Fair Value Carrying Value

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We are authorized to issue 10,000,000 shares of Preferred Stock, $ 0.01 par value per share.

No preferred shares are issued and outstanding at January 28, 2023 and January 29, 2022.

Net Income Per Share

The following table sets forth the calculations of basic and diluted net income per share:

January 28, January 29, January 30,

(in millions, except per share data) 2023 2022 2021

Basic net income per share:

Net income $ 1,615.4 $ 1,327.9 $ 1,341.9

Weighted average number of shares outstanding 223.2 227.9 236.4

Basic net income per share $ 7.24 $ 5.83 $ 5.68

Diluted net income per share:

Net income $ 1,615.4 $ 1,327.9 $ 1,341.9

Weighted average number of shares outstanding 223.2 227.9 236.4

Dilutive effect of stock options and restricted stock (as determined by

applying the treasury stock method) 0.9 1.1 0.9

Weighted average number of shares and dilutive potential shares

outstanding 224.1 229.0 237.3

Diluted net income per share $ 7.21 $ 5.80 $ 5.65

For the year ended January 28, 2023, stock options and other stock-based awards of 3.0 million shares were excluded from the calculation of diluted net income per share because their inclusion would be anti-dilutive.

For the years ended January 29, 2022 and January 30, 2021, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

No preferred shares are issued and outstanding at February 3, 2024 and January 28, 2023.

Share Repurchase Programs

We periodically repurchase shares of our common stock under share repurchase programs authorized by our Board of Directors.

Under the existing Board repurchase authorization, we may repurchase up to $ 2.5 billion of our common stock in open market or privately negotiated transactions with financial institutions.

The repurchase authorization does not have an expiration date.

We repurchased 3,905,599 , 4,613,696 and 9,156,898 shares of common stock on the open market in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, for $ 504.3 million, $ 647.5 million and $ 950.0 million, respectively.

At January 28, 2023, we had $ 1.85 billion remaining under our Board repurchase authorization.

Note 9 – Employee Benefit Plans

Dollar Tree Retirement Savings Plan

We maintain a 401(k) plan which is available to all full-time, United States-based employees who are at least 18 years of age.

Eligible employees may make elective salary deferrals.

We may make contributions, at our discretion, to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.

Contributions to and reimbursements by us of expenses of the plan were recorded in the accompanying consolidated income statements as follows:

January 28, January 29, January 30,

(in millions) 2023 2022 2021

Cost of sales $ 8.6 $ 8.2 $ 7.4

Selling, general and administrative expenses 23.1 20.6 19.0

Total $ 31.7 $ 28.8 $ 26.4

All eligible employees are immediately vested in any company match contributions under the 401(k) plan.

At February 3, 2024, we had $ 1.35 billion remaining under our existing $ 2.5 billion Board repurchase authorization.

Note 10 - Stock-Based Compensation Plans

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The 2011 Omnibus Incentive Plan permitted us to grant to our employees, consultants and directors up to 4.0 million shares of our common stock plus any shares available under former plans which were previously approved by the shareholders.

The plan permitted us to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance bonuses, performance share units (“PSUs”), non-employee director stock options and other equity-related awards.

The plan permitted us to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, service-based restricted stock units (“RSUs”), performance bonuses, performance-based restricted stock units (“PSUs”), non-employee director stock options and other equity-related awards.

As of March 17, 2021, the plan was no longer available for new grants of awards, but all outstanding awards that were granted under the plan prior to March 17, 2021 continue to be governed by the terms and conditions of the plan and applicable award agreements.

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In addition, if a holder of restricted shares or units ceases to be employed by us, any shares or units in which the restrictions have not lapsed will be forfeited.

The 2013 Director Deferred Compensation Plan permits any of our directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of our common stock, or receive all or a portion of such fees in non-statutory stock options.

Prior to July 1, 2023, the 2013 Director Deferred Compensation Plan permitted our directors to defer all or a portion of fees for Board or Board committee service until a future date, at which time they may be paid in cash or shares of our common stock, or receive all or a portion of such fees in non-statutory stock options.

Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate.

If a director elects to be paid in common stock, the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral.

Deferred amounts to be paid in common stock are determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral.

The number of options issued to a director will equal the deferred fee amount divided by 33 % of the price of a share of our common stock.

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The options are fully vested when issued and have a term of 10 years.

In conjunction with the acquisition of Family Dollar in 2015, we assumed the Family Dollar Stores, Inc.

2006 Incentive Plan (the “2006 Plan”).

The 2006 Plan permitted the granting of a variety of compensatory award types, including stock options and performance share rights.

Total stock-based compensation expense was recorded in the accompanying consolidated income statements as follows:

January 28, January 29, January 30,

(in millions) 2023 2022 2021

The 2013 plan expired on June 30, 2023.

All amounts deferred by directors pursuant to the terms of the 2013 plan on or before June 30, 2023 will continue to be administered in accordance with the terms of the 2013 plan and applicable deferral elections.

Beginning July 1, 2023, our non-employee directors are permitted to defer all or a part of fees earned for his or her service as a director pursuant to our Non-Employee Director Deferred Compensation Program, which operates in conjunction with, and under the authority of, the Omnibus Plan.

Pursuant to this program, cash fees may be deferred into either a cash account or a phantom stock account, and annual equity awards for service as a director may be deferred into the director’s phantom stock account.

Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate.

Deferred amounts to be paid in common stock are determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral.

Total stock-based compensation expense was recorded in the accompanying Consolidated Statements of Operations as follows:

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Cost of sales $ 22.4 $ 19.7 $ 18.3

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Total stock-based compensation expense $ 96.7 $ 110.4 $ 79.9

Excess tax benefit (deficit) on stock-based compensation

recognized in the Provision for income taxes $ 9.8 $ 8.5 $ ( 2.8 )

Excess tax benefit on stock-based compensation recognized

in the provision for income taxes

$ 3.9 $ 9.8 $ 8.5

Restricted Stock

We issue service-based RSUs to employees and officers and issue PSUs to certain of our officers.

We issue RSUs to employees and officers and issue PSUs to certain of our officers.

We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years , on a straight-line basis or a shorter period based on the retirement eligibility of the grantee.

The fair value of RSUs and PSUs is determined based on our closing stock price on the grant date.

Service-Based RSUs

The following table summarizes the status of service-based RSUs as of January 28, 2023 and changes during the year then ended:

Number of Shares Weighted Average Grant Date Fair Value

For PSUs, the compensation expense recorded is re-evaluated at each reporting period and adjusted, as necessary, based on the probability of achieving the performance criteria.

The fair value of RSUs is determined based on our closing stock price on the grant date.

The following table summarizes the status of RSUs as of February 3, 2024 and changes during the year then ended:

Number of RSUs Weighted Average Grant Date Fair Value

Nonvested at January 28, 2023

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Forfeited ( 93,227 ) 141.20

Nonvested at January 28, 2023

Nonvested at February 3, 2024

839,186 $ 141.45

The total fair value of the service-based restricted shares vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $ 51.5 million , $ 56.8 million and $ 48.5 million, respectively.

The weighted average grant date fair value of the RSUs granted in 2022, 2021 and 2020 was $ 158.05 , $ 109.01 and $ 73.24 , respectively.

As of January 28, 2023, there was $ 58.0 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 1.2 years.

The following table summarizes the status of PSUs as of January 28, 2023 and changes during the year then ended:

Number of Shares Weighted Average Grant Date Fair Value

The total fair value of the RSUs vested during the years ended February 3, 2024, January 28, 2023 and January 29, 2022 was $ 53.8 million, $ 51.5 million and $ 56.8 million, respectively.

The weighted average grant date fair value of the RSUs granted in fiscal 2023, fiscal 2022 and fiscal 2021 was $ 141.70 , $ 158.05 and $ 109.01 , respectively.

As of February 3, 2024, there was $ 65.9 million of total unrecognized compensation expense related to the outstanding RSUs which is expected to be recognized over a weighted-average period of 1.4 years.

Historically, we have granted PSUs that have a service and performance condition.

The fair value of these awards is determined based on our closing stock price on the grant date.

In fiscal 2023, we granted PSUs that cliff vest at the end of three years and that contain a market condition modifier, in addition to having a service and performance condition.

The market condition modifier can adjust the number of shares that vest under the award based on a comparison of our total shareholder return to that of a designated peer group over the performance period.

The fair value of these awards incorporating the market condition was estimated on the grant date using a Monte Carlo simulation model with the following weighted average assumptions:

Expected term (in years) 2.8

Expected stock price volatility 34.5 %

Dividend yield — %

Risk-free interest rate 3.82 %

The expected stock price volatility is based on the historical and implied volatility of our common stock over a period matching the expected term of the awards granted.

The dividend yield reflects that we have never paid cash dividends.

The risk-free interest rate represents the yield curve in effect at the time of grant for U.S.

Treasury zero-coupon securities with maturities that approximate the expected term of the awards.

The following table summarizes the status of PSUs as of February 3, 2024 and changes during the year then ended:

Number of PSUs Weighted Average Grant Date Fair Value

Nonvested at January 28, 2023

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Forfeited ( 30,584 ) 129.29

Nonvested at January 28, 2023

Nonvested at February 3, 2024

150,150 $ 147.29

The total fair value of the PSUs vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $ 44.5 million, $ 17.3 million and $ 19.6 million, respectively.

The weighted average grant date fair value of the PSUs granted in 2022, 2021 and 2020 was $ 159.57 , $ 95.04 and $ 74.46 , respectively.

As of January 28, 2023, there was $ 9.9 million of total unrecognized compensation expense related to these PSUs which is expected to be recognized over a weighted-average period of 0.9 years.

The total fair value of the PSUs vested during the years ended February 3, 2024, January 28, 2023 and January 29, 2022 was $ 8.7 million, $ 44.5 million and $ 17.3 million, respectively.

The weighted average grant date fair value of the PSUs granted in fiscal 2023, fiscal 2022 and fiscal 2021 was $ 129.24 , $ 159.57 and $ 95.04 , respectively.

As of February 3, 2024, there was $ 3.7 million of total unrecognized compensation expense related to these PSUs which is expected to be recognized over a weighted-average period of 1.1 years.

We assess the probability of the achievement of the remaining performance targets at the end of each reporting period and based on that assessment, cumulative adjustments may be recorded in future periods.

Stock Options

Stock options are valued using the Black-Scholes option pricing model and compensation expense is recognized on a straight-line basis over the requisite service period.

Options granted in 2021 and 2020 are immaterial.

On March 19, 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock with a fair value of $ 135.6 million to the Executive Chairman of the Board, who was also appointed Chief Executive Officer of the company effective January 29, 2023.

Historically, we have not used stock options broadly as part of our compensation strategy.

In fiscal 2023, we began to issue stock options to certain key executives.

These awards generally have a ten-year term and vest in equal installments on each of the first three anniversaries of the grant date, subject to the employees’ continued employment with the company through each vesting date.

Stock options granted in fiscal 2023 had a fair value of $ 4.9 million.

In addition, in fiscal 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock at a fair value of $ 135.6 million to the Executive Chairman of the Board, who was also appointed Chief Executive Officer of the company effective January 29, 2023.

The grant of options was subject to the terms and conditions of a five-year Executive Agreement.

The option award has a ten-year term and is scheduled to vest in equal installments on each of the first five anniversaries of the grant date, subject to the Executive Chairman’s continued employment with the company through each vesting date.

The assumptions used in the Black-Scholes option pricing model for this award are as follows:

Options granted in fiscal 2021 were immaterial.

Stock options are valued using the Black-Scholes option pricing model and compensation expense is recognized on a straight-line basis over the requisite service period.

The weighted average assumptions used in the Black-Scholes option pricing model for the executive stock options granted in fiscal 2023 and the assumptions used for the fiscal 2022 award granted to the Executive Chairmain are as follows:

Fiscal 2023 Fiscal 2022

Expected term (in years) 6.0 6.5

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Risk-free interest rate 3.81 % 2.15 %

The simplified method was used to estimate the expected term of the options due to our lack of historical option exercise experience and the “plain vanilla” characteristics of the option award.

The simplified method was used to estimate the expected term of the options due to our lack of historical option exercise experience and the “plain vanilla” characteristics of the option awards.

The simplified method results in an expected term equal to the average of the weighted average time-to-vesting and the contractual life of the options.

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Treasury zero-coupon securities with maturities that approximate the expected term of the options.

Certain of our directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan.

These options vest immediately and are expensed on the grant date.

The following tables summarize information about options outstanding at January 28, 2023 and changes during the year then ended:

Prior to July 1, 2023, certain of our directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan.

These options vested immediately and were expensed on the grant date.

The following tables summarize information about options outstanding at February 3, 2024 and changes during the year then ended:

Number of Shares Weighted Average Per Share Exercise Price Weighted Average Remaining Term (Years) Aggregate Intrinsic Value

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Exercised ( 1,207 ) 77.59

Outstanding at January 28, 2023

Forfeited ( 1,075 ) 143.55

Outstanding at February 3, 2024

2,360,102 $ 155.84 8.1 $ 1.5

Exercisable at January 28, 2023

Exercisable at February 3, 2024

475,810 $ 153.92 7.9 $ 1.1

The intrinsic value of options exercised during 2022, 2021 and 2020 was less than $ 0.1 million, $ 5.6 million and $ 0.9 million, respectively.

As of January 28, 2023, there was $ 112.1 million of total unrecognized compensation expense related to these options which is expected to be recognized over a weighted-average period of 4.1 years.

The intrinsic value of options exercised during fiscal 2023, fiscal 2022 and fiscal 2021 was $ 0.1 million, less than $ 0.1 million and $ 5.6 million, respectively.

As of February 3, 2024, there was $ 87.5 million of total unrecognized compensation expense related to these options which is expected to be recognized over a weighted-average period of 3.1 years.

Note 11 – Net Income (Loss) Per Share

The following table sets forth the calculations of basic and diluted net income (loss) per share:

(in millions, except per share data) February 3, 2024 January 28, 2023 January 29, 2022

Basic net income (loss) per share:

Net income (loss) $ ( 998.4 ) $ 1,615.4 $ 1,327.9

Weighted average number of shares outstanding 219.5 223.2 227.9

Basic net income (loss) per share $ ( 4.55 ) $ 7.24 $ 5.83

Diluted net income (loss) per share:

Net income (loss) $ ( 998.4 ) $ 1,615.4 $ 1,327.9

Weighted average number of shares outstanding 219.5 223.2 227.9

Dilutive impact of share-based awards (as determined by applying the

treasury stock method) — 0.9 1.1

Weighted average number of shares and dilutive potential shares

outstanding 219.5 224.1 229.0

Diluted net income (loss) per share $ ( 4.55 ) $ 7.21 $ 5.80

For the years ended February 3, 2024 and January 28, 2023, share-based awards of 2.9 million shares and 3.0 million shares, respectively, were excluded from the calculation of diluted net income (loss) per share because their inclusion would be anti-dilutive.

For the year ended January 29, 2022, substantially all of the outstanding share-based awards were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.

Note 12 – Employee Benefit Plan

Dollar Tree Retirement Savings Plan

We maintain a 401(k) plan which is available to all full-time, United States-based employees who are at least 18 years of age.

Eligible employees may make elective salary deferrals.

We make contributions in the form of a dollar-for-dollar match on the first five percent of employee contributions to eligible employees who have completed one year of service in which they have worked at least 1,000 hours.

Contributions to and reimbursements by us of expenses of the plan were recorded in the accompanying Consolidated Statements of Operations as follows:

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Cost of sales $ 9.9 $ 8.6 $ 8.2

Selling, general and administrative expenses 26.0 23.1 20.6

Total $ 35.9 $ 31.7 $ 28.8

All eligible employees are immediately vested in any company match contributions under the 401(k) plan.

Note 13 – Segments and Disaggregated Revenue

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We define our segments as those operations whose results our CODM regularly reviews to analyze performance and allocate resources.

We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income.

We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income (loss).

The CODM reviews these metrics for each of our reporting segments.

We may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM.

We may revise the measurement of each segment’s operating income (loss), as determined by the information regularly reviewed by the CODM.

If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation.

Corporate, support and Other consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments.

These costs include operating expenses for our store support center and the results of operations for our Summit Pointe property in Chesapeake, Virginia.

The Family Dollar segment Operating income includes advertising revenue, which is a component of Other revenue in the accompanying consolidated income statements.

Information for our segments, as well as for Corporate, support and Other, including the reconciliation to Income before income taxes, is as follows:

January 28, January 29, January 30,

(in millions) 2023 2022 2021

Consolidated Income Statement Data:

Corporate, support and other consists primarily of store support center costs and the results of operations for our Summit Pointe property in Chesapeake, Virginia that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments.

The Family Dollar segment operating income (loss) includes advertising revenue, which is a component of “Other revenue” in the accompanying Consolidated Statements of Operations.

Information for our segments, as well as for corporate, support and other, including the reconciliation to income (loss) before income taxes, is as follows:

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Consolidated Statements of Operations Data:

Dollar Tree $ 16,770.3 $ 15,405.7 $ 13,922.1

9 unchanged sentences

Corporate, support and other ( 497.1 ) ( 427.2 ) ( 338.7 )

Consolidated Operating income 2,236.3 1,811.4 1,887.9

Consolidated operating income (loss) ( 881.8 ) 2,236.3 1,811.4

Interest expense, net 106.8 125.3 178.9

Other expense, net 0.1 0.4 0.3

Income before income taxes $ 2,110.6 $ 1,632.2 $ 1,739.8

Income (loss) before income taxes $ ( 988.7 ) $ 2,110.6 $ 1,632.2

Depreciation and amortization expense:

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Consolidated depreciation and amortization expense $ 841.3 $ 768.0 $ 716.0

January 28, January 29,

(in millions) 2023 2022

(in millions) February 3, 2024 January 28, 2023

Consolidated Balance Sheet Data:

14 unchanged sentences

The following table summarizes net sales by merchandise category for our segments:

January 28, January 29, January 30,

(in millions) 2023 2022 2021

(in millions) February 3, 2024 January 28, 2023 January 29, 2022

Dollar Tree segment net sales by

11 unchanged sentences

Total Family Dollar segment net sales $ 13,811.3 100.0 % $ 12,912.5 100.0 % $ 12,387.7 100.0 %

Note 14 – Supply Chain Finance Program

During the third quarter of fiscal 2023, we implemented a supply chain finance program, administered through a financial institution, which provides participating suppliers with the opportunity to finance payments due from us.

Participating suppliers may, at their sole discretion, elect to finance one or more invoices of ours prior to their scheduled due dates at a discounted price with the financial institution.

Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by the supplier’s decision to finance amounts under these arrangements.

As such, the outstanding payment obligations under our supply chain financing program are included within “ Accounts payable ” in the accompanying Consolidated Balance Sheets and within “Cash flows from operating activities” in the accompanying Consolidated Statements of Cash Flows.

As of February 3, 2024, our outstanding payment obligations under this program were $ 11.8 million.

Note 15 – Goodwill and Nonamortizing Intangible Assets

In connection with our annual impairment testing of goodwill and nonamortizing intangible assets during the fourth quarter, and as a result of the anticipated store closures described in Note 16 , we determined it was more likely than not that an impairment loss had been incurred with respect to the Family Dollar goodwill and trade name, and proceeded to perform a quantitative impairment test of both assets.

We estimated, with the assistance of a third party specialist, the fair value of the Family Dollar trade name based on an income approach using the relief-from-royalty method.

The significant estimates used in the relief-from-royalty method, which are level 3 inputs, include a company-specific royalty rate, our weighted average cost of capital adjusted by a company-specific risk premium and trade name premium.

The valuation date for the Family Dollar trade name was November 25, 2023.

The results of the impairment test showed that the carrying value of the Family Dollar trade name exceeded its estimated fair value resulting in the recognition of a $ 950.0 million impairment charge in the fourth quarter of fiscal 2023, which is recorded as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Operations.

Subsequent to the Family Dollar trade name and long-lived asset impairment tests, we estimated, with the assistance of a third party specialist, the fair value of the Family Dollar reporting unit using a combination of a market multiple method and a discounted cash flow method.

The significant estimates used in the discounted cash flow method, which are level 3 inputs, include our weighted average cost of capital adjusted by a company-specific risk premium, long-term rates of growth and profitability for the Family Dollar reporting unit, working capital effects, and changes in market conditions, consumer trends and strategy.

The market multiple method utilized comparable public company revenue and profitability multiples to estimate the fair value of the Family Dollar reporting unit.

The valuation date for the Family Dollar reporting unit was November 25, 2023.

The annual goodwill impairment evaluation in 2023 showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in the recognition of a $ 1,069.0 million impairment charge in the fourth quarter of fiscal 2023.

The annual goodwill and nonamortizing intangible asset impairment evaluations in fiscal 2022 and fiscal 2021 did not result in impairment.

We have recorded cumulative goodwill impairment charges totaling $ 4,109.0 million, all of which relate to the Family Dollar reporting unit and recorded during the fourth quarters of fiscal 2023 ($ 1,069.0 million), fiscal 2019 ($ 313.0 million), and fiscal 2018 ($ 2,727.0 million).

Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the years ended February 3, 2024 and January 28, 2023 are as follows:

(in millions) Dollar Tree Family Dollar Total

Balance at January 29, 2022

$ 424.9 $ 1,559.5 $ 1,984.4

Foreign currency translation adjustments ( 1.3 ) — ( 1.3 )

Balance at January 28, 2023

423.6 1,559.5 1,983.1

Foreign currency translation adjustments ( 0.3 ) — ( 0.3 )

Goodwill impairment — ( 1,069.0 ) ( 1,069.0 )

Balance at February 3, 2024

$ 423.3 $ 490.5 $ 913.8

Note 16 – Store Portfolio Optimization Review

During the fourth quarter of fiscal 2023, we announced that we had initiated a comprehensive store portfolio optimization review which involved identifying stores for closure, relocation or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors.

As a result of this portfolio optimization review, we plan to close approximately 970 underperforming Family Dollar stores, including approximately 600 stores to be closed in the first half of fiscal 2024, and approximately 370 stores to be closed at the end of each store's current lease term.

Additionally, we identified approximately 30 underperforming Dollar Tree stores for closure and plan to close each store at the end of the store's current lease term.

We performed an undiscounted cash flow analysis on each individual store’s asset group, and determined that certain store asset groups had net carrying values that exceeded their estimated undiscounted future cash flows.

Accordingly, we estimated the fair values of the asset groups based on a discounted cash flow method.

For stores that are closing in the first half of fiscal 2024, we estimated the remaining fair value of the asset groups taking into account our ability to generate sublease income or lease termination benefits prior to the end of the lease term.

The significant estimates used in the discounted cash flow methodology, which are based on level 3 inputs, include our expectations for future operations and projected cash flows.

The valuation date for estimating the fair value of the long-lived assets for these stores was November 25, 2023.

As a result of the impairment test for the long-lived assets, we incurred $ 503.9 million of non-cash impairment charges which are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations, comprised of $ 152.2 million of property, plant and equipment impairment charges and $ 351.7 million of operating lease ROU asset impairment charges.

The operating lease ROU asset impairment does not relieve us of our monthly cash payment obligations under the lease.

We will pursue lease terminations or subleases where practicable.

In addition, we recorded $ 80.6 million of inventory markdowns and $ 5.6 million of capitalized distribution cost impairment within “Cost of sales” in the accompanying Consolidated Statements of Operations for the stores expected to close in the first half of fiscal 2024.

We also incurred $ 4.3 million in third party consulting fees related to the portfolio optimization review which are included in “Selling, general and administrative expenses” within the accompanying Consolidated Statements of Operations.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data