DOLLAR TREE, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Note Regarding Forward-Looking Statements This document contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,” “should,” “predict,” “possible,” “potential,” “continue,” “strategy,” and similar expressions. For example, our forward-looking statements include, without limitation, statements regarding: • Our plans and expectations regarding our current initiatives and future strategic investments and the uncertainty with respect to the amount, timing and impact of those initiatives and investments on our business and results of operations; • Our merchandising plans and initiatives and related impacts, including those regarding product and brand assortment, merchandisable space and store layout, cooler and freezer expansions, private brand products and planogram and category resets in the Family Dollar segment, and multi-price assortments in the Dollar Tree segment; • Our plans to add, renovate and remodel stores, including our plans relating to emerging store formats such as H2.5, rural and XSB formats for Family Dollar stores, and our expectations regarding store standards and operations, efficiency initiatives, selling square footage and the performance of those formats; • Our expectations regarding the implementation and impact of investments in supply chain, distribution facilities, truck fleet and transportation management systems, store delivery and equipment, store appearance, wage investments and other workforce investments and goals; • Our expectations regarding the implementation and impact of investments in our technology infrastructure and the design and implementation of internal controls around our technology transformation; • Our plans to close, relocate or re-banner stores as a result of our store portfolio optimization review; • Our plans and expectations regarding our review of strategic alternatives for the Family Dollar business segment; • The potential effect of general business or economic conditions on our business and our customers, including the direct and indirect effects of inflation, interest rates and government benefits; • The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations, including proceedings arising out of or relating to issues associated with Family Dollar’s West Memphis, Arkansas distribution center, our plans regarding these matters, and the availability of indemnification or insurance with respect to such matters; • The impacts of tornado damage to our Dollar Tree distribution center in Marietta, Oklahoma, including expectations regarding inventory and property damage, related losses, the availability of insurance coverage and expected insurance recoveries, changes within our supply chain network and our customer shopping experience; • Our expectations regarding the impact of inflation and interest rates on our business; • Our expectations regarding our commercial paper program, including our expected use of proceeds and repayment sources, and supply chain finance program; and • Our cash needs, including our ability to fund our future capital expenditures and working capital requirements. A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Our forward-looking statements are all based on currently available operating, financial and business information. The outcome of the events described in these forward-looking statements is subject to a variety of factors, including, but not limited to, the risks and uncertainties summarized below and the more detailed discussions in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 and in this Quarterly Report on Form 10-Q. The following risks could have a material adverse impact on our sales, costs, profitability, financial performance or implementation of strategic initiatives: • Our profitability is vulnerable to increases in merchandise, shipping, freight and fuel costs, wage and benefit and other operating costs. 15 Table of Contents • Higher costs and disruptions in our distribution network could have an adverse impact on our sales and profitability. • We may stop selling or recall certain products for safety-related or other issues. • We could experience a decline in consumer confidence and spending because of concerns about the quality and safety of our products or our brand standards. • Inflation or other adverse change or downturn in economic conditions could impact our sales or profitability. • Risks associated with merchandise supply could adversely affect our financial performance. • Our growth is dependent on our ability to increase sales in existing stores and to expand our square footage profitably. • Our profitability is affected by the mix of products we sell. • Our business is seasonal, and adverse events during the fourth quarter could materially affect our full-year financial results. • Failure to protect our inventory or other assets from loss and theft may impact our financial results. • We have risks related to the security of our facilities including risks of personal injury to customers or associates. • We face significant pressure from competitors which may reduce our sales and profits. • Our business could be adversely affected if we fail to manage our organizational talent and capacity, including attracting and retaining qualified associates and key personnel. • We rely on third parties in many aspects of our business, which creates additional risk. • We may not be successful in implementing or in anticipating the impact of important strategic initiatives, and our plans for implementing such initiatives may be altered or delayed due to various factors, which may have an adverse impact on our business and financial results. • We could incur losses due to impairment of goodwill and other long-lived assets. • We rely on computer and technology systems in our operations, and any material failure, inadequacy, interruption or security failure of those systems, including because of a cyberattack, could harm our ability to effectively operate and grow our business and could adversely affect our financial results. • The potential unauthorized access to our systems could disrupt operations or lead to the theft of data which may violate privacy laws and could damage our business reputation, subject us to negative publicity, litigation and costs, and adversely affect our results of operations or financial condition. • Legal proceedings may adversely affect our reputation, business, results of operations or financial condition. • Our failure to comply with applicable law, or to adequately respond to changes to such laws, could increase our expenses, expose us to legal risks or otherwise adversely affect us. • Our business is subject to evolving disclosure requirements and expectations with respect to environmental, social and governance matters that could expose us to numerous risks. • Our inability to access credit or capital markets, a downgrade of our credit ratings and/or increases in interest rates could negatively affect our financing costs, results of operations and financial condition. • Our business or the value of our common stock could be negatively affected as a result of actions by shareholders. • The price of our common stock is subject to market and other conditions and may be volatile. • Certain provisions in our Articles of Incorporation and By-Laws could delay or discourage a change of control transaction that may be in a shareholder’s best interest. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements. 16 Table of Contents We do not undertake to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, or otherwise. Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that we agree with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, we have a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility. Overview We are a leading operator of more than 16,300 retail discount stores and conduct our operations through two reporting segments. Our Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the opening price point of $1.25, with additional offerings at $3, $4 and $5 price points. Our Family Dollar segment operates general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores. Our net sales are derived from the sale of merchandise. Two major factors tend to affect our net sales trends. First is our success at opening new stores. Second is the performance of stores once they are open which can be impacted by a number of factors including operational performance, competition, inflation and changes in the product assortment, pricing, or quality. Sales vary at our existing stores from one year to the next. We refer to this as a change in comparable store net sales, because we include only those stores that are open throughout both of the periods being compared, beginning after the first fifteen months of operation. We include sales from stores expanded, relocated or remodeled during the period in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. Stores that have been re-bannered (i.e., Family Dollar stores converted to Dollar Tree stores, or vice versa) are considered to be new stores and are not included in the calculation of the comparable store net sales change until after the first fifteen months of operation under the new brand. Sales that are excluded from the calculation of comparable store net sales are referred to as non-comparable store sales and consist of sales from new stores open fifteen months or less and stores that are closed permanently or expected to be closed for more than 90 days. Quarterly Results Financial highlights for the 13 weeks ended May 4, 2024, as compared to the 13 weeks ended April 29, 2023, include: • Net sales increased 4.2% to $7,626.4 million, due to a 1.0% enterprise-wide comparable store net sales increase and net sales of $457.4 million at non-comparable stores. • Gross profit, as a percentage of net sales, increased 30 basis points to 30.8%, primarily due to lower freight costs, offset partially by increased sales of higher cost consumable merchandise and higher shrink. • Selling, general and administrative expenses, as a percentage of total revenues, increased 50 basis points to 25.3%, primarily due to an increase in temporary labor on the Dollar Tree segment to support our multi-price rollout, severance and retention-related costs for store closures on the Family Dollar segment, and higher depreciation expense, offset partially by decreases in legal costs on the Family Dollar segment. • Operating income, as a percentage of total revenues, decreased 20 basis points to 5.5%. • The effective tax rate increased to 24.2% compared to 24.1%. • Net income was $300.1 million, or $1.38 per diluted share, compared to $299.0 million, or $1.35 per diluted share. 17 Table of Contents At May 4, 2024, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces. The average size of stores opened during the 13 weeks ended May 4, 2024 was approximately 9,300 selling square feet for the Dollar Tree segment and 8,940 selling square feet for the Family Dollar segment. A breakdown of store counts and square footage by segment for the 13 weeks ended May 4, 2024 and April 29, 2023 is as follows: 13 Weeks Ended May 4, 2024 April 29, 2023 Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total Store Count: Beginning 8,415 8,359 16,774 8,134 8,206 16,340 New stores 116 41 157 32 75 107 Re-bannered stores 5 (10) (5) 2 (1) 1 Closings (16) (513) (529) (15) (14) (29) Ending 8,520 7,877 16,397 8,153 8,266 16,419 Relocations 7 13 20 6 27 33 Selling Square Feet (in millions): Beginning 73.1 63.7 136.8 70.5 61.6 132.1 New stores 1.1 0.4 1.5 0.3 0.7 1.0 Re-bannered stores* — (0.1) (0.1) — — — Closings (0.1) (3.9) (4.0) (0.1) (0.1) (0.2) Relocations* — — — — 0.1 0.1 Ending 74.1 60.1 134.2 70.7 62.3 133.0 *Selling square footage impact of re-bannered or relocated stores is only provided if it equals or exceeds 0.1 million selling square feet Stores are included as re-banners when they close or open, respectively. During the fourth quarter of fiscal 2023, we initiated a comprehensive store portfolio optimization review, including identifying stores as candidates for closure, re-bannering, or relocation. See the “Strategic Initiatives and Recent Developments” section below for additional detail. The percentage change in comparable store net sales for the 13 weeks ended May 4, 2024, as compared with the preceding year, is as follows: 13 Weeks Ended May 4, 2024 Sales Growth Change in Customer Traffic Change in Average Ticket Consolidated 1.0% 2.1% (1.1)% Dollar Tree Segment 1.7% 2.8% (1.1)% Family Dollar Segment 0.1% 0.9% (0.8)% Comparable store net sales are positively affected by our expanded, relocated and remodeled stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores. Net sales per selling square foot is calculated based on total net sales for the preceding 12 months as of the end of the reporting period divided by the average selling square footage during the period. Selling square footage excludes the storage, receiving and office space that generally occupies approximately 20% of the total square footage of our stores. We believe that net sales per selling square foot more accurately depicts the productivity and operating performance of our stores as it reflects the portion of our footprint that is dedicated to selling merchandise. 18 Table of Contents Net sales per selling square foot for the 52 weeks ended May 4, 2024 and April 29, 2023 is as follows: 52 Weeks Ended May 4, 2024 April 29, 2023 Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total Net sales per selling square foot $235 $227 $231 $221 $216 $219 For the 52 weeks ended May 4, 2024, Family Dollar’s net sales per selling square foot includes net sales for the stores that were closed in connection with the store portfolio optimization review in the numerator of the calculation, but the related selling square footage as of May 4, 2024 is excluded from the denominator of the calculation which represents the average selling square footage for the 52-week period. See our “Strategic Initiatives and Recent Developments” below for more information on the initiatives that are driving our comparable store net sales growth and net sales per selling square foot growth. Strategic Initiatives and Recent Developments We continue to execute on a number of strategic initiatives across the Dollar Tree and Family Dollar segments to drive productive sales growth, improve operating efficiency, invest in technology, and expand our culture of service to our associates. These initiatives include, among others, the following. Dollar Tree Merchandising. We continue to expand our brand assortment at the $1.25 price point to provide greater value to our customers and increase customer traffic and store productivity. We are continuing to expand our multi-price product assortment, which began with the introduction of $3 and $5 Dollar Tree Plus product in select discretionary categories, expanded into $3, $4 and $5 frozen and refrigerated product, and now comprises a wide assortment of other consumable and discretionary product. We are currently taking actions to improve operating efficiencies and prepare for expanded multi-price products within our stores, including raising shelf heights, implementing space productivity, and rightsizing assortments. In fiscal 2024, we expect to expand our multi-price assortment in approximately 3,000 stores. Family Dollar Merchandising. Our store design initiatives at Family Dollar provide significantly improved merchandise offerings and establish a minimum number of cooler doors. We tailor space and assortment to local demographics with emerging formats including H2.5, our primary store format with optimized layout and expanded frozen and refrigerated doors; larger rural stores where assortments may include Dollar Tree product; and XSB (Extra Small Box), which adds elements of H2.5 optimized to our smaller stores, particularly in urban markets. As of May 4, 2024, we have more than 2,050 stores across these three formats. Across all of Family Dollar’s formats we are expanding our SKUs, continuing to add cooler doors, increasing our standard shelf profile, and implementing planogram and category resets. We continue to introduce new private brands at Family Dollar, convert control brands to private brands and align our “Family” brand message across key categories. Store Portfolio Optimization and Family Dollar Strategic Alternatives Reviews. Additionally, 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 the portfolio optimization review, we identified 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. As of May 4, 2024, we have closed approximately 550 stores identified under the portfolio optimization review and expect to close an additional 150 during the remainder of fiscal 2024. Subsequent to the quarter ended May 4, 2024, we announced that we had initiated a formal review of strategic alternatives for the Family Dollar business segment, which could include among others, a potential sale, spin-off or other disposition of the business. There is not a set deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any transaction or particular outcome. Our Workforce & Our Workplace. Across both of our segments, we are investing in our talent, including initiatives to provide competitive pay and benefits, enhanced training, and attractive career opportunities to deliver an enhanced associate experience, reduce turnover, and improve our store standards and efficiencies and ultimately the customer experience. Additional initiatives include projects to optimize and modernize our stores, with a focus on improving store appearance, delivering consistent experiences across all stores, and driving positive sales trends. Supply Chain Optimization . Our supply chain initiatives include enhancing our distribution and transportation network, including investments in our truck fleet, transportation management systems, a new distribution center with enhanced automation to improve efficiency, and a new RotaCart delivery process to streamline the truck unloading and store delivery process. Significant investments are also underway to improve climate control conditions in our distribution centers. 19 Table of Contents Technology Investment. We continue our multi-year plan for significant investment in our technology across our business, including our store network and point-of-sale, merchandising and supply chain. We believe these improvements can promote operational efficiencies and deliver an elevated customer experience. Marietta, Oklahoma Distribution Center. On April 28, 2024, a tornado destroyed our Dollar Tree distribution center in Marietta, Oklahoma. Based on the significant damage sustained by the facility, the inventory contained in the facility and the facility itself are not salvageable. We have pivoted our supply chain network to deliver product to the approximately 600 Marietta-serviced Dollar Tree stores, and we expect that these efforts will limit disruption to the Dollar Tree shopping experience. We anticipate incurring additional costs within our supply chain as a result of servicing these impacted stores, including additional stem miles for delivered product and outside storage, and expect such costs to negatively impact gross margin in the near term. Results of Operations Our results of operations and period-over-period changes are discussed in the following section. Note that gross profit margin is calculated as gross profit (i.e., net sales less cost of sales) divided by net sales. The cost of sales rate is calculated by dividing cost of sales by net sales. The selling, general and administrative expense rate, operating income margin and net income margin are calculated by dividing the applicable amount by total revenue. Basis points, as referred to below, are a percentage of net sales for expense categories within gross profit and cost of sales, and are a percentage of total revenue for all other expense categories. A 100 basis point increase equals 1.00% and a 1 basis point increase equals 0.01%. The following table contains results of operations data for the 13 weeks ended May 4, 2024 and April 29, 2023: 13 Weeks Ended (in millions, except percentages) May 4, 2024 April 29, 2023 Revenues Net sales $ 7,626.4 $ 7,319.5 Other revenue 6.4 4.3 Total revenue 7,632.8 7,323.8 Expenses Cost of sales 5,278.7 5,089.1 Selling, general and administrative expenses 1,933.5 1,815.0 Operating income 420.6 419.7 Interest expense, net 24.4 25.9 Other expense, net 0.1 0.1 Income before income taxes 396.1 393.7 Provision for income taxes 96.0 94.7 Net income $ 300.1 $ 299.0 Gross profit margin 30.8 % 30.5 % Selling, general and administrative expense rate 25.3 % 24.8 % Operating income margin 5.5 % 5.7 % Interest expense, net as a percentage of total revenue 0.3 % 0.4 % Income before income taxes as percentage of total revenue 5.2 % 5.4 % Effective tax rate 24.2 % 24.1 % Net income margin 3.9 % 4.1 % Net Sales 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Net sales $ 7,626.4 $ 7,319.5 4.2 % Comparable store net sales change 1.0 % 4.8 % 20 Table of Contents The increase in net sales in the 13 weeks ended May 4, 2024 was a result of the comparable store net sales increases in the Dollar Tree and Family Dollar segments, and net sales of $457.4 million at non-comparable stores. For the 13 weeks ended May 4, 2024, net sales at non-comparable stores include sales from the Family Dollar stores that were closed under the portfolio optimization review in the first quarter of this year. Enterprise comparable store net sales increased 1.0% in the 13 weeks ended May 4, 2024, as a result of a 2.1% increase in customer traffic, partially offset by a 1.1% decrease in average ticket. Comparable store net sales increased 1.7% in the Dollar Tree segment and increased 0.1% in the Family Dollar segment. The low single-digit comparable store net sales increase was primarily impacted by the Easter calendar shift to earlier in the quarter this year and a softer than expected sell through. In addition, the macro environment continues to impact our customers due to the impact of inflationary pressures, higher interest rates, and reduced government benefits. Gross Profit 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Gross profit $ 2,347.7 $ 2,230.4 5.3 % Gross profit margin 30.8 % 30.5 % 0.3 % Gross profit margin increased during the 13 weeks ended May 4, 2024 due to a 30 basis point decrease in cost of sales. The cost of sales rate decreased to 69.2% during the 13 weeks ended May 4, 2024 from 69.5% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise and increased shrink costs due to unfavorable physical inventory results. Selling, General and Administrative Expenses 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Selling, general and administrative expenses $ 1,933.5 $ 1,815.0 6.5 % Selling, general and administrative expense rate 25.3 % 24.8 % 0.5 % The selling, general and administrative expense rate increased 50 basis points primarily due to temporary labor on the Dollar Tree segment to support our multi-price rollout, higher depreciation expense from store investments and loss of leverage from the low-single digit comparable store net sales increase, and severance and retention-related expenses for Family Dollar stores closed in connection with the portfolio optimization review in the first quarter of this year. The increases were partially offset by a decrease in legal costs as the prior year quarter included a $30.0 million accrual for DC 202-related legal matters on the Family Dollar segment. Operating Income 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Operating income $ 420.6 $ 419.7 0.2 % Operating income margin 5.5 % 5.7 % (0.2) % Operating income margin decreased to 5.5% for the 13 weeks ended May 4, 2024 compared to 5.7% for the same period last year, resulting from the increase in the selling, general and administrative expense rate, partially offset by the increase in gross profit margin, as described above. 21 Table of Contents Interest Expense, Net 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Interest expense, net $ 24.4 $ 25.9 (5.8) % Interest expense, net decreased $1.5 million in the 13 weeks ended May 4, 2024 compared to the same period last year, resulting from higher interest income earned on investments. Provision for Income Taxes 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Provision for income taxes $ 96.0 $ 94.7 1.4 % Effective tax rate 24.2 % 24.1 % 0.1 % The effective tax rate was 24.2% for the 13 weeks ended May 4, 2024 compared to 24.1% for the comparable prior year period, resulting from higher tax expense in the current year related to restricted stock vesting, partially offset by lower non-deductible expenses. Segment Information Our operating results for the Dollar Tree and Family Dollar segments and period-over-period changes are discussed in the following sections. Dollar Tree The following table summarizes the operating results of the Dollar Tree segment: 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Net sales $ 4,165.6 $ 3,931.7 5.9 % Gross profit 1,476.5 1,388.6 6.3 % Gross profit margin 35.4 % 35.3 % 0.1 % Operating income $ 522.3 $ 535.7 (2.5) % Operating income margin 12.5 % 13.6 % (1.1) % Net sales for the Dollar Tree segment increased $233.9 million, or 5.9%, during the 13 weeks ended May 4, 2024 compared to the same period last year due to an increase in comparable store net sales of 1.7%, and net sales of $184.7 million at non-comparable stores. Customer traffic increased 2.8% and average ticket decreased 1.1%. Gross profit margin in the Dollar Tree segment increased to 35.4% during the 13 weeks ended May 4, 2024 from 35.3% during the same period last year due to a 10 basis point decrease in cost of sales. The cost of sales rate decreased to 64.6% during the 13 weeks ended May 4, 2024 from 64.7% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise and increased shrink costs resulting from unfavorable physical inventory results. Operating income margin for the Dollar Tree segment decreased to 12.5% during the 13 weeks ended May 4, 2024 from 13.6% during the same period last year as a result of an increase in the selling, general and administrative expense rate, partially offset by the gross profit margin increase noted above. The selling, general and administrative expense rate increased 120 basis points primarily due to temporary labor to support our multi-price rollout, higher depreciation expense from store investments and loss of leverage from the low-single digit comparable store net sales increase. 22 Table of Contents Family Dollar The following table summarizes the operating results of the Family Dollar segment: 13 Weeks Ended (dollars in millions) May 4, 2024 April 29, 2023 Percentage Change Net sales $ 3,460.8 $ 3,387.8 2.2 % Gross profit 871.2 841.8 3.5 % Gross profit margin 25.2 % 24.8 % 0.4 % Operating income $ 36.9 $ 8.8 319.3 % Operating income margin 1.1 % 0.3 % 0.8 % Net sales for the Family Dollar segment increased $73.0 million, or 2.2%, during the 13 weeks ended May 4, 2024 compared to the same period last year due to an increase in comparable store net sales of 0.1%, and net sales of $272.7 million at non-comparable stores. For the 13 weeks ended May 4, 2024, net sales at non-comparable stores include sales from the stores that were closed under the portfolio optimization review in the first quarter of this year. Customer traffic increased 0.9% and average ticket decreased 0.8%. Gross profit margin in the Family Dollar segment increased to 25.2% during the 13 weeks ended May 4, 2024 from 24.8% during the same period last year due to a 40 basis point decrease in cost of sales. The cost of sales rate decreased to 74.8% during the 13 weeks ended May 4, 2024 from 75.2% during the same period last year primarily due to lower freight costs, partially offset by cost increases due to inflation and increased sales of higher cost consumable merchandise. Operating income margin for the Family Dollar segment increased to 1.1% during the 13 weeks ended May 4, 2024 from 0.3% during the same period last year resulting from the increase in gross profit margin noted above and a decrease in the selling, general and administrative expense rate. The selling, general and administrative expense rate decreased 40 basis points primarily due to a decrease in legal costs as the prior year quarter included a $30.0 million accrual for DC 202-related legal matters. The decrease was partially offset by severance and retention-related expenses for stores closed in connection with the portfolio optimization review in the first quarter of this year, higher depreciation expense from store investments and loss of leverage from the low comparable store net sales increase. Liquidity and Capital Resources We invest capital to build and open new stores, expand and renovate existing stores, enhance and grow our distribution network, operate our existing stores, maintain and upgrade our technology, and support our other strategic initiatives. Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October. We have satisfied our seasonal working capital requirements for existing and new stores and have funded our distribution network programs and other capital projects from internally generated funds and borrowings under our credit facilities and commercial paper program. The following table compares cash flow-related information for the 13 weeks ended May 4, 2024 and April 29, 2023: 13 Weeks Ended (in millions) May 4, 2024 April 29, 2023 Net cash provided by (used in): Operating activities $ 695.7 $ 752.0 Investing activities (473.0) (352.7) Financing activities (287.8) (167.6) Net cash provided by operating activities decreased $56.3 million primarily due to inventory levels decreasing at a lower rate compared to the prior year and decreases in other current liabilities, partially offset by increases in accounts payable. Net cash used in investing activities increased $120.3 million due to higher capital expenditures in the current year. Net cash used in financing activities increased $120.2 million primarily due to higher payments for stock repurchases in the current year. At May 4, 2024, our long-term borrowings were $3.45 billion and we had $1.5 billion available under our Revolving Credit Facility, less amounts outstanding for standby letters of credit totaling $4.1 million. We also have a commercial paper program under 23 Table of Contents which we may issue unsecured commercial paper notes up to an aggregate amount outstanding at any time of $1.5 billion. Our Revolving Credit Facility serves as a liquidity backstop for the repayment of notes outstanding under the program. As of May 4, 2024, there were no notes outstanding under the commercial paper program. Additionally, we have $355.0 million in trade letters of credit with various financial institutions, under which $48.8 million was committed to letters of credit issued for routine purchases of imported merchandise as of May 4, 2024. We repurchased 2,537,302 and 1,025,000 shares of common stock on the open market at a cost of $312.8 million and $152.1 million, including applicable excise tax, during the 13 weeks ended May 4, 2024 and April 29, 2023, respectively. Of the shares repurchased during the 13 weeks ended May 4, 2024 and April 29, 2023, $37.8 million and $7.7 million, respectively, settled subsequent to May 4, 2024 and April 29, 2023, respectively, and these amounts were accrued in the accompanying unaudited Condensed Consolidated Balance Sheets. At May 4, 2024, we had $1.04 billion remaining under our existing $2.5 billion Board repurchase authorization. Critical Accounting Estimates and Assumptions Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Actual results could be significantly different from these estimates. Refer to Note 2 of our Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024, for a summary of our significant accounting policies.