What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-04 compared with 2024-09-04 · 100 added, 107 removed, 233 unchanged (47% of the section changed)

9 unchanged sentences

• 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 supply chain, distribution facilities, truck fleet and transportation management systems, store delivery and equipment, the in-store experience, wage investments and other workforce investments and goals;

• Our expectations regarding the implementation and impact of investments in our technology and the design and implementation of internal controls around our technology transformation;

1 unchanged sentence

• 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 and interest rates on our sales and our operating costs and income;

• 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 losses, the availability of insurance coverage and expected insurance recoveries, changes within our supply chain network and our customer shopping experience;

• The impacts of tornado damage to our Dollar Tree distribution center in Marietta, Oklahoma, including expectations regarding inventory and property losses, the availability of insurance coverage and expected insurance recoveries, costs and other changes within our supply chain network and our customer shopping experience;

• Risks related to inflation and interest rates;

7 unchanged sentences

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.

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

• Higher costs and disruptions in our distribution network could have an adverse impact on our sales and profitability.

42 unchanged sentences

Quarterly Results

Financial highlights for the 13 weeks ended August 3, 2024, as compared to the 13 weeks ended July 29, 2023, include:

Financial highlights for the 13 weeks ended November 2, 2024, as compared to the 13 weeks ended October 28, 2023, include:

• Net sales increased 3.5% to $7,561.7 million, primarily due to a 1.8% enterprise-wide comparable store net sales increase.

• Gross profit, as a percentage of net sales, increased 80 basis points to 30.0%, primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise, and increased occupancy and distribution costs.

• Selling, general and administrative expenses, as a percentage of total revenues, increased 200 basis points to 27.3%, primarily due to unfavorable development of general liability claims, higher depreciation expense from store investments, increases in temporary labor on the Dollar Tree segment to support our multi-price rollout, and the loss of leverage from the low single-digit comparable store net sales increase, partially offset by lower incentive compensation.

• Operating income, as a percentage of total revenues, decreased 110 basis points to 2.8%.

• The effective tax rate was 24.0% and remained unchanged as compared to the prior year quarter.

• Net income was $132.4 million, or $0.62 per diluted share, compared to $200.4 million, or $0.91 per diluted share.

At August 3, 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 26 weeks ended August 3, 2024 was approximately 9,330 selling square feet for the Dollar Tree segment and 8,840 selling square feet for the Family Dollar segment.

A breakdown of store counts and square footage by segment for the 26 weeks ended August 3, 2024 and July 29, 2023 is as follows:

• Gross profit, as a percentage of net sales, increased 120 basis points to 30.9%, primarily due to lower freight costs and improved shrink results in relation to accruals, partially offset by increased distribution costs.

• Selling, general and administrative expenses, as a percentage of total revenues, increased 90 basis points to 26.6%, primarily due to higher depreciation expense from store investments, higher professional fees related to the review of Family Dollar strategic alternatives, temporary labor on the Dollar Tree segment to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

• Operating income, as a percentage of total revenues, increased 30 basis points to 4.4%.

• The effective tax rate was 23.7%, an increase of 190 basis points as compared to the prior year quarter, resulting primarily from lower Work Opportunity Tax Credits.

• Net income was $233.3 million, or $1.08 per diluted share, compared to $212.0 million, or $0.97 per diluted share in the prior year quarter.

At November 2, 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 39 weeks ended November 2, 2024 was approximately 11,050 selling square feet for the Dollar Tree segment and 8,850 selling square feet for the Family Dollar segment.

A breakdown of store counts and square footage by segment for the 39 weeks ended November 2, 2024 and October 28, 2023 is as follows:

39 Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total

18 unchanged sentences

See the “Strategic Initiatives and Recent Developments” section below for additional detail.

The percentage change in comparable store net sales for the 13 and 26 weeks ended August 3, 2024, as compared with the preceding year, is as follows:

13 Weeks Ended August 3, 2024

26 Weeks Ended August 3, 2024

The percentage change in comparable store net sales for the 13 and 39 weeks ended November 2, 2024, as compared with the preceding year, is as follows:

13 Weeks Ended November 2, 2024

39 Weeks Ended November 2, 2024

Sales Growth Change in

10 unchanged sentences

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.

Net sales per selling square foot for the 52 weeks ended August 3, 2024 and July 29, 2023 is as follows:

Net sales per selling square foot for the 52 weeks ended November 2, 2024 and October 28, 2023 is as follows:

52 Weeks Ended

August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023

Dollar Tree Family Dollar Total Dollar Tree Family Dollar Total

Net sales per selling square foot $233 $223 $229 $227 $218 $222

For the 52 weeks ended August 3, 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 August 3, 2024 is excluded from the denominator of the calculation which represents the average selling square footage for the 52-week period.

For the 52 weeks ended November 2, 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 November 2, 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.

5 unchanged sentences

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 at varying price points.

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.

As of August 3, 2024, we have expanded our multi-price assortment in approximately 1,600 stores.

As of November 2, 2024, we have expanded our multi-price assortment in approximately 2,300 stores.

99 Cents Only Stores Acquisition.

1 unchanged sentence

The designation rights were acquired following the bankruptcy of 99 Cents Only Stores, which provided us an attractive opportunity to secure leases in priority markets.

We have secured the leases for 164 of these stores and have opened approximately half of these stores under our Dollar Tree segment.

We expect to open the remaining stores during the second half of fiscal 2024 under our Dollar Tree segment.

We secured the leases for 164 of these stores and substantially all have opened under our Dollar Tree segment.

Family Dollar Merchandising.

3 unchanged sentences

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

As of August 3, 2024, we have more than 2,150 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 height presentation, and implementing planogram and category resets.

As of November 2, 2024, we have more than 2,180 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 height presentation, updating in-store signage, implementing planogram and category resets and updating our pricing strategy.

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.

2 unchanged sentences

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 August 3, 2024, we have closed approximately 655 stores identified under the portfolio optimization review and expect to close an additional 45 during the remainder of fiscal 2024.

As of November 2, 2024, we have closed approximately 670 stores identified under the portfolio optimization review and expect to close an additional 25 during the remainder of fiscal 2024.

During the second quarter of fiscal 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.

We continue to progress in our strategic review to position Family Dollar in an optimal ownership structure.

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.

1 unchanged sentence

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.

Additional initiatives include projects to optimize and modernize our stores, with a focus on improving the in-store experience through renovations and customer service enhancements.

Supply Chain Optimization .

2 unchanged sentences

Technology Investment.

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

We continue our multi-year plan for significant investment in our technology across our business, including our mobile apps, store systems, merchandising and supply chain.

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

3 unchanged sentences

We have pivoted our supply chain network to deliver products 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 are 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 continue negatively impacting gross margin in the near term.

General Liability Claims Development.

Our self-insured general liability claims related to customer accidents and other incidents at our stores continue to develop unfavorably due to the rising costs to reimburse, settle, or litigate the claims.

As a result, our actuarially determined liabilities were increased during the second quarter, contributing to a $64.3 million increase in our general liability claim expenses compared to the prior year quarter.

This increase was comprised of a $45.3 million increase in the Dollar Tree segment and a $19.0 million increase in the Family Dollar segment.

4 unchanged sentences

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.

Note that the cost of sales rate is calculated by dividing cost of sales by net sales.

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

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

1 unchanged sentence

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 and 26 weeks ended August 3, 2024 and July 29, 2023:

The following table contains results of operations data for the 13 and 39 weeks ended November 2, 2024 and October 28, 2023:

13 Weeks Ended 39 Weeks Ended

(in millions, except percentages)

August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023

November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Net sales $ 7,561.7 $ 7,309.1 $ 22,560.8 $ 21,948.7

5 unchanged sentences

Interest expense, net 27.5 30.4 80.8 80.5

Other (income) expense, net

— (0.1) 0.1 —

Other expense, net 0.1 0.2 0.2 0.2

Income before income taxes 305.8 271.1 876.1 928.5

13 unchanged sentences

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Net sales $ 7,561.7 $ 7,309.1 3.5 % $ 22,560.8 $ 21,948.7 2.8 %

Comparable store net sales change 1.8 % 3.9 % 1.2 % 5.2 %

The increase in net sales in the 13 weeks ended August 3, 2024 was a result of the comparable store net sales increase in the Dollar Tree segment, and net sales of $336.2 million at non-comparable stores.

The increase was partially offset by lower sales on the Family Dollar segment resulting from approximately 655 stores closed under the portfolio optimization review since the same period last year, and a comparable store net sales decrease for that segment.

For the 13 weeks ended August 3, 2024, net sales at non-comparable stores included $10.7 million from the Family Dollar stores that were closed under the portfolio optimization review in the second quarter of this year.

Enterprise comparable store net sales increased 0.7% in the 13 weeks ended August 3, 2024, as a result of a 1.1% increase in customer traffic, partially offset by a 0.5% decrease in average ticket.

Comparable store net sales increased 1.3% in the Dollar Tree segment and decreased 0.1% in the Family Dollar segment.

The increase in net sales in the 26 weeks ended August 3, 2024 was a result of the comparable store net sales increase in the Dollar Tree segment, and net sales of $846.9 million at non-comparable stores.

The increase in net sales in the 13 weeks ended November 2, 2024 was a result of comparable store net sales increases in the Dollar Tree and Family Dollar segments, and net sales of $401.4 million at non-comparable stores.

The increase was partially offset by lower sales on the Family Dollar segment resulting from approximately 670 stores closed under the portfolio optimization review since the same period last year.

For the 26 weeks ended August 3, 2024, net sales at non-comparable stores included $189.9 million from the Family Dollar stores that were closed under the portfolio optimization review in the first half of this year.

Enterprise comparable store net sales increased 0.8% in the 26 weeks ended August 3, 2024, as a result of a 1.6% increase in customer traffic, partially offset by a 0.8% decrease in average ticket.

Comparable store net sales increased 1.5% in the Dollar Tree segment and was flat in the Family Dollar segment.

Enterprise comparable store net sales increased 1.8% in the 13 weeks ended November 2, 2024, as a result of a 1.6% increase in customer traffic and a 0.2% increase in average ticket.

Comparable store net sales increased 1.8% in the Dollar Tree segment and increased 1.9% in the Family Dollar segment.

The low single-digit comparable store net sales increase was primarily impacted by the macro economic environment which continues to affect our customers due to the impact of inflationary pressures and higher interest rates.

We expect these sales trends, and the resulting negative impact on operating income, to continue into the second half of fiscal 2024.

We expect these sales trends, and the resulting negative impact on operating income, to continue for the remainder of fiscal 2024.

The increase in net sales in the 39 weeks ended November 2, 2024 was a result of comparable store net sales increases in the Dollar Tree and Family Dollar segments, and net sales of $1.3 billion at non-comparable stores.

The increase was partially offset by lower sales on the Family Dollar segment resulting from approximately 670 stores closed under the portfolio optimization review since the same period last year.

For the 39 weeks ended November 2, 2024, net sales at non-comparable stores included $200.0 million from the Family Dollar stores that were closed under the portfolio optimization review in the first three quarters of this year.

Enterprise comparable store net sales increased 1.2% in the 39 weeks ended November 2, 2024, as a result of a 1.6% increase in customer traffic, partially offset by a 0.5% decrease in average ticket.

Comparable store net sales increased 1.6% in the Dollar Tree segment and 0.6% in the Family Dollar segment.

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Gross profit $ 2,337.4 $ 2,173.0 7.6 % $ 6,899.6 $ 6,538.1 5.5 %

Gross profit margin 30.9 % 29.7 % 1.2 % 30.6 % 29.8 % 0.8 %

Gross profit margin increased during the 13 weeks ended August 3, 2024 due to an 80 basis point decrease in cost of sales.

The cost of sales rate decreased to 70.0% during the 13 weeks ended August 3, 2024 from 70.8% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise, higher occupancy costs on the Dollar Tree segment resulting from the loss of leverage from the low single-digit comparable store net sales increase, and higher distribution costs on the Family Dollar segment.

Gross profit margin increased during the 26 weeks ended August 3, 2024 due to a 60 basis point decrease in cost of sales.

The cost of sales rate decreased to 69.6% during the 26 weeks ended August 3, 2024 from 70.2% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise, higher distribution costs and increased shrink costs due to unfavorable physical inventory results.

Gross profit margin increased during the 13 weeks ended November 2, 2024 due to a 120 basis point decrease in cost of sales.

The cost of sales rate decreased to 69.1% during the 13 weeks ended November 2, 2024 from 70.3% during the same period last year primarily due to lower freight costs and improved shrink results in relation to accruals, partially offset by increased distribution costs.

Gross profit margin increased during the 39 weeks ended November 2, 2024 due to an 80 basis point decrease in cost of sales.

The cost of sales rate decreased to 69.4% during the 39 weeks ended November 2, 2024 from 70.2% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise and higher distribution costs.

Selling, General and Administrative Expenses

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Selling, general and administrative

2 unchanged sentences

expense rate 26.6 % 25.7 % 0.9 % 26.4 % 25.2 % 1.2 %

The selling, general and administrative expense rate increased 200 basis points during the 13 weeks ended August 3, 2024 primarily due to unfavorable development of general liability claims, higher depreciation expense from store investments, temporary labor on the Dollar Tree segment to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

The increases were partially offset by lower incentive compensation costs.

The selling, general and administrative expense rate increased 130 basis points during the 26 weeks ended August 3, 2024 primarily due to unfavorable development of general liability claims, higher depreciation expense from store investments, temporary labor on the Dollar Tree segment to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

The selling, general and administrative expense rate increased 90 basis points during the 13 weeks ended November 2, 2024 primarily due to higher depreciation expense from store investments, higher professional fees related to the review of Family Dollar strategic alternatives, temporary labor on the Dollar Tree segment to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

The selling, general and administrative expense rate increased 120 basis points during the 39 weeks ended November 2, 2024 primarily due to higher depreciation expense from store investments, unfavorable development of general liability claims, temporary labor on the Dollar Tree segment to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

The increases were partially offset by a decrease in legal costs as the prior year included a $30.0 million accrual for DC 202-related legal matters on the Family Dollar segment.

1 unchanged sentence

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Operating income $ 333.4 $ 301.7 10.5 % $ 957.1 $ 1,009.2 (5.2) %

Operating income margin 4.4 % 4.1 % 0.3 % 4.2 % 4.6 % (0.4) %

Operating income margin decreased to 2.8% for the 13 weeks ended August 3, 2024 compared to 3.9% 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.

Operating income margin decreased to 4.2% for the 26 weeks ended August 3, 2024 compared to 4.8% 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.

Operating income margin increased to 4.4% for the 13 weeks ended November 2, 2024 compared to 4.1% for the same period last year, resulting from the increase in gross profit margin, partially offset by the increase in the selling, general and administrative expense rate, as described above.

Operating income margin decreased to 4.2% for the 39 weeks ended November 2, 2024 compared to 4.6% 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.

Interest Expense, Net

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Interest expense, net $ 27.5 $ 30.4 (9.5) % $ 80.8 $ 80.5 0.4 %

Interest expense, net increased $4.7 million in the 13 weeks ended August 3, 2024 compared to the same period last year, due to a decrease in interest income resulting from lower invested cash, and interest incurred for short-term borrowings under our commercial paper program.

There were no borrowings under our commercial paper program in the same period last year.

Interest expense, net increased $3.2 million in the 26 weeks ended August 3, 2024 compared to the same period last year, due to a decrease in interest income resulting from lower invested cash, and interest incurred for short-term borrowings under our commercial paper program.

There were no borrowings under our commercial paper program in the same period last year.

Interest expense, net decreased $2.9 million in the 13 weeks ended November 2, 2024 compared to the same period last year, primarily due to an increase in interest income resulting from higher invested cash.

Interest expense, net increased $0.3 million in the 39 weeks ended November 2, 2024 compared to the same period last year, primarily due to higher interest incurred for short-term borrowings under our commercial paper program.

Provision for Income Taxes

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Provision for income taxes $ 72.5 $ 59.1 22.7 % $ 210.3 $ 217.1 (3.1) %

Effective tax rate 23.7 % 21.8 % 1.9 % 24.0 % 23.4 % 0.6 %

The effective tax rate was 24.0% for the 13 weeks ended August 3, 2024 and remained unchanged as compared to the prior year quarter.

The effective tax rate was 24.2% for the 26 weeks ended August 3, 2024 compared to 24.0% for the comparable prior year period, resulting primarily from higher tax expense in the current year related to restricted stock vesting, partially offset by lower non-deductible expenses.

The effective tax rate was 23.7% for the 13 weeks ended November 2, 2024 compared to 21.8% for the comparable prior year period, resulting primarily from lower Work Opportunity Tax Credits.

The effective tax rate was 24.0% for the 39 weeks ended November 2, 2024 compared to 23.4% for the comparable prior year period, resulting primarily from higher tax expense in the current year related to restricted stock vesting and lower Work Opportunity Tax Credits, partially offset by lower non-deductible expenses.

Segment Information

2 unchanged sentences

13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Net sales $ 4,338.0 $ 4,003.8 8.3 % $ 12,569.1 $ 11,808.9 6.4 %

3 unchanged sentences

Operating income margin 10.7 % 12.1 % (1.4) % 10.6 % 12.0 % (1.4) %

Net sales for the Dollar Tree segment increased $192.1 million, or 5.0%, during the 13 weeks ended August 3, 2024 compared to the same period last year due to an increase in comparable store net sales of 1.3%, and net sales of $207.5 million at non-comparable stores.

Customer traffic increased 1.4% and average ticket decreased 0.1%.

Net sales for the Dollar Tree segment increased $426.0 million, or 5.5%, during the 26 weeks ended August 3, 2024 compared to the same period last year due to an increase in comparable store net sales of 1.5%, and net sales of $401.6 million at non-comparable stores.

Net sales for the Dollar Tree segment increased $334.2 million, or 8.3%, during the 13 weeks ended November 2, 2024 compared to the same period last year due to an increase in comparable store net sales of 1.8%, and net sales of $296.7 million at non-comparable stores.

Customer traffic increased 1.5% and average ticket increased 0.3%.

Net sales for the Dollar Tree segment increased $760.2 million, or 6.4%, during the 39 weeks ended November 2, 2024 compared to the same period last year due to an increase in comparable store net sales of 1.6%, and net sales of $707.0 million at non-comparable stores.

Customer traffic increased 1.9% and average ticket decreased 0.3%.

Gross profit margin in the Dollar Tree segment increased to 34.2% during the 13 weeks ended August 3, 2024 from 33.4% during the same period last year due to an 80 basis point decrease in cost of sales.

The cost of sales rate decreased to 65.8% during the 13 weeks ended August 3, 2024 from 66.6% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise and increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase.

Gross profit margin in the Dollar Tree segment increased to 34.8% during the 26 weeks ended August 3, 2024 from 34.4% during the same period last year due to a 40 basis point decrease in cost of sales.

The cost of sales rate decreased to 65.2% during the 26 weeks ended August 3, 2024 from 65.6% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise, increased shrink costs resulting from unfavorable inventory results, increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase and higher distribution costs.

Operating income margin for the Dollar Tree segment decreased to 8.4% during the 13 weeks ended August 3, 2024 from 10.3% 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 270 basis points primarily due to unfavorable development of general liability claims, higher depreciation expense from store investments, temporary labor to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

Operating income margin for the Dollar Tree segment decreased to 10.5% during the 26 weeks ended August 3, 2024 from 12.0% 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 195 basis points primarily due to unfavorable development of general liability claims, higher depreciation expense from store investments, temporary labor to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

Gross profit margin in the Dollar Tree segment increased to 35.4% during the 13 weeks ended November 2, 2024 from 34.8% during the same period last year due to a 60 basis point decrease in cost of sales.

The cost of sales rate decreased to 64.6% during the 13 weeks ended November 2, 2024 from 65.2% during the same period last year primarily due to lower freight costs, partially offset by increased markdown costs for slow moving items, higher distribution costs, increased sales of higher cost consumable merchandise, and increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase.

Gross profit margin in the Dollar Tree segment increased to 35.0% during the 39 weeks ended November 2, 2024 from 34.5% during the same period last year due to a 50 basis point decrease in cost of sales.

The cost of sales rate decreased to 65.0% during the 39 weeks ended November 2, 2024 from 65.5% during the same period last year primarily due to lower freight costs, partially offset by increased sales of higher cost consumable merchandise, higher distribution costs, increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase, increased markdown costs for slow moving items, and increased shrink costs resulting from unfavorable inventory results.

Operating income margin for the Dollar Tree segment decreased to 10.7% during the 13 weeks ended November 2, 2024 from 12.1% 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 180 basis points primarily due to higher depreciation expense from store investments, temporary labor to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

Operating income margin for the Dollar Tree segment decreased to 10.6% during the 39 weeks ended November 2, 2024 from 12.0% 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 190 basis points primarily due to higher depreciation expense from store investments, unfavorable development of general liability claims, temporary labor to support our multi-price rollout, higher utilities costs, and loss of leverage from the low single-digit comparable store net sales increase.

Family Dollar

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13 Weeks Ended 39 Weeks Ended

(dollars in millions) August 3, 2024 July 29, 2023 Percentage Change August 3, 2024 July 29, 2023 Percentage Change

(dollars in millions) November 2, 2024 October 28, 2023 Percentage Change November 2, 2024 October 28, 2023 Percentage Change

Net sales $ 3,223.7 $ 3,305.3 (2.5) % $ 9,991.7 $ 10,139.8 (1.5) %

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Operating income (loss) margin — % (2.0) % 2.0 % 0.2 % (0.5) % 0.7 %

Net sales for the Family Dollar segment decreased $139.5 million, or 4.0%, during the 13 weeks ended August 3, 2024 compared to the same period last year resulting from approximately 655 stores closed under the portfolio optimization review since the same period last year, and a decrease in comparable store net sales of 0.1%.

Net sales at non-comparable stores totaled $128.7 million and included $10.7 million of sales from the stores that were closed under the portfolio optimization review in the second quarter of this year.

Customer traffic increased 0.7% and average ticket decreased 0.8%.

Net sales for the Family Dollar segment decreased $66.5 million, or 1.0%, during the 26 weeks ended August 3, 2024 compared to the same period last year resulting from approximately 655 stores closed under the portfolio optimization review since the same period last year.

Comparable store net sales were flat.

Net sales at non-comparable stores totaled $445.3 million and included $189.9 million of sales from the stores that were closed under the portfolio optimization review in the first half of this year.

Net sales for the Family Dollar segment decreased $81.6 million, or 2.5%, during the 13 weeks ended November 2, 2024 compared to the same period last year resulting from approximately 670 stores closed under the portfolio optimization review since the same period last year, partially offset by an increase in comparable store net sales of 1.9%.

Net sales at non-comparable stores totaled $104.7 million.

Customer traffic increased 1.8% and average ticket was flat.

Net sales for the Family Dollar segment decreased $148.1 million, or 1.5%, during the 39 weeks ended November 2, 2024 compared to the same period last year resulting from approximately 670 stores closed under the portfolio optimization review since the same period last year, partially offset by an increase in comparable store net sales of 0.6%.

Net sales at non-comparable stores totaled $579.5 million and included $200.0 million of sales from the stores that were closed under the portfolio optimization review in the first three quarters of this year.

Customer traffic increased 1.2% and average ticket decreased 0.5%.

Gross profit margin in the Family Dollar segment increased to 24.9% during the 13 weeks ended August 3, 2024 from 24.4% during the same period last year due to a 50 basis point decrease in cost of sales.

The cost of sales rate decreased to 75.1% during the 13 weeks ended August 3, 2024 from 75.6% during the same period last year primarily due to lower freight costs and lower occupancy costs resulting from the store closures in connection with the portfolio optimization review, partially offset by increased sales of higher cost consumable merchandise, higher distribution costs, and higher dated product markdowns.

Gross profit margin in the Family Dollar segment increased to 25.0% during the 26 weeks ended August 3, 2024 from 24.6% during the same period last year due to a 40 basis point decrease in cost of sales.

The cost of sales rate decreased to 75.0% during the 26 weeks ended August 3, 2024 from 75.4% during the same period last year primarily due to lower freight costs and lower occupancy costs resulting from the store closures in connection with the portfolio optimization review, partially offset by increased sales of higher cost consumable merchandise, higher distribution costs, and higher dated product markdowns.

Operating income (loss) margin for the Family Dollar segment decreased to (0.4)% during the 13 weeks ended August 3, 2024 from 0.3% 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 130 basis points primarily due to higher depreciation expense from store investments, unfavorable development of general liability claims, higher professional fees related to the review of Family Dollar strategic alternatives, and the loss of leverage from the comparable store net sales decrease.

Operating income margin for the Family Dollar segment was 0.3% for the 26 weeks ended August 3, 2024 and remained unchanged compared to the same period last year as a result of an increase in the selling, general and administrative expense rate, offset by the gross profit margin increase noted above.

The selling, general and administrative expense rate increased 40 basis points primarily due to higher depreciation expense from store investments, unfavorable development of general liability claims, higher professional fees related to the review of Family Dollar strategic alternatives, and loss of leverage from the flat comparable store net sales.

These increases were partially offset by a decrease in legal costs as the prior year included a $30.0 million accrual for DC 202-related legal matters.

Gross profit margin in the Family Dollar segment increased to 24.9% during the 13 weeks ended November 2, 2024 from 23.6% during the same period last year due to a 130 basis point decrease in cost of sales.

The cost of sales rate decreased to 75.1% during the 13 weeks ended November 2, 2024 from 76.4% during the same period last year primarily due to lower freight costs, lower markdown costs resulting from a voluntary retail-level product recall in the prior year quarter and higher allowances for promotional activity in the current quarter, improved shrink results in relation to accruals and lower occupancy costs resulting from the store closures in connection with the portfolio optimization review, partially offset by higher distribution costs.

Gross profit margin in the Family Dollar segment increased to 25.0% during the 39 weeks ended November 2, 2024 from 24.3% during the same period last year due to a 70 basis point decrease in cost of sales.

The cost of sales rate decreased to 75.0% during the 39 weeks ended November 2, 2024 from 75.7% during the same period last year primarily due to lower freight costs and lower occupancy costs resulting from the store closures in connection with the portfolio optimization review, partially offset by higher distribution costs.

Operating income (loss) margin for the Family Dollar segment increased to 0.0% during the 13 weeks ended November 2, 2024 from (2.0)% during the same period last year as a result of the gross profit margin increase noted above and a decrease in the selling, general and administrative expense rate.

The selling, general and administrative expense rate decreased 70 basis points primarily due to lower store payroll, lower store supplies expenses, and lower repairs and maintenance expenses, partially offset by higher professional fees related to the review of Family Dollar strategic alternatives, higher depreciation expense from store investments and the loss of leverage from the low single-digit comparable store net sales increase.

Operating income (loss) margin for the Family Dollar segment increased to 0.2% during the 39 weeks ended November 2, 2024 from (0.5)% during the same period last year as a result of the gross profit margin increase noted above.

The selling, general and administrative expense rate remained unchanged compared to the same period last year as higher depreciation expense from store investments, unfavorable development of general liability claims, higher professional fees related to the review of Family Dollar strategic alternatives, and the loss of leverage from the low single-digit comparable store net sales increase was offset by a decrease in legal costs, lower store payroll, and lower store supplies expenses.

The prior year included a $30.0 million accrual for DC 202-related legal matters.

Liquidity and Capital Resources

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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 26 weeks ended August 3, 2024 and July 29, 2023:

The following table compares cash flow-related information for the 39 weeks ended November 2, 2024 and October 28, 2023:

39 Weeks Ended

(in millions) August 3, 2024 July 29, 2023

(in millions) November 2, 2024 October 28, 2023

Net cash provided by (used in):

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Financing activities (412.9) (301.9)

Net cash provided by operating activities increased $78.8 million primarily due to higher current year earnings, excluding non-cash items.

In addition, an increase in accounts payable was partially offset by inventory levels decreasing at a lower rate compared to the prior year and other changes in operating assets and liabilities.

Net cash used in investing activities increased $169.0 million primarily due to higher capital expenditures.

Net cash used in financing activities decreased $107.3 million primarily due to borrowings under our commercial paper program in the current year, partially offset by an increase in stock repurchases.

At August 3, 2024, our long-term borrowings were $3.45 billion, of which $1.0 billion matures in May 2025, and we had $1.5 billion available under our Revolving Credit Facility, less amounts outstanding for standby letters of credit totaling $4.1 million.

Net cash provided by operating activities increased $358.6 million primarily due to an increase in accounts payable and higher current year earnings, excluding non-cash items, partially offset by increasing inventory levels and decreases in accrued liabilities.

Net cash used in investing activities increased $36.8 million primarily due to higher capital expenditures, partially offset by insurance recoveries related to damaged property and equipment at our Dollar Tree distribution center in Marietta, Oklahoma as discussed in Note 3 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q .

Net cash used in financing activities increased $111.0 million primarily due to lower net borrowings under our commercial paper program, partially offset by lower stock repurchases.

At November 2, 2024, our long-term borrowings were $3.45 billion, of which $1.0 billion matures in May 2025, 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 which we may issue unsecured commercial paper notes up to an aggregate amount outstanding at any time of $1.5 billion.

As of November 2, 2024, there were no commercial paper notes outstanding.

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

As of August 3, 2024, $250.0 million principal amount of notes were outstanding under the commercial paper program.

Additionally, we have $300.0 million in trade letters of credit with various financial institutions, under which $7.4 million was committed to letters of credit issued for routine purchases of imported merchandise as of August 3, 2024.

We repurchased 3,283,837 and 1,728,713 shares of common stock on the open market at a cost of $403.6 million and $252.0 million, including applicable excise tax, during the 26 weeks ended August 3, 2024 and July 29, 2023, respectively.

At August 3, 2024, we had $952.4 million remaining under our existing $2.5 billion Board repurchase authorization.

We issued and repaid $3.2 billion of commercial paper notes during the 39 weeks ended November 2, 2024 and incurred interest expense of $3.9 million related to these notes.

Additionally, we have $250.0 million in trade letters of credit with various financial institutions, under which $3.6 million was committed to letters of credit issued for routine purchases of imported merchandise as of November 2, 2024.

We repurchased 3,283,837 and 3,905,599 shares of common stock on the open market at a cost of $403.6 million and $504.3 million, including applicable excise tax, during the 39 weeks ended November 2, 2024 and October 28, 2023, respectively.

At November 2, 2024, we had $952.4 million remaining under our existing $2.5 billion Board repurchase authorization.

Critical Accounting Estimates and Assumptions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis