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 and future strategic initiatives, 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 multi-price assortments in the Dollar Tree segment and our ability to adjust pricing; • Our plans to add, renovate and remodel stores, and our expectations regarding store standards and operations, efficiency initiatives, selling square footage, the in-store experience and the performance of those formats; • Our customer’s response to our product offerings, value and shopping experience; • Our expectations regarding the implementation and impact of investments in supply chain, distribution facilities, warehouse and human capital management systems, trucking fleet and transportation management systems, and store delivery and equipment, including new distribution centers, the expansion or conversion of existing distribution centers, and the capabilities of our distribution center network; • Our expectations regarding the implementation and impact of investments in our technology infrastructure; • The design and implementation of internal controls around various investments and initiatives; • Our plans and expectations regarding the pending sale of the Family Dollar business; • 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 business; • The direct and indirect impacts of current and potential tariffs and other trade-related measures, restrictions and policies and any retaliatory counter measures, and our plans to mitigate those impacts; • The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations, 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 changes within our supply chain network and expectations regarding our customer shopping experience; and • Our liquidity and 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 1, 2025 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 cost pressures from increases in merchandise, shipping, freight and fuel costs, wage and benefit and other operating costs. • Risks associated with merchandise supply could adversely affect our financial performance. 16 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, other changes in economic conditions or consumer spending habits could impact our sales or profitability. • 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, which may have an adverse impact on our business and financial results. • The completion of the pending sale of the Family Dollar business is subject to various risks and uncertainties, may not be completed in a timely fashion or at all, and the pending sale may be disruptive to our business operations and adversely affect our profitability. • If the pending sale of the Family Dollar business is completed, we may not achieve the anticipated benefits of the transaction, and the transaction may expose us to new risks. • We have incurred losses due to impairment of goodwill and other long-lived assets. • We make estimates and assumptions in connection with the preparation of our consolidated financial statements, and any changes to those estimates and assumptions could adversely affect our results of operations. • 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. 17 Table of Contents 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. 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 9,000 retail discount stores, as of May 3, 2025, offering merchandise predominantly at the opening price point of $1.25, with additional offerings at higher price points. 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, consumer buying preference 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 were converted from Family Dollar stores to Dollar Tree stores 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 Dollar Tree brand. Additionally, 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. On March 25, 2025, the Company entered into a definitive agreement to sell the Family Dollar business to Brigade Capital Management, LP and Macellum Capital Management, LLC, for a purchase consideration of $1,007.0 million, subject to a number of adjustments, including with respect to working capital and net indebtedness. The closing of the transaction is subject to satisfaction of customary closing conditions. Net proceeds are estimated to total approximately $800 million. The transaction is expected to close in the second quarter of fiscal 2025. The results of Family Dollar are presented as discontinued operations in the accompanying unaudited Condensed Consolidated Income Statements for all periods presented. The assets and liabilities of Family Dollar have been reflected as assets and liabilities of discontinued operations in the accompanying unaudited Condensed Consolidated Balance Sheets for all periods presented. Unless otherwise noted, all amounts, percentages and discussions below reflect only the results of operations and financial condition of our continuing operations. Refer to “Strategic Initiatives and Recent Developments” below and Note 10 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information on discontinued operations. Quarterly Results Financial highlights for the 13 weeks ended May 3, 2025, as compared to the 13 weeks ended May 4, 2024, include: • Net sales increased 11.3% to $4,636.5 million due to a 5.4% comparable store net sales increase and net sales of $345.3 million at non-comparable stores. • Gross profit increased 11.7% to $1,649.5 million primarily due to our net store growth. Gross profit, as a percentage of net sales, increased 20 basis points to 35.6%. • Selling, general and administrative expenses, as a percentage of total revenues, increased 100 basis points to 27.3%. • Operating income, as a percentage of total revenues, decreased 90 basis points to 8.3%. • The effective tax rate was 25.9%, an increase of 130 basis points as compared to the prior year quarter. • Income from continuing operations was $313.5 million, or $1.47 per diluted share, compared to $267.7 million, or $1.23 per diluted share in the prior year quarter. 18 Table of Contents Store Activity & Selected Sales Data At May 3, 2025, 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 3, 2025 was approximately 8,910 selling square feet. A breakdown of the changes in store count and square footage is as follows: 13 Weeks Ended May 3, 2025 May 4, 2024 Store Count: Beginning 8,881 8,415 New stores 148 116 Stores converted from Family Dollar 5 5 Closings (18) (16) Ending 9,016 8,520 Relocations 1 7 Selling Square Feet (in millions): Beginning 78.4 73.1 New stores 1.3 1.1 Stores converted from Family Dollar* 0.1 — Closings (0.2) (0.1) Ending 79.6 74.1 *Selling square footage impact of converted stores is only provided if it equals or exceeds 0.1 million selling square feet. The store counts above do not include new stores until they are opened for sales. Similarly, stores converted from a Family Dollar store to a Dollar Tree store are reflected in the table above when they re-opened as a Dollar Tree store. The percentage change in comparable store net sales, as compared with the preceding year, is as follows: 13 Weeks Ended May 3, 2025 May 4, 2024 Sales Growth 5.4% 1.7% Change in Customer Traffic 2.5% 2.8% Change in Average Ticket 2.8% (1.1)% 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 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. Net sales per selling square foot for the 52 weeks ended May 3, 2025 and May 4, 2024 is as follows: 52 Weeks Ended May 3, 2025 May 4, 2024 Net sales per selling square foot $235 $235 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. 19 Table of Contents Strategic Initiatives and Recent Developments We continue to execute on a number of strategic initiatives 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, and in no particular order, 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 products 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. As of May 3, 2025, we had more than 3,520 multi-price format stores. Tariffs and Other Trade Measures. Beginning in the first quarter of 2025, new tariffs were announced on imports to the U.S. (“U.S. Tariffs”), including additional tariffs on imports from China, Mexico, Canada and other countries from which we import goods. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other retaliatory measures. Various modifications and delays to the U.S. Tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. We are actively implementing mitigation strategies to offset the impact of cost inflation including tariffs as noted above, by negotiating lower product costs, rebates or invoice deductions with our suppliers, shifting supply sources to alternate countries, changing our product assortment or discontinuing certain items, or increasing our prices. We believe our mitigation strategies will allow us to protect our margins and maintain our competitiveness over the long term and, most importantly, keep providing our customers with the value, convenience, and discovery they expect for the products they need to help live and celebrate their lives. However, we expect our results to be impacted by near-term challenges, including higher costs due to the volatility in effective tariffs in the second quarter of fiscal 2025. Additionally, implementation costs associated with our mitigation strategies may be experienced before the benefits from those efforts are expected to materialize. The ultimate impact of cost inflation including tariffs and other related measures remains uncertain and will depend on several factors, including whether additional or incremental U.S. Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, the overall magnitude and duration of these measures, and the costs and effectiveness of, and consumer response to, our mitigation efforts. Our Workforce & Our Workplace. 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 the in-store experience through renovations and customer service enhancements. Supply Chain Optimization . Our supply chain initiatives include expanding and 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. These investments are expected to negatively impact gross margin in the near-to-mid term. Technology Investment. We continue our multi-year plan for significant investment in our technology across our business, including our mobile apps, human capital management system and supply chain system. We believe these improvements can promote operational efficiencies and deliver an elevated customer experience. Marietta, Oklahoma Distribution Center. In the first quarter of fiscal 2024, a tornado destroyed our 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 products to the approximately 600 Marietta-serviced stores, and we believe these efforts have limited and will continue to limit disruption to the Dollar Tree shopping experience. Such efforts included the conversion of the West Memphis Family Dollar distribution center to a Dollar Tree distribution center in the third quarter of fiscal 2024, and the expected conversion of the Odessa, Texas Family Dollar distribution center to a Dollar Tree distribution center in the second quarter of fiscal 2025. 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-to-mid term. In April 2025, we announced that we will be returning to Marietta, Oklahoma with a new, enhanced distribution center that is expected to be fully operational by spring 2027 with the capacity to serve 700 stores across the West and Southwest regions of the country. Family Dollar Strategic Alternatives Review. During the second quarter of fiscal 2024, we announced that we had initiated a formal review of strategic alternatives for the Family Dollar business, which could have included among others, a potential sale, spin-off or other disposition of the business. This strategic alternatives review concluded in the fourth quarter of fiscal 2024 and resulted in the decision to sell the Family Dollar business. As a result, we concluded the Family Dollar business met the held for sale and 20 Table of Contents discontinued operations accounting criteria. On March 25, 2025, we entered into a definitive agreement to sell the Family Dollar business to Brigade Capital Management, LP and Macellum Capital Management, LLC, for a purchase consideration of $1,007.0 million, subject to a number of adjustments, including with respect to working capital and net indebtedness. The closing of the transaction is subject to satisfaction of customary closing conditions. Net proceeds are estimated to total approximately $800 million. The transaction is expected to close in the second quarter of fiscal 2025. For information on discontinued operations, refer to Note 1 0 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q . Results of Operations Our results of operations and period-over-period changes are discussed in the following section. 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 and operating 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 3, 2025 and May 4, 2024: 13 Weeks Ended (in millions, except percentages) May 3, 2025 May 4, 2024 Revenues Net sales $ 4,636.5 $ 4,165.6 Other revenue 3.2 3.3 Total revenue 4,639.7 4,168.9 Expenses Cost of sales 2,987.0 2,689.1 Selling, general and administrative expenses 1,268.6 1,097.9 Operating income 384.1 381.9 Interest expense, net 22.7 26.7 Other (income) expense, net (61.7) 0.1 Income from continuing operations before income taxes 423.1 355.1 Provision for income taxes 109.6 87.4 Income from continuing operations $ 313.5 $ 267.7 Gross profit margin 35.6 % 35.4 % Selling, general and administrative expense rate 27.3 % 26.3 % Operating income margin 8.3 % 9.2 % Interest expense, net as a percentage of total revenue 0.5 % 0.6 % Income from continuing operations before income taxes as a percentage of total revenue 9.1 % 8.5 % Effective tax rate 25.9 % 24.6 % Income from continuing operations as a percentage of total revenue 6.8 % 6.4 % Net Sales 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Net sales $ 4,636.5 $ 4,165.6 11.3 % Comparable store net sales change 5.4 % 1.7 % The increase in net sales in the 13 weeks ended May 3, 2025 was a result of the comparable store net sales increase and net sales of $345.3 million at non-comparable stores. Comparable store net sales increased 5.4% in the 13 weeks ended May 3, 2025, as a result of a 2.8% increase in average ticket and a 2.5% increase in customer traffic. 21 Table of Contents Gross Profit 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Gross profit $ 1,649.5 $ 1,476.5 11.7 % Gross profit margin 35.6 % 35.4 % 0.2 % Gross profit margin increased during the 13 weeks ended May 3, 2025 due to a 20 basis point decrease in cost of sales. The cost of sales rate decreased to 64.4% during the 13 weeks ended May 3, 2025 from 64.6% during the same period last year primarily due to lower freight costs, improved mark-on and lower occupancy costs due to leverage from the comparable store net sales increase, partially offset by increased distribution costs, shrink costs and markdown costs. Selling, General and Administrative Expenses 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Selling, general and administrative expenses $ 1,268.6 $ 1,097.9 15.5 % Selling, general and administrative expense rate 27.3 % 26.3 % 1.0 % The selling, general and administrative expense rate increased 100 basis points during the 13 weeks ended May 3, 2025 primarily due to higher depreciation expense from store investments, higher store payroll from wage increases, higher general liability claims costs, and higher utilities costs, partially offset by lower stock compensation, lower temporary labor needed to support our multi-price rollout, and leverage from the comparable store net sales increase. Operating Income 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Operating income $ 384.1 $ 381.9 0.6 % Operating income margin 8.3 % 9.2 % (0.9) % Operating income margin decreased to 8.3% for the 13 weeks ended May 3, 2025 compared to 9.2% 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 (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Interest expense, net $ 22.7 $ 26.7 (15.0) % Interest expense, net decreased $4.0 million in the 13 weeks ended May 3, 2025 compared to the same period last year, primarily due to higher interest income on investments. Other (Income) Expense, Net 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Other (income) expense, net $ (61.7) $ 0.1 (61,800.0) % 22 Table of Contents Other income, net was $61.7 million in the 13 weeks ended May 3, 2025 compared to expense of $0.1 million in the same period last year, primarily due to an insurance gain of approximately $62.0 million recognized in the first quarter of fiscal 2025 for the excess of the insurance proceeds received over the losses incurred for damaged property and equipment and damaged inventory associated with the tornado that destroyed our Marietta, Oklahoma Dollar Tree distribution center. Provision for Income Taxes 13 Weeks Ended (dollars in millions) May 3, 2025 May 4, 2024 Percentage Change Provision for income taxes $ 109.6 $ 87.4 25.4 % Effective tax rate 25.9 % 24.6 % 1.3 % The effective tax rate was 25.9% for the 13 weeks ended May 3, 2025 compared to 24.6% for the comparable prior year period, primarily due to reduced benefits from the vesting of share-based payment awards. 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 our cash flows for the 13 weeks ended May 3, 2025 and May 4, 2024: 13 Weeks Ended (in millions) May 3, 2025 May 4, 2024 Net cash provided by (used in): Operating activities of continuing operations $ 378.5 $ 505.2 Investing activities of continuing operations (198.9) (316.7) Financing activities of continuing operations (439.4) (287.8) Net cash provided by operating activities decreased $126.7 million primarily due to a decrease in accounts payable, partially offset by higher income tax accruals and other changes in accrued liabilities. Net cash used in investing activities decreased $117.8 million primarily due to lower capital expenditures and $50.0 million of 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 $151.6 million primarily due to higher stock repurchases. At May 3, 2025, our long-term borrowings were $3.45 billion, including $1.0 billion 4.00% Senior Notes maturing on May 15, 2025. Additionally, we had $1.5 billion available under our new Five-Year Credit Facility, less amounts outstanding for standby letters of credit totaling $3.8 million, and $1.0 billion available under our 364-Day Revolving Credit Facility. Refer to Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion of the new Five-Year Credit Facility and 364-Day Revolving Credit Facility. 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 May 3, 2025, there were no commercial paper notes outstanding. Our Five-Year Credit Facility serves as a liquidity backstop for the repayment of notes outstanding under the program. Additionally, we have $100.0 million in trade letters of credit with various financial institutions, under which $4.3 million was committed to letters of credit issued for routine purchases of imported merchandise as of May 3, 2025. On May 15, 2025, we leveraged our commercial paper program to redeem our $1.0 billion 4.00% Senior Notes, in addition to utilizing available cash. As of June 2, 2025, we had $550.0 million of commercial paper notes outstanding. 23 Table of Contents We repurchased 5,926,985 and 2,537,302 shares of common stock on the open market at a cost of $436.8 million and $312.8 million, including applicable excise tax, during the 13 weeks ended May 3, 2025 and May 4, 2024, respectively. Of the shares repurchased during the 13 weeks ended May 3, 2025 and May 4, 2024, $5.0 million and $37.8 million, respectively, settled subsequent to May 3, 2025 and May 4, 2024, respectively, and these amounts were accrued in the accompanying unaudited Condensed Consolidated Balance Sheets. At May 3, 2025, we had $519.7 million remaining under our existing $2.5 billion Board repurchase authorization. Subsequent to May 3, 2025, we purchased an additional 779,512 shares of common stock on the open market at a cost of $67.5 million, as of June 2, 2025. Critical Accounting Estimates and Assumptions Our condensed consolidated financial statements have been prepared in accordance with 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. For a summary of our significant accounting policies and critical accounting estimates, refer to Note 2 of our Consolidated Financial Statements and Critical Accounting Estimates and Assumptions within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.