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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-26 · 147 added, 184 removed, 177 unchanged (65% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of Form 10-K generally discusses fiscal 2025 and fiscal 2024 events and results, and year-to-year comparisons between fiscal 2025 and fiscal 2024.

Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

In Management’s Discussion and Analysis, we explain the general financial condition and the results of operations for our company, including, factors that affect our business, analysis of annual changes in certain line items in the consolidated financial statements, expenditures incurred for capital projects and sources of funding for future expenditures.

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Financial Statements and Supplementary Data ” of this Form 10-K.

During fiscal 2024, the Family Dollar business met the held for sale and discontinued operations accounting criteria.

Accordingly, the results of operations of the Family Dollar business are reported as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented and the related assets and liabilities are classified as assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets.

Unless otherwise noted, all amounts, percentages and discussions below reflect only the results of operations and financial condition of our continuing operations.

We are a leading operator of more than 8,800 retail discount stores, as of February 1, 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 preferences 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 year 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.

2025 Financial Highlights

Financial highlights for the fiscal year ended February 1, 2025, as compared to the fiscal year ended February 3, 2024, include:

Financial highlights for the fiscal year ended January 31, 2026, as compared to the fiscal year ended February 1, 2025, include:

• Net sales increased 10.4% to $19,395.7 million due to a 5.3% comparable store net sales increase and net sales of $1.4 billion at non-comparable stores.

The 53 rd week in fiscal 2023 accounted for $307.0 million of the total net sales.

• Gross profit increased 4.5% to $6,281.7 million as a result of our net store growth.

Gross profit, as a percentage of net sales, remained unchanged in fiscal 2024 as the cost of sales rate is 64.2% in both fiscal 2024 and 2023.

• Gross profit increased 12.2% to $7,050.7 million primarily due to the 5.3% comparable store net sales increase, our net store growth, and lower freight costs.

Gross profit, as a percentage of net sales, increased 60 basis points to 36.4%.

• Selling, general and administrative expenses, as a percentage of total revenues, increased 70 basis points to 28.2%.

• Operating income, as a percentage of total revenues, decreased 230 basis points to 8.3%.

• The effective tax rate increased to 24.7% compared to 23.8% in the prior year.

• Income from continuing operations was $1,042.5 million, or $4.83 per diluted share, compared to $1,265.8 million, or $5.76 per diluted share.

Store Activity & Selected Sales Data

At February 1, 2025, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces.

• Transition services agreement income, net was $54.9 million resulting from services provided to Family Dollar following the sale.

• Operating income, as a percentage of total revenues, increased 20 basis points to 8.5%.

• The effective tax rate was 24.8%, an increase of 10 basis points as compared to the prior year.

• Income from continuing operations was $1,225.3 million, or $5.94 per diluted share, compared to $1,042.5 million, or $4.83 per diluted share in the prior year.

Store Activity and Selected Sales Data

At January 31, 2026, we operated stores in 48 states and the District of Columbia, as well as stores in seven Canadian provinces.

The average size of stores opened in fiscal 2025 was approximately 9,210 selling square feet.

A breakdown of the changes in store count and square footage is as follows:

February 1, 2025 February 3, 2024 January 28, 2023

January 31, 2026 February 1, 2025 February 3, 2024

Beginning 8,881 8,415 8,134

New stores 402 525 333

Stores converted from or to Family Dollar 12 15 (5)

Stores converted from Family Dollar 71 12 15

Closings (72) (71) (67)

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New stores 3.7 5.8 3.1

Stores converted from or to Family Dollar* 0.1 0.1 —

Stores converted from Family Dollar* 1.1 0.1 0.1

Closings (0.6) (0.6) (0.6)

Relocations* — — 0.1

Ending 82.6 78.4 73.1

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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, or vice versa, are reflected in the table above when they opened or closed, respectively.

Fiscal 2024 and fiscal 2022 which ended on February 1, 2025 and January 28, 2023, respectively, each included 52 weeks.

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.

Fiscal 2025 and fiscal 2024, which ended on January 31, 2026 and February 1, 2025, respectively, each included 52 weeks.

Fiscal 2023 ended on February 3, 2024 and included 53 weeks, commensurate with the retail calendar.

The 53rd week in fiscal 2023 added approximately $307.0 million in sales.

Our net sales are derived from the sale of merchandise at new stores and at comparable stores.

We use comparable store net sales to evaluate the performance of our existing stores from one year to the next.

Comparable stores 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 year in the calculation of comparable store net sales.

Comparable store sales measures vary across the retail industry.

As a result, our comparable store net sales calculation is not necessarily comparable to similarly titled measures reported by other companies.

The percentage change in comparable store net sales, as compared with the preceding year, is as follows:

February 1, 2025 February 3, 2024 January 28, 2023

January 31, 2026 February 1, 2025 February 3, 2024

Sales Growth 5.3 % 1.8 % 5.8 %

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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.

The comparable store net sales change for the years ended February 1, 2025 and January 28, 2023 is based on a 52-week comparison for both periods included in the calculation.

The comparable store net sales change for the years ended January 31, 2026 and February 1, 2025 is based on a 52-week comparison for both periods included in the calculation.

The comparable store net sales change for the year ended February 3, 2024 is based on a 53-week comparison for both periods included in the calculation.

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Net sales per selling square foot for the last three fiscal years is as follows:

52 Weeks Ended 53 Weeks Ended 52 Weeks Ended

February 1, 2025 February 3, 2024 January 28, 2023

52 Weeks Ended 53 Weeks Ended

January 31, 2026 February 1, 2025 February 3, 2024

Net sales per selling square foot $241 $232 $234

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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 February 1, 2025, we had approximately 2,900 multi-price format stores, including approximately 2,600 conversions and 300 new stores.

99 Cents Only Stores Acquisition.

During the second quarter of fiscal 2024, we acquired designation rights for up to 170 leases of 99 Cents Only Stores across Arizona, California, Nevada and Texas.

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 secured the leases for 164 of these stores and substantially all have opened as Dollar Tree stores.

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.

We continue to execute on strategic initiatives to accelerate profitable growth for Dollar Tree as a standalone banner following the sale of Family Dollar.

At our 2025 Investor Day held on October 15, 2025, we outlined our strategic plan that will help drive profitable sales growth:

(i) expanding and enhancing our product assortment, (ii) managing costs with agility and discipline, (iii) strengthening our customer connection through data-driven marketing and other initiatives, (iv) opening new stores and improving store conditions, and (v) improving store operations and consistent execution to enhance the experience for our customers and our associates – all supported by supply chain enhancements, disciplined financial management, technology and investment in our people.

Expanded and Enhanced Assortment .

A central pillar of our strategy is expanding and refining our multi-price assortment to deliver a broader, more relevant offering while preserving our foundational value proposition.

Our multi-price strategy is designed to increase basket size and drive margin expansion by introducing complementary products, new categories, larger pack sizes, and select branded and licensed items that we could not historically offer under a single price point.

As of January 31, 2026, we carried our expanded multi-price assortment in the majority of our stores.

We are also expanding customer access through digital and delivery partnerships.

In August 2025, we announced a nationwide partnership with Uber to bring the Uber Eats platform to our stores.

As of January 31, 2026, over 8,800 Dollar Tree stores were serviceable through Uber Eats.

Agile Cost Management.

We are implementing cost management strategies designed to mitigate cost pressures both in how we buy and distribute our products as well as the selling, general and administrative costs to support the business.

Our merchandising approach includes five primary levers:

renegotiating supplier terms, re-engineering products for efficiency, shifting country of origin where advantageous, discontinuing lower-margin or underperforming items, and executing targeted retail price adjustments when appropriate.

During fiscal 2025, the volatile tariff environment and the implementation of these mitigation strategies resulted in increased costs, including significant labor and other discrete costs related to price adjustments, which also impacted our net sales.

The tariff environment remains fluid, and we expect our results to continue to be impacted by near-term challenges, potentially including higher costs due to increases or variability in tariffs.

Further, we may experience implementation costs associated with our mitigation strategies that impact us before the benefits from those efforts are expected to materialize.

On February 20, 2026, the U.S.

Supreme Court ruled that certain of the tariffs imposed last year under the International Emergency Economic Powers Act (“IEEPA”) were unlawful.

We are taking action to preserve our rights to refunds for these IEEPA tariffs, but the availability, timing, and amount of any potential refunds remains highly uncertain and subject to further legal, regulatory, and administrative developments.

Following the Supreme Court’s decision, the United States imposed new, temporary tariffs on imports from all countries under section 122 of the Trade Act of 1974 and could take action to invoke other laws to collect additional tariffs.

There remains substantial uncertainty regarding the impacts of this decision on existing tariffs, the scope and duration of any newly announced tariffs, and the possibility of further additional or modified tariffs or retaliatory actions.

As a result, our margins and operating results could vary significantly.

Beyond addressing the cost of goods sold, our strategy includes disciplined management of operating expenses.

Following the sale of Family Dollar, we are reshaping our organization to align with the needs of the standalone Dollar Tree business, with a focus on operating leverage and scalable profitability.

Our long-term objective includes reducing corporate selling, general and administrative expenses as a percentage of net sales through improved productivity, cost optimization, and right-sizing initiatives.

New Store Growth and Improved Conditions.

We continue to expand our store footprint while investing to modernize and optimize our fleet.

We operate more than 9,200 stores and believe we have ample opportunities for new store growth in the future, supported by disciplined site selection and capital allocation.

Our modernization efforts include refresh and renovation programs, which are designed to improve the customer shopping experience.

Improved Store Operations.

We are focused on improving store standards and operational consistency to enhance the in-store experience and optimize shelf productivity.

These actions are intended to strengthen customer connection, increase traffic and basket size, and drive higher returns on invested capital.

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.

We are modernizing our distribution network to improve flexibility, speed, and efficiency, including investments in expanded and optimized distribution center capacity, enhanced warehouse management systems, transportation improvements, and selective automation initiatives.

In April 2025, we announced plans to return to Marietta, Oklahoma, with a new, enhanced distribution center expected to be fully operational by spring 2027, with capacity to serve approximately 700 stores across the West and Southwest regions.

Reconstruction of the Marietta, Oklahoma distribution center commenced in September 2025.

In October 2025, we announced the purchase of a 1.25 million square foot distribution center outside Phoenix, Arizona, expected to open in spring 2026 and service stores in Arizona, Colorado, Nevada, New Mexico, and Utah.

These investments are expected to support long-term growth and improve network resilience, though they may modestly impact gross margin in the near-to-mid term as capacity ramps up.

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.

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.

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 of fiscal 2024, contributing to a $45.3 million increase in our general liability claim expenses compared to the prior year second quarter.

For the full year, fiscal 2024 general liability claim expenses increased $20.4 million compared to fiscal 2023.

The liabilities related to our self-insurance programs, which include general liability claims, are estimates that require judgment and the use of assumptions.

See the “ Critical Accounting Estimates and Assumptions ” later in this “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on the estimates and assumptions related to these liabilities.

Such estimates are inherently uncertain, and future changes in claim trends and assumptions could result in significant adjustments to our liabilities, which could materially and adversely affect our results of operations.

Family Dollar Store Portfolio Optimization and Strategic Alternatives Reviews.

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 February 1, 2025, we had closed approximately 695 stores identified under the portfolio optimization 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 discontinued operations accounting criteria.

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, including receipt of U.S.

antitrust approval.

Net proceeds are estimated to total approximately $804.0 million.

We are executing a multi-year plan to modernize our technology platform, replacing legacy systems with integrated, real-time tools that we believe can enhance decision-making and operational agility.

Key investments include enhancements to our human capital management systems, supply chain platforms, and data analytics capabilities.

These initiatives are intended to improve productivity, enable test-and-learn capabilities, and support scalable growth.

Human Capital .

Our more than 150,000 associates remain foundational to our strategy.

We continue to invest in competitive pay and benefits, training, career development, and initiatives designed to reduce turnover and improve productivity.

Since 2023, we have promoted tens of thousands of associates and advanced initiatives focused on making it easier to work in our stores through improved tools and processes.

Sale and Separation of Family Dollar .

On July 5, 2025, we completed our previously announced sale of the Family Dollar business to 1959 Holdings, LLC.

Total cash generated from the sale approximated $793 million, consisting of approximately $680 million of net proceeds, including from settlement of net working capital and net indebtedness, and approximately $113 million monetized primarily through a reduction of net working capital prior to the date of sale.

The Company has continuing involvement with Family Dollar under a transition services agreement, through which the Company and Family Dollar continue to provide certain services to each other for a period of 18 months following the date of sale.

For information on discontinued operations, refer to Note 2 to our consolidated financial statements under the caption “Assets Held for Sale and Discontinued Operations” and Note 15 .

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The following table contains results of operations data for the last three fiscal years:

(in millions, except percentages)

February 1, 2025 February 3, 2024 January 28, 2023

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024

Net sales $ 19,395.7 $ 17,565.8 $ 16,770.3

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Total revenue 19,411.8 17,578.5 16,781.1

Expenses and other operating items

Cost of sales 12,345.0 11,284.1 10,761.4

Selling, general and administrative expenses 5,468.6 4,832.4 4,245.2

Transition services agreement income, net 54.9 — —

Operating income 1,653.1 1,462.0 1,774.5

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Operating income margin 8.5 % 8.3 % 10.6 %

Interest expense, net as a percentage of total revenue 0.6 % 0.7 % 0.8 %

Income from continuing operations before income taxes as a percentage of total revenue 8.4 % 7.9 % 9.9 %

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Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Net sales $ 19,395.7 $ 17,565.8 $ 16,770.3 10.4 %

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The increase in net sales from fiscal 2024 to fiscal 2025 was a result of the comparable store net sales increase and net sales of $1.4 billion at non-comparable stores.

Comparable store net sales increased 1.8% in fiscal 2024, as a result of a 1.6% increase in customer traffic and a 0.1% increase in average ticket.

This increase is based on a 52-week comparison for both periods.

The 53 rd week in fiscal 2023 accounted for $307.0 million of the total net sales.

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 in the near-to-mid term.

Fiscal 2023 compared to Fiscal 2022

The increase in net sales from fiscal 2022 to fiscal 2023 was a result of the comparable store net sales increase and net sales of $467.1 million at non-comparable stores.

Comparable store net sales increased 5.8% in fiscal 2023, as a result of a 7.4% increase in customer traffic, partially offset by a 1.5% decrease in average ticket.

This increase is based on a 53-week comparison for both periods.

The 53 rd week in fiscal 2023 accounted for $307.0 million of the total net sales increase.

Comparable store net sales increased 5.3% in fiscal 2025, as a result of a 4.3% increase in average ticket and a 1.0% increase in customer traffic.

The increase in average ticket was primarily the result of targeted retail price changes executed during the second and third quarters of fiscal year 2025 and increased multi-price penetration.

As a result of the retail price changes, customer traffic was negatively impacted and declined in the third and fourth quarters of fiscal 2025.

Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Gross profit $ 7,050.7 $ 6,281.7 $ 6,008.9 12.2 %

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Fiscal 2025 compared to Fiscal 2024

Gross profit margin remained unchanged in fiscal 2024 as the cost of sales rate is 64.2% in both fiscal 2024 and 2023.

Changes in the cost of sales rates consist of lower freight costs, offset by increased sales of higher cost consumable merchandise, increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase and the 53 rd week of sales in 2023, higher distribution costs, increased shrink costs resulting from unfavorable inventory results, and increased markdown costs for slow moving items.

Gross profit margin increased in fiscal 2025 due to a 60 basis point decrease in cost of sales.

The cost of sales rate decreased to 63.6% in fiscal 2025 from 64.2% in fiscal 2024 primarily due to improved mark-on from pricing initiatives, lower domestic and import freight costs, favorable sales mix resulting from increased sales of higher margin discretionary merchandise as a percentage of net sales, and lower occupancy costs due to leverage from the comparable store net sales increase, partially offset by higher tariff costs, higher markdowns, higher shrink, and increased distribution costs expense.

The higher markdowns in fiscal 2025 include a $56.0 million write-off of various slow-turning SKUs.

This reflects actions taken related to our ongoing strategic initiative to increase shelf space productivity, as discussed within “Strategic Initiatives and Recent Developments” above.

Included in freight costs for fiscal 2024 is $25.0 million of duties related to an anti-dumping case for paper plates imported in fiscal 2024.

Fiscal 2023 compared to Fiscal 2022

Gross profit margin decreased in fiscal 2023 due to a 170 basis point increase in cost of sales.

The cost of sales rate increased to 64.2% in fiscal 2023 from 62.5% in fiscal 2022 primarily due to re-investment in value-product assortments after transitioning to the $1.25 price point during the prior year, increased sales of higher cost consumable merchandise, higher distribution costs, increased shrink costs resulting from unfavorable inventory results, partially offset by lower freight costs and decreased occupancy costs resulting from the leverage from the comparable store net sales increase and leverage from the 53 rd week of sales in 2023.

Selling, General and Administrative Expenses

Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

Selling, general and administrative

expenses $ 4,832.4 $ 4,245.2 $ 3,682.0 13.8 % 15.3 %

Selling, general and administrative

expense rate 27.5 % 25.3 % 23.9 % 2.2 % 1.4 %

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Selling, general and administrative expenses $ 5,468.6 $ 4,832.4 $ 4,245.2 13.2 %

Selling, general and administrative expense rate 28.2 % 27.5 % 25.3 % 0.7 %

Fiscal 2025 compared to Fiscal 2024

The selling, general and administrative expense rate increased 220 basis points in fiscal 2024 primarily due to higher depreciation expense from store investments, software impairments and related contract termination costs, temporary labor to support our multi-

price rollout, higher utilities costs, higher stock compensation expense resulting from the accelerated vesting of the former Chief Executive Officer’s option award, the loss of leverage from the low single-digit comparable store net sales increase and the loss of leverage from the 53rd week of sales in the prior year.

The software impairments and related contract termination costs totaled $58.0 million and were related to enterprise merchandising and store system projects that were not fully implemented and were cancelled in connection with the decision to sell the Family Dollar business.

The selling, general and administrative expense rate increased 70 basis points in fiscal 2025 primarily due to higher store payroll in support of our pricing initiatives and from wage increases, higher incentive compensation, higher depreciation expense from store investments, and unfavorable development of general liability claims, partially offset by lower stock compensation, lower impairment costs, lower corporate payroll, and leverage from the comparable store net sales increase.

Fiscal 2024 included higher stock compensation expense resulting from the accelerated vesting of the former Chief Executive Officer’s option award and software impairments and related contract termination costs totaling $58.0 million related to enterprise merchandising and store system projects that were not fully implemented and were cancelled in connection with the decision to sell the Family Dollar business.

Transition Services Agreement Income, Net

Year Ended Percentage Change

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Transition services agreement income, net $ 54.9 $ — $ — N/A

Fiscal 2025 compared to Fiscal 2024

The selling, general and administrative expense rate increased 140 basis points in fiscal 2023 primarily due to wage investments and minimum wage increases in store payroll, unfavorable development of general liability claims, and higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, partially offset by leverage from the comparable store net sales increase and leverage from the 53rd week of sales at the end of fiscal 2023.

Transition services agreement income, net was $54.9 million in fiscal 2025 resulting from services provided to Family Dollar following the sale.

Operating Income

Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Operating income $ 1,653.1 $ 1,462.0 $ 1,774.5 13.1 %

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Fiscal 2025 compared to Fiscal 2024

Operating income margin decreased to 8.3% in fiscal 2024 compared to 10.6% in fiscal 2023, resulting from the increase in the selling, general and administrative expense rate.

Fiscal 2023 compared to Fiscal 2022

Operating income margin decreased to 10.6% in fiscal 2023 compared to 13.6% in fiscal 2022, resulting from the decrease in gross profit margin and an increase in the selling, general and administrative expense rate.

Operating income margin increased to 8.5% in fiscal 2025 compared to 8.3% in fiscal 2024, resulting from the increase in gross profit margin as described above, and income from the transition services agreement with Family Dollar, partially offset by the increase in the selling, general and administrative expense rate.

Interest Expense, Net

Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Interest expense, net $ 85.5 $ 107.5 $ 112.5 (20.5) %

Fiscal 2025 compared to Fiscal 2024

Interest expense, net decreased $5.0 million in fiscal 2024 compared to the prior year, primarily due to higher interest income on investments.

Interest expense, net decreased $22.0 million in fiscal 2025 compared to the prior year, primarily due to the repayment of our $1.0 billion principal amount of 4.00% Senior Notes in the second quarter of fiscal 2025, and higher interest income on investments, partially offset by higher borrowings of commercial paper.

Other (Income) Expense, Net

Year Ended Percentage Change

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Other (income) expense, net $ (61.9) $ (29.1) $ 0.1 112.7 %

Fiscal 2025 compared to Fiscal 2024

Interest expense, net decreased $14.7 million in fiscal 2023 compared to the prior year, primarily due to higher interest income on investments.

Other income, net increased $32.8 million in fiscal 2025 compared to the prior year, primarily due to a higher insurance gain recognized in 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.

The insurance gain recognized in fiscal 2025 totaled $62.0 million compared to $30.0 million in fiscal 2024.

Provision for Income taxes

Year Ended Percentage Change

(dollars in millions) February 1, 2025 February 3, 2024 January 28, 2023 Fiscal 2024 vs.

Fiscal 2023 vs.

(dollars in millions) January 31, 2026 February 1, 2025 February 3, 2024 Fiscal 2025 vs.

Provision for income taxes $ 404.2 $ 341.1 $ 396.1 18.5 %

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Fiscal 2025 compared to Fiscal 2024

The effective tax rate for fiscal 2024 was 24.7% compared to 23.8% for fiscal 2023, resulting primarily from higher non-deductible executive compensation, increased tax expense in the current year related to restricted stock vesting and lower Work Opportunity Tax Credits.

Fiscal 2023 compared to Fiscal 2022

The effective tax rate for fiscal 2023 was 23.8% compared to 23.9% for fiscal 2022, resulting primarily from higher Work Opportunity Tax Credits, partially offset by higher tax expense in the current year related to restricted stock vesting.

The effective tax rate for fiscal 2025 was 24.8% compared to 24.7% for fiscal 2024, primarily due to an increase in expected state taxes and reduced benefits from the vesting of share-based payment awards, partially offset by a decrease in non-deductible compensation.

Liquidity and Capital Resources

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The following table compares our cash flows for the last three fiscal years:

(in millions) February 1, 2025 February 3, 2024 January 28, 2023

(in millions) January 31, 2026 February 1, 2025 February 3, 2024

Net cash provided by (used in):

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Fiscal 2025 compared to Fiscal 2024

Net cash provided by operating activities decreased $207.5 million in fiscal 2024 compared to fiscal 2023 primarily due to lower current year earnings and increased inventory levels, partially offset by increases in trade accounts payable.

The increase in inventory was the result of an increase in store count and inventory from our multi-price initiative.

The increase in trade accounts payable was the result of extensions of payment terms with suppliers implemented in late fiscal 2023.

Fiscal 2023 compared to Fiscal 2022

Net cash provided by operating activities increased $982.9 million in fiscal 2023 compared to fiscal 2022 primarily due to decreases in inventory levels.

Inventory was elevated at the end of fiscal 2022 due to global supply chain issues that resolved in fiscal 2023, resulting in lower payments for inventory.

Net cash provided by operating activities decreased $2.6 million in fiscal 2025 compared to fiscal 2024 primarily due to a decrease in accounts payable in the current year compared to an increase in the prior year, partially offset by reductions in merchandise inventories compared to a prior year increase, higher income from continuing operations, and lower income tax payments resulting from tax benefits used from the sale of Family Dollar.

The reductions in merchandise inventories reflects actions taken related to our ongoing strategic initiative to increase shelf space productivity, as discussed within “Strategic Initiatives and Recent Developments” above.

The prior year increase in accounts payable reflects the impact of the implementation of our supply chain finance program in late fiscal 2023, which corresponded with the optimization of vendor terms.

Investing Activities

Fiscal 2025 compared to Fiscal 2024

Net cash used in investing activities increased $54.6 million in fiscal 2024 compared with fiscal 2023 due to higher capital expenditures in the current year, partially offset by insurance recoveries related to damaged property and equipment at our distribution center in Marietta, Oklahoma as discussed in Note 5 to our consolidated financial statements.

Fiscal 2023 compared to Fiscal 2022

Net cash used in investing activities increased $551.1 million in fiscal 2023 compared with fiscal 2022 due to higher capital expenditures in fiscal 2023.

Net cash used in investing activities decreased $600.7 million in fiscal 2025 compared with fiscal 2024 primarily due to $680.0 million of net proceeds received for the sale of Family Dollar, and lower capital expenditures, partially offset by $246.0 million of cash divested from the sale of Family Dollar.

The decrease in capital expenditures was the result of completing transformation-related investments in store network technology and transportation equipment in fiscal 2024, partially offset by the purchase and initial construction of our new distribution center in Phoenix, Arizona, and the beginning of the rebuild of our Marietta, Oklahoma distribution center.

Financing Activities

Fiscal 2025 compared to Fiscal 2024

Net cash used in financing activities decreased $118.7 million in fiscal 2024 compared to fiscal 2023 primarily due to lower payments for stock repurchases in fiscal 2024.

Fiscal 2023 compared to Fiscal 2022

Net cash used in financing activities decreased $156.8 million in fiscal 2023 compared to fiscal 2022 primarily due to lower payments for stock repurchases in fiscal 2023.

Net cash used in financing activities increased $2,145.6 million in fiscal 2025 compared to fiscal 2024 primarily due to higher stock repurchases, and the repayment of our $1.0 billion principal amount of 4.00% Senior Notes due May 15, 2025.

We issued and repaid $10.1 billion and $3.2 billion principal amount of commercial paper notes in fiscal 2025 and fiscal 2024, respectively.

At January 31, 2026 and February 1, 2025, no notes were outstanding under the commercial paper program.

For detail on our long-term and short-term borrowings and other commitments, refer to the discussion of “Funding Requirements” below, as well as Note 5 and Note 6 to our consolidated financial statements.

Share Repurchases

We repurchased 3,283,837, 3,905,599 and 4,613,696 shares of common stock on the open market at a cost of $403.6 million, $504.3 million and $647.5 million, including applicable excise tax, in fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

As of February 1, 2025, we had $952.4 million remaining under our existing $2.5 billion Board repurchase authorization.

We repurchased 17,176,514, 3,283,837 and 3,905,599 shares of common stock on the open market at a cost of $1.6 billion, $403.6 million and $504.3 million, including applicable excise tax, in fiscal 2025, fiscal 2024 and fiscal 2023, respectively.

Of the shares repurchased during fiscal 2025, $9.0 million settled subsequent to January 31, 2026 and this amount was accrued in the accompanying Consolidated Balance Sheets.

As of January 31, 2026, we had $1.8 billion remaining under the $2.5 billion Board repurchase authorization.

Subsequent to January 31, 2026, we purchased an additional 1,598,978 shares of common stock on the open market at a cost of $192.7 million, as of March 12, 2026.

Funding Requirements

Our total estimated capital expenditures for fiscal 2025 are approximately $1.2 billion to $1.3 billion, including planned expenditures for supply chain investments, our new and expanded stores, store renovations, information technology investments, and other property improvements.

Our total estimated capital expenditures for fiscal 2026 are approximately $1.1 billion to $1.2 billion, including planned expenditures for supply chain investments, our new and expanded stores, store renovations and initiatives, information technology investments, and other property improvements.

We expect our cash needs for opening new stores and expanding existing stores in fiscal 2026 to total approximately $440.0 million, which includes capital expenditures, initial inventory and pre-opening costs.

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Additionally, we have commitments related to ocean shipping contracts, software license and support agreements, telecommunication services and store technology assets and maintenance for our stores.

Other commitments include letters of credit for imported merchandise, standby letters of credit that serve as collateral for our large-deductible insurance programs and surety bonds that serve as collateral for utility payments at our stores and self-insured insurance programs.

For additional information regarding these obligations, including amounts outstanding at February 1, 2025, refer to Note 5 , Note 6 and Note 7 to our consolidated financial statements.

Other commitments include letters of credit for imported merchandise and surety bonds that serve as collateral for utility payments at our stores and self-insured insurance programs, as well as U.S.

customs compliance.

For additional information regarding these obligations, including amounts outstanding at January 31, 2026, refer to Note 5 , Note 6 and Note 7 to our consolidated financial statements.

Critical Accounting Estimates and Assumptions

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Historically, we have not experienced significant differences in our estimated reserve for markdowns compared with actual results.

Our accrual for shrink is based on the shrink results of our most recent physical inventories adjusted, if necessary, for current economic conditions and business trends.

These estimates are compared to actual results as physical inventory counts are taken and reconciled to the general ledger.

Our physical inventory counts are generally taken between January and October of each year;

therefore, the shrink accrual recorded at February 1, 2025 is based on estimated shrink for most of fiscal 2024, including the fourth quarter.

We periodically adjust our shrink estimates to reflect our best estimates based on the factors described and, historically, these adjustments have not been material.

Actual shrink is recorded as physical inventory counts at the stores are taken once a year between January and October of each year.

After physical inventory counts are taken, shrink accruals at period end are estimated using the overall enterprise-wide results from our most recent physical inventories adjusted, if necessary, for current economic conditions and business trends.

We periodically adjust our shrink estimate based on these latest trends, and historically, these adjustments have not been material.

Our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis.

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Management’s estimate for self-insurance liabilities could vary from the ultimate loss sustained given the difficulty in predicting future events.

Our self-insurance liabilities associated with workers’ compensation, general liability and auto related to continuing operations are recorded within “Other current liabilities” and “Other liabilities” in the accompanying Consolidated Balance Sheets and amounted to $244.3 million and $187.0 million at February 1, 2025 and February 3, 2024, respectively.

Self-insurance liabilities related to discontinued operations totaled $185.0 million and $176.5 million at February 1, 2025 and February 3, 2024, respectively.

The increases were primarily due to general liability claims developing and paying out at amounts significantly higher than anticipated, resulting in higher actuarially determined accruals.

Our self-insurance liabilities associated with workers’ compensation, general liability and auto related to continuing operations are recorded within “Other current liabilities” and “Other liabilities” in the accompanying Consolidated Balance Sheets and amounted to $327.2 million and $244.3 million at January 31, 2026 and February 1, 2025, respectively.

The increase was primarily due to general liability claims developing and paying out at amounts significantly higher than anticipated, resulting in higher actuarially determined accruals.

Goodwill and Indefinite-Lived Intangible Assets

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Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock.

For purposes of our goodwill impairment evaluation, the reporting units are Family Dollar, Dollar Tree and Dollar Tree Canada.

For purposes of our goodwill impairment evaluation, the reporting units are Dollar Tree and Dollar Tree Canada.

Goodwill has been assigned to the reporting units based on prior business combinations related to the brands.

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Alternatively, we may bypass the qualitative assessment and proceed directly to performing the quantitative impairment test.

At the end of fiscal 2025, there were no indicators that the fair value of the Dollar Tree or Dollar Tree Canada reporting units were less than their carrying value.

In fiscal 2024, Family Dollar was also considered a reporting unit for goodwill impairment evaluations prior to being classified as held for sale.

In connection with the fiscal 2024 annual impairment evaluation, management’s qualitative assessment indicated that it was more likely than not that the fair values of the Family Dollar reporting unit and the Family Dollar trade name were less than their carrying values.

There were no indicators that the fair value of the Dollar Tree or Dollar Tree Canada reporting units were less than their carrying value.

Therefore, management performed a quantitative assessment of both the Family Dollar goodwill and trade name.

In fiscal 2024, we estimated the fair value of the Family Dollar reporting unit by using market participant assumptions as there was an expected sale price for the business based on negotiations with potential third party buyers.

We estimated the fair value of the Family Dollar reporting unit by using market participant assumptions as there was an expected sale price for the business based on negotiations with potential third-party buyers.

Based on this fair value, we recognized an impairment loss of $490.5 million which represented the remaining carrying amount of goodwill from the Family Dollar business.

The fiscal 2024 goodwill impairment was driven primarily by a decrease in enterprise value attributed to the Family Dollar business using the expected sale price compared to our carrying value.

Our evaluation of goodwill resulted in an impairment charge of $1,069.0 million in fiscal 2023 related to the Family Dollar reporting unit.

Our evaluation of goodwill did not result in impairment charges being recorded in fiscal 2022.

The Family Dollar trade name comprises a substantial portion of our indefinite-lived intangible assets and management’s judgment utilized in the Family Dollar trade name impairment evaluations is critical.

The computations require management to make estimates and assumptions and actual results may differ significantly, particularly if there are significant adverse changes in the operating environment.

Indefinite-lived intangible assets, such as the Family Dollar trade name, are not subject to amortization but are reviewed at least annually for impairment.

The indefinite-lived intangible asset impairment evaluations are performed by comparing the fair value of the indefinite-lived intangible assets to their carrying values.

We estimate the fair value of our trade name intangible asset based on an income approach using the relief-from-royalty method.

This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables.

Royalty rates are derived using future estimates of earnings before interest, and taxes (“EBIT”), and a profit split analysis that examines how EBIT would be allocated to separate parties in an intellectual property license arrangement.

We base our fair value estimates on assumptions we believe to be reasonable, but which are inherently uncertain.

Critical assumptions that are used as part of a tradename evaluation include:

• The potential future revenue, EBIT and cash flows of the reporting unit.

The projections use management’s assumptions about economic and market conditions over the projected period as well as our estimates of future performance and reporting unit revenue, gross margin, expenses and other factors.

The resulting revenue, EBIT and cash flow estimates are based on our most recent business operating plans, and various growth rates are assumed for years beyond the current business plan period.

We believe that the assumptions, estimates and rates used in our impairment evaluations are reasonable;

however, variations in the assumptions, estimates and rates could result in significantly different estimates of fair value.

• Selection of an appropriate discount rate.

Calculating the present value of future cash flows requires the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis.

The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants.

Given current economic conditions, it is possible that the discount rate will fluctuate in the near term.

We engaged third party experts to assist in the determination of the weighted-average cost of capital used to discount the expected income under the relief of royalty method.

The weighted-average cost of capital used to discount the cash flows for our evaluation was 10.5% for our fiscal 2024 analysis.

The discount rate includes a premium due to the inherently higher risk profile of intangible assets.

Our evaluation of the Family Dollar trade name resulted in impairment charges of $1.4 billion in fiscal 2024 and $950.0 million in fiscal 2023.

Our evaluation of the Family Dollar trade name did not result in impairment charges being recorded during fiscal 2022.

The fiscal 2024 trade name impairment was driven primarily by a decrease in the royalty rate assumption based on lower future growth rates and EBIT margin assumptions for the Family Dollar reporting unit.

Our evaluation of the Family Dollar trade name resulted in an impairment charge of $1.4 billion in fiscal 2024, driven primarily by a decrease in the royalty rate assumption based on lower future growth rates and earnings before interest and taxes (“EBIT”) margin assumptions for the Family Dollar reporting unit.

For additional information related to goodwill and indefinite-lived intangible assets, including the related impairment evaluations, refer to Note 2 to our consolidated financial statements under the caption “Goodwill and Nonamortizing Intangible Assets” and Note 15 .

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This strategic alternatives review concluded in the fourth quarter of fiscal 2024 and resulted in the decision to sell the Family Dollar business.

Accordingly, we concluded the assets of the Family Dollar business met the criteria for classification as held for sale.

We determined the ultimate disposal will represent a strategic shift that will have a major effect on our operations and financial results.

As such, the results of Family Dollar are presented as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented and the assets and liabilities of Family Dollar have been reflected as assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets for all periods presented.

The Company has ceased depreciating and amortizing its long-lived assets for Family Dollar which primarily includes right-of-use assets and property and equipment.

The closing of the transaction is subject to satisfaction of customary closing conditions, including receipt of U.S.

antitrust approval.

Net proceeds are estimated to total approximately $804.0 million.

We calculated an estimated loss on classification to held for sale of approximately $3.4 billion, reflecting the write-down of the carrying value of the Family Dollar business to fair value less costs to sell.

We concluded the assets of the Family Dollar business met the criteria for classification as held for sale during the fourth quarter of fiscal 2024.

Additionally, we determined the ultimate disposal, which took place on July 5, 2025, represented a strategic shift that had a major effect on our operations and financial results.

As such, the results of Family Dollar are presented as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented.

The assets and liabilities of Family Dollar have been reflected as assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets for all prior periods presented.

The Company ceased depreciating and amortizing its long-lived assets for Family Dollar which primarily included right-of-use assets and property and equipment, during the fourth quarter of fiscal 2024.

On July 5, 2025, we completed our previously announced sale of the Family Dollar business to 1959 Holdings, LLC.

In fiscal 2024, we calculated an estimated loss on classification to held for sale of approximately $3.4 billion, reflecting the write-down of the carrying value of the Family Dollar business to fair value less costs to sell.

The fair value was determined by using market participant assumptions as there was an expected sale price for the business based on negotiations with the buyer.

Costs to sell included estimated incremental, direct costs incurred to transact the sale of the Family Dollar business.

In fiscal 2025, we calculated an additional loss on disposal of approximately $407.7 million based on the actual proceeds received from the buyer compared to the final carrying value of the Family Dollar business less costs to sell.

Refer to Note 15 to our consolidated financial statements for additional information.

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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-K

Item 7. Management’s Discussion and Analysis