What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-28 compared with 2025-12-03 · 166 added, 168 removed, 129 unchanged (72% of the section changed)

9 unchanged sentences

• Our cost management initiatives, including our mitigation strategies to offset the impact of cost pressures and inflation, and the financial and business impacts of those strategies;

• Our long-term approach to managing selling, general and administrative expenses;

• Our plans to add, refresh and renovate stores, improve store standards and operations, and optimize and modernize stores and shelf space;

• Our customer connection and 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, inventory, transportation and human capital management systems, 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 key control activities around updated systems and various investments and initiatives;

• Our plans and expectations regarding the sale of the Family Dollar business, including those regarding the estimated proceeds and tax benefits therefrom and the transition services agreement;

• 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;

• Our management of operating expenses and long-term approach to managing selling, general and administrative expenses;

• Our plans to add, refresh and renovate stores, improve store standards, operations and execution, and optimize and modernize stores and shelf space;

• Our customer connection, including the impacts of data-driven engagement and other marketing initiatives, and the in-store experience;

• Our expectations regarding traffic, and our customers’ response to our product offerings, value and shopping experience;

• Our expectations regarding the implementation and impact of investments in supply chain, including new distribution centers, enhancements to distribution facilities, warehouse, inventory, and transportation management systems, and the capabilities of our distribution center network;

• Our expectations regarding the implementation and impact of investments in our technology infrastructure, and our information security and cybersecurity plans, policies and procedures;

• The potential effect of general business or economic conditions on our customers and our business, including the direct and indirect effects of inflation, fuel prices, interest rates, labor shortages, consumer spending levels, and unemployment in our markets;

• The direct and indirect impacts of and challenges associated with the current and potential tariff environment;

• Our plans to mitigate the impact of current and potential tariffs and related implementation costs;

• 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;

• Our expectations regarding our investment in our people, including wage investments, enhanced safety and working conditions, and other workforce initiatives, and increases in wage expenses, including increases in minimum wages by federal, state and local laws;

• Our expectations regarding net sales, comparable store net sales, adjusted earnings per share, gross profit margin and profitability, costs of goods sold, product mix, shrink rates, selling, general and administrative and other fixed costs, and our ability to leverage those costs;

• The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, countervailing duties orders, other legal proceedings or governmental investigations, our plans regarding these matters, and the availability of indemnification or insurance with respect to such matters;

• Our capital allocation priorities, liquidity, cash needs and estimated capital expenditures, our expectations regarding our capital investments and uses of cash, and our ability to fund our future capital expenditures and working capital requirements;

• The impacts of recent legislation, including those affecting various tax regulations, and accounting principles;

• Our capital allocation priorities, liquidity and cash needs, including our ability to fund our future capital expenditures and working capital requirements.

• Management’s estimates associated with our critical accounting estimates and assumptions, including inventory valuation, self-insurance liabilities for general liability claims and valuations for our goodwill impairment analyses.

A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances.

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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 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 January 31, 2026 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, including tariffs and other trade-related measures, restrictions and policies and any retaliatory counter measures, could adversely affect our financial performance.

• Our tariff mitigation strategies could subject us to increased costs and other risks.

• 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 profitability is vulnerable to cost pressures from increases in merchandise, shipping, freight and fuel, wages, benefits and other operating costs.

• Risks associated with merchandise supply could adversely affect our financial performance.

• The direct and indirect impacts of tariffs and other related measures, our mitigation strategies, and our customers’ response and consumer behavior generally, could subject us to increased costs and other risks and adversely affect our financial performance.

• Higher costs and disruptions in our supply chain could have an adverse impact on our sales and 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 sales and profitability are affected by our product assortment and customer response to the value and mix of products we sell.

• Changes in economic conditions such as inflation, fuel prices, or interest rates, or consumer spending habits, could impact our sales or profitability.

• We face significant pressure from competitors which may reduce our sales and profits.

• 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 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.

• 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 anticipating the impacts of implementing, achieving or realizing the benefits of our strategies, initiatives and long-term goals, which may have an adverse impact on our business and financial results.

• Our growth and profitability is dependent on our customer’s response to our initiatives, including multi-price assortments, pricing initiatives, and store standards.

• The completion of the sale of the Family Dollar business is subject to various risks and uncertainties, including those related to the estimated proceeds therefrom and transition services agreement income, and may be disruptive to our business operations and adversely affect our profitability.

• We may not achieve the anticipated benefits of the sale of the Family Dollar business, and the transaction may expose us to new risks.

• We have incurred and may in the future incur losses due to impairment of goodwill and other long-lived assets.

• We may not be successful in executing important strategic initiatives, which may have an adverse impact on our business and financial results.

• We may not achieve the anticipated benefits of the sale of the Family Dollar business.

• We could incur 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.

• We rely on computer and technology systems in our operations, and any material failure, inadequacy or interruption 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.

• We use, and may over time increase the usage of, artificial intelligence and machine learning in our business, and challenges with properly managing its use could adversely affect our business.

• 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 business is subject to evolving disclosure requirements and expectations with respect to social, environmental, and similar 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.

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Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

We are a leading operator of more than 9,200 retail discount stores, as of November 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 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 July 5, 2025, the Company completed its previously announced sale of the Family Dollar business to 1959 Holdings, LLC, for a purchase consideration of $1,007.5 million, subject to certain adjustments, including with respect to working capital and net indebtedness.

Net proceeds from the sale consisted of $665 million paid at closing and $22 million to be received post-closing, subject to final adjustment under the terms of the purchase agreement, dated as of March 25, 2025.

In addition, the Company monetized approximately $113 million of cash from Family Dollar prior to the closing date primarily through a reduction of net working capital.

Together, the total cash monetized from the sale of the Family Dollar business approximates $800 million.

As of November 1, 2025, the remaining receivable for estimated net proceeds to be received totaled $14.7 million.

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 prior 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 November 1, 2025, as compared to the 13 weeks ended November 2, 2024, include:

• Net sales increased 9.4% to $4,746.3 million due to a 4.2% comparable store net sales increase and net sales of $351.7 million at non-comparable stores.

• Gross profit increased 10.8% to $1,700.5 million primarily due to our net store growth.

Gross profit, as a percentage of net sales, increased 40 basis points to 35.8%.

• Selling, general and administrative expenses, as a percentage of total revenues, increased 140 basis points to 29.2%.

Quarterly Financial Highlights

Financial highlights for the 13 weeks ended May 2, 2026, as compared to the 13 weeks ended May 3, 2025, include:

• Net sales increased 7.2% to $4,970.5 million primarily due to a 3.5% comparable store net sales increase and net sales of $259.0 million at non-comparable stores.

• Gross profit increased 10.9% to $1,829.5 million primarily due to our net store growth, the 3.5% comparable store net sales increase, and a 120 basis point improvement in gross profit margin.

• Selling, general and administrative expenses, as a percentage of total revenue, increased 50 basis points to 27.8%.

• Transition services agreement income, net was $21.1 million resulting from services provided to Family Dollar following the sale.

• Operating income, as a percentage of total revenues, decreased 40 basis points to 7.2%.

• The effective tax rate was 23.9%, an increase of 70 basis points as compared to the prior year quarter.

• Operating income, as a percentage of total revenue, increased 120 basis points to 9.5%.

• The effective tax rate was 24.9%, a decrease of 100 basis points as compared to the prior year quarter.

• Income from continuing operations was $347.3 million, or $1.76 per diluted share, compared to $313.5 million, or $1.47 per diluted share, in the prior year quarter.

Store Activity & Selected Sales Data

At November 1, 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 39 weeks ended November 1, 2025 was approximately 9,230 selling square feet.

Store Activity and Selected Sales Data

At May 2, 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 during the 13 weeks ended May 2, 2026 was approximately 9,230 selling square feet.

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

13 Weeks Ended

November 1, 2025 November 2, 2024

May 2, 2026 May 3, 2025

Beginning 9,282 8,881

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Ending 83.5 79.6

*Selling square footage impact of relocated 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.

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:

13 Weeks Ended 39 Weeks Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

13 Weeks Ended

May 2, 2026 May 3, 2025

Sales Growth 3.5% 5.4%

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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 November 1, 2025 and November 2, 2024 is as follows:

Net sales per selling square foot for the 52 weeks ended May 2, 2026 and May 3, 2025 is as follows:

52 Weeks Ended

November 1, 2025 November 2, 2024

May 2, 2026 May 3, 2025

Net sales per selling square foot $242 $235

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Strategic Initiatives and Recent Developments

We continue to execute on a number of strategic initiatives across our business to drive profitable growth for Dollar Tree as a standalone banner following the sale of Family Dollar.

During our Investor Day on October 15, 2025, we outlined our operational strategy for the years ahead, including an expanded, more relevant assortment, agile cost management, a more connected customer experience in stores, new store growth, and improved store conditions and operations, supported by an evolving supply chain and disciplined financial management.

Some of these initiatives and other recent developments, in no particular order, include the following.

Merchandising .

In addition to our $1.25 price point, we continue to expand our multi-price offerings to provide a broader, more relevant assortment and differentiated value to our customers.

As of November 1, 2025, we carried this multi-price assortment in more than 5,000 of our stores.

In August 2025, we announced a new nationwide partnership with Uber to bring the Uber Eats platform to nearly 9,000 Dollar Tree stores, offering customers on-demand access to and delivery of value-driven essentials, snacks, party supplies and seasonal surprises.

Cost Management.

We are actively implementing mitigation strategies to offset the impact of cost pressures and inflation, including tariffs, by re-negotiating supplier terms, re-engineering products for efficiency, shifting country of origin where it adds advantage, discontinuing lower-margin or underperforming items and executing targeted retail price changes.

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.

In addition, our long-term strategy includes a disciplined approach to managing our selling, general and administrative expenses to drive operating leverage and profitability.

During fiscal 2025, we have experienced increased costs associated with the tariff environment and implementation of our mitigation strategies, including discrete price-change costs.

We expect our results to continue to be impacted by near-term challenges, including higher costs due to the volatility in the tariff environment, in the fourth quarter of fiscal 2025.

Additionally, implementation costs associated with our mitigation strategies may continue to 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 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 .

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.

Store Growth and Improved Conditions.

Our strategy includes continued new store growth, as well as improved store conditions and operations to deliver a consistent experience for our associates and customers, provide a stronger customer connection and drive profitable growth.

These initiatives include projects to optimize and modernize our stores, with a focus on increasing shelf space productivity, improving the in-store experience through refresh and renovation programs 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 May 2, 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, such as 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.

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 continue to 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.

In April 2026, the U.S.

Customs and Border Protection launched a platform for submitting IEEPA tariff refund claims.

We are taking action to preserve our rights to refunds for these IEEPA tariffs and have submitted refund claims.

Subsequent to May 2, 2026, we began receiving refunds for IEEPA tariffs previously paid, totaling approximately $ 110 million through May 26, 2026, including $ 6 million of interest.

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.

In May 2026, the U.S.

Court of International Trade invalidated these section 122 tariffs.

There remains substantial uncertainty regarding the impacts of these events 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 9,300 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 network, improving our transportation and inventory management capabilities and upgrading our warehouse management systems.

Investments are also

underway for enhancements in automation in existing buildings to improve efficiency.

These investments are expected to negatively impact 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.

We broke ground on the new Marietta distribution center in September 2025.

In October 2025, we announced that we purchased a 1.25 million square foot distribution center outside of Phoenix, Arizona, which we expect to open in spring 2026.

This new distribution center will strengthen our supply chain in the Southwest, servicing stores in Arizona, Colorado, Nevada, New Mexico and Utah.

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 distribution center outside Phoenix, Arizona.

On May 13, 2026, we celebrated the grand opening of this 1.0 million square foot facility with outbound deliveries to begin in June 2026, shipping to approximately 700 stores across 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 app, human capital management system and supply chain system.

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

Family Dollar Strategic Alternatives Review .

On March 25, 2025, we entered into a definitive agreement to sell the Family Dollar business to 1959 Holdings, LLC, and on July 5, 2025, we completed the sale for a purchase consideration of $1,007.5 million, subject to certain adjustments, including with respect to working capital and net indebtedness.

Net proceeds from the sale consisted of $665 million paid at closing and $22 million to be received post-closing, subject to final adjustment under the terms of the purchase agreement.

In addition, the Company monetized approximately $113 million of cash from Family Dollar prior to the closing date primarily through a reduction of net working capital.

Together, the total cash monetized from the sale of the Family Dollar business approximates $800 million.

As of November 1, 2025, the remaining receivable for estimated net proceeds to be received totaled $14.7 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 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.

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A 100 basis point increase equals 1.00% and a 1 basis point increase equals 0.01%.

The following table contains results of operations data for the 13 and 39 weeks ended November 1, 2025 and November 2, 2024:

13 Weeks Ended 39 Weeks Ended

The following table contains results of operations data for the 13 weeks ended May 2, 2026 and May 3, 2025:

13 Weeks Ended

(in millions, except percentages)

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

May 2, 2026 May 3, 2025

Net sales $ 4,970.5 $ 4,636.5

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Total revenue 4,975.8 4,639.7

Expenses & other operating items

Expenses and other operating items

Cost of sales 3,141.0 2,987.0

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Interest expense, net 16.3 22.7

Other (income) expense, net 0.1 0.1 (62.0) 0.2

Other income, net 5.4 61.7

Income from continuing operations before income taxes 462.4 423.1

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27.8 % 27.3 %

Transition services agreement income, net as a percentage of total revenue 0.4 % — %

Operating income margin 9.5 % 8.3 %

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Income from continuing operations as a percentage of total revenue 7.0 % 6.8 %

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Net sales $ 4,970.5 $ 4,636.5 7.2 %

Comparable store net sales change 3.5 % 5.4 %

The increase in net sales in the 13 weeks ended November 1, 2025 was a result of the comparable store net sales increase and net sales of $351.7 million at non-comparable stores.

Comparable store net sales increased 4.2% in the 13 weeks ended November 1, 2025, as a result of a 4.5% increase in average ticket, partially offset by a 0.3% decrease in customer traffic.

The increase in net sales in the 39 weeks ended November 1, 2025 was a result of the comparable store net sales increase and net sales of $1,037.7 million at non-comparable stores.

Comparable store net sales increased 5.4% in the 39 weeks ended November 1, 2025, as a result of a 3.6% increase in average ticket and a 1.8% increase in customer traffic.

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

The increase in net sales in the 13 weeks ended May 2, 2026 was primarily the result of the comparable store net sales increase and net sales of $259.0 million at non-comparable stores.

Comparable store net sales increased 3.5% in the 13 weeks ended May 2, 2026, as a result of a 4.5% increase in average ticket, partially offset by a 1.0% decrease in customer traffic.

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

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Gross profit $ 1,829.5 $ 1,649.5 10.9 %

Gross profit margin 36.8 % 35.6 % 1.2 %

Gross profit margin increased during the 13 weeks ended November 1, 2025 due to a 40 basis point decrease in cost of sales.

The cost of sales rate decreased to 64.2% during the 13 weeks ended November 1, 2025 from 64.6% during the same period last year

primarily due to improved mark-on from pricing initiatives, lower domestic and import freight costs, and favorable sales mix resulting from increased sales of higher margin discretionary merchandise as a percentage of net sales, partially offset by higher tariff costs, higher markdowns, and higher shrink costs resulting from unfavorable inventory results.

Gross profit margin increased during the 39 weeks ended November 1, 2025 due to a 30 basis point decrease in cost of sales.

The cost of sales rate decreased to 64.7% during the 39 weeks ended November 1, 2025 from 65.0% during the same period last year 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 costs resulting from unfavorable inventory results, and increased distribution costs expense.

The higher markdowns for both the 13 weeks and 39 weeks ended November 1, 2025 included a $56.0 million write-off of various slow-turning SKUs recorded during the third quarter of fiscal 2025.

This reflects actions taken related to our ongoing strategic initiative to increase shelf space productivity, as described above.

Gross profit margin increased during the 13 weeks ended May 2, 2026 due to a 120 basis point decrease in cost of sales.

The cost of sales rate decreased to 63.2% during the 13 weeks ended May 2, 2026 from 64.4% during the same period last year primarily due to

improved mark-on from pricing initiatives executed during the second and third quarters of fiscal year 2025, lower import freight costs, and lower shrink from favorable inventory count results, partially offset by higher tariff costs and higher markdowns.

Selling, General and Administrative Expenses

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

Selling, general and administrative

expenses $ 1,385.7 $ 1,206.6 14.8 % $ 4,005.0 $ 3,483.1 15.0 %

Selling, general and administrative

expense rate 29.2 % 27.8 % 1.4 % 28.7 % 27.7 % 1.0 %

The selling, general and administrative expense rate increased 140 basis points during the 13 weeks ended November 1, 2025 primarily due to higher store payroll in support of our pricing initiatives and from wage increases, higher general liability claims costs, and higher depreciation expense from store investments, partially offset by lower stock compensation, lower corporate payroll, and leverage from the comparable store net sales increase.

The selling, general and administrative expense rate increased 100 basis points during the 39 weeks ended November 1, 2025 primarily due to higher store payroll in support of our pricing initiatives and from wage increases, higher depreciation expense from store investments, higher incentive compensation and higher store-related repairs and maintenance expenses, partially offset by lower stock compensation, lower corporate payroll, and leverage from the comparable store net sales increase.

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Selling, general and administrative expenses $ 1,382.6 $ 1,268.6 9.0 %

Selling, general and administrative expense rate 27.8 % 27.3 % 0.5 %

The selling, general and administrative expense rate increased 50 basis points during the 13 weeks ended May 2, 2026 primarily due to increased investments in marketing, higher general liability claims costs, and higher depreciation expense from store investments, partially offset by lower payroll expenses.

Payroll expenses decreased primarily due to lower temporary labor used to support our multi-price rollout, lower corporate payroll and incentive compensation, partially offset by higher store payroll from wage increases.

Selling, general and administrative expenses include costs to support the transition services agreement with Family Dollar.

Transition Services Agreement Income, Net

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Transition services agreement income, net $ 21.1 $ — N/A

Transition services agreement income, net as a percentage of total revenue 0.4 % — % 0.4 %

Transition services agreement income, net was $21.1 million in the 13 weeks ended May 2, 2026 resulting from services provided to Family Dollar following the sale.

Operating Income

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Operating income $ 473.3 $ 384.1 23.2 %

Operating income margin 9.5 % 8.3 % 1.2 %

Operating income margin decreased to 7.2% for the 13 weeks ended November 1, 2025 compared to 7.6% for the same period last year, resulting from the increase in the selling, general and administrative expense rate, partially offset by the increase in gross profit margin as described above, and income from the transition services agreement with Family Dollar.

Operating income margin decreased to 6.9% for the 39 weeks ended November 1, 2025 compared to 7.4% 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, and income from the transition services agreement with Family Dollar.

Operating income margin increased to 9.5% for the 13 weeks ended May 2, 2026 compared to 8.3% for the same period last year, 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

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Interest expense, net $ 16.3 $ 22.7 (28.2) %

Interest expense, net decreased $6.4 million in the 13 weeks ended November 1, 2025 compared to the same period last 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.

Interest expense, net decreased $17.5 million in the 39 weeks ended November 1, 2025 compared to the same period last 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

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

Other (income) expense, net $ 0.1 $ 0.1 — % $ (62.0) $ 0.2 (31,100.0) %

Other income, net was $62.0 million in the 39 weeks ended November 1, 2025 compared to expense of $0.2 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.

Interest expense, net decreased $6.4 million in the 13 weeks ended May 2, 2026 compared to the same period last 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, partially offset by lower interest income on investments, and interest on our new $500 million Term Loan.

Other Income, Net

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Other income, net $ 5.4 $ 61.7 (91.2) %

Other income, net decreased $56.3 million in the 13 weeks ended May 2, 2026 compared to the same period last year, primarily due to a higher insurance gain recognized in the prior year 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 the first quarter of fiscal 2026 totaled $5.2 million compared to $62.0 million in fiscal 2025.

Provision for Income Taxes

13 Weeks Ended 39 Weeks Ended

(dollars in millions) November 1, 2025 November 2, 2024 Percentage Change November 1, 2025 November 2, 2024 Percentage Change

13 Weeks Ended

(dollars in millions) May 2, 2026 May 3, 2025 Percentage Change

Provision for income taxes $ 115.1 $ 109.6 5.0 %

Effective tax rate 24.9 % 25.9 % (1.0) %

The effective tax rate increased to 23.9% for the 13 weeks ended November 1, 2025 compared to 23.2% for the comparable prior year period, primarily due to an increase in expected state taxes, partially offset by a decrease in non-deductible compensation.

The effective tax rate increased to 25.1% for the 39 weeks ended November 1, 2025 compared to 23.8% for the comparable prior year period, 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.

The effective tax rate decreased to 24.9% for the 13 weeks ended May 2, 2026 compared to 25.9% for the comparable prior year period, primarily due to increased benefits from the vesting of share-based payment awards, partially offset by an increase in expected state taxes and lower Work Opportunity Tax credits.

Liquidity and Capital Resources

2 unchanged sentences

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 39 weeks ended November 1, 2025 and November 2, 2024:

The following table compares our cash flows for the 13 weeks ended May 2, 2026 and May 3, 2025:

13 Weeks Ended

(in millions) November 1, 2025 November 2, 2024

(in millions) May 2, 2026 May 3, 2025

Net cash provided by (used in):

2 unchanged sentences

Financing activities of continuing operations $ (100.9) $ (439.4)

Net cash provided by operating activities decreased $377.3 million primarily due to a decrease in accounts payable in the current year compared to an increase in the prior year, partially offset by inventory levels increasing at a lower rate compared to the prior year, and higher income from continuing operations.

Net cash used in investing activities decreased $568.5 primarily due to $672.0 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.

Net cash used in financing activities increased $1,290.6 million primarily due to the repayment of our $1.0 billion principal amount of 4.00% Senior Notes due May 15, 2025, and higher stock repurchases, partially offset by increased borrowings under our commercial paper program.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S.

The most significant impacts to the Company of the OBBBA are the immediate expensing of domestic research and development expenditures and the permanent reinstatement of bonus depreciation for qualifying properties.

The Company expects the impact will defer the payment of approximately $100.0 million of current federal income taxes.

In connection with the sale of Family Dollar, completed on July 5, 2025, the Company expects to realize cash tax benefits from losses on the sale totaling approximately $425.0 million, subject to final adjustment under the terms of the purchase agreement.

At November 1, 2025, our long-term borrowings were $2.45 billion.

Additionally, we had $1.5 billion available under our new Five-Year Credit Facility 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 have a commercial paper program which as of November 1, 2025 allowed us to issue unsecured commercial paper notes up to an aggregate amount outstanding at any time of $1.5 billion.

On May 15, 2025, we leveraged our commercial paper program, in addition to utilizing available cash, to redeem our $1.0 billion principal amount of 4.00% Senior Notes.

As of November 1, 2025, $620.0 million principal amount of notes were outstanding under the commercial paper program.

Additionally, we have $85.0 million in trade letters of credit with various financial institutions, under which $3.1 million was committed to letters of credit issued for routine purchases of imported merchandise as of November 1, 2025.

Our credit facilities serve as a liquidity backstop for the repayment of notes outstanding under the commercial paper program.

On November 10, 2025, we increased the size of our commercial paper program to permit the issuance of commercial paper notes up to a maximum aggregate amount outstanding at any time of $2.5 billion, compared to the previous maximum permitted of $1.5 billion.

The $2.5 billion maximum is authorized through the maturity date of our 364-Day Revolving Credit Facility on March 20, 2026 or such later date to which the maturity of the 364-Day Facility or a similar replacement financing arrangement is extended, and will return to $1.5 billion thereafter.

We repurchased 15,007,491 and 3,283,837 shares of common stock on the open market at a cost of $1.3 billion and $403.6 million, including applicable excise tax, during the 39 weeks ended November 1, 2025 and November 2, 2024, respectively.

Of the shares repurchased during the 39 weeks ended November 1, 2025, $12.8 million settled subsequent to November 1, 2025 and these amounts were accrued in the accompanying unaudited Condensed Consolidated Balance Sheets.

In July 2025, our Board of Directors replenished the Company’s share repurchase authorization to an aggregate amount of $2.5 billion, reflecting the limit previously approved by the Board in September 2021.

At November 1, 2025, we had $2.0 billion remaining under the $2.5 billion Board repurchase authorization.

Subsequent to November 1, 2025, we purchased an additional 1,711,878 shares of common stock on the open market at a cost of $176.0 million, as of December 1, 2025.

Net cash provided by operating activities increased $265.5 million primarily due to higher income from continuing operations, net of non-cash items, increases in accounts payable in the current year compared to decreases in the prior year, and reductions in merchandise inventories compared to a prior year increase.

The changes in accounts payable and merchandise inventories were primarily due to the timing of certain payments and inventory receipts.

Net cash used in investing activities increased $54.0 million primarily due to no property and equipment-related insurance proceeds received in the current year compared to $50.0 million in insurance proceeds received in the prior year 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.

Capital expenditures were relatively unchanged from the prior year as we continue to invest in new stores and our supply chain network including the construction at our new distribution centers in Phoenix, Arizona and Marietta, Oklahoma.

Net cash used in financing activities decreased $338.5 million primarily due to $500.0 million in proceeds from our Term Loan, partially offset by higher share repurchases in the current year.

At May 2, 2026, our long-term borrowings were $3.0 billion, including our new $500.0 million Term Loan which we entered into on March 19, 2026 as discussed further in Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Additionally, we had $1.5 billion available under our Five-Year Credit Facility, as well as borrowing capacity under our commercial paper program.

Further, on March 20, 2026, the existing $1.0 billion 364-Day Revolving Credit Facility expired and all commitments thereunder were terminated.

In connection with the maturity of the 364-Day Revolving Credit Facility on March 20, 2026, we decreased the size of our commercial paper program, with the issuance of commercial paper notes limited to a maximum aggregate amount outstanding at any time of $1.5 billion, compared to the previous maximum permitted of $2.5 billion.

The $1.5 billion Five-Year Credit Facility serves as a liquidity backstop for the repayment of notes outstanding under the commercial paper program.

At May 2, 2026, we had no borrowings outstanding under our Five-Year Credit Facility or our commercial paper program.

We also have $85.0 million in trade letters of credit with various financial institutions, under which $2.6 million was committed to letters of credit issued for routine purchases of imported merchandise as of May 2, 2026.

We repurchased 5,552,410 and 5,926,985 shares of common stock on the open market at a cost of $600.4 million and $436.8 million, including applicable excise tax, during the 13 weeks ended May 2, 2026 and May 3, 2025, respectively.

Of the shares repurchased during the 13 weeks ended May 2, 2026 and May 3, 2025, $18.0 million and $5.0 million, respectively, settled subsequent to May 2, 2026 and May 3, 2025, respectively, and these amounts were accrued in the accompanying unaudited Condensed Consolidated Balance Sheets.

At May 2, 2026, we had $1.3 billion remaining under our existing $2.5 billion Board repurchase authorization.

Subsequent to May 2, 2026, we purchased an additional 1,031,569 shares of common stock on the open market at a cost of $98.0 million, as of May 26, 2026.

Critical Accounting Estimates and Assumptions

5 unchanged sentences

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.

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 January 31, 2026.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis