Dollar Tree(DLTR) - 2025 Q3 - Quarterly Report

Tornado Impact and Insurance Recovery - The company incurred losses totaling $117.0 million due to a tornado destroying its Dollar Tree distribution center in Marietta, Oklahoma, with$ 70.0 million related to damaged inventory and $47.0 million related to property and equipment[47] - Insurance proceeds totaling$ 90.0 million have been received, including $45.0 million related to damaged inventory and$ 45.0 million related to damaged property and equipment[47] Financial Performance and Net Income - Net income for the 13 weeks ended November 2, 2024 was $233.3 million, compared to$ 212.0 million for the same period in 2023[63] - Net income for the 39 weeks ended November 2, 2024 was $665.8 million, compared to$ 711.4 million for the same period in 2023[63] - Basic net income per share for the 13 weeks ended November 2, 2024 was $1.09, compared to$ 0.97 for the same period in 2023[63] - Basic net income per share for the 39 weeks ended November 2, 2024 was $3.08, compared to$ 3.23 for the same period in 2023[63] - Diluted net income per share for the 13 weeks ended November 2, 2024 was $1.08, compared to$ 0.97 for the same period in 2023[63] - Diluted net income per share for the 39 weeks ended November 2, 2024 was $3.08, compared to$ 3.23 for the same period in 2023[63] - Net income rose to $233.3 million, or$ 1.08 per diluted share, compared to $212.0 million, or$ 0.97 per diluted share in the prior year quarter[109] Segment Performance and Sales - The Dollar Tree segment reported net sales of $4,338.0 million for the 13 weeks ended November 2, 2024, a 8.3% increase from$ 4,003.8 million in the same period last year[71] - The Family Dollar segment reported net sales of $3,223.7 million for the 13 weeks ended November 2, 2024, a 2.5% decrease from$ 3,305.3 million in the same period last year[71] - Consolidated net sales for the 13 weeks ended November 2, 2024, were $7,561.7 million, a 3.5% increase from$ 7,309.1 million in the same period last year[71] - The Dollar Tree segment's gross profit for the 13 weeks ended November 2, 2024, was $1,534.1 million, a 10.1% increase from$ 1,393.8 million in the same period last year[71] - The Family Dollar segment's gross profit for the 13 weeks ended November 2, 2024, was $803.3 million, a 3.1% increase from$ 779.2 million in the same period last year[71] - Consolidated gross profit for the 13 weeks ended November 2, 2024, was $2,337.4 million, a 7.6% increase from$ 2,173.0 million in the same period last year[71] - Net sales increased by 3.5% to $7,561.7 million, driven by a 1.8% enterprise-wide comparable store net sales growth[107] - Net sales increased by 3.5% to$ 7.56 billion in the 13 weeks ended November 2, 2024, driven by comparable store sales growth and $401.4 million from non-comparable stores[134] - Enterprise comparable store net sales increased 1.8% in the 13 weeks ended November 2, 2024, with a 1.6% increase in customer traffic and a 0.2% increase in average ticket[135] - Net sales increased by 2.8% to$ 22.56 billion in the 39 weeks ended November 2, 2024, with $1.3 billion from non-comparable stores partially offset by store closures[139] - Enterprise comparable store net sales increased 1.2% in the 39 weeks ended November 2, 2024, driven by a 1.6% increase in customer traffic[140] - Net sales for the Dollar Tree segment increased by 8.3% to$ 4,338.0 million for the 13 weeks ended November 2, 2024, driven by a 1.8% increase in comparable store net sales[153] - Net sales for the Family Dollar segment decreased by 2.5% to $3,223.7 million for the 13 weeks ended November 2, 2024, due to store closures, partially offset by a 1.9% increase in comparable store net sales[160] Gross Profit Margin - Gross profit margin increased by 120 basis points to 30.9%, primarily due to lower freight costs and improved shrink results[107] - Gross profit margin increased to 30.9% in the 13 weeks ended November 2, 2024, up 120 basis points due to lower freight costs and improved shrink results[141] - Gross profit margin increased to 30.6% in the 39 weeks ended November 2, 2024, up 80 basis points due to lower freight costs[142] - Gross profit margin for the Dollar Tree segment increased by 60 basis points to 35.4% for the 13 weeks ended November 2, 2024, due to lower freight costs[156] - Gross profit margin for the Family Dollar segment increased by 130 basis points to 24.9% for the 13 weeks ended November 2, 2024, primarily due to lower freight and markdown costs[162] Operating Income and Expenses - Operating income increased by 10.5% to$ 333.4 million for the 13 weeks ended November 2, 2024, compared to $301.7 million in the same period last year[145] - Selling, general, and administrative expenses increased by 90 basis points to 26.6% of total revenues, driven by higher depreciation and professional fees[108] - Selling, general and administrative expenses increased by 7.1% to$ 2,010.5 million for the 13 weeks ended November 2, 2024, compared to $1,877.0 million in the same period last year[143] - Selling, general and administrative expense rate increased by 90 basis points to 26.6% for the 13 weeks ended November 2, 2024, primarily due to higher depreciation and temporary labor costs[143] - Operating income (loss) margin for the Family Dollar segment improved to 0.0% for the 13 weeks ended November 2, 2024, from (2.0)% in the same period last year, driven by higher gross profit margin[167] - Family Dollar segment operating income margin increased to 0.2% from (0.5%) in the same period last year due to gross profit margin improvement[168] Strategic Review and Store Closures - The company initiated a formal review of strategic alternatives for the Family Dollar business segment, which could include a potential sale, spin-off, or other disposition of the business[67] - Family Dollar initiated a strategic alternatives review, including potential sale or spin-off, with no set deadline for completion[122] - Approximately 970 underperforming Family Dollar stores were identified for closure, with 670 already closed and 25 more expected to close in fiscal 2024[121] Share Repurchases and Financing - The company repurchased 3,283,837 shares of common stock at a cost of$ 403.6 million during the 39 weeks ended November 2, 2024, and had $952.4 million remaining under its$ 2.5 billion Board repurchase authorization[64] - The company repurchased 3,283,837 shares of common stock at a cost of $403.6 million during the 39 weeks ended November 2, 2024[176] - The company has$ 952.4 million remaining under its $2.5 billion Board repurchase authorization[176] - The company issued and repaid$ 3.2 billion of commercial paper notes during the 39 weeks ended November 2, 2024, with interest expense of $3.9 million[56] - No borrowings were outstanding under the Revolving Credit Facility or the commercial paper program as of November 2, 2024[180] - Long-term borrowings totaled$ 3.45 billion, with $1.0 billion maturing in May 2025 and$ 1.5 billion available under the Revolving Credit Facility[173] Cash Flow and Capital Expenditures - Net cash provided by operating activities increased by $358.6 million, driven by higher accounts payable and current year earnings[170] - Net cash used in investing activities increased by$ 36.8 million due to higher capital expenditures, partially offset by insurance recoveries[171] - Net cash used in financing activities increased by $111.0 million due to lower net borrowings under the commercial paper program[172] - Net cash provided by operating activities for the 39 weeks ended November 2, 2024, was$ 1,788.2 million compared to $1,429.6 million in the same period last year[174] Legal and Liability Expenses - The company resolved matters related to a past rodent infestation at Family Dollar's West Memphis, Arkansas distribution center, recording charges of$ 56.7 million in fiscal 2023[55] - General liability claim expenses increased by $64.3 million in Q2 2024, with$ 45.3 million in the Dollar Tree segment and $19.0 million in the Family Dollar segment[128] Tax and Interest Expenses - Interest expense, net decreased by 9.5% to$ 27.5 million for the 13 weeks ended November 2, 2024, compared to $30.4 million in the same period last year[148] - Effective tax rate increased to 23.7% for the 13 weeks ended November 2, 2024, compared to 21.8% in the same period last year, primarily due to lower Work Opportunity Tax Credits[150] Store Operations and Expansion - The company operates more than 16,500 retail discount stores in 48 states and five Canadian provinces, with two reporting business segments: Dollar Tree and Family Dollar[65] - The company operates 16,590 stores across 48 states, the District of Columbia, and five Canadian provinces, with an average store size of 11,050 sq. ft. for Dollar Tree and 8,850 sq. ft. for Family Dollar[111] - Comparable store net sales grew by 1.8% for the 13 weeks ended November 2, 2024, with a 1.6% increase in customer traffic and a 0.2% rise in average ticket size[112] - Net sales per selling square foot for the 52 weeks ended November 2, 2024, were$ 233 for Dollar Tree and $223 for Family Dollar, totaling$ 229 overall[115] - The company expanded its multi-price product assortment to approximately 2,300 stores, including $3,$ 4, and $5 frozen and refrigerated products[117] - Acquired designation rights for up to 170 leases of 99 Cents Only Stores, with 164 stores opened under the Dollar Tree segment[118] - Family Dollar has more than 2,180 stores across three formats (H2.5, larger rural stores, and XSB) as of November 2, 2024[119] Inflation and Risk Factors - The company is exposed to inflation risks, including merchandise, transportation, and labor costs, which could impact financial performance if not offset[181] Supply Chain Finance - The company's outstanding payment obligations under its supply chain finance program were$ 460.5 million as of November 2, 2024, compared to $11.8 million as of February 3, 2024[78]