DOLLAR TREE, INC. Q4 FY2024 earnings call

• Announced Brigade-Macellum will acquire Family Dollar for over $1 billion; Dollar Tree to receive just over $800 million in cash proceeds.
• Q4 comp was 2%, with traffic up 0.7% and ticket up 1.3%. 3.0 stores saw strong comp lifts in various categories.
• Expanded assortment boosted Q4 results, with 3.0 stores showing significant lifts in comp, traffic, and ticket.
• Addressed tariffs with multiple mitigation strategies, including negotiating supplier concessions, changing product specs, etc.
• Welcomed Stewart Glendinning as CFO, who will help with 2025 outlook.

Net sales from continuing operations (Dollar Tree segment and Corporate) increased 0.7% to $5 billion. Net sales from discontinued operations (Family Dollar) decreased 11.2% to $3.3 billion. On a consolidated basis, net sales were $8.3 billion. Adjusted operating income from continuing operations was $628 million, a 15% decrease. Dollar Tree segment's adjusted operating income declined 12.1% to $768 million. Total inventory on continuing operations increased $176 million to $2.7 billion.

• Fiscal 2025 sales expected $18.5 billion to $19.1 billion with 3%-5% comparable store sales growth.
• Adjusted EPS from continuing operations expected $5 to $5.50, compared to last year's $5.10.
• Capital expenditures expected $1.2 billion to $1.3 billion, including ~400 new store openings.
• First quarter net sales expected $4.5 billion to $4.6 billion, adjusted diluted EPS $1.10 to $1.25.

• Tariff uncertainties with potential impact on margins, as second round tariffs are not fully mitigated and remain volatile.
• Transition costs related to separating Family Dollar, including carrying full corporate costs in the short term before TSA takes effect.

Q: Rupesh Parikh from Oppenheimer asked about 3.0 format store performance and optimization.

A: Michael Creedon said 3.0 stores continue to perform well, with longer-term benefits from expanded assortment, and focus on store readiness for conversion.

Q: Chuck Grom from Gordon Haskett asked about multi-price directional change and leverage in 2025 guidance.

A: Michael Creedon discussed balanced conversion approach and Stewart Glendinning explained SG&A deleverage due to corporate cost bearing and TSA timing.

Q: Kate McShane from Goldman Sachs asked about combo stores and tariff mitigation with higher prices.

A: Michael Creedon mentioned combo stores going to new owner and using various tools including pricing to mitigate tariffs.

Q: Paul Lejuez from Citigroup asked about price moves, comp traffic/ticket, and TSA lease guarantees.

A: Michael Creedon talked about targeted pricing for essential products, focus on both traffic and ticket, and clean deal with no guarantees on Family Dollar leases.

Q: Karen Short from Melius Research asked about operating margin run rate and breakup fee.

A: Michael Creedon and Stewart Glendinning discussed improving operating margin over time and no specific mention of breakup fee details.

Q: Seth Sigman from Barclays asked about gross margin improvement and offsets.

A: Stewart Glendinning explained first round tariffs are mitigated but second round is not included, and discussed factors affecting gross margin like multi-price and freight.