Dollar Tree, Inc. Q2 FY2025 earnings call

• Closing the Family Dollar sale was a key milestone. - Delivered strong Q2 results with net sales up 12.3% and comp sales up 6.5%. - Added 2.4 million new customers in the last 12 months, 2/3 from households earning $100,000 or more. - Completed 3,600 3.0 format store conversions, on track to reach 5,000 by year-end. - Partnered with Uber Eats to access 25 million customers. - Opened 254 new stores, converted 26 Family Dollar combo stores to full Dollar Trees, and continued store renovations and preventative maintenance.

Net sales increased 12.3% to $4.6 billion. Comparable store sales grew 6.5%, with 3% growth in traffic and 3.4% in ticket. Sales contribution from noncomp stores exceeded expectations. Gross margin increased 20 basis points to 34.4% due to lower merchandise costs, favorable pricing, and mix shift. Consumables comp was 6.7% and discretionary was 6.1%, with strength in electronics, hardware, and lawn and garden.

• Expect comparable sales growth of 4% to 6% and adjusted EPS of $5.32 to $5.72 for full year 2025. - Anticipate gross margin improvement of approximately 50 basis points, partially offset by higher tariffs. - Dollar Tree segment adjusted SG&A expected to deleveraging by ~120 basis points due to higher labor and general liability costs. - Corporate SG&A expected to increase 11%-12%, offset by TSA proceeds of $55 million to $60 million.

• Tariffs remain a significant source of volatility with frequent rate changes. - General liability costs are rising across the industry, impacting margins. - Uncertainty in consumer spending due to inflation and ongoing tariff impacts create volatility.

Q: Perception that consumer pushback on price points has risked margins.

A: Michael Creedon states customer response is positive, with balanced traffic and ticket, and Dollar Tree resonating with all income levels.

Q: Drivers of higher ticket and pricing actions.

A: Michael Creedon mentions balanced mix of discretionary and consumables, positive unit performance despite some pricing, and customer acceptance.

Q: Guidance range for back half.

A: Stewart Glendinning notes volatility in the marketplace, general liability costs rising without increased claims, and shrink/markdowns having some impact.

Q: Normalized EPS.

A: Michael Creedon discusses moving parts in tariffs, one-offs like stickering costs and inventory revaluations, balancing out by year-end.

Q: Sequential acceleration in same-store sales.

A: Michael Creedon notes strong performance in Q2 with balanced ticket and traffic across income cohorts, Q3 within guidance range.

Q: Multi-price buying team evolution and zone pricing.

A: Michael Creedon praises merchant team agility, zone pricing still a priority but pivoted to tariff mitigation temporarily.

Q: Pricing innings and price gaps.

A: Michael Creedon states pricing setup is in place, customer response positive.

Q: Consumer caution and TSA outlook.

A: Michael Creedon cites unknowns in tariffs and consumer spending, Stewart Glendinning discusses TSA income shortfall offset by other savings.

Q: Store service level and in-stock levels.

A: Michael Creedon and Stewart Glendinning mention strong DC performance, improving shopping experience, and positive customer feedback.

Q: Uber Eats partnership.

A: Michael Creedon states partnership with Uber Eats covers 8,500 stores, sees strong initial response, and focuses on convenience.