Dollar Tree, Inc. Q4 FY2025 earnings call

• Mike emphasized the fourth quarter as a proof point of strategic pillars translating to results, with 9% revenue growth and 5% comp, despite January storm headwinds. • 2025 saw progress on transformation initiatives like selling Family Dollar, scaling multi-price, modernizing operations, and growing Dollar Tree U.S. households to 102 million. • Traffic declined but was above prior reset levels, with sequential improvement in Q4. • Operational metrics improved, with over one-third of stores improving against internal standards. • Supply chain service levels and inventory discipline improved. • Tariff mitigation levers used to manage cost headwinds.

Fourth quarter revenue growth was 9% with a comp of 5%. Comparable sales comp was 5%, driven by ticket growth, with discretionary categories outperforming consumables. Multi-price represented approximately 16% of total sales in Q4, with inline multi-price stores delivering higher sales productivity. Gross margin expanded 150 basis points year over year, driven by higher merchandise margin, lower freight costs, favorable mix, and occupancy leverage, partially offset by tariffs and higher markdowns. Segment-adjusted SG&A delevered 170 basis points year-over-year due to higher store payroll and general liability claims, with $100 million restickering costs in Q4.

• Fiscal 2026 net sales expected in range of $20.5 to $20.7 billion, comp sales growth 3% to 4%. • Adjusted diluted earnings per share expected in range of $6.50 to $6.90. • Gross margin roughly flat, with improved markdown performance offset by higher freight costs. • Plan to tightly manage store labor and right-size corporate cost structure. • Expect to lap majority of restickering costs in 2026, with TSA income of approximately $70 million. • CapEx in range of $1.1 to $1.2 billion. • Expect to utilize NOL balance for cash tax benefits of roughly $165 million.

• Tariff volatility and potential near-term changes, with current inventories capitalizing prior tariff rates. • Macro-economic factors and future tariff changes could impact results. • Freight costs may revert to higher levels, affecting gross margin. • Weather events can impact store operations and sales. • Fluctuations in energy prices, such as diesel and fuel, can affect P&L. • Wage movements and general liability claims can impact SG&A and operating margin.

Q: Matthew Balls from J.P. Morgan asked about monthly comp cadence in Q4, traffic drivers, and quarter-to-date comp trend relative to guidance.

A: Mike said Q4 comp was 5% with December strongest, November close, January impacted by storms, traffic improved sequentially.

Q: Seth Sigmund from Barclays asked about traffic inflection and elasticity.

A: Mike said traffic improved sequentially post-restickering, more muted response than past price resets due to strategic pricing.

Q: Rupesh Parikh from Oppenheimer asked about impacts of higher gas prices, raw materials, and freight costs.

A: Mike said higher gas prices lead to trade-in to Dollar Tree, Stuart discussed diesel price impacts and tariff offset.

Q: Bobby Griffin from Raymond James asked about multi-price points and competition.

A: Mike said multi-price has strong customer acceptance, improves store productivity, and remains competitive.

Q: Michael Lasser from UBS asked about earnings guidance range and reinvestment.

A: Mike discussed moving parts in earnings guidance and reinvestment in the business.

Q: Edward Kelly from Wells Fargo asked about store standards and UPT.

A: Mike said store standards improving with net third of stores improving, UPT mirroring traffic and assortment relevance.

Q: Paula Jews from Citigroup asked about inventory.

A: Stuart said inventory down 7% vs prior year, units even lower, focusing on managing inventory for efficiency.

Q: John Heinbacher from Guggenheim asked about traffic by cohort and MPP role.

A: Mike said household growth across all income cohorts, MPP driving discretionary and trade-in.