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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-25464
dltr-20210130_g1.gif
DOLLAR TREE, INC.
(Exact name of registrant as specified in its charter)
Virginia26-2018846
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
500 Volvo Parkway
Chesapeake,Virginia23320
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (757) 321-5000

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareDLTRNASDAQ Global Select Market
Securities registered pursuant to section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YesNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YesNo


Table of Contents
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value of common stock held by non-affiliates of the registrant on July 31, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was $21,864,456,043, based upon the closing sale price for the registrant’s common stock on such date. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the registrant.
On March 10, 2021, there were 233,420,925 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for in Items 10, 11, 12, 13 and 14 of Part III, to the extent not set forth herein, is incorporated by reference to the definitive Proxy Statement for the Annual Meeting of Stockholders to be held June 10, 2021, which will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended January 30, 2021.
2


DOLLAR TREE, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 30, 2021
TABLE OF CONTENTS
  Page
 PART I 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 PART II 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 PART III 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 PART IV 
Item 15.
Item 16.
3

Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,” “should,” “predict,” “possible,” “potential,” “continue,” “strategy,” and similar expressions. For example, our forward-looking statements include, without limitation, statements regarding:
The potential effect of general business or economic conditions on our business, including the direct and indirect effects of the COVID-19 pandemic on the economy, consumer spending levels, and unemployment in our markets;
The uncertainty of the impact of the COVID-19 pandemic and public health measures on our business and results of operations, including uncertainties surrounding possible disruptions in our supply chain or sources of supply, the physical and financial health of our customers, the effectiveness and duration of government assistance programs to individuals, households and businesses to support consumer spending, levels of foot traffic in our stores, changes in customer demand for our consumable and essential products as well as our discretionary products, and increased expenses for higher wages and bonuses paid to associates and the cost of personal protective equipment and additional cleaning supplies and protocols for the safety of our associates;
Our expectations regarding cost increases in the future, including costs relating to our COVID-19 response initiatives, increases in the minimum wage by states and localities, potential federal minimum wage legislation, increases in shipping rates, domestic freight, other distribution costs, and fuel costs and potential new legal requirements to provide increased pay for associates who work during pandemic restrictions (“hero pay”) and a potential increase in the minimum salary for exempt store managers;
The disruptions in shipping from China, particularly the shortages in shipping capacity resulting from container shortages, and the resulting delays in having merchandise from China delivered to our distribution centers when needed.
Our growth plans, including our plans to add, renovate, re-banner, expand, remodel, relocate or close stores and any related costs or charges, our anticipated square footage increase, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;
Our anticipated sales, comparable store net sales, net sales growth, gross profit margin, costs of goods sold (including product mix), shrink rates, earnings and earnings growth, inventory levels, 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, other legal proceedings or governmental investigations (including the proceeding by the Food and Drug Administration);
The effect of our initiatives to renovate Family Dollar stores to the H2 store format and the performance of that format, the sales mix of consumable and higher margin merchandise in Dollar Tree and Family Dollar stores, including an increase in the number of stores with freezers and coolers and the roll-out of adult beverages, on our results of operations;
Our plans relating to new store openings and new store concepts such as Dollar Tree Plus! and our Combination Store format;
The impact of trade relations and the ongoing trade dispute between the United States and China, including the actual and potential effect of Section 301 tariffs on Chinese goods imposed by the United States Trade Representative, uncertainties surrounding the policies of the new presidential administration, and other potential impediments to imports;
The reliability of, and cost associated with, our sources of supply, particularly imported goods such as those sourced from China and domestic goods which are in higher demand as a result of the COVID-19 pandemic;
The effect of changes in labor laws, and the effect of the Fair Labor Standards Act as it relates to the qualification of our managers for exempt status, minimum wage and health care law;
Our seasonal sales patterns and customer demand including those relating to the important holiday selling seasons and party merchandise;
The average size and productivity of our stores, including those to be added in 2021 and beyond;
Our cash needs, including our ability to fund our future capital expenditures, working capital requirements and repurchases
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of common stock under our repurchase program, and our ability to service our debt obligations, including our expected annual interest expense;
Our expectations regarding the construction of new distribution centers and the capabilities of our distribution center network;
Our expectations regarding compliance with debt covenants and stock repurchases;
Our expectations regarding competition and our potential for long-term growth;
Our assessment of the impact on us of certain actions by activist shareholders and our potential responses to these actions;
Our assessment of the materiality and impact on our business of recent accounting pronouncements adopted by the Financial Accounting Standards Board;
Management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes and uncertain tax positions; and
Management’s estimates associated with our critical accounting policies, including inventory valuation, self-insurance liabilities and valuations for our goodwill and indefinite-lived intangible assets impairment analyses.
A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. 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 discussed under “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-K.
We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements.
We do not undertake to publicly update or revise any forward-looking statements after the date of this Form 10-K, whether as a result of new information, future events, or otherwise.
Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that we agree with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, we have a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
Introductory Note
Unless otherwise stated, references to “we,” “our” and “us” generally refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis. Unless specifically indicated otherwise, any references to “2021” or “fiscal 2021,” “2020” or “fiscal 2020,” “2019” or “fiscal 2019,” and “2018” or “fiscal 2018,” relate to as of or for the years ended January 29, 2022, January 30, 2021, February 1, 2020 and February 2, 2019, respectively.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website at www.dollartree.com as soon as reasonably practicable after electronic filing of such reports with the Securities and Exchange Commission (“SEC”).
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PART I
Item 1. Business
Overview
We are a leading operator of discount variety stores. We believe the convenience and value we offer are key factors in serving and growing our base of loyal customers. At January 30, 2021, we operated 15,685 discount variety retail stores. Our stores operate under the brand names of Dollar Tree, Family Dollar and Dollar Tree Canada.
We operate in two reporting business segments: Dollar Tree and Family Dollar. For discussion of the operating results of our reporting business segments, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Segment Information” and Note 12 to our consolidated financial statements.
Impact of COVID-19
Beginning in fiscal 2020, our business was affected by the COVID-19 pandemic. As an essential business, our stores and distribution centers have remained open during the pandemic; however, our business trends and operations have been impacted in various ways. For example, we have experienced fewer customer visits and higher average ticket and the mix and profit margin of products purchased by our customers has differed from historical patterns. We have seen a shift in our customers’ purchases towards higher-margin discretionary products. We have also experienced changes in when our customers are shopping relative to the dates of seasonal holidays with spending occurring further in advance of the holidays than in previous years.
The future impact of COVID-19 on our customers is difficult to predict as the course of the pandemic, the effectiveness of health measures, and the impact of ongoing economic stabilization efforts is uncertain and government assistance payments may not provide enough funding to support current spending levels. The American Rescue Plan Act of 2021 (“Rescue Act”), which was enacted on March 11, 2021, provides U.S. government funding to address the continuing impact of COVID-19 on the economy, public health, individuals and businesses. Among other things, the Rescue Act provides for $1,400 direct payments to individuals, continues supplemental unemployment benefits until September 2021, extends a prior increase in food stamp benefits, expands the child tax credit and earned income tax credit, provides for rent and utility assistance, and funds COVID-19 vaccinations, testing, treatment and prevention. An increase in the federal minimum wage was not included in the Rescue Act as enacted. During fiscal 2020, we paid wage premiums to our store and distribution center associates as well as “Thank You” bonuses to our store managers in recognition of their extraordinary efforts during the COVID-19 pandemic, which increased our costs. We currently do not anticipate paying these types of premiums and bonuses in fiscal 2021.
As a result of COVID-19, our supply chain has been strained and our suppliers have faced challenges in keeping up with the unprecedented demand for essential goods, as well as discretionary goods. Recently, the ocean-shipping industry has faced capacity issues resulting in higher costs and delays in the shipment of products from Asia. We continue to make operational changes in an attempt to minimize the impact of these challenges on our business; however, we do not know how long these disruptions will continue. For additional information regarding the impact of COVID-19 on our business, refer to the discussion in this Item 1. below and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Dollar Tree
  Our Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $1.00. The Dollar Tree segment includes 7,805 stores operating under the Dollar Tree and Dollar Tree Canada brands, 15 distribution centers in the United States and two in Canada. Our stores predominantly range from 8,000 - 10,000 selling square feet. In our Dollar Tree stores in the United States, we sell items primarily for $1.00 or less and in our Dollar Tree Canada stores, we sell items principally for $1.25(CAD) or less. Our revenue and assets in Canada are not material. We are the owners of several trademarks including “Dollar Tree” and the “Dollar Tree” logo.
We strive to exceed our customers’ expectations of the variety and quality of products they can purchase for $1.00 by offering items we believe typically sell for higher prices elsewhere. We buy approximately 60% to 62% of our merchandise domestically and import the remaining 38% to 40%. Our domestic purchases include basic, home, closeouts and promotional merchandise. We believe our mix of imported and domestic merchandise affords our buyers flexibility that allows them to consistently exceed our customers’ expectations. In addition, direct relationships with manufacturers permit us to select from a broad range of products and customize packaging, product sizes and package quantities that meet our customers’ needs.
We believe that our initiatives positively affect our comparable store net sales. In fiscal 2019, we introduced our Crafter’s Square initiative in more than 650 stores. This offering includes a new expanded assortment of arts and crafts supplies. During fiscal 2020, we expanded this program, completing the roll-out to all of our Dollar Tree stores. The Crafter’s Square assortment carries mark-ups which are higher than our average mark-up. Additionally, for more than a year, we have tested a multi-price initiative referred to as Dollar Tree Plus! Beginning in fiscal 2019, we began testing multi-price assortments in more than 100 stores in southwestern markets.
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Based on learnings from the test, we made modifications to: the mix of products offered to include primarily discretionary items; the displays and signage to drive awareness and excitement to the stores; the price points to focus on the $1, $3 and $5 price points; and increase the number of offerings above the $1 price point. We plan to expand this initiative into a total of 500 stores beginning in the first quarter of fiscal 2021. We believe these initiatives have and will continue to enable us to increase sales and earnings.
We carry approximately 7,500 items in our Dollar Tree stores and as of the end of fiscal 2020 approximately 34% of our items are automatically replenished. The remaining items are pushed to the stores and a portion can be reordered by our store managers on a weekly basis. Through automatic replenishment and our store managers’ ability to order product, each store manager is able to satisfy the demands of their particular customer base.
We maintain a balanced selection of products within traditional variety store categories. We offer a wide selection of everyday basic products and we supplement these basic, everyday items with seasonal, closeout and promotional merchandise. We attempt to keep certain basic consumable merchandise in our stores continuously to establish our stores as a destination and increase traffic in our stores. Closeout and promotional merchandise is purchased opportunistically and represents less than 10% of our purchases.
The merchandise mix in our Dollar Tree stores consists of:
consumable merchandise, which includes everyday consumables such as household paper and chemicals, food, candy, health and personal care products, and in many stores, frozen and refrigerated food;
variety merchandise, which includes toys, durable housewares, gifts, stationery, party goods, greeting cards, softlines, arts and crafts supplies and other items; and
seasonal goods, which include, among others, Christmas, Easter, Halloween and Valentine’s Day merchandise.
For information regarding the amounts and percentages of our net sales contributed by the above merchandise categories for the last three fiscal years, please refer to Note 12 to our consolidated financial statements.
Family Dollar
Our Family Dollar segment operates general merchandise retail discount stores providing customers with a selection of competitively-priced merchandise in convenient neighborhood stores. Our stores predominantly range from 6,000 - 8,000 selling square feet. In our 7,880 Family Dollar stores, we sell merchandise at prices that generally range from $1.00 to $10.00. The Family Dollar segment consists of our store operations under the Family Dollar brand and 11 distribution centers. We are the owners of the trademarks “Family Dollar,” “Family Dollar Stores” and other names and designs of certain merchandise sold in Family Dollar stores.
Our Family Dollar stores provide customers with a quality, high-value assortment of basic necessities and seasonal merchandise. We offer competitively-priced national brands from leading manufacturers alongside name brand equivalent-value, lower-priced private labels. We purchase merchandise from a wide variety of suppliers and generally have not experienced difficulty in obtaining adequate quantities of merchandise. In fiscal 2020, we purchased approximately 13% of our merchandise through our relationship with McLane Company, Inc., which distributes consumable merchandise from multiple manufacturers. In addition, approximately 16% of our merchandise is imported directly.
We are executing several initiatives in our Family Dollar stores to increase sales. During 2020, we entered into a partnership with Instacart to enable our customers to shop online and receive merchandise without having to visit a store. During 2019, we introduced a new model for both new and renovated Family Dollar stores internally known as H2. This H2 model has significantly improved merchandise offerings, including approximately 20 Dollar Tree $1.00 merchandise sections and establishing a minimum number of freezer and cooler doors, throughout the store. H2 stores have higher customer traffic and provide an average comparable store net sales lift in excess of 10%, when compared to non-renovated stores, in the first year following renovation. H2 stores perform well in a variety of locations and especially in locations where our Family Dollar stores have been most challenged in the past. As of January 30, 2021, we have approximately 2,385 H2 stores. We plan to renovate at least 1,250 stores to this format in fiscal 2021 and also plan to build new stores in this format.
Building on the success of the H2 format, we have developed a Combination Store which leverages both the Dollar Tree and Family Dollar brands to serve small towns across the country. We are combining Family Dollar’s great value and assortment with Dollar Tree’s “thrill of the hunt” and fixed price point, creating a new strategic store format targeted for small towns and rural communities with populations of 3,000 to 4,000 residents.
While the number of items in a given store can vary based on the store’s size, geographic location, merchandising initiatives and other factors, our typical Family Dollar store generally carries approximately 7,600 basic items alongside items that are ever-changing and seasonally-relevant throughout the year.

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The merchandise mix in our Family Dollar stores consists of:
consumable merchandise, which includes food and beverages, tobacco, health and personal care products, household chemicals, paper products, hardware and automotive supplies, diapers, batteries, and pet food and supplies;
home products, which include housewares, home décor, giftware, and domestics, including comforters, sheets and towels;
apparel and accessories merchandise, which includes clothing, fashion accessories and shoes; and
seasonal and electronics merchandise, which includes Christmas, Easter, Halloween and Valentine’s Day merchandise, personal electronics, including pre-paid cellular phones and services, stationery and school supplies, and toys.
For information regarding the amounts and percentages of our net sales contributed by the above merchandise categories for the last three fiscal years, please refer to Note 12 to our consolidated financial statements.
Business Strategy
Continue to execute our proven and best‑in‑class retail business strategy. We will continue to execute our proven strategies that have generated a history of success and continued growth for us. Key elements of our strategy include:
aiming continuously to “Wow” the customer with a compelling, fun and fresh merchandise assortment comprising a variety of the things you want and things you need, all at incredible values in bright, clean and friendly stores;
maintaining a flexible sourcing merchandise model that allows a variety of products to be sold as long as desired merchandise margin thresholds are met;
growing and improving both the Dollar Tree and Family Dollar brands;
pursuing a “more, better, faster” approach to the roll-out of new Dollar Tree and Family Dollar stores to broaden our geographic footprint;
maintaining customer relevance by ensuring that we reinvent ourselves constantly through new merchandise categories and initiatives;
leveraging the complementary merchandise expertise of each segment including Dollar Tree’s sourcing and product development expertise and Family Dollar’s consumer package goods and national brands sourcing expertise; and
maintaining a prudent approach with our use of capital for the benefit of our shareholders.
Operate a diversified and complementary business model across both fixedprice and multiprice point strategies. We plan to operate and grow both the Dollar Tree and Family Dollar brands. We will utilize the reach and scale of our combined company to serve a broader range of customers in more ways, offering better prices and more value for the customer. At Dollar Tree, everything is predominantly $1.00, offering the customer a balanced mix of things they need and things they want. Our shopping experience will remain fun and friendly as we exceed our customers’ expectations for what they can buy for $1.00. As noted previously, we plan to expand our Dollar Tree Plus! initiative into a total of 500 stores beginning in the first quarter of fiscal 2021. Merchandise in these stores includes select items which retail for more than $1.00 but not more than $5.00 and maintain our customers’ expectations of extreme value. Dollar Tree serves a broad range of income customers in suburban locations. Family Dollar stores will continue to operate using multiple price points, serving customers as their “neighborhood discount store,” offering great values on everyday items and a convenient shopping experience. Family Dollar primarily serves a lower than average income customer in urban and rural locations. We expect to benefit from an expanded target customer profile and utilize the store concepts of both Dollar Tree and Family Dollar to serve a broader range of customer demographics to drive further improvements in sales and profitability.
Take advantage of significant white-space opportunity. Over the past decade we have built a solid and scalable infrastructure, which provides a strong foundation for our future growth. We are committed to growing our combined business to take advantage of significant market or white space opportunities that we believe exist for both the Dollar Tree and Family Dollar store concepts. Using our proven real estate strategy across our combined business, we intend to drive future store openings by capitalizing on data‑driven insights regarding location, target customer profile, competitive dynamics and cost structure. Over the long-term, we believe that the market can support more than 10,000 Dollar Tree stores and 15,000 Family Dollar stores across the United States, and approximately 1,000 Dollar Tree stores in Canada.
Convenient Locations and Store Size. We focus primarily on opening new Dollar Tree stores in strip shopping centers anchored by large retailers who draw target customers we believe to be similar to ours. Our stores are successful in metropolitan areas, mid-sized cities and small towns. We open new Family Dollar stores in strip shopping centers, freestanding buildings and downtown buildings. The range of our new store sizes, 8,000 - 10,000 selling square feet for Dollar Tree and 7,000 - 10,000 selling square feet
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for Family Dollar, allows us to target a particular location with a store that best suits that market and takes advantage of available real estate opportunities. Our stores are attractively designed and create an inviting atmosphere for shoppers by using bright lighting, vibrant colors and decorative signs. We enhance the store design with attractive merchandise displays. We believe this design attracts new and repeat customers and enhances our image as both a destination and impulse purchase store.
Profitable Stores with Strong Cash Flow. We maintain a disciplined, cost-sensitive approach to store site selection in order to minimize the initial capital investment required and maximize our potential to generate high operating margins and strong cash flows. We believe that our Dollar Tree stores and our urban Family Dollar stores have a relatively small shopping radius, which allows us to profitably concentrate multiple stores within a single market. In addition, our rural Family Dollar stores have a larger shopping radius, allowing us to profitably locate in these areas because of our ability to reach customers who live farther from our stores. Our ability to open new stores is dependent upon, among other factors, locating suitable sites and negotiating favorable lease terms.
The strong cash flows generated by our stores allow us to self-fund infrastructure investment and new stores. Typically, our cash flows from operating activities exceed our capital expenditures.
For more information on our results of operations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Merchandising Cost Control. We believe that our substantial buying power and our flexibility in making sourcing decisions contributes to our successful purchasing strategy, which includes targeted merchandise margin goals by category. We also believe our ability to negotiate with our vendor partners allows us to minimize the margin impact of economic pressures such as tariffs. We buy products on an order-by-order basis and have no material long-term purchase contracts or other assurances of continued product supply or guaranteed product cost. Historically, no vendor has accounted for more than 10% of total merchandise purchased by us.
Our supply chain systems continue to provide us with valuable sales information to assist our buyers and improve merchandise allocation to our stores. We use this information to target our inventory levels in our distribution centers and stores in order to plan for capacity and labor needs.
Information Systems. We believe that investments in technology help us to increase sales and control costs. Our inventory management system provides information to calculate our estimate of inventory cost under the retail inventory method, which is widely used in the retail industry. Our automated replenishment system replenishes key items, based on actual store-level sales and inventory.
Point-of-sale data allows us to track sales and inventory by merchandise category at the store level and assists us in planning for future purchases of inventory. We believe that this information allows us to ship the appropriate product to stores at the quantities commensurate with selling patterns. Using this point-of-sale data to plan purchases has helped us manage our inventory levels.
Corporate Culture and Values. We believe that honesty and integrity, and treating people fairly and with respect are core values within our corporate culture. We believe that running a business, and certainly a public company, carries with it a responsibility to be above reproach when making operational and financial decisions. Our executive management team visits and shops at our stores like every customer, and ideas and individual creativity on the part of our associates are encouraged, particularly from our store managers who know their stores and their customers. We have standards for store displays, merchandise presentation, and store operations. We maintain an open door policy for all associates. Our distribution centers are operated based on objective measures of performance and virtually everyone in our store support centers is available to assist associates in our stores and distribution centers.
During 2020, we launched an enterprise Executive Diversity Council comprised of diverse leaders from every department within the company who are charged with creating a diversity, equity and inclusion (“DEI”) strategy which is linked with our business goals, catalyzing cultural change throughout the organization and driving accountability at the senior management level for progress on key DEI objectives.
Our disclosure committee meets at least quarterly and monitors our internal controls over financial reporting to ensure that our public filings contain discussions about the potential risks our business faces. We believe that we have appropriate controls in place to be able to certify our financial statements. Additionally, we have complied with the listing requirements for the Nasdaq Global Select Market.
Seasonality. For information on the impact of seasonality, see “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Growth Strategy
Store Openings, Relocations and Square Footage Growth. The primary factors contributing to our net sales growth have been new store openings and an active store relocation, expansion and remodel program. In the last five years, net sales increased at a compound annual growth rate of 5.3%. During this time, our store count and approximate selling square footage increased from
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13,851 and 108.4 million square feet at January 30, 2016 to 15,685 and 125.1 million square feet at January 30, 2021. We expect that the majority of our future sales growth will come from new store openings in our Dollar Tree and Family Dollar segments and our store expansion and relocation program as well as our renovation initiatives.
Our growth and productivity statistics are reported based on selling square footage because our management believes the use of selling square footage yields a more accurate measure of store productivity. We expect to increase the selling square footage in our stores in the future by opening new stores in underserved markets and strategically increasing our presence in our existing markets via new store openings and store expansions (expansions include store relocations). In fiscal 2021 and beyond, we plan to predominantly open Dollar Tree stores that are approximately 8,000 - 10,000 selling square feet and Family Dollar stores that are approximately 7,000 - 10,000 selling square feet. We believe these store sizes allow us to achieve our objectives in the markets in which we plan to expand.
In addition to new store openings, we plan to continue our Dollar Tree and Family Dollar store relocation and expansion program to increase our net sales per store and take advantage of market opportunities. We target stores for expansion based on the current sales per selling square foot and changes in market opportunities. Stores targeted for expansion are generally less than 7,000 selling square feet in size. Store expansions generally increase the existing store size by approximately 2,500 selling square feet. At January 30, 2021, 6,591 of our Dollar Tree stores, totaling approximately 88% of our Dollar Tree segment selling square footage, were 7,000 selling square feet or larger.
Since 1995, we have added a total of 695 stores through several mergers and acquisitions, excluding our acquisition of Family Dollar. Historically, our acquisition strategy has been to target companies that have a similar single price point concept that have shown success in operations or companies that provide a strategic advantage. We evaluate potential acquisition opportunities as they become available. In 2015, we completed our acquisition of Family Dollar which allowed us to create a diversified company with complementary business models.
From time to time, we also acquire the rights to store leases through bankruptcy or other proceedings. We will continue to take advantage of these opportunities as they arise depending upon several factors including their fit within our location and selling square footage size parameters.
Merchandising and Distribution. Expanding our customer base is important to our growth plans. We plan to continue to stock our stores with a compelling mix of ever-changing merchandise that our customers have come to appreciate. Consumable merchandise typically leads to more frequent return trips to our stores resulting in increased sales. The presentation and display of merchandise in our stores are critical to communicating value to our customers and creating a more exciting shopping experience. We believe our approach to visual merchandising results in higher sales volume and an environment that encourages impulse purchases. We leverage our merchandising team to source products that can be sold in both Dollar Tree and Family Dollar stores. Our Family Dollar H2 stores include $1.00 sections of Dollar Tree merchandise and our Dollar Tree Plus! stores sell items at the $1.00, $3.00 and $5.00 price points.
A strong and efficient distribution network is critical to our ability to grow and to maintain a low-cost operating structure. In fiscal 2020, we completed construction of our Rosenberg, Texas automated distribution center, which is 1.2 million square feet and currently serves stores in our Dollar Tree segment. Additionally, in fiscal 2020, we completed construction of a 0.5 million square foot distribution center in Ocala, Florida and we began shipping product from this facility during the third quarter of fiscal 2020. We expect to complete an expansion of the Ocala, Florida distribution center in 2023. New distribution sites are strategically located to reduce stem miles, maintain flexibility and improve efficiency in our store service areas.
We currently operate 26 distribution centers in the United States, 15 of which are primarily dedicated to serving our Dollar Tree stores and 11 distribution centers primarily serve our Family Dollar stores. Our St. George, Utah distribution center, which is a legacy Family Dollar facility, services both Dollar Tree and Family Dollar stores and we expect future distribution centers to be built with the capability to service both Dollar Tree and Family Dollar stores.
Our distribution network supports multiple store formats including H2, Combination Stores and Dollar Tree Plus! We ship to our H2 format stores from our Family Dollar distribution centers and we ship to our Dollar Tree Plus! format stores from our Dollar Tree distribution centers. We ship to our Combination Stores from both Dollar Tree and Family Dollar distribution centers. We believe our distribution center network is currently capable of supporting approximately $30.2 billion in annual sales in the United States. We also are party to an agreement which provides distribution services from two facilities in Canada.
Our Dollar Tree stores receive approximately 90% of their inventory from our distribution centers via contract carriers and our Family Dollar stores receive approximately 74% of their inventory from our distribution centers. The remaining store inventory, primarily perishable consumable items and other vendor-maintained display items, are delivered directly to our stores from vendors. Our Family Dollar stores receive approximately 13% of their merchandise from McLane Company, Inc. For more information on our distribution center network, see “Item 2. Properties.”
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Competition
Our segment of the retail industry is fragmented and highly competitive and we expect competition to increase in the future. We operate in the discount retail sector, which is currently and is expected to continue to be highly competitive with respect to price, store location, merchandise quality, assortment and presentation, and customer service, including merchandise delivery and checkout options. Our competitors include single-price dollar stores, multi-price dollar stores, mass merchandisers, on-line retailers, discount retailers, drug stores, convenience stores, independently-operated discount stores, grocery stores and a wide variety of other retailers. In addition, several competitors have sections within their stores devoted to “one dollar” price point merchandise, which further increases competition. We believe we differentiate ourselves from other retailers by providing high-value, high-quality, low-cost merchandise in attractively-designed stores that are conveniently located. Our sales and profits could be reduced by increases in competition. There are no significant economic barriers for others to enter our retail sector.
Government Regulation
We are subject to a wide variety of local, state and federal laws and regulations within the United States and Canada. Compliance with these laws and regulations often requires the dedication of our associates’ time and attention, as well as financial resources. In fiscal 2020, compliance with these laws and regulations did not have a material effect on our capital expenditures, earnings or competitive position.
Human Capital Resources
Our business success is built upon our dedicated, passionate and diverse associates who work and live in the communities we serve. Our associates share our corporate values, “Attitude, Judgment, and Commitment.” We recruit and hire in these communities using local job fairs, social media as well as local community service partners to provide part-time and full-time jobs that can become lasting careers. Our Human Resources team, with oversight from our Board of Directors and their Committees, develops and executes programs for compensation and benefits, onboarding and training, professional development, performance management, retention and succession planning. We strive to create and maintain a safe working environment for our associates. We consider our relationship with our associates to be good, and have not experienced significant interruptions of operations due to labor disagreements. We greatly value our people and invest in their personal well-being and professional growth through various human capital programs and initiatives, including the following:
Compensation and benefits: We are committed to providing market-competitive pay for all positions and we are a pay-for-performance organization, offering performance-based compensation opportunities at nearly all levels of the organization, including hourly-paid positions. We strive to ensure gender and racial pay equity for employees performing equal or substantially similar work. Full-time associates can participate in our Retirement Savings Plan, which provides a dollar for dollar match on the first 5% of employee contributions and all associates can participate in our Employee Stock Purchase Plan. All full-time and part-time associates are eligible for competitive health and welfare benefits, including medical, dental, vision, disability, life insurance and other benefits.
Health, wellness and family resources: In addition to making health and welfare benefits available to our associates, we also support our associates and members of their household through our Employee Assistance Program, which includes financial and legal services, as well as expert counsel in areas such as parenting, family issues and resilience skills. We offer primary caregiver and parental leave to support our associates while they are starting or growing their families and we have a program that provides financial support to associates recovering from natural disasters and personal hardships. To support our associates with high school-aged children, we recently launched a scholarship program to provide access to financial support in their pursuit of higher education.
Talent development: We believe in the growth and development of our associates and provide a multitude of professional and leadership development experiences, including online and instructor-led trainings that enable associates to consume relevant learning content for their current role and future career growth. To remove barriers to education, we recently launched an education assistance program that provides tuition reimbursement, as well as discounted tuition at over 200 colleges and universities for our associates and their families. Our associates also receive personalized coaching and advisement on degree programs that meet their needs. Retention of our associates is a focus for all leaders and we continue to strive to improve our turnover rate. We monitor associate turnover as we know our success depends on retaining and engaging talent in all areas of the business. To identify high-potential talent, leadership assesses talent at the store manager level and above on a regular basis through structured talent reviews and succession planning paired with customized development plans. This focus on talent has resulted in more than 35,600 promotions in 2020.
Diversity, equity and inclusion: We believe our associates should mirror our diverse customer base and the communities we serve. In 2020, we launched an enterprise Executive Diversity Council comprised of diverse leaders from every department within the company who are charged with creating a DEI strategy which is linked with our business goals, catalyzing cultural change throughout the organization and driving accountability at the senior management level for
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progress on key DEI objectives.
As of January 30, 2021, we employed more than 199,300 associates, as follows:
Store and Distribution Center Associates
Dollar TreeFamily DollarStore Support Center AssociatesTotal
Full-time Associates27,952 29,862 2,403 60,217 
Part-time Associates97,913 41,184 13 139,110 
Total125,865 71,046 2,416 199,327 
Part-time associates work an average of less than 30 hours per week and the number of part-time associates fluctuates depending on seasonal needs.
COVID-19 Response. We implemented several changes to protect our associates and our customers in response to the COVID-19 pandemic and to ensure adherence to Centers for Disease Control and Prevention (CDC) recommendations. We provided personal protective equipment including masks, gloves and sanitizers for our store and distribution center associates, installed plexiglass sneeze guards at all store registers and enabled the majority of our store support center teams to work remotely. We provided wage premiums for store and distribution center hourly associates, provided minimum guaranteed sales bonuses for store managers and pay continuation for associates who tested positive for COVID-19. For additional information on the steps taken to support our associates in response to the COVID-19 pandemic, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. Any failure to meet market expectations, including our comparable store sales growth rate, earnings and earnings per share or new store openings, could cause the market price of our stock to decline. You should carefully consider the specific risk factors listed below together with all other information included or incorporated in this report and other filings that we make from time to time with the SEC, including our consolidated financial statements and accompanying notes. However, the risks and uncertainties that we face are not limited to those described below and those set forth in our SEC filings. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also arise. In such event, our business, financial condition, results of operations or prospects could be materially adversely affected.
Profitability and Operational Risks
Our profitability is vulnerable to cost increases.
Future increases in costs such as wage and benefit costs, ocean shipping rates, domestic freight costs, fuel and energy costs, the cost of merchandise, duties and tariffs, merchandise loss (due to theft, damage, or errors) and store occupancy costs would reduce our profitability. Without respect to COVID-19-related premium pay, we expect material increases in wage rates and labor costs as well as in shipping rates, freight and fuel costs in 2021. Certain states and localities have passed laws to increase the minimum wage beginning in 2021 and are considering “hero pay”, i.e., laws that would require increasing the pay of certain associates if we remain open when certain pandemic restrictions are implemented. In addition, the U.S. Congress is considering whether to pass national minimum wage increases in 2021, and the current administration may consider raising the minimum salary for store managers who have exempt status under the Fair Labor Standards Act. Separately, government or industry actions addressing the impact of climate change may result in increases in merchandise or operating costs.
In our Dollar Tree segment, we do not raise the sales price of our merchandise to offset cost increases because we are committed to selling primarily at the $1.00 price point to continue to provide value to the customer. We are dependent on our ability to adjust our product assortment, to operate more efficiently or to increase our comparable store net sales in order to offset cost increases. We can give no assurance that we will be able to operate more efficiently or increase our comparable store net sales in the future. Although Family Dollar, unlike Dollar Tree, can raise the price of merchandise, customers may buy fewer products if prices were to increase. Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effect of economic factors on our operations.
If the COVID-19 pandemic worsens or continues longer than expected, there could be a material adverse impact on our business and results of operations.
In March 2020, the World Health Organization declared a pandemic arising from a novel strain of coronavirus and its related disease, known as COVID-19. Nations and governments at every level responded with significant actions to attempt to mitigate the public health crisis and the impact of the pandemic on the economy. The continuing COVID-19 pandemic and related public health measures have caused economic disruptions that have adversely affected, and are expected to continue to adversely affect, elements of our business. We have, however, been classified as an essential business and been allowed to remain open but our operational costs have increased significantly because of COVID-19. To date, sales at Family Dollar have increased during the pandemic. However, sales at Dollar Tree have been adversely affected, especially in our party departments and for Easter in 2020 and, as a result of fewer customer trips, in certain consumable departments such as snacks and candy.
There continues to be uncertainty and unpredictability about the impact of the COVID-19 pandemic on our financial and operating results in future periods. If the pandemic worsens or continues longer than expected, governments may reinstate or extend business or personal restrictions, and we could be forced to curtail or restrict operations or incur additional costs. Certain states and localities are considering laws that would require increasing the pay of store associates if we remain open when certain COVID-19 restrictions are implemented. We might also experience new disruptions in our supply chain and sources of supply, suffer facility closures or encounter difficulties in hiring or retaining the workforce required for our business. These circumstances, if applicable for an extended duration or across significant parts of our operating footprint, could have a material adverse effect on our business and results of operations.
The COVID-19 pandemic and public health measures have already contributed to, among other things:
Increases in the cost of operating our stores and distribution centers, including temporarily higher wages and bonuses paid to associates, enhanced cleaning protocols and the cost of personal protection equipment.
Disruptions in the patterns of consumer demand, which has led to, among other things, decreased demand for party merchandise and, during 2020, Easter merchandise in the Dollar Tree segment, an increase in consumer demand for household cleaning and other essential supplies and corresponding difficulty in our ability to maintain those items in stock,
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fluctuations in demand for discretionary products, and an increase in demand for online sales (which is an insignificant part of our business) and home (which we recently began providing in the Family Dollar segment) or curbside deliveries (which we do not offer).
Decreasing foot traffic in our stores as a result of the promotion of social distancing, the adoption of various governmental restrictions on personal and business activities and changing consumer attitudes with respect to in-person shopping and changes in shopping patterns.
Reduced consumer demand for holiday, seasonal, party, and other discretionary products that generally carry a higher margin may have a negative impact on our gross profit margin, especially in the later part of the year when they typically form a larger part of our merchandise mix. It is uncertain what effect the COVID-19 pandemic will have on holiday merchandise sales in the future. Also, other sales have decreased in the past, and may decrease in the future when COVID-19 infection rates spike.
Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of continued unfavorable economic conditions, for example because government assistance to households and businesses terminate or are reduced.
Governmental authorities have adopted substantial measures, including fiscal and monetary stimulus, to provide economic assistance to individual households and businesses and support economic stability during the COVID-19 pandemic and the related recession and increase in unemployment. We believe the economic intervention that occurred in fiscal 2020 benefited our sales. While the enactment of the American Rescue Plan Act of 2021 on March 11, 2021 is expected to provide additional economic assistance to individual households and businesses, there can be no assurance that current or future governmental efforts to support the economy during the pandemic will be sufficient to mitigate the negative effect of the pandemic on the economy. If consumer spending on the goods we sell declines as a result, there could be a material adverse impact on our business and results of operations.
We are unable to predict the full extent to which the COVID-19 pandemic will affect the economy and our customers, associates, suppliers, vendors, other business partners or our business, results of operations and financial condition. If the economic consequences of the pandemic are prolonged and/or worsen, it could amplify many of the other risks described in this Form 10-K.
We may continue to encounter higher costs and disruptions in our distribution network.
Our success is dependent on our ability to import or transport merchandise to our distribution centers and then truck merchandise to our stores in a timely and cost-effective manner. We rely heavily on third parties including ocean shippers and truckers in that process. We may not anticipate, respond to or control all of the challenges of operating our distribution network. Additionally, when a shipping or trucking line fails to deliver on its commitments or our distribution centers fail to operate effectively, we could experience increased freight costs or merchandise shortages that could lead to lost sales. We are experiencing ocean shipping disruptions, trucking shortages, increased ocean shipping rates and increased trucking and fuel costs. In the last several years, we have incurred higher distribution costs due to a variety of factors. Some of the factors that could have an adverse effect on our distribution network or costs in 2021 are:
Shipping disruptions. There is currently a shortage of shipping containers in China and other parts of Asia, and as a result we are experiencing significant delays in importing our goods. We are also experiencing issues with port congestion. Our shipping schedules and shipping capacity may be further disrupted or delayed as a result of these or other factors. Although these delays have not yet impacted our sales and we believe we are adequately stocked with merchandise for Easter, the delays could potentially have a material adverse impact on our sales after Easter, especially at Dollar Tree, if the delays do not improve. The global COVID-19 pandemic is also expected to continue to present a risk to trans-Pacific shipping in 2021 and may affect shipping from China, where we buy a significant portion of our merchandise. Our supply chain may be disrupted as a result of the pandemic as well as other international events such as war or acts of terrorism.
Shipping costs. We are experiencing increases in shipping rates from the trans-Pacific ocean carriers. We are currently projecting approximately $80.0 to $100.0 million of additional costs in fiscal 2021 as a result of higher shipping and domestic freight costs. Changes in import duties, import quotas and other trade sanctions could also increase our costs.
Efficient operations and management. Distribution centers and other aspects of our distribution network are difficult to operate efficiently, and we have and could experience a reduction in operating efficiency as a result of high turnover and challenges in maintaining a stable workforce, especially if the COVID-19 crisis continues.
Diesel fuel costs. We have experienced volatility in diesel fuel costs over the past few years and are expecting increases this year.
Trucking costs. We have experienced significant increases in trucking costs in recent years due to the truck driver shortage and other factors, and our trucking costs are expected to increase in the future.
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Vulnerability to natural or man-made disasters, including climate change. A fire, explosion or natural disaster at a port or any of our distribution facilities could result in a loss of merchandise and impair our ability to adequately stock our stores. Some facilities are vulnerable to earthquakes, hurricanes, tornadoes or floods, and an increase in the severity and frequency of extreme weather events may increase our operating costs or disrupt our supply chain.
Labor disagreement. Labor disagreements, disruptions or strikes, for example at ports, may result in delays in the delivery of merchandise to our distribution centers or stores and increase costs.
McLane Company, Inc. In fiscal 2020, we purchased and delivered approximately 13% of our merchandise for our Family Dollar segment through our relationship with McLane Company, Inc., which distributes consumable merchandise from multiple manufacturers. A disruption in our relationship with McLane Company, Inc. could have a significant near-term impact on our operations.
Risks associated with our domestic and foreign suppliers, including tariffs or restrictions on trade or disruptions arising from the COVID-19 pandemic, could adversely affect our financial performance.
We are dependent on our vendors to supply merchandise in a timely and efficient manner. If a vendor fails to deliver on its commitments due to financial or other difficulties, we could experience merchandise shortages which could lead to lost sales or increased merchandise costs if alternative sources must be used.
We rely on the availability of imported goods at favorable wholesale prices. Merchandise imported directly accounts for approximately 38% to 40% of our Dollar Tree segment’s total retail value purchases and 15% to 17% of our Family Dollar segment’s total retail value purchases. In addition, we believe that a significant portion of our goods purchased from domestic vendors is imported. Imported goods are generally less expensive than domestic goods and increase our profit margins. A disruption in the flow of our imported merchandise or an increase in the cost of those goods may significantly decrease our profits. Risks associated with our reliance on imported goods may include disruptions in the flow of or increases in the cost of imported goods because of factors such as:
duties, tariffs or other restrictions on trade, including Section 301 tariffs that have already been imposed on imported Chinese goods, and it is unclear whether the current presidential administration will support rolling back these tariffs. We are currently expecting the amount of Section 301 tariffs we pay in 2021 to increase above 2020 levels because the amount of our imports is expected to increase and we expect to pay tariffs on products which were temporarily excluded from tariffs during 2020;
raw material shortages, work stoppages, government travel restrictions, strikes and political unrest, including any impact on vendors or shipping arising from epidemics and related travel restrictions, such as the recent COVID-19 pandemic;
economic crises and international disputes or conflicts;
changes in currency exchange rates or policies and local economic conditions, including inflation (including energy prices and raw material costs) in the country of origin;
potential changes to, or withdrawal of the United States from, international trade agreements or the failure of the United States to maintain normal trade relations with China and other countries;
changes in leadership and the political climate in countries from which we import products and their relations with the United States; and
failure of manufacturers outside the United States to meet food, drug and cosmetic safety and labeling requirements or environmental standards set by government regulators or consumer expectations.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effect of foreign suppliers on our operations.
Our supply chain may be disrupted by changes in United States trade policy with China.
We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. Among our foreign suppliers, China is the source of a substantial majority of our imports. A disruption in the flow of our imported merchandise from China or an increase in the cost of those goods may significantly decrease our profits.
The United States has scaled back punitive Section 301 tariffs on certain Chinese imports based on an agreement reached with China in 2020. However, there is uncertainty as to the actions that may be taken under the current presidential administration with respect to U.S. trade policy with China, including whether the administration will support reductions in tariffs. The imposition of any new U.S. tariffs on Chinese imports or the taking of other actions against China in the future, and any responses by China, could
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impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a material adverse impact on our business and results of operations.
Our growth is dependent on our ability to increase sales in existing stores and to expand our square footage profitably.
Existing store sales growth is critical to good operating results and is dependent on a variety of factors including merchandise quality, relevance and availability, store operations and customer satisfaction. In addition, increased competition could adversely affect our sales. Failure to meet our sales targets, including in our renovated stores, could result in our needing to record material non-cash impairment charges related to our intangible assets. We believe improving sales at Family Dollar depends in significant part on the success of the H2 renovations and other new store concepts.
Our highest sales periods are during the Christmas and Easter seasons, and we generally realize a disproportionate amount of our net sales and our operating and net income during the fourth quarter. In anticipation, we stock extra inventory and hire many temporary employees to prepare our stores. A reduction in sales during these periods could adversely affect our operating results, particularly operating and net income, to a greater extent than if a reduction occurred at other times of the year. Untimely merchandise delays due to receiving or distribution problems could have a similar effect.
When Easter is observed earlier in the year, the selling season is shorter and, as a result, our sales could be adversely affected. Easter was observed on April 12, 2020 and will be observed on April 4, 2021.
Expanding our square footage profitably depends on a number of uncertainties, including our ability to locate, lease, build out and open or expand stores in suitable locations on a timely basis under favorable economic terms. Obtaining an increasing number of profitable stores is an ever-increasing challenge. In addition, our expansion is dependent upon third-party developers’ abilities to acquire land, obtain financing, and secure necessary permits and approvals. We also open or expand stores within our established geographic markets, where new or expanded stores may draw sales away from our existing stores. We may not manage our expansion effectively, and our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of operations.
Our profitability is affected by the mix of products we sell.
Our gross profit margin decreases when we increase the proportion of higher cost goods we sell. Imported merchandise is generally lower cost than domestic goods. Our supply of goods, including imported goods, could be negatively impacted by the COVID-19 pandemic. In recent years, the percentage of our sales from higher cost consumable products has increased, and we can give no assurance that this trend will not continue.
In our Family Dollar segment, our success also depends on our ability to select and obtain sufficient quantities of relevant merchandise at prices that allow us to sell such merchandise at profitable and appropriate prices. A sales price that is too high causes products to be less attractive to our customers and our sales at Family Dollar could suffer. We are continuing to refine our pricing strategy at Family Dollar to drive customer loyalty and have a strategic pricing team to improve our value and to increase profitability. Inability to successfully implement our pricing strategies at Family Dollar could have a negative effect on our business.
In addition, our Family Dollar segment has a substantial number of private brand items and the number of items has been increasing. We believe our success in maintaining broad market acceptance of our private brands depends on many factors, including our pricing, costs, quality and customer perception. We may not achieve or maintain our expected sales for our private brands and, as a result, our business and results of operations could be adversely impacted. Additionally, the increased number of private brands could negatively impact our existing relationships with our non-private brand suppliers.
We may stop selling or recall certain products for safety-related issues.
We may stop selling or recall certain products produced by certain manufacturers for safety-related issues, including product contamination, product content such as lead, spoilage or other adulteration, improper manufacturing processes, improper testing, product mislabeling or product tampering. For example, we may stop selling or recall products if the products or operations of our suppliers violate applicable laws or regulations, including food, drug and cosmetic safety laws, or when our suppliers’ products cause injury, illness or death. In addition, our marketing of adulterated products could subject us to claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment against us, a related regulatory enforcement action or a widespread product recall could materially and adversely affect our reputation and results of operations. Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against the products we sell could materially and adversely affect our business, reputation and profitability.
Pressure from competitors may reduce our sales and profits.
The retail industry is highly competitive. The marketplace is highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and merchandising strategies, including mobile and online shopping. We expect
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competition to increase in the future. There are no significant economic barriers for others to enter our retail sector. Some of our current or potential competitors have greater financial resources than we do. We cannot guarantee that we will continue to be able to compete successfully against existing or future competitors or that doing so will not require substantial capital expenditures. Please see “Item 1. Business” for further discussion of the effect of competition on our operations.
A downturn or adverse change in economic conditions could impact our sales or profitability.
A deterioration in economic conditions, whether related to the COVID-19 pandemic or otherwise, could reduce consumer spending or cause customers to shift their spending to products we either do not sell or do not sell as profitably. Adverse economic conditions could disrupt consumer spending and significantly reduce our sales, decrease our inventory turnover, cause greater markdowns or reduce our profitability due to lower margins. Other factors that could result in or exacerbate adverse economic conditions include a prolonged or deep recession, inflation, higher unemployment, consumer debt levels, trade disputes, as well as adverse climate or weather conditions, epidemics, terrorism or international conflict.
Furthermore, factors that could adversely affect consumer disposable income could decrease our customers’ spending on products we sell. Factors that could reduce our customers’ disposable income and over which we exercise no influence include but are not limited to, the pandemic and other adverse economic conditions described above as well as increases in fuel or other energy costs and interest rates, lack of available credit, higher tax rates and other changes in tax laws, increasing healthcare costs, and changes in, decreases in, or elimination of, government subsidies such as unemployment and food assistance programs.
Many of the factors identified above that affect disposable income, as well as commodity rates, transportation costs (including the costs of diesel fuel), costs of labor, insurance and healthcare, foreign exchange rate fluctuations, lease costs, barriers or increased costs associated with international trade and other economic factors also affect our ability to implement our corporate strategy effectively, our cost of goods sold and our selling, general and administrative expenses, and may have other adverse consequences which we are unable to fully anticipate or control, all of which may adversely affect our sales or profitability. We have limited or no ability to control many of these factors.
Our business could be adversely affected if we fail to attract and retain qualified associates and key personnel.
Our growth and performance is dependent on the skills, experience and contributions of our associates, executives and key personnel for both Dollar Tree and Family Dollar. Various factors, including the ongoing pandemic, integration of our segments, constraints on overall labor availability, wage rates, regulatory or legislative impacts, and benefit costs could impact our ability to attract and retain qualified associates at our stores, distribution centers and corporate offices.
Risks Relating to Strategic Initiatives
We may not be successful in implementing important strategic initiatives, which may have an adverse impact on our business and financial results.
We have adopted important strategic initiatives that are designed to create growth, improve our results of operations and drive long-term shareholder value, including:
our plans relating to new store openings for Dollar Tree and Family Dollar;
the continued integration of the operations of Family Dollar with Dollar Tree;
the renovation of Family Dollar stores to the H2 format;
the testing and implementation of a multi-price initiative in Dollar Tree stores referred to as Dollar Tree Plus!;
the introduction of selected Dollar Tree merchandise into Family Dollar stores; and
the testing and roll-out of a new store format that combines a Dollar Tree store and Family Dollar store in a single location.
The implementation of these strategic initiatives are subject to various risks and uncertainties, including consumer acceptance of new store concepts and merchandise offerings, construction and permitting delays relating to new and renovated stores, the success of our integration strategies, the availability of desirable real estate locations for lease at reasonable rates, the impact of the COVID-19 pandemic and other factors beyond our control. In addition, several of these initiatives depend on the continued success of our integration of Family Dollar merchandising, supply chain and operations with those of Dollar Tree. There can be no assurance that we will be able to implement important strategic initiatives in accordance with our expectations or that they will generate expected returns, which may result in an adverse impact on our business and financial results.


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We could incur losses due to impairment of long-lived assets, goodwill and intangible assets.
Under U.S. generally accepted accounting principles, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Identifiable intangible assets with an indefinite useful life, including goodwill, are not amortized but are evaluated annually for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred.
In fiscal 2019 and 2018, we recorded a $313.0 million and a $2.73 billion non-cash pre-tax and after-tax goodwill impairment charge, respectively, related to our Family Dollar reporting unit. These impairments were a result of business challenges including slower sales growth, higher freight, shrink and store labor costs. Should we experience similar business challenges or significant negative industry or general economic trends, we could recognize additional impairments to our goodwill, intangible assets and other long-lived assets. We monitor key assumptions and other factors utilized in our goodwill impairment analysis, and if business or other market conditions develop that are materially different than we currently anticipate, we will conduct an additional impairment evaluation. Any reduction in or impairment of the value of goodwill or intangible assets will result in a charge against earnings, which could have a material adverse impact on our reported results of operations and financial condition. For additional information on goodwill impairments please refer to Note 3 to our consolidated financial statements.
Cybersecurity and Technology Risks
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 cyber-attack could harm our ability to effectively operate and grow our business and could adversely affect our financial results.
We rely extensively on our computer and technology systems and, in certain cases, those of third-party service providers to manage inventory, process credit card and customer transactions and summarize results. Our ability to effectively manage our business and coordinate the distribution and sale of our merchandise depends significantly on the confidentiality, integrity and availability of these systems and on our ability to successfully integrate the Dollar Tree and Family Dollar systems. We also rely on third-party providers and platforms for some of these computer and technology systems and support.
Although we have operational safeguards in place, they may not be effective in preventing the failure of these systems or platforms to operate effectively and be available to us. This may be as the result of deliberate breach in the security of these systems or platforms by bad actors, including through malicious software, ransomware and other cyber-attacks. Failures may also be caused by various other factors, including power outages, catastrophic events, physical theft, computer and network failures, inadequate or ineffective redundancy, problems with transitioning to upgraded or replacement systems or platforms, flaws in third-party software or services, errors or improper use by our employees or third party service providers.
If these systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions and may receive negative publicity, which could adversely affect our results of operations and business. In addition, remediation of any problems with our systems could take an extensive amount of time and could result in significant, unplanned expenses.
The potential unauthorized access to customer information 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 business.
Many of our information technology systems, such as those we use for our point-of-sale, web and mobile platforms, including online and mobile payment systems, and for administrative functions, including human resources, payroll, accounting, and internal and external communications, contain personal, financial or other confidential information that is entrusted to us by our customers and associates as well as proprietary and other confidential information related to our business and suppliers.
We have procedures and technology in place to safeguard our customers’ personal information (including debit and credit card information), our associates’ private data, suppliers’ data, and our business records and intellectual property and other sensitive information. Despite these measures, we have experienced attempted and ongoing cyber-attacks, which are rapidly evolving. Perpetrators, who may include well-funded state actors, are becoming increasingly sophisticated and difficult to detect. We and/or our third party suppliers may be vulnerable to, and unable to anticipate, detect and appropriately respond to such cyber-security attacks, including data security breaches and data loss.
We are subject to laws and regulations in various jurisdictions in which we operate regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. For example, the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020, imposes responsibilities on us for the handling, disclosure and deletion of personal information for consumers who reside in California. The CCPA permits California to assess potentially significant fines for violating CCPA and creates a right for individuals to bring class action suits seeking damages for violations. Our efforts to comply with CCPA and other privacy and data protection laws may impose significant
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costs and challenges that are likely to increase over time, and we could incur substantial penalties or be subject to litigation related to violation of existing or future data privacy laws and regulations.
Likewise, we are subject to the Payment Card Industry Data Security Standards (“PCI-DSS”) which is mandated by the card brands and administered through the Payment Card industry Security Standards Council. Failure to meet requirements and maintain compliance could result in a loss of credibility or reputation and our inability to continue to accept credit cards as a tender type materially impacting our ability to sell our products. There exists the potential to have recurring and accumulating fines levied against us as a result of not meeting compliance until compliance is achieved. Considerable investments to strengthen our information security could also be required should we ever be deemed to be non-compliant. As a Level 1 Merchant, we are subject to assessment and attestation for PCI-DSS compliance on an annual basis.
In addition, our reputation within the business community and with our customers may be affected, which could result in our customers discontinuing the use of debit or credit cards in our stores or not shopping in our stores altogether.
Moreover, significant capital investments and other expenditures could also be required to remedy cyber-security problems and prevent future security breaches, including costs associated with additional security technologies, personnel, experts and services (e.g., credit-monitoring services) for those whose data has been breached. These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.
The unavailability of our information technology systems or the failure of those systems or software to perform as anticipated for any reason and any inability to respond to, or recover from, such an event, could disrupt our business, decrease performance and increase overhead costs. If we are unable to secure our customers’ credit card and confidential information, or other private data relating to our associates, suppliers or our business, we could be subject to negative publicity, costly government enforcement actions or private litigation and increased costs. Any of these factors could have a material adverse effect on our results of operations or business.
Legal and Regulatory Risks
Litigation and arbitration may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of litigation and arbitration involving employees, consumers, suppliers, competitors, shareholders, government agencies, or others through private actions, class actions, governmental investigations, administrative proceedings, regulatory actions, mass arbitration or other similar actions. Our products could also cause illness or injury, harm our reputation, and subject us to litigation. We are dependent on our vendors to ensure that the products we buy comply with all applicable safety standards. However, product liability, personal injury or other claims may be asserted against us relating to product contamination, product tampering, mislabeling, recall and other safety issues with respect to the products that we sell. We seek but may not be successful in obtaining contractual indemnification and insurance coverage from our vendors, and if we do not have adequate contractual indemnification or insurance available, such product liability or safety claims could adversely affect our business, financial condition and results of operations. Our ability to obtain the benefit of contractual indemnification from foreign vendors may be hindered by our ability to enforce contractual indemnification obligations against such vendors. Our litigation-related expenses could increase as well, which also could have a materially negative impact on our results of operations even if a product liability claim is unsuccessful or is not fully pursued.
The outcome of such matters is difficult to assess or quantify. Plaintiffs in these types of lawsuits or proceedings may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss may remain unknown for substantial periods of time. In addition, certain of these matters, if decided adversely to us or settled by us, may result in an expense that may be material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend current and future litigation or proceedings, including arbitrations, may be significant. There also may be adverse publicity associated with litigation, including litigation related to product or food safety, customer information and environmental or safety requirements, which could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable.
For a discussion of current legal matters, please see “Item 3. Legal Proceedings” and Note 5 to our consolidated financial statements under the caption “Contingencies.” Resolution of these matters, if decided against us, could have a material adverse effect on our results of operations, accrued liabilities or cash flows.
Changes in laws and government regulations, or our failure to adequately estimate the impact of such changes, could increase our expenses, expose us to legal risks or otherwise adversely affect us.
Our business is subject to a wide array of laws and regulations, and changes to those laws and regulations could have an adverse effect on our business. In 2021, the new presidential administration and Congress are expected to have public policy positions and
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legislative priorities that are significantly different than the positions and priorities of the prior presidential administration including, among other things, such matters as climate change and sustainability, wage and labor laws, health care, tax policy and less focus on deregulation. The possible enactment of new environmental laws and regulations and potential new carbon taxes or energy efficiency standards could increase our costs. In addition, certain states and local governments have passed laws to increase the minimum wage beginning in 2021, and the minimum wage may increase nationally depending on the outcome of future legislation proposed in Congress.
Significant legislative changes in laws or regulations that impact our relationship with our workforce, such as minimum wage increases, “hero pay,” health care, labor laws or workplace safety, could increase our expenses and adversely affect our operations. Changes in other regulatory areas, such as consumer credit, privacy and information security, product and food safety, energy or environmental protection, among others, could cause our expenses to increase or product recalls. In addition, if we fail to comply with applicable laws and regulations, including wage and hour laws, we could be subject to legal risk, including government enforcement action and class action civil litigation, which could adversely affect our results of operations.
Risks Relating to Indebtedness
Our substantial indebtedness could adversely affect our financial condition, limit our ability to obtain additional financing, restrict our operations and make us more vulnerable to economic downturns and competitive pressures.
As of January 30, 2021, our total indebtedness is $3.25 billion. In addition, we have $1.25 billion of additional borrowing availability under our revolving credit facility, less amounts outstanding for letters of credit totaling $98.7 million.
Our level of debt could have significant consequences, including the following:
limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;
requiring a substantial portion of our cash flows to be dedicated to debt service payments, instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
limiting our ability to refinance our indebtedness on terms acceptable to us or at all;
imposing restrictive covenants on our operations;
placing us at a competitive disadvantage to competitors carrying less debt; and
making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures.
In addition, our credit ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings reflect the opinions of the ratings agencies of our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
The terms of the agreements governing our indebtedness may restrict our current and future operations and could adversely affect our capital resources, financial condition and liquidity.

The agreements that govern our indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. In addition, certain of these agreements require us to comply with certain financial maintenance covenants. Our ability to satisfy these financial maintenance covenants can be affected by events beyond our control, and we cannot assure you that we will meet them.
A breach of the covenants under these agreements could result in an event of default under the applicable indebtedness, which, if not cured or waived, could result in us having to repay our borrowings before their due dates. Such default may allow the debt holders to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. If we are forced to refinance these borrowings on less favorable terms or if we were to experience difficulty in refinancing the debt prior to maturity, our results of operations or financial condition could be materially affected. In addition, an event of default under our credit facilities may permit the lenders under our credit facilities to terminate all commitments to extend further credit under such credit facilities. In the event our lenders or holders of notes accelerate the repayment of such borrowings, we cannot assure you that we will have sufficient assets to repay such indebtedness.
As a result of these restrictions, we may be:
limited in how we conduct our business;
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unable to raise additional debt or equity financing to operate during general economic or business downturns; or
unable to compete effectively, take advantage of new business opportunities or grow in accordance with our plans.
Risks Relating to Our Common Stock
Our business or the value of our common stock could be negatively affected as a result of actions by activist shareholders.
We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. The Board of Directors and management team are committed to acting in the best interests of all of our shareholders. There is no assurance that the actions taken by the Board of Directors and management in seeking to maintain constructive engagement with our shareholders will be successful. Activist shareholders who disagree with our strategy or the way we are managed have sought to effect change, and may seek to effect change in the future, through various strategies that range from private engagement to publicity campaigns, proxy contests, efforts to force transactions not supported by the Board of Directors and litigation.
Responding to these actions may be costly and time-consuming, disrupt our operations, divert the attention of our Board of Directors, management and employees, and interfere with our ability to execute our strategic plan and attract and retain qualified executive leadership. A contested election, for example, could also require us to incur substantial legal and public relations fees and proxy solicitation expenses. The perceived uncertainty as to our future direction resulting from activist strategies could also affect the market price and volatility of our common stock.
The price of our common stock is subject to market and other conditions and may be volatile.
The market price of our common stock may fluctuate significantly in response to a number of factors. These factors, some of which may be beyond our control, include the perceived prospects and actual results of operations of our business; changes in estimates of our results of operations by analysts, investors or us; trading activity by our large shareholders; trading activity by sophisticated algorithms (high-frequency trading); our actual results of operations relative to estimates or expectations; actions or announcements by us or our competitors; litigation and judicial decisions; legislative or regulatory actions or changes; and changes in general economic or market conditions. In addition, the stock market in general has from time to time experienced extreme price and volume fluctuations. These market fluctuations could reduce the market price of our common stock for reasons unrelated to our operating performance.
Certain provisions in our Articles of Incorporation and By-Laws could delay or discourage a change of control transaction that may be in a shareholder’s best interest.
Our Articles of Incorporation and By-Laws currently contain provisions that may delay or discourage a takeover attempt that a shareholder might consider in his/her best interest. These provisions, among other things:
provide that only the Board of Directors, the chairman of the Board or the chief executive officer may call special meetings of the shareholders;
establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and
permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
However, we believe that these provisions allow our Board of Directors to negotiate a higher price in the event of a takeover attempt which would be in the best interest of our shareholders.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
As of January 30, 2021, we operated 15,455 stores across the contiguous United States and the District of Columbia and operated 230 stores within five Canadian provinces.
The Dollar Tree segment includes 7,805 stores operating under the Dollar Tree and Dollar Tree Canada brands with stores predominantly ranging from 8,000 - 10,000 selling square feet. The Family Dollar segment includes 7,880 stores operating under the Family Dollar brand with stores predominantly ranging from 6,000 - 8,000 selling square feet. For additional information on store counts and square footage by segment for the years ended January 30, 2021 and February 1, 2020, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Overview.”
We lease the vast majority of our stores and expect to lease the majority of our new stores as we expand. Our leases typically provide for a short initial lease term, generally five years, with options to extend; however, in some cases we have initial lease terms of seven to fifteen years. We believe this leasing strategy enhances our flexibility to pursue various expansion opportunities resulting from changing market conditions. As current leases expire, we believe that we will be able to obtain lease renewals, if desired, for present store locations, or to obtain leases for equivalent or better locations in the same general area.
Our network of distribution centers is strategically located throughout the United States to support our stores. As of January 30, 2021, we operated 26 distribution centers occupying a total of 24.0 million square feet, 15 of which are primarily dedicated to serving our Dollar Tree stores and 11 distribution centers primarily serve our Family Dollar stores. Our St. George, Utah distribution center services both Family Dollar and Dollar Tree stores and we expect future distribution centers to be built with the capability to service both Dollar Tree and Family Dollar stores. Our distribution network supports multiple store formats including H2, Combination Stores and Dollar Tree Plus! We ship to our H2 format stores from our Family Dollar distribution centers and we ship to our Dollar Tree Plus! format stores from our Dollar Tree distribution centers. We ship to our Combination Stores from both Dollar Tree and Family Dollar distribution centers. We believe our distribution center network is currently capable of supporting approximately $30.2 billion in annual sales in the United States. Except for 0.4 million square feet of our distribution center in San Bernardino, California, all of our distribution center capacity is owned.
Each of our distribution centers contains advanced materials handling technologies, including radio-frequency inventory tracking equipment and specialized information systems. With the exception of four of our facilities, each of our distribution centers in the United States also contains automated conveyor and sorting systems.
Distribution services in Canada are provided by a third party from facilities in British Columbia and Ontario.
During fiscal 2019, we consolidated our Matthews, North Carolina store support center with our store support center in Chesapeake, Virginia, which is located in an approximately 0.5 million square foot office tower that we own in the Summit Pointe development in Chesapeake, Virginia. We are also developing additional parcels on our Summit Pointe property for mixed-use purposes and began leasing some portions during 2020.
For more information on financing of our new and expanded stores, distribution centers and the Summit Pointe development activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Funding Requirements.”
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Item 3. Legal Proceedings
From time to time, we are defendants in ordinary, routine litigation or proceedings incidental to our business, including allegations regarding:
employment-related matters;
infringement of intellectual property rights;
personal injury/wrongful death claims;
real estate matters;
environmental and safety issues; and
product safety matters, which may include regulatory matters.
In addition, we are currently defendants in national and state proceedings described in Note 5 to our consolidated financial statements under the caption “Contingencies.”
We will vigorously defend ourselves in these matters. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the period or year in which they are reserved or resolved. Based on the information available, including the amount of time remaining before trial, the results of discovery and the judgment of internal and external counsel, we may be unable to express an opinion as to the outcome of those matters which are not close to being resolved and may be unable to estimate a loss or potential range of loss.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on The Nasdaq Global Select Market® under the symbol “DLTR.” As of March 10, 2021, we had 2,288 shareholders of record.
Issuer Purchases of Equity Securities
The following table presents our share repurchase activity during the fourth quarter of 2020:
Fiscal PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
November 1, 2020 - November 28, 2020— $— — $600.0 
November 29, 2020 - January 2, 2021896,698 109.23 896,698 502.1 
January 3, 2021 - January 30, 2021931,476 109.56 931,476 400.0 
Total1,828,174 $109.40 1,828,174 $400.0 
During fiscal 2020 and 2019, we repurchased 3,982,478 and 1,967,355 shares of common stock, respectively, on the open market at a total cost of $400.0 million and $200.0 million, respectively. We did not repurchase any shares of common stock in fiscal 2018.
As of January 30, 2021, we had $400.0 million remaining under the Board repurchase authorization. Subsequently, on March 2, 2021, the Board increased the share repurchase authorization by $2.0 billion resulting in a total share repurchase authorization of $2.4 billion. The repurchase authorization does not have an expiration date.
Stockholder Matters
We anticipate that substantially all of our cash flow from operations in the foreseeable future will be retained for the development and expansion of our business, the repayment of indebtedness and, as authorized by our Board of Directors, the repurchase of stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future.

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Stock Performance Graph
The following graph sets forth the yearly percentage change in the cumulative total shareholder return on our common stock during the five fiscal years ended January 30, 2021, compared with the cumulative total returns of the S&P 500 Index and the S&P Retailing Index. The comparison assumes that $100 was invested in our common stock on January 30, 2016, and, in each of the foregoing indices on January 30, 2016, and that dividends were reinvested. The stock price performance shown in the graph is not necessarily indicative of future price performance.
dltr-20210130_g2.jpg
Year Ended
January 30, 2016January 28, 2017February 3, 2018February 2, 2019February 1, 2020January 30, 2021
Dollar Tree, Inc.$100.00 $91.06 $133.83 $118.90 $107.07 $125.01 
S&P 500 Index100.00 120.04 151.74 148.23 180.37 211.48 
S&P Retailing Index100.00 120.09 174.49 186.29 219.46 316.05 
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Item 6. Selected Financial Data
The following table presents a summary of our selected financial data for the fiscal years ended January 30, 2021, February 1, 2020, February 2, 2019, February 3, 2018, and January 28, 2017. Fiscal 2017 included 53 weeks, commensurate with the retail calendar, while all other fiscal years reported in the table contain 52 weeks. The selected statement of operations and balance sheet data have been derived from our consolidated financial statements that have been audited by our independent registered public accounting firm. This information should be read in conjunction with the consolidated financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial information found elsewhere in this report.
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. 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 or remodeled during the year in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. The term ‘expanded’ also includes stores that are relocated. Stores that have been re-bannered 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 new brand. We report our comparable store net sales on a constant currency basis. Constant currency basis refers to the calculation excluding the impact of currency exchange rate fluctuations. We calculated the constant currency basis increase by translating the current year’s comparable store net sales in Canada using the prior year’s currency exchange rates. We believe that the constant currency basis provides a more accurate measure of comparable store net sales performance.
Both our Dollar Tree stores and our acquired Family Dollar stores are included in the comparable store net sales calculation for the years ended February 3, 2018 and forward. For all prior years, only our Dollar Tree stores are included in the comparable store net sales calculation.
Net sales per selling square foot is calculated based on total net sales for the reporting period divided by the average selling square footage during the period. Selling square footage excludes the storage, receiving and office space that generally occupies approximately 20% of the total square footage of our stores. We believe that net sales per selling square foot more accurately depicts the productivity and operating performance of our stores as it isolates that portion of our footprint that is dedicated to selling merchandise. Net sales per store and net sales per selling square foot are calculated for stores open throughout the period presented.
In the fourth quarter of 2019 and 2018, we recorded non-cash pre-tax and after-tax goodwill impairment charges related to our Family Dollar reporting unit of $313.0 million and $2.73 billion, respectively. These impairment charges are reflected in “Selling, general and administrative expenses” in the accompanying consolidated statements of operations for the years ended February 1, 2020 and February 2, 2019. As a result of these goodwill impairment charges, diluted earnings per share decreased by $1.31 and $11.46 per share for the years ended February 1, 2020 and February 2, 2019, respectively. For additional information regarding the impairment of the Family Dollar goodwill, refer to Note 3 to our consolidated financial statements.
As a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”) in 2017, net income and diluted net income per share for the year ended February 3, 2018 increased by $583.7 million and $2.45 per share, respectively.
Amounts in the following tables are in millions, except per share data, number of stores data, net sales per selling square foot data and inventory turns. 
 Year Ended
January 30,
2021
February 1,
2020
February 2,
2019
February 3,
2018
January 28,
2017
Statement of Operations Data:     
Net sales$25,509.3 $23,610.8 $22,823.3 $22,245.5 $20,719.2 
Gross profit7,788.3 7,040.7 6,947.5 7,021.9 6,394.7 
Selling, general and administrative expenses5,900.4 5,778.5 7,887.0 5,022.8 4,689.9 
Operating income (loss)1,887.9 1,262.2 (939.5)1,999.1 1,704.8 
Net income (loss)1,341.9 827.0 (1,590.8)1,714.3 896.2 
Margin Data (as a percentage of net sales):  
Gross profit30.5 %29.8 %30.4 %31.6 %30.8 %
Selling, general and administrative expenses23.1 %24.5 %34.5 %22.6 %22.6 %
Operating income (loss)7.4 %5.3 %(4.1)%9.0 %8.2 %
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 Year Ended
January 30,
2021
February 1,
2020
February 2,
2019
February 3,
2018
January 28,
2017
Net income (loss)5.3 %3.5 %(7.0)%7.7 %4.3 %
Per Share Data:     
Diluted net income (loss) per share$5.65 $3.47 $(6.69)$7.21 $3.78 
Diluted net income (loss) per share increase
(decrease)
62.8 %151.9 %(192.8)%90.7 %200.0 %
 As of
January 30,
2021
February 1,
2020
February 2,
2019
February 3,
2018
January 28,
2017
Balance Sheet Data:     
Cash and cash equivalents and short-term investments
$1,416.7 $539.2 $422.1 $1,097.8 $870.4 
Working capital1,320.5 722.9 2,197.6 1,717.2 1,832.1 
Total assets20,696.0 19,574.6 13,501.2 16,332.8 15,701.6 
Total debt3,250.0 3,800.0 4,300.0 5,732.7 6,391.8 
Total operating lease liabilities6,413.7 6,258.8 — — — 
Shareholders’ equity7,285.3 6,254.8 5,642.9 7,182.3 5,389.5 
 Year Ended
 January 30,
2021
February 1,
2020
February 2,
2019
February 3,
2018
January 28,
2017
Selected Operating Data:     
Number of stores open at end of period15,685 15,288 15,237 14,835 14,334 
Dollar Tree7,805 7,505 7,001 6,650 6,360 
Family Dollar7,880 7,783 8,236 8,185 7,974 
Gross square footage at end of period154.5 149.8 148.3 143.9 138.8 
Dollar Tree84.0 80.6 75.4 71.6 68.5 
Family Dollar70.5 69.2 72.9 72.3 70.3 
Selling square footage at end of period125.1 121.3 120.1 116.6 112.4 
Dollar Tree67.4 64.6 60.3 57.3 54.7 
Family Dollar57.7 56.7 59.8 59.3 57.7 
Selling square footage annual growth3.1 %1.0 %3.0 %3.7 %3.7 %
Net sales annual growth1
8.0 %3.5 %2.6 %7.4 %8.6 %
Comparable store net sales increase1
6.1 %1.8 %1.7 %1.9 %1.8 %
Net sales per selling square foot$207 $196 $193 $194 $188 
Net sales per store$1.6 $1.5 $1.5 $1.5 $1.5 
Selected Financial Ratios:     
Return on assets6.7 %5.0 %(10.7)%10.7 %5.7 %
Return on equity19.8 %13.9 %(24.8)%27.3 %18.3 %
Inventory turns4.4 4.0 4.1 4.4 4.1 
______________
1 Family Dollar was included in the determination of these items for the years ended February 3, 2018 and forward.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section of Form 10-K generally discusses 2020 and 2019 events and results and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020.
In Management’s Discussion and Analysis, we explain the general financial condition and the results of operations for our company, including, factors that affect our business, analysis of annual changes in certain line items in the consolidated financial statements, performance of each of our operating segments, expenditures incurred for capital projects and sources of funding for future expenditures. As you read Management’s Discussion and Analysis, please refer to our consolidated financial statements and related notes, included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Key Events and Recent Developments
Several key events have had or are expected to have a significant effect on our operations. They are listed below:
Impact of COVID-19
The COVID-19 pandemic has materially affected, and likely will continue to affect, our financial condition and results of operations for the foreseeable future. As you review the Management’s Discussion and Analysis of Financial Condition and Results of Operations, please keep in mind the following.
As an essential business, our stores and distribution centers have remained open during the pandemic; however, our business trends and financial results are materially different than what we expected. We estimate that our increased costs related to COVID-19 for premium pay including bonuses, supplies, protective equipment, and similar items in fiscal 2020 was $279.0 million. Although we believe that the pandemic has resulted in higher sales at Family Dollar, we also believe it has resulted in significantly lower sales at Dollar Tree during the Easter season in 2020 and in our party departments. In addition, as a result of fewer customer trips, sales in certain consumable departments such as snacks and candy have been lower. We have experienced fewer customer visits and higher average ticket. The mix and profit margin of products being purchased by our customers has been different and has changed during 2020. As demand for essential goods, including cleaning supplies and sanitizer, household products, paper goods, food and over-the-counter medicine, increased to unprecedented levels, both our domestic suppliers and distribution centers were stressed to keep up with the demand. We expect this disruption with certain vendors and SKUs to continue into 2021. The effect of COVID-19-related stimulus purchases for some other non-essential items may create additional disruptions.
We have implemented several changes to support our associates in adhering to CDC recommendations. We have:
Activated our Business Response Team to communicate, assess and address potential exposure throughout the organization;
Provided personal protective equipment including masks, gloves and sanitizers for our store and distribution center associates;
Deployed plexiglass sneeze guards for all registers at all stores;
Deployed hand sanitizer stands in each of our stores;
Equipped stores, distribution centers and the store support center with necessary supplies for enhanced cleaning protocol;
Provided wage premiums for all store and distribution center hourly associates, excluding hourly-paid store managers;
Provided minimum guaranteed sales bonuses for each store manager as well as “Thank You” bonuses and bonuses for certain salaried associates in our field operations and distribution centers;
Provided pay continuation for associates who test positive or who are Group 1 associates who have to self-quarantine;
Created a “store” within each distribution center to allow our associates to shop for needed supplies at work when supplies were scarce in retail locations;
Eliminated all non-essential air travel;
Utilized technology options for all large group meetings;
Prohibited external visitors’ access to the store support center;
Enabled the majority of our store support center teams to work remotely;
Enabled contactless payments to our POS systems for our customers;
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Followed local municipality, county, and state guidelines and regulations needed to be open as an essential business;
Encouraged safe social distancing protocols for our customers with signing, graphics and communications;
Enabled health prescreening questionnaire for all store and distribution associates before entering work; and
Established temperature check protocols for our associates at all distribution centers and the store support center.
Given the level of volatility and uncertainty surrounding the future impact of COVID-19 on our customers, suppliers and the broader economies in the locations that we operate as well as uncertainty around the future impact on our supply chain, it is challenging to predict our future operations and financial results. Following is a discussion of the impacts that we have seen and the factors which could influence our future performance.
During March 2020, our Dollar Tree and Family Dollar stores began to experience a significant increase in customer demand and sales related to essential products and comparable store net sales increased significantly. However, beginning the last week of March 2020 and continuing into April during the peak of the Easter selling season, comparable store net sales at our Dollar Tree stores decreased. Beginning in mid-April, comparable store net sales at our Dollar Tree stores increased as the comparable Easter period from 2019 had passed. For fiscal 2020, enterprise comparable store net sales increased 6.1% resulting from an increase in average ticket of 20.0%, partially offset by decreased traffic of 11.6%. After the Easter selling season, in both banners, we saw an increase in demand for and sales of discretionary products and our seasonal business for the other holidays throughout the year was strong.
The future impact of COVID-19 on our customers and our business is difficult to predict. The course of the pandemic, the effectiveness of health measures such as vaccines, and the impact of ongoing economic stabilization efforts is uncertain and government assistance payments may not provide enough funding to support current spending. The American Rescue Plan Act of 2021 (“Rescue Act”), which was enacted on March 11, 2021, provides U.S. government funding to address the continuing impact of COVID-19 on the economy, public health, individuals and businesses. Among other things, the Rescue Act provides for $1,400 direct payments to individuals, continues supplemental unemployment benefits until September 2021, extends a prior increase in food stamp benefits, expands the child tax credit and earned income tax credit, provides for rent and utility assistance, and funds COVID-19 vaccinations, testing, treatment and prevention. An increase in the federal minimum wage was not included in the Rescue Act as enacted.
The demand for essential supplies has increased and we are dependent on our suppliers to replenish the goods in our stores. Disruptions in our supply chain or sources of supply could adversely impact our sales.
Our new store openings in fiscal 2020 were affected by construction delays due to challenges with the permitting process during COVID-19. During 2020, we opened 341 new Dollar Tree stores and 156 new Family Dollar stores compared to an original plan of 350 new Dollar Tree stores and 200 new Family Dollar stores.
With the increase in customer activity in our Family Dollar stores and COVID-19-related travel restrictions, we paused the roll-out of our H2 stores during the first quarter of 2020. We resumed the roll-out during the second quarter of 2020 and renovated approximately 770 stores to this format in fiscal 2020 compared with our original plan of 1,250 renovations. Also, as a result of COVID-19-related delays in obtaining permits, we added adult beverage product to approximately 570 stores in fiscal 2020 compared with our original plan of 1,000.
For further discussion of the impacts that COVID-19 had on our financial condition and results of operations during fiscal 2020, refer to “Results of Operations” in this Item 7. below.
Family Dollar
In 2018, based on our strategic and operational reassessment of the Family Dollar segment following challenges that the business experienced that impacted our ability to grow the business at the originally estimated rate when we acquired Family Dollar in 2015, management determined there were indicators that the goodwill of the business may be impaired. Accordingly, a goodwill impairment test was performed in the fourth quarter of fiscal 2018 and we recorded a $2.73 billion non-cash pre-tax and after-tax goodwill impairment charge. The results of our 2019 annual impairment test showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in a $313.0 million non-cash pre-tax and after-tax goodwill impairment charge.
In March 2019, we announced plans for a store optimization program for Family Dollar. For fiscal 2019, this program included rolling out a new model for both new and renovated Family Dollar stores, internally known as H2, re-bannering selected stores to the Dollar Tree brand, closing under-performing stores, and installing adult beverages and expanding freezers and coolers in selected stores. In fiscal 2020, we continued to roll out the H2
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concept to more stores, increased the number of stores with adult beverages and expanded freezers and coolers in selected stores and plan to continue these initiatives in fiscal 2021.
In fiscal 2019, we substantially completed our consolidation of our store support centers in Matthews, North Carolina and Chesapeake, Virginia to our Summit Pointe development in Chesapeake, Virginia.
Building on the success of the H2 format, we have developed a Combination Store which leverages both the Dollar Tree and Family Dollar brands to serve small towns across the country. We are taking Family Dollar’s great value and assortment and blending in select Dollar Tree merchandise categories, creating a new store format targeted for small towns and rural communities with populations of 3,000 to 4,000 residents.
Supply Chain
In the third quarter of 2019, we opened a new 1.2 million square foot distribution center in Morrow County, Ohio.
In the third quarter of 2020, we opened a new 1.2 million square foot distribution center in Rosenberg, Texas and opened the first phase of our new Ocala, Florida distribution center.
Long-term Debt
During the first quarter of 2018, we redeemed our $750.0 million acquisition notes and accelerated the amortization of debt-issuance costs associated with the notes of $6.1 million.
During the first quarter of 2018, we refinanced our long-term debt obligations as follows:
We completed the registered offering of $750.0 million of Senior Floating Rate Notes due 2020, $1.0 billion of 3.70% Senior Notes due 2023, $1.0 billion of 4.00% Senior Notes due 2025 and $1.25 billion of 4.20% Senior Notes due 2028;
We entered into a credit agreement for a $782.0 million term loan facility and a $1.25 billion revolving credit facility;
We used the proceeds of the above offerings to repay the $2,182.7 million outstanding under our senior secured credit facilities and redeem the remaining $2.5 billion outstanding under our acquisition debt, resulting in the acceleration of the expensing of $41.2 million of deferred financing costs and our incurring $114.3 million in prepayment penalties.
During the fourth quarter of 2018, we prepaid the $782.0 million outstanding under the term loan facility and accelerated the expensing of $1.5 million of deferred financing costs.
During the fourth quarter of 2019, we prepaid $500.0 million of the $750.0 million Senior Floating Rate Notes due 2020 and accelerated the expensing of $0.3 million of deferred financing costs.
During the first quarter of 2020, we repaid the remaining $250.0 million outstanding under the Senior Floating Rate Notes.
During the first quarter of 2020, we preemptively drew $750.0 million on our revolving credit facility to reduce our exposure to potential short-term liquidity risk in the banking system as a result of the COVID-19 pandemic, all of which was repaid by the end of the third quarter of 2020.
During the fourth quarter of 2020, we repaid the $300.0 million 5.00% Senior Notes that we assumed upon the acquisition of Family Dollar.
Overview
We are a leading operator of more than 15,600 retail discount stores and we conduct our operations in two reporting segments. Our Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price of $1.00. Our Family Dollar segment operates general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores.
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. 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 or remodeled during the year in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. The term ‘expanded’ also includes stores that are relocated. Stores that have been re-bannered 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 new brand.

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At January 30, 2021, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces. A breakdown of store counts and square footage by segment for the years ended January 30, 2021 and February 1, 2020 is as follows:
Year Ended
January 30, 2021February 1, 2020
Dollar TreeFamily DollarTotalDollar TreeFamily DollarTotal
Store Count:
Beginning7,505 7,783 15,288 7,001 8,236 15,237 
New stores341 156 497 348 170 518 
Re-bannered stores(4)200 (200)— 
Closings(37)(64)(101)(44)(423)(467)
Ending7,805 7,880 15,685 7,505 7,783 15,288 
Relocations49 39 88 47 15 62 
Selling Square Feet (in millions):
Beginning64.6 56.7 121.3 60.3 59.8 120.1 
New stores3.1 1.3 4.4 3.0 1.3 4.3 
Re-bannered stores(0.1)0.1 — 1.5 (1.5)— 
Closings(0.3)(0.5)(0.8)(0.4)(2.9)(3.3)
Relocations0.1 0.1 0.2 0.2 — 0.2 
Ending67.4 57.7 125.1 64.6 56.7 121.3 
Stores are included as re-banners when they close or open, respectively. Comparable store net sales for Dollar Tree may be negatively affected when a Family Dollar store is re-bannered near an existing Dollar Tree store.
The average size of stores opened in 2020 was approximately 8,640 selling square feet (or about 10,800 gross square feet) for the Dollar Tree segment and 8,460 selling square feet (or about 10,360 gross square feet) for the Family Dollar segment. For 2021, we continue to plan to open stores that are 8,000 - 10,000 selling square feet (or about 10,000 - 12,000 gross square feet) for the Dollar Tree segment and 7,000 - 10,000 selling square feet (or about 9,000 - 12,000 gross square feet) for the Family Dollar segment. We believe that these size stores are in the ranges of our optimal sizes operationally and give our customers a shopping environment which invites them to shop longer, buy more and make return visits.
Fiscal 2020, fiscal 2019 and fiscal 2018 each included 52 weeks.
The percentage change in comparable store net sales on a constant currency basis for the fiscal year ended January 30, 2021, as compared with the preceding year, is as follows:
Year Ended January 30, 2021
Sales GrowthChange in Customer TrafficChange in Average Ticket
Consolidated6.1 %(11.6)%20.0 %
Dollar Tree Segment2.2 %(13.3)%17.9 %
Family Dollar Segment10.5 %(9.1)%21.5 %
Constant currency basis refers to the calculation excluding the impact of currency exchange rate fluctuations. We calculated the constant currency basis change by translating the current year’s comparable store net sales in Canada using the prior year’s currency exchange rates. We believe that the constant currency basis provides a more accurate measure of comparable store net sales performance. Comparable store net sales are positively affected by our expanded and relocated stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores.
Dollar Tree Initiatives
We believe that our Dollar Tree initiatives continue to positively affect our comparable store net sales. In fiscal 2019, we introduced our Crafter’s Square initiative in more than 650 stores. This offering includes a new expanded assortment of arts and crafts supplies. During fiscal 2020, we expanded this program, completing the roll-out to all of our Dollar Tree stores. The Crafter’s Square assortment carries mark-ups which are higher than our average mark-up. Additionally, for more than a year, we have tested a multi-price initiative referred to as Dollar Tree Plus! Beginning in fiscal 2019, we began testing multi-price assortments in more than 100 stores in southwestern markets. Based on learnings from the test, we made modifications to: the mix of products offered to include
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primarily discretionary items; the displays and signage to drive awareness and excitement to the stores; the price points to focus on the $1, $3 and $5 price points; and increase the number of offerings above the $1 price point. We plan to expand this initiative into a total of 500 stores beginning in the first quarter of fiscal 2021. We believe these initiatives have and will continue to enable us to increase sales and earnings.
Family Dollar Initiatives
We are executing several initiatives in our Family Dollar stores to increase sales. During 2020, we entered into a partnership with Instacart to enable our customers to shop online and receive merchandise without having to visit a store. In fiscal 2019, we executed a store optimization program for our Family Dollar stores to improve performance. Included in that program was a roll-out of a new model for both new and renovated Family Dollar stores internally known as H2. The H2 model has significantly improved merchandise offerings, including approximately 20 Dollar Tree $1.00 merchandise sections and establishing a minimum number of freezer and cooler doors, throughout the store. H2 stores have higher customer traffic and provide an average comparable store net sales lift in excess of 10%, when compared to non-renovated stores, in the first year following renovation. H2 stores perform well in a variety of locations and especially in locations where our Family Dollar stores have been most challenged in the past. As of January 30, 2021, we have approximately 2,385 H2 stores. We plan to renovate at least 1,250 stores to this format in fiscal 2021 and also plan to build new stores in this format. In addition, we installed adult beverage product in approximately 570 stores in fiscal 2020 and plan to add it to approximately 1,000 stores in fiscal 2021. We believe the addition of adult beverage to our assortment will drive traffic to our stores.
Building on the success of the H2 format, we have developed a Combination Store which leverages both the Dollar Tree and Family Dollar brands to serve small towns across the country. We are taking Family Dollar’s great value and assortment and blending in select Dollar Tree merchandise categories, creating a new store format targeted for small towns and rural communities with populations of 3,000 to 4,000 residents.
Other Items
Additionally, the following items have already impacted or could impact our business or results of operations during 2021 or in the future:
We are experiencing delays in receiving import merchandise as a result of worldwide container and other equipment shortages and issues with port congestion. In the United States, the port congestion is resulting in ships not returning to Asia in a timely manner as well as impacting equipment availability. This is resulting in delays in product being loaded and shipped from overseas locations. Although this has not yet impacted our sales and we believe we are adequately stocked with merchandise for Easter, the delays could potentially have a material adverse impact on our sales after Easter, especially at Dollar Tree, if the delays do not improve. In addition to creating business uncertainty, this disruption in the import transportation process is also resulting in higher costs. We are also seeing increases in the cost to ship domestic freight from our suppliers to our distribution centers. We are currently projecting approximately $80.0 to $100.0 million of additional costs in fiscal 2021 as a result of higher shipping and domestic freight costs.
In 2021, the minimum wage has increased in certain States and localities and may increase nationally depending on the outcome of future legislation proposed in Congress. The currently scheduled minimum wage increases are estimated to increase store payroll by $45.0 million to $50.0 million in 2021, which is less than the COVID-19-related payroll increases in 2020. Additional minimum wage increases and other wage and hour law changes in the future could materially impact our results of operations.
The amount of COVID-19-related costs for premium pay including bonuses, supplies, protective equipment, and similar items was $279.0 million in fiscal 2020; the amount of these costs for 2021 is highly uncertain. Among other things, the duration and severity of the pandemic is uncertain, and a number of States and localities are considering legislation that could require premium pay for certain essential workers during certain government mandated restricted work periods.
We must continue to control our merchandise costs, inventory levels and our general and administrative expenses as increases in these items could negatively impact our operating results.

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Results of Operations
Our results of operations as a percentage of net sales and year-over-year changes are discussed in the following section.
Net Sales
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Net sales$25,509.3 $23,610.8 $22,823.3 8.0 %
Comparable store net sales change,
on a constant currency basis
6.1 %1.8 %1.7 %
The increase in net sales from 2019 to 2020 was a result of comparable store net sales increases in the Family Dollar and Dollar Tree segments and sales of $852.4 million at new stores. These sales increases were partially offset by lost sales resulting from store closures during fiscal 2019 in connection with our Family Dollar segment store optimization program.
Enterprise comparable store net sales increased 6.1% on a constant currency basis in 2020, as a result of a 20.0% increase in average ticket and an 11.6% decrease in customer traffic. Comparable store net sales increased 6.0% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 10.5% in the Family Dollar segment and 2.2% in the Dollar Tree segment. Lower traffic resulting from the COVID-19 pandemic negatively affected Easter sales in the Dollar Tree segment in the first quarter of fiscal 2020.
Gross Profit
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Gross profit$7,788.3 $7,040.7 $6,947.5 10.6 %
Gross profit margin30.5 %29.8 %30.4 %0.7 %
The increase in gross profit margin from 2019 to 2020 was a result of the net of the following:
Occupancy costs decreased 40 basis points as a result of the leverage from the increase in comparable store net sales.
Markdown costs decreased 25 basis points resulting primarily from the prior year including markdowns related to Family Dollar store closures and clearance sales as well as lower promotional activity in the current year on the Family Dollar segment as a result of the increase in sales of discretionary product. Both segments also had higher sell-through of both Christmas and Halloween merchandise. These decreases were partially offset by $10.4 million of uninsured markdown costs for stores affected by civil unrest during 2020 and higher seasonal markdowns in the Dollar Tree segment in the first quarter of 2020 due to the lower than planned sell-through on Easter merchandise as a result of the COVID-19 pandemic.
Merchandise cost, including freight, decreased 20 basis points in 2020 compared to 2019 resulting from higher sales of higher margin discretionary merchandise and improved initial mark-on, partially offset by incremental tariff costs of $30.7 million.
Shrink costs decreased 15 basis points resulting from favorable inventory reconciliations on the Family Dollar segment in the current year, partially offset by unfavorable physical inventory results in relation to accruals on the Dollar Tree segment.
Distribution costs increased 30 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associates a wage premium for all hours worked from March 8, 2020 through January 2, 2021. Total distribution center COVID-19-related expenses were $36.3 million, or 15 basis points of this increase.

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Selling, General and Administrative Expenses
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Selling, general and administrative
expenses
$5,900.4 $5,778.5 $7,887.0 2.1 %
As a percentage of Net sales23.1 %24.5 %34.5 %(1.4)%
We recorded non-cash goodwill impairment charges of $313.0 million and $2,727.0 million in fiscal 2019 and fiscal 2018, respectively. The goodwill impairments are discussed further in Note 3 to our consolidated financial statements. Excluding the goodwill impairment charges in 2019 and 2018, selling, general and administrative expenses were 23.2% and 22.6%, as a percentage of net sales, in 2019 and 2018, respectively. The decrease in selling, general and administrative expenses, as a percentage of net sales, from 2019 to 2020, excluding the goodwill impairment charge from 2019, was the result of the net of the following:
Other selling, general and administrative expenses decreased 40 basis points as a result of the leverage from the comparable store net sales increase, higher costs in the prior year related to the disposal of fixed assets in connection with the store optimization program on the Family Dollar segment, lower promotional advertising on the Family Dollar segment, decreases in travel due to the COVID-19 pandemic, lower legal expenses and higher costs in the prior year for the store support center consolidation. These improvements were partially offset by an increase in store supplies expenses due to the COVID-19 pandemic. Fiscal 2020 included $26.5 million, or 10 basis points, of costs for the installation of plexiglass sneeze guards at all registers in our stores as well as incremental costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic and $2.7 million of uninsured costs associated with stores damaged in civil unrest.
Store facility costs decreased 20 basis points due to leverage from the comparable store net sales increase and lower electricity costs. Fiscal 2020 included $1.3 million of COVID-19-related expenses and $4.5 million of expenses for stores damaged in civil unrest.
Depreciation costs decreased 5 basis points due primarily to the leverage from the comparable store net sales increase.
Payroll expenses increased 65 basis points primarily due to incremental costs associated with the COVID-19 pandemic and increases in incentive compensation, store sales bonuses and stock compensation expenses resulting from improved operating performance in the Family Dollar segment. These increases were partially offset by leverage from the comparable store net sales increase, lower benefits costs and lower temporary help expenses as a result of the prior year including higher expenses to support store-level initiatives. Office payroll costs also decreased resulting from the store support center consolidation in the prior year and other leadership changes made in the fourth quarter of fiscal 2019. Incremental payroll costs associated with the COVID-19 pandemic, including a wage premium paid to all store hourly associates for all hours worked March 8, 2020 through September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and “Thank You” bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes, totaled $212.6 million, or 85 basis points.
Operating Income (Loss)
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Operating income (loss)$1,887.9 $1,262.2 $(939.5)49.6 %
Operating income margin7.4 %5.3 %(4.1)%2.1 %
Excluding the non-cash goodwill impairment charges in 2019 and 2018, operating income margin was 6.7% in 2019 and 7.8% in 2018. Operating income margin increased to 7.4% in fiscal 2020 compared to 6.7% in fiscal 2019, excluding the goodwill impairment charge, as operating income margin in the Family Dollar segment increased 330 basis points, partially offset by a 140 basis point decrease in the Dollar Tree segment operating income margin. Operating income in fiscal 2020 includes $279.0 million of COVID-19-related expenses and $18.2 million of uninsured expenses related to civil unrest.

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Interest Expense, Net
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Interest expense, net$147.3 $162.1 $370.0 (9.1)%
Interest expense, net decreased $14.8 million in fiscal 2020 compared to the prior year, resulting from lower average debt outstanding in the current year, partially offset by lower interest income.
In fiscal 2018, we refinanced our debt, resulting in the acceleration of the expensing of $41.2 million of amortizable non-cash deferred financing costs and prepayment penalties totaling $114.3 million.
Provision for Income taxes
Year EndedPercentage Change
January 30,February 1,February 2,Fiscal 2020 vs. Fiscal 2019
(dollars in millions)202120202019
Provision for income taxes$397.9 $271.7 $281.8 46.4 %
Effective tax rate22.9 %24.7 %21.5 %(1.8)%
The effective tax rate for 2020 was 22.9% compared to 24.7% for 2019. The 2020 effective rate decreased compared to the prior year rate as the $313.0 million goodwill impairment charge in 2019 was not tax deductible. Partially offsetting that decrease, the 2020 rate reflects higher state tax rates, higher income amounts taxed at the statutory rate and additional tax expense for restricted stock vestings due to the stock price for certain grants being lower at the vest date than the grant date. The 2019 effective tax rate also includes the benefit of the reversal of a valuation allowance of $24.6 million.
Segment Information
We operate a chain of more than 15,600 retail discount stores in 48 states and five Canadian provinces. Our operations are conducted in two reporting business segments: Dollar Tree and Family Dollar. We define our segments as those operations whose results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.
We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income. The CODM reviews these metrics for each of our reporting segments. We may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM. If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation. Corporate, support and Other consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments. These costs include operating expenses for our store support centers in Chesapeake, Virginia and Matthews, North Carolina. During fiscal 2019, we consolidated our Matthews, North Carolina store support center with our store support center in Chesapeake, Virginia. Corporate, support and Other also includes the results of operations for our Summit Pointe property in Chesapeake, Virginia. Prior year amounts have been reclassified to be comparable to the current year presentation.
Dollar Tree
The following table summarizes the operating results of the Dollar Tree segment:
 Year EndedPercentage Change
 January 30, 2021February 1, 2020February 2, 2019Fiscal 2020 vs. Fiscal 2019
(in millions)$% of
Net Sales
$% of
Net Sales
$% of
Net Sales
Net sales$13,265.0 $12,507.9 $11,712.1 
Gross profit4,543.8 34.3 %4,342.9 34.7 %4,137.5 35.3 %(0.4)%
Operating income1,598.0 12.0 %1,670.2 13.4 %1,657.4 14.2 %(1.4)%
Net sales for the Dollar Tree segment increased 6.1%, or $757.1 million, in 2020 compared to 2019 due to sales from new stores of $591.0 million and a 2.2% increase in comparable store net sales. Average ticket increased 17.9% and customer traffic declined 13.3% in 2020.
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Gross profit margin for the Dollar Tree segment decreased to 34.3% in 2020 from 34.7% in 2019. The decrease is due to the net of the following:
Distribution costs increased 50 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associates a wage premium for all hours worked from March 8, 2020 through January 2, 2021. Total distribution center COVID-19-related expenses were $21.3 million, or 15 basis points of this increase.
Shrink costs increased 5 basis points resulting from unfavorable physical inventory results in relation to accruals in the current year and an increase in the shrink accrual rate.
Markdown costs were flat as a percentage of net sales compared to the prior year as lower markdowns from higher seasonal merchandise sell-through in the third and fourth quarters of 2020 were offset by higher markdowns from the lower sell-through of Easter merchandise as a result of the COVID-19 pandemic in the first quarter of 2020, and $2.9 million of uninsured markdown costs for stores affected by civil unrest.
Merchandise cost, including freight, decreased 10 basis points primarily due to increased sales of higher margin discretionary merchandise and increased initial mark-on, partially offset by incremental tariffs of $23.7 million. Discretionary merchandise sales were a higher proportion of total sales in the second, third and fourth quarters of 2020 while they were a lower proportion in the first quarter of 2020 as a result of the lower Easter sales due to the COVID-19 pandemic.
Operating income margin for the Dollar Tree segment decreased to 12.0% in 2020 compared to 13.4% in 2019. The decrease in operating income margin in 2020 was the result of lower gross profit margin as noted above and higher selling, general and administrative expenses as a percentage of net sales. Selling, general and administrative expenses, as a percentage of net sales, increased to 22.3% in 2020 compared to 21.3% in 2019 as a result of the net of the following:
Payroll expenses increased 100 basis points primarily due to incremental costs associated with the COVID-19 pandemic and higher incentive compensation and store sales bonuses. Incremental payroll costs associated with the COVID-19 pandemic included a wage premium paid to all store hourly associates for all hours worked from March 8, 2020 through September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and “Thank You” bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes. These costs totaled $124.2 million, or 95 basis points, in fiscal 2020. These increases were partially offset by leverage from the comparable store net sales increase and lower benefits costs.
Other selling, general and administrative expenses decreased 5 basis points as a result of decreased travel costs due to the COVID-19 pandemic and lower legal expenses, partially offset by an increase in store supplies costs resulting from the COVID-19 pandemic. Fiscal 2020 includes $14.9 million, or 10 basis points, of costs for the installation of plexiglass sneeze guards at all registers in our stores as well as incremental costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic.
Store facility costs decreased 10 basis points due to leverage from the comparable store net sales increase. Fiscal 2020 includes $1.7 million of expenses for repairs to stores damaged in civil unrest.
Operating income in fiscal 2020 includes $161.1 million of COVID-19-related expenses and $5.4 million of uninsured costs related to civil unrest.
Family Dollar
The following table summarizes the operating results of the Family Dollar segment:
 Year EndedPercentage Change
 January 30, 2021February 1, 2020February 2, 2019Fiscal 2020 vs. Fiscal 2019
(in millions)$% of
Net Sales
$% of
Net Sales
$% of
Net Sales
Net sales$12,243.4 $11,102.9 $11,111.2 
Gross profit3,243.6 26.5 %2,697.8 24.3 %2,810.0 25.3 %2.2 %
Operating income (loss)655.6 5.4 %(74.9)(0.7)%(2,312.8)(20.8)%6.1 %
Net sales for the Family Dollar segment increased $1,140.5 million or 10.3% in 2020 compared to 2019 due to a comparable store net sales increase of 10.5% and $261.4 million of new store sales, partially offset by lost sales resulting from store closures during
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fiscal 2019 in connection with our store optimization program. Average ticket increased 21.5% and customer traffic declined 9.1% in 2020.
Gross profit margin for the Family Dollar segment increased to 26.5% in 2020 compared to 24.3% in 2019. The increase is due to the net of the following:
Occupancy costs decreased 80 basis points as a result of the leverage from the comparable store net sales increase.
Markdowns at cost decreased 55 basis points primarily due to higher store closure and clearance sale markdowns in the prior year and lower promotional activity in the current year as a result of the increase in sales of discretionary product. Family Dollar also had higher sell-through of both Christmas and Halloween merchandise. These markdown reductions were partially offset by $7.5 million of uninsured markdown costs for stores affected by civil unrest.
Merchandise cost, including freight, decreased 50 basis points primarily due to increased sales of higher margin discretionary merchandise and improved initial mark-on, partially offset by incremental tariffs of $7.1 million.
Shrink expense decreased 45 basis points resulting from favorable physical inventory results in relation to accruals in the current year and a decrease in the accrual rate compared to an increase in the accrual rate in the prior year.
Distribution costs increased 5 basis points resulting primarily from higher distribution center payroll costs. We paid our hourly distribution center associates a wage premium for all hours worked from March 8, 2020 through January 2, 2021. Total distribution center COVID-19-related expenses were $15.0 million, or 10 basis points of this increase.
Excluding the $313.0 million and $2,727.0 million non-cash goodwill impairment charges in 2019 and 2018, respectively, operating income margin for the Family Dollar segment was 2.1% in 2019 and 3.7% in 2018. Operating income margin increased to 5.4% in fiscal 2020 compared to 2.1% in fiscal 2019, excluding the goodwill impairment charge, resulting from the gross margin increase noted above and a decrease in selling, general and administrative expenses, as a percentage of net sales. Selling, general and administrative expenses were 21.1%, as a percentage of net sales, in 2020 compared to 22.2% in 2019, excluding the goodwill impairment charge. The decrease in selling, general and administrative expenses, as a percentage of net sales, was due to the following:
Other selling, general and administrative expenses decreased 60 basis points primarily due to a decrease in promotional advertising, less travel during the COVID-19 pandemic, higher costs in the prior year related to the disposal of fixed assets in connection with the store optimization program, lower legal expenses, and leverage associated with the increase in comparable store net sales during the period, partially offset by an increase in store supplies expense. Fiscal 2020 included $11.6 million or 10 basis points of costs for the installation of plexiglass sneeze guards at all registers in our stores as well as incremental costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic and $2.1 million of expenses primarily for fixed asset disposals for stores damaged by civil unrest.
Store facility costs decreased 25 basis points primarily due to leverage from the comparable store net sales increase and lower electricity costs. Fiscal 2020 included $2.8 million of incremental repairs and maintenance expenses for stores damaged by civil unrest.
Depreciation and amortization expense decreased 15 basis points primarily due to leverage from the comparable store net sales increase.
Payroll expenses decreased 5 basis points as incremental costs associated with the COVID-19 pandemic and increased incentive compensation and store sales bonus expenses resulting from the improved Family Dollar operating performance were more than offset by leverage from the comparable store net sales increase, lower temporary help expenses as a result of the prior year including higher expenses to support store-level initiatives, a decrease in workers’ compensation expenses and lower benefits costs. Incremental costs associated with the COVID-19 pandemic, including a wage premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and “Thank You” bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes totaled $88.4 million or 70 basis points.
Operating income in fiscal 2020 includes $115.5 million for COVID-19-related expenses and $12.8 million of uninsured costs related to civil unrest.
Liquidity and Capital Resources
Our business requires capital to build and open new stores, expand and renovate existing stores, expand our distribution network and operate our existing stores. Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October. Historically, we have satisfied our seasonal working capital requirements for existing
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stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities.
The following table compares cash-flow related information for the years ended January 30, 2021, February 1, 2020 and February 2, 2019:
 Year Ended
 January 30,February 1,February 2,
(in millions)202120202019
Net cash provided by (used in):
Operating activities$2,716.3 $1,869.8 $1,766.0 
Investing activities(889.7)(1,020.2)(816.7)
Financing activities(949.9)(709.8)(1,599.9)
Operating Activities
Net cash provided by operating activities increased $846.5 million in 2020 compared to 2019 primarily as a result of higher accounts payable, current liabilities and other liabilities and lower inventory levels at January 30, 2021, and higher earnings before depreciation and amortization in the current year.
Investing Activities
Net cash used in investing activities decreased $130.5 million in 2020 compared with 2019 primarily due to 2019 including higher capital expenditures related to the Family Dollar segment store optimization program, including H2 renovations and re-banners. H2 renovations were slowed in the current year due to the COVID-19 pandemic. The decrease was partially offset by increased capital expenditures related to distribution center projects in the current year and grant funds received from state and local governments for our Summit Pointe development in the prior year.
Financing Activities
Net cash used in financing activities increased $240.1 million in 2020 compared to 2019 primarily due to $400.0 million of stock repurchases in 2020 compared to $200.0 million in 2019. In 2020, we also repaid the remaining $250.0 million of our $750.0 million Floating Rate Notes and the $300.0 million 5% Senior Notes. In fiscal 2019, we prepaid $500.0 million of our $750.0 million Floating Rate Notes.
At January 30, 2021, our long-term borrowings were $3.25 billion and we had $1.25 billion available under our revolving credit facility, less amounts outstanding for standby letters of credit totaling $98.7 million. For additional detail on our long-term borrowings and other commitments, refer to the discussion of Funding Requirements below, as well as Note 5 and Note 6 to our consolidated financial statements.
Share Repurchases
We repurchased 3,982,478 shares of common stock on the open market for $400.0 million in fiscal 2020 and we repurchased 1,967,355 shares of common stock on the open market for $200.0 million in fiscal 2019. There were no shares repurchased in fiscal 2018. At January 30, 2021, we had $400.0 million remaining under Board repurchase authorization. Subsequently, on March 2, 2021, the Board increased the share repurchase authorization by $2.0 billion resulting in a total share repurchase authorization of $2.4 billion.
Funding Requirements
Overview
We expect our cash needs for opening new stores and expanding and renovating existing stores in fiscal 2021 to total approximately $592.7 million, which includes capital expenditures, initial inventory and pre-opening costs.
Our estimated capital expenditures for fiscal 2021 are approximately $1.2 billion, including planned expenditures for our new and expanded stores, approximately 1,250 planned H2 renovations of Family Dollar segment stores, distribution center expansions and the development of additional parcels on our Summit Pointe property, located in Chesapeake, Virginia, for mixed-use purposes. We believe that we can adequately fund our working capital requirements and planned capital expenditures for the foreseeable future from net cash provided by operations and potential borrowings under our revolving credit facility.
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The following tables summarize our material contractual obligations at January 30, 2021, including both on- and off-balance sheet arrangements, and our commitments, including interest on long-term borrowings (in millions):
Contractual ObligationsTotal20212022202320242025Thereafter
Lease Financing       
Operating lease obligations$7,459.5 $1,480.1 $1,396.4 $1,184.1 $965.0 $731.2 $1,702.7 
Long-term Borrowings       
Principal3,250.0 — — 1,000.0 — 1,000.0 1,250.0 
Interest639.2 129.1 129.1 104.8 92.0 64.1 120.1 
Total obligations$11,348.7 $1,609.2 $1,525.5 $2,288.9 $1,057.0 $1,795.3 $3,072.8 
CommitmentsTotalExpiring in 2021Expiring in 2022Expiring in 2023Expiring in 2024Expiring in 2025Thereafter
Letters of credit and surety bonds$404.8 $378.5 $25.7 $0.5 $0.1 $— $— 
Purchase obligations189.8 68.3 43.2 35.5 27.6 15.2 — 
Total commitments$594.6 $446.8 $68.9 $36.0 $27.7 $15.2 $— 
Lease Financing
Operating lease obligations. Refer to Note 7 to our consolidated financial statements for information on our operating leases. The obligation above includes amounts for leases that were signed prior to January 30, 2021 for stores that were not yet open on January 30, 2021.
Long-term Borrowings
In the first quarter of 2018, we redeemed our $750.0 million acquisition notes and accelerated the amortization of debt-issuance costs associated with the notes of $6.1 million.
Additionally, in the first quarter of 2018, we completed the registered offering of $750.0 million aggregate principal amount of Senior Floating Rate Notes due 2020, $1.0 billion aggregate principal amount of 3.70% Senior Notes due 2023, $1.0 billion aggregate principal amount of 4.00% Senior Notes due 2025 and $1.25 billion aggregate principal amount of 4.20% Senior Notes due 2028. We also entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, providing for $2.03 billion in senior credit facilities, consisting of a $1.25 billion revolving credit facility and a $782.0 million term loan facility. We used the proceeds of these borrowings and cash on hand to repay all of the outstanding loans under our then-existing senior secured credit facilities and acquisition notes, resulting in the acceleration of the expensing of $41.2 million of deferred financing costs and our incurring $114.3 million in prepayment penalties. In the fourth quarter of 2018, we prepaid in full the $782.0 million term loan facility. In the fourth quarter of 2019, we prepaid $500.0 million of the $750.0 million Senior Floating Rate Notes and repaid the remaining $250.0 million outstanding in the first quarter of 2020.
In addition, upon the acquisition of Family Dollar in 2015, we assumed the liability for $300.0 million of 5.00% senior notes, which we repaid in the fourth quarter of 2020.
The interest on our long-term borrowings represents the interest payments on the foregoing long-term borrowings that were outstanding at January 30, 2021 using the interest rates for each at January 30, 2021.
For additional information on our long-term borrowings, please refer to Note 6 to our consolidated financial statements.
Commitments
Letters of credit and surety bonds. We have $356.5 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which $209.6 million was committed to letters of credit issued for routine purchases of imported merchandise at January 30, 2021.
We also have $98.7 million of letters of credit outstanding that serve as collateral for our large-deductible insurance programs and $96.5 million of surety bonds outstanding primarily for certain utility payment obligations at some of our stores and self-insured insurance programs.
Purchase obligations. We have commitments totaling $189.8 million related to agreements for software licenses and support, telecommunication services and store technology assets and maintenance for our stores.
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Critical Accounting Policies
The preparation of financial statements requires the use of estimates. Certain of our estimates require a high level of judgment and have the potential to have a material effect on the financial statements if actual results vary significantly from those estimates. Following is a discussion of the policies that we consider critical.
Inventory Valuation
As discussed in Note 1 to our consolidated financial statements under the caption “Merchandise Inventories,” inventories at the distribution centers are stated at the lower of cost or net realizable value with cost determined on a weighted-average basis. Cost is assigned to store inventories using the retail inventory method on a weighted-average basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that is widely used in the retail industry and results in valuing inventories at lower of cost or market when markdowns are taken as a reduction of the retail value of inventories on a timely basis.
Inventory valuation methods require certain management estimates and judgments, including estimates of future merchandise markdowns and shrink, which significantly affect the ending inventory valuation at cost as well as the resulting gross margins. The averaging required in applying the retail inventory method and the estimates of shrink and markdowns could, under certain circumstances, result in costs not being recorded in the proper period.
We estimate our markdown reserve based on the consideration of a variety of factors, including, but not limited to, quantities of slow moving or seasonal carryover merchandise on hand, historical markdown statistics and future merchandising plans. The accuracy of our estimates can be affected by many factors, some of which are outside of our control, including changes in economic conditions and consumer buying trends. Historically, we have not experienced significant differences in our estimated reserve for markdowns compared with actual results.
Our accrual for shrink is based on the actual, historical shrink results of our most recent physical inventories adjusted, if necessary, for current economic conditions and business trends. These estimates are compared to actual results as physical inventory counts are taken and reconciled to the general ledger. Our physical inventory counts are generally taken between January and October of each year; therefore, the shrink accrual recorded at January 30, 2021 is based on estimated shrink for most of 2020, including the fourth quarter. The amounts recorded in the current year reflect the Dollar Tree and Family Dollar segments’ historical results. We periodically adjust our shrink estimates to reflect our best estimates based on the factors described.
Our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis.
Self-Insurance Liabilities
The liabilities related to our self-insurance programs for workers’ compensation and general liability are estimates that require judgment and the use of assumptions. Semiannually, we obtain third-party actuarial valuations to aid in valuing the liabilities and in determining the amount to accrue during the year. These actuarial valuations are estimates based on our historical loss development factors and the related accruals are adjusted as management’s estimates change.
Management’s estimate for self-insurance liabilities could vary from the ultimate loss sustained given the difficulty in predicting future events; however, historically, the net total of these differences has not had a material effect on our financial condition or results of operations.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are initially recorded at their fair values. These assets are not amortized but are evaluated annually for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock.
For purposes of our goodwill impairment evaluation, the reporting units are Family Dollar, Dollar Tree and Dollar Tree Canada. Goodwill has been assigned to the reporting units based on prior business combinations related to the brands. In the event a qualitative assessment of the fair value of a reporting unit indicates it is more likely than not that the fair value is less than the carrying amount, we then estimate the fair value using a combination of a market multiple method and a discounted cash flow method. Under the market multiple approach, we estimate a fair value based on comparable companies’ market multiples of revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted for a control premium. Under the discounted cash flow approach, we project future cash flows which are discounted using a weighted-average cost of capital analysis that reflects current market conditions, adjusted for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). If
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the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.
The Family Dollar goodwill and trade name comprise a substantial portion of our goodwill and indefinite-lived intangible assets and management’s judgment utilized in the Family Dollar goodwill and trade name impairment evaluations is critical. The computations require management to make estimates and assumptions and actual results may differ significantly, particularly if there are significant adverse changes in the operating environment. Critical assumptions that are used as part of the Family Dollar goodwill evaluation include:
The potential future revenue, EBITDA and cash flows of the reporting unit. The projections use management’s assumptions about economic and market conditions over the projected period as well as our estimates of future performance and reporting unit revenue, gross margin, expenses and other factors. The resulting revenue, EBITDA and cash flow estimates are based on our most recent business operating plans, and various growth rates have been assumed for years beyond the current business plan period. We believe that the assumptions, estimates and rates used in our fiscal 2020 impairment evaluations are reasonable; however, variations in the assumptions, estimates and rates could result in significantly different estimates of fair value.
Selection of an appropriate discount rate. Calculating the present value of future cash flows requires the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants. Given current economic conditions, it is possible that the discount rate will fluctuate in the near term. We engaged third party experts to assist in the determination of the weighted-average cost of capital used to discount the cash flows for our Family Dollar reporting unit. The weighted-average cost of capital used to discount the cash flows for our evaluation was 8.25% for our fiscal 2020 analysis.
Indefinite-lived intangible assets, such as the Family Dollar trade name, are not subject to amortization but are reviewed at least annually for impairment. The indefinite-lived intangible asset impairment evaluations are performed by comparing the fair value of the indefinite-lived intangible assets to their carrying values. We estimate the fair value of our trade name intangible asset based on an income approach using the relief-from-royalty method. This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables. We base our fair value estimates on assumptions we believe to be reasonable, but which are inherently uncertain. The discount rate includes a premium compared to the discount used for the Family Dollar goodwill impairment evaluation due to the inherently higher risk profile of intangible assets compared to the overall reporting unit.
Our evaluation of goodwill did not result in an impairment charge being recorded in fiscal 2020. Non-cash impairment charges of $313.0 million and $2.73 billion were recorded in fiscal 2019 and 2018, respectively, related to the Family Dollar reporting unit. Our evaluation of the Family Dollar trade name did not result in impairment charges during fiscal 2020, 2019 or 2018. Based on the results of the 2020 evaluation, the fair value of the Family Dollar reporting unit exceeded its carrying value by a significant margin and the fair value of the Family Dollar trade name exceeded its carrying value by approximately 7.5%.
For additional information related to goodwill and indefinite-lived intangible assets, including the related impairment evaluations, refer to Note 3 to our consolidated financial statements. For additional information related to uncertainties associated with the key assumptions and any potential events and/or circumstances that could have a negative effect on the key assumptions, please refer to “Item 1A. Risk Factors” and elsewhere within this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If our assumptions and related estimates change in the future, we may be required to record impairment charges against earnings in future periods. Any impairment charges that we may take in the future could be material to our results of operations and financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes and diesel fuel cost changes. We may enter into interest rate or diesel fuel swaps to manage exposure to interest rate and diesel fuel price changes. We do not enter into derivative instruments for any purpose other than cash flow hedging and we do not hold derivative instruments for trading purposes.
Interest Rate Risk
Our exposure to interest rate risk relates to our revolving credit facility, as borrowings under the revolving credit facility bear interest at LIBOR, reset periodically, plus 1.00% to 1.50% as determined by our credit ratings and leverage ratio. At January 30, 2021, there were no borrowings outstanding under the revolving credit facility.
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Item 8. Financial Statements and Supplementary Data


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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Dollar Tree, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc. and subsidiaries (the Company) as of January 30, 2021 and February 1, 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 30, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 30, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 3, 2019, due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of goodwill and trade name intangible asset in the Family Dollar operating segment
As discussed in Notes 1 and 3 to the consolidated financial statements, the Company performs goodwill and trade name intangible asset impairment testing on an annual basis and when events and changes in circumstances indicate possible impairment of these assets. Total recorded goodwill as of January 30, 2021 was $2.0 billion. Of this amount, the goodwill balance for the Family Dollar reporting unit, which is also the Family Dollar operating segment, was $1.6 billion. The Family Dollar trade name intangible asset was $3.1 billion as of January 30, 2021.
We identified the assessment of the valuation of goodwill and trade name intangible asset in the Family Dollar operating segment as a critical audit matter. The assumptions utilized to calculate the fair value of the operating segment, which included revenue growth rates and discount rate, as well as the assumptions used to calculate the fair value of the trade name intangible asset, which included revenue growth rates, discount rate, and royalty rate, required subjective auditor judgment. Minor changes to these assumptions could have a significant effect on the assessment of the carrying value of the goodwill and trade name, which resulted
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in a high degree of subjectivity in performing the associated audit procedures.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill and trade name impairment assessment process, including controls related to the determination of the fair value of the assets, the development of the revenue growth rates, discount rates, and royalty rate. We performed a sensitivity analysis over the revenue growth rate assumptions to assess their impact on the Company’s determination of the fair values of the Family Dollar reporting unit and the trade name intangible asset. To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasts to actual results. We evaluated the Company’s revenue growth rates reflected in the forecasted revenues for the Family Dollar operating segment by comparing the store sales growth assumptions to historical results. We also evaluated assumptions related to new store openings and renovations through comparison to the Company’s forecasted capital expenditures and its known store openings and renovations. We involved valuation professionals with specialized skills and knowledge who assisted in:
evaluating the Company’s revenue growth rates based on publicly available market data for comparable entities;
assessing the Company’s discount rates and royalty rate by comparing the Company’s inputs to the discount and royalty rates to publicly available market data for comparable companies and assessing the resulting rates; and
evaluating (1) the Family Dollar operating segment’s fair value using the related cash flow forecast and discount rate, as well as (2) the trade name’s fair value using the related discount rate and royalty rate, and comparing the results to the Company’s fair value estimate.
Estimated self-insurance liability
As discussed in Note 1 to the consolidated financial statements, the Company employs an actuary to estimate its self-insurance liability. As of January 30, 2021, the Company recorded an estimated liability of $319 million.
We identified the evaluation of the estimated self-insurance liability as a critical audit matter. The estimation process involves auditor judgment and actuarial expertise to evaluate the actuarial methods and assumptions that are used to estimate future claim payments. Specifically, the evaluation includes the assumptions related to the loss development factors and expected loss rates which are primarily driven by historical claims paid and incurred data.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance liability estimation process. This included controls related to (1) the selection of the actuarial methods, and the development of the loss development factors and expected loss rates used to calculate the liability, and (2) the completeness and accuracy of historical claims paid and incurred data. We assessed the Company’s estimate of the liability by testing a selection of certain data, including claims data, utilized by the Company’s actuary by comparing it to relevant documentation. We involved actuarial professionals with specialized skills and knowledge, who assisted in:
assessing the Company’s actuarial methods by comparing them to generally accepted actuarial methodologies; and
evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data and trends.

/s/ KPMG LLP
We have served as the Company’s auditor since 1987.

Norfolk, Virginia
March 16, 2021

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DOLLAR TREE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended
 January 30,February 1,February 2,
(in millions, except per share data)202120202019
Net sales$25,509.3 $23,610.8 $22,823.3 
Cost of sales17,721.0 16,570.1 15,875.8 
Gross profit7,788.3 7,040.7 6,947.5 
Selling, general and administrative expenses, excluding Goodwill
impairment
5,900.4 5,465.5 5,160.0 
Goodwill impairment 313.0 2,727.0 
Selling, general and administrative expenses5,900.4 5,778.5 7,887.0 
Operating income (loss)1,887.9 1,262.2 (939.5)
Interest expense, net147.3 162.1 370.0 
Other expense (income), net0.8 1.4 (0.5)
Income (loss) before income taxes1,739.8 1,098.7 (1,309.0)
Provision for income taxes397.9 271.7 281.8 
Net income (loss)$1,341.9 $827.0 $(1,590.8)
Basic net income (loss) per share$5.68 $3.49 $(6.69)
Diluted net income (loss) per share$5.65 $3.47 $(6.69)

See accompanying Notes to Consolidated Financial Statements
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DOLLAR TREE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended
January 30,February 1,February 2,
(in millions)202120202019
Net income (loss)$1,341.9 $827.0 $(1,590.8)
Foreign currency translation adjustments4.6 (1.5)(6.0)
Total comprehensive income (loss)$1,346.5 $825.5 $(1,596.8)

See accompanying Notes to Consolidated Financial Statements
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DOLLAR TREE, INC.
CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)January 30, 2021February 1, 2020
ASSETS  
Current assets:  
Cash and cash equivalents$1,416.7 $539.2 
Merchandise inventories3,427.0 3,522.0 
Other current assets207.1 208.2 
Total current assets5,050.8 4,269.4 
Property, plant and equipment, net of accumulated depreciation of $4,765.0 and $4,194.1,
    respectively
4,116.3 3,881.8 
Restricted cash46.9 46.8 
Operating lease right-of-use assets6,324.1 6,225.0 
Goodwill1,984.4 1,983.3 
Trade name intangible asset3,100.0 3,100.0 
Deferred tax asset23.2 24.4 
Other assets50.3 43.9 
Total assets$20,696.0 $19,574.6 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$ $250.0 
Current portion of operating lease liabilities1,348.2 1,279.3 
Accounts payable1,480.5 1,336.5 
Income taxes payable86.3 62.7 
Other current liabilities815.3 618.0 
Total current liabilities3,730.3 3,546.5 
Long-term debt, net, excluding current portion3,226.2 3,522.2 
Operating lease liabilities, long-term5,065.5 4,979.5 
Deferred income taxes, net1,013.5 984.7 
Income taxes payable, long-term22.6 28.9 
Other liabilities352.6 258.0 
Total liabilities13,410.7 13,319.8 
Commitments and contingencies
Shareholders’ equity:  
Common stock, par value $0.01; 600,000,000 shares authorized, 233,383,199 and
  236,726,563 shares issued and outstanding at January 30, 2021 and February 1, 2020,
    respectively
2.3 2.4 
Additional paid-in capital2,138.5 2,454.4 
Accumulated other comprehensive loss(35.2)(