dltr-20221029

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 29, 2022


☐			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

DOLLAR TREE, INC.

(Exact name of registrant as specified in its charter)


Virginia						26-2018846
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


500 Volvo Parkway
Chesapeake,	Virginia	23320
(Address of principal executive offices)		(Zip Code)

(757) 321-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	DLTR	NASDAQ Global Select Market

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.


Yes			☒			No			☐

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).


Yes			☒			No			☐

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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes			☐			No			☒

As of November 18, 2022, there were 221,184,479 shares of the registrant’s common stock outstanding.

DOLLAR TREE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED OCTOBER 29, 2022

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		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Income Statements	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

DOLLAR TREE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(in millions, except per share data)	2022		2021		2022		2021
Net sales	$	6,936.6	$	6,415.4	$	20,602.0	$	19,232.4
Other revenue	3.3		2.3		9.0		8.2
Total revenue	6,939.9		6,417.7		20,611.0		19,240.6
Cost of sales	4,865.1		4,651.7		14,065.6		13,643.6
Selling, general and administrative expenses	1,693.5		1,455.5		4,927.2		4,364.4
Operating income	381.3		310.5		1,618.2		1,232.6
Interest expense, net	32.7		33.4		97.3		99.4
Other expense, net	0.2		0.2		0.3		0.2
Income before income taxes	348.4		276.9		1,520.6		1,133.0
Provision for income taxes	81.5		60.1		357.4		259.3
Net income	$	266.9	$	216.8	$	1,163.2	$	873.7
Basic net income per share	$	1.20	$	0.96	$	5.20	$	3.82
Diluted net income per share	$	1.20	$	0.96	$	5.17	$	3.80

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(in millions)	2022		2021		2022		2021
Net income	$	266.9	$	216.8	$	1,163.2	$	873.7

Foreign currency translation adjustments	(8.3)		0.7		(9.4)		3.9

Total comprehensive income	$	258.6	$	217.5	$	1,153.8	$	877.6

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in millions)	October 29, 2022		January 29, 2022		October 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	439.0	$	984.9	$	701.4

Merchandise inventories	5,657.7		4,367.3		4,316.0
Other current assets	349.9		257.0		357.1
Total current assets	6,446.6		5,609.2		5,374.5
Property, plant and equipment, net of accumulated depreciation of $5,849.8, $5,363.8 and $5,209.9, respectively	4,823.9		4,477.3		4,377.4

Restricted cash	67.9		53.4		53.4
Operating lease right-of-use assets	6,413.3		6,425.3		6,424.0
Goodwill	1,982.4		1,984.4		1,985.3
Trade name intangible asset	3,100.0		3,100.0		3,100.0
Deferred tax asset	15.7		20.3		22.3

Other assets	59.7		51.9		53.1
Total assets	$	22,909.5	$	21,721.8	$	21,390.0
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	350.0	$	—	$	—
Current portion of operating lease liabilities	1,426.7		1,407.8		1,388.0
Accounts payable	1,864.2		1,884.2		1,984.8
Income taxes payable	—		82.6		—
Other current liabilities	1,042.2		802.0		918.4
Total current liabilities	4,683.1		4,176.6		4,291.2
Long-term debt, net, excluding current portion	3,420.4		3,417.0		3,231.1
Operating lease liabilities, long-term	5,155.9		5,145.5		5,151.0
Deferred income taxes, net	1,101.1		987.2		1,096.8
Income taxes payable, long-term	22.0		20.9		26.4
Other liabilities	251.7		256.1		349.1
Total liabilities	14,634.2		14,003.3		14,145.6
Commitments and contingencies (Note 2)
Shareholders’ equity	8,275.3		7,718.5		7,244.4
Total liabilities and shareholders’ equity	$	22,909.5	$	21,721.8	$	21,390.0

Common shares outstanding	221.2		225.1		224.9

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


	13 Weeks Ended October 29, 2022
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at July 30, 2022	223.9	$	2.2	$	1,026.7	$	(36.3)	$	7,403.9	$	8,396.5
Net income	—	—		—		—		266.9		266.9
Total other comprehensive loss	—	—		—		(8.3)		—		(8.3)
Issuance of stock under Employee Stock Purchase Plan	0.1	—		2.3		—		—		2.3

Stock-based compensation, net	—	—		15.4		—		—		15.4
Repurchase of stock	(2.8)	—		(397.5)		—		—		(397.5)
Balance at October 29, 2022	221.2	$	2.2	$	646.9	$	(44.6)	$	7,670.8	$	8,275.3



	39 Weeks Ended October 29, 2022
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at January 29, 2022	225.1	$	2.2	$	1,243.9	$	(35.2)	$	6,507.6	$	7,718.5

Net income	—	—		—		—		1,163.2		1,163.2
Total other comprehensive loss	—	—		—		(9.4)		—		(9.4)
Issuance of stock under Employee Stock Purchase Plan	0.1	—		7.1		—		—		7.1

Stock-based compensation, net	0.6	—		43.4		—		—		43.4
Repurchase of stock	(4.6)	—		(647.5)		—		—		(647.5)
Balance at October 29, 2022	221.2	$	2.2	$	646.9	$	(44.6)	$	7,670.8	$	8,275.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)

(Unaudited)


	13 Weeks Ended October 30, 2021
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at July 31, 2021	224.9	$	2.2	$	1,204.9	$	(32.0)	$	5,836.6	$	7,011.7

Net income	—	—		—		—		216.8		216.8
Total other comprehensive income	—	—		—		0.7		—		0.7
Issuance of stock under Employee Stock Purchase Plan	—	—		2.4		—		—		2.4

Stock-based compensation, net	—	—		12.8		—		—		12.8

Balance at October 30, 2021	224.9	$	2.2	$	1,220.1	$	(31.3)	$	6,053.4	$	7,244.4



	39 Weeks Ended October 30, 2021
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at January 30, 2021	233.4	$	2.3	$	2,138.5	$	(35.2)	$	5,179.7	$	7,285.3

Net income	—	—		—		—		873.7		873.7
Total other comprehensive income	—	—		—		3.9		—		3.9
Issuance of stock under Employee Stock Purchase Plan	0.1	—		8.3		—		—		8.3
Exercise of stock options	—	—		0.7		—		—		0.7
Stock-based compensation, net	0.6	—		22.5		—		—		22.5
Repurchase of stock	(9.2)	(0.1)		(949.9)		—		—		(950.0)
Balance at October 30, 2021	224.9	$	2.2	$	1,220.1	$	(31.3)	$	6,053.4	$	7,244.4

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	39 Weeks Ended
	October 29,		October 30,
(in millions)	2022		2021
Cash flows from operating activities:
Net income	$	1,163.2	$	873.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	571.4		527.3
Provision for deferred income taxes	117.4		85.0
Stock-based compensation expense	90.8		63.1
Amortization of debt discount and debt-issuance costs	3.4		4.9

Other non-cash adjustments to net income	26.4		8.6

Changes in operating assets and liabilities	(1,238.5)		(543.9)
Net cash provided by operating activities	734.1		1,018.7
Cash flows from investing activities:
Capital expenditures	(920.8)		(749.6)


Proceeds from governmental grant	—		2.9
Proceeds from (payments for) fixed asset disposition	(5.1)		0.4
Net cash used in investing activities	(925.9)		(746.3)
Cash flows from financing activities:



Proceeds from revolving credit facility	440.0		—
Repayments of revolving credit facility	(90.0)		—
Proceeds from stock issued pursuant to stock-based compensation plans	7.1		9.0
Cash paid for taxes on exercises/vesting of stock-based compensation	(47.4)		(40.6)
Payments for repurchase of stock	(647.5)		(950.0)
Net cash used in financing activities	(337.8)		(981.6)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1.8)		0.4
Net decrease in cash, cash equivalents and restricted cash	(531.4)		(708.8)
Cash, cash equivalents and restricted cash at beginning of period	1,038.3		1,463.6
Cash, cash equivalents and restricted cash at end of period	$	506.9	$	754.8
Supplemental disclosure of cash flow information:
Cash paid for:
Interest, net of amounts capitalized	$	65.4	$	65.7
Income taxes	$	373.4	$	362.5
Non-cash transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,095.0	$	1,134.3
Accrued capital expenditures	$	65.2	$	63.4

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

Unless otherwise stated, references to “we,” “us,” and “our” in this quarterly report on Form 10-Q refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis. We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended January 29, 2022. The results of operations for the 13 and 39 weeks ended October 29, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 28, 2023.

In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of our financial position as of October 29, 2022 and October 30, 2021 and the results of our operations and cash flows for the periods presented. The January 29, 2022 balance sheet information was derived from the audited consolidated financial statements as of that date.

Note 2 - Contingencies

We are defendants in legal proceedings including the class, collective, representative and large cases described below as well as individual claims in arbitration. 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 quarter or year in which they are reserved or resolved.

We assess our legal proceedings monthly and reserves are established if a loss is probable and the amount of such loss can be reasonably estimated. For matters that have settled, we reserve the estimated settlement amount even if the settlement has not been approved by the court. Many, if not substantially all, of our legal proceedings are subject to significant uncertainties and, therefore, determining the likelihood of a loss and the measurement of any loss can be complex and subject to judgment. With respect to legal proceedings where we have determined that a loss is reasonably possible but not probable, we are unable to estimate the amount or range of the reasonably possible loss due to the inherent difficulty of predicting the outcome of and uncertainties regarding legal proceedings. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Management’s assessment of legal proceedings could change because of future determinations or the discovery of facts which are not presently known. Accordingly, the ultimate costs of resolving these proceedings may be substantially higher or lower than currently estimated.

Active Matters

On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related sale and distribution of adulterated product, as well as other processes and procedures that require remediation. In connection therewith, we initiated a voluntary retail-level product recall of FDA and U.S. Department of Agriculture-regulated products stored and shipped from DC 202 from January 1, 2021 through February 18, 2022 (the “Recall”), temporarily closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, permanently ceased the shipment of FDA-regulated products from DC 202, and initiated corrective actions. In June 2022, we stopped shipping to stores from DC 202 and are decommissioning the facility. On November 9, 2022 we received an FDA Warning Letter (“Warning Letter”) in connection with the DC 202 inspection. The conditions and issues detailed in the Warning Letter are generally the same as those described in the Form 483 observations or were otherwise observed during the inspection. The Warning Letter acknowledged certain remedial actions we have taken in response to the Form 483 observations, including conducting the voluntary recall and decommissioning the facility. We are taking this matter extremely seriously and continue to cooperate with the FDA.

Since February 22, 2022, Family Dollar has received 14 putative class action complaints primarily related to issues associated with DC 202 described above. The lawsuits are proceeding in federal court in Tennessee using the federal court’s multi-district litigation process. An amended consolidated complaint seeking class action status was filed October 17, 2022 alleging violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception and unjust enrichment related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of, money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in

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unspecified amounts), including equitable and injunctive relief. We have filed a motion to dismiss the amended consolidated complaint and a ruling on the motion by the court is expected in early 2023.

On March 1, 2022, a federal grand jury subpoena was issued to us by the Eastern District of Arkansas requesting the production of information, documents and records pertaining to pests, sanitation, compliance with law, and the issues described above. We are cooperating with the subpoena and the related investigation; however, no assurance can be given as to the timing or outcome of this matter.

On April 28, 2022, the State of Arkansas filed a complaint in state court alleging violations of the Arkansas Deceptive Trade Practices Act, gross negligence and negligence, strict liability in tort, unjust enrichment and civil conspiracy related to the sale of products that may have been contaminated by virtue of rodent infestation and other unsanitary conditions. The State of Arkansas is seeking injunctive relief, restitution, disgorgement, damages, civil penalties, punitive damages and suspension or revocation of our authorization to do business in Arkansas.

The Food and Drug Administration (“FDA”) has alleged that Dollar Tree improperly sold certain topically applied, over the counter products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA. We believe we have made significant improvements in our processes in our supply chain and continue to monitor these for compliance.

From time to time, various federal and state regulators such as the U.S. Department of Labor’s Occupational Safety and Health Administration and the state equivalents along with state-level hazardous waste and product regulators have found violations of applicable regulations at Dollar Tree stores and Family Dollar stores and assessed penalties relating to the violations. For those periods in which this occurs, pending resolution of the matters, we record the associated estimated liabilities in the financial statements.

California state court lawsuits have been filed against Dollar Tree and Family Dollar for similar employment-related claims brought under the Private Attorney General Act (“PAGA”). These cases allege that we failed to provide non-exempt associates with compliant rest and meal breaks, suitable seating, overtime pay, minimum wages, reimbursement of business expenses, and properly calculated sick leave pay, as well as other potential labor code violations. The plaintiffs generally seek civil penalties and attorneys’ fees and costs.

Five personal injury lawsuits are pending in state court in Illinois, New York, Massachusetts, Texas, and New Jersey against Dollar Tree, Family Dollar or both alleging that certain talc products that were sold in the past caused cancer. The plaintiffs seek compensatory, punitive and exemplary damages, damages for loss of consortium, and attorneys’ fees and costs. Although we have been able to resolve previous talc lawsuits against us without material loss to the company, given the inherent uncertainties of litigation there can be no assurances regarding the outcome of pending or future cases. Future costs to litigate these cases are not known but may be material, and it is uncertain whether our costs will be covered by insurance. In addition, although we have indemnification rights against our vendors in several of these cases, it is uncertain whether the vendors will have the financial ability to carry out their obligations.

Since August 2022, four personal injury cases have been filed in federal court in California and Minnesota against Dollar Tree, Family Dollar, or both, on behalf of minors alleging that their mothers took acetaminophen while pregnant, that the acetaminophen interfered with fetal development such that plaintiffs were born with autism and/or ADHD, and that we knew or should have known of the danger, had a duty to warn and failed to include appropriate warnings on the product labels. The plaintiffs seek compensatory, punitive and/or exemplary damages, restitution and disgorgement, economic damages, and attorneys’ fees and costs. These cases, along with other cases against many other defendants, have been consolidated in multi-district court litigation in the Southern District of New York.

Since September 2022, five personal injury cases have been filed in state court in Pennsylvania against both Dollar Tree and Family Dollar alleging that both sold Zantac and generic ranitidine products containing N-Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen. The plaintiffs seek compensatory, exemplary and punitive damages and costs. The five cases along with similar cases against other companies filed in the Philadelphia Court of Common Pleas have been consolidated. Under the court’s rules, one long form master complaint was filed in a process that is similar to multi-district litigation in federal court. Dollar Tree and Family Dollar have not been named as defendants in the long form master complaint but could still be named in short form complaints that may be filed. In addition, in February 2021, as part of a multi-district litigation in the Southern District of Florida, master personal injury and consumer protection class complaints were filed against Zantac manufacturers and retailers, including Dollar Tree and Family Dollar. While Dollar Tree and Family Dollar have been dismissed from both master complaints, those dismissals are currently being appealed. We believe we will be indemnified by our suppliers with respect to these proceedings.

Since January 2021, four state-wide consumer class actions have been filed against Family Dollar in Georgia, Alabama, Florida, and Tennessee for breach of warranty based on the allegation that the coffee we sold was mislabeled because the canisters did not contain enough coffee to make the number of cups of coffee stated on the label. The plaintiffs seek compensatory damages.

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Resolved Matters

In August 2020 and July 2021, consumer class actions were filed against Family Dollar in New York and Illinois, respectively, alleging Smoked Almonds sold by us are mislabeled because the almonds do not go through a smoking process but rather acquire their smoky taste through the use of smoked flavoring. These actions alleged violation of consumer protection laws, negligent misrepresentation, breach of warranties, fraud and unjust enrichment. The New York and Illinois cases were dismissed with prejudice on March 21, 2022 and April 28, 2022, respectively.

Note 3 - Fair Value Measurements

As required, financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). We did not record any material impairment charges during the 13 or 39 weeks ended October 29, 2022 or October 30, 2021.

Fair Value of Financial Instruments

The carrying amounts of Cash and cash equivalents, Restricted cash and Accounts payable as reported in the accompanying unaudited condensed consolidated balance sheets approximate fair value due to their short-term maturities. The carrying value of our Revolving Credit Facility approximates its fair value.

The aggregate fair values and carrying values of our long-term borrowings were as follows:


	October 29, 2022				January 29, 2022				October 30, 2021
(in millions)	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Level 1
Senior Notes	$	3,004.6	$	3,425.8	$	3,558.5	$	3,423.4	$	3,532.4	$	3,234.5

The fair values of our Senior Notes were determined using Level 1 inputs as quoted prices in active markets for identical assets or liabilities are available.

Note 4 - Net Income Per Share

The following table sets forth the calculations of basic and diluted net income per share:


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(in millions, except per share data)	2022		2021		2022		2021
Basic net income per share:
Net income	$	266.9	$	216.8	$	1,163.2	$	873.7
Weighted average number of shares outstanding	222.2		224.9		223.9		228.9
Basic net income per share	$	1.20	$	0.96	$	5.20	$	3.82
Diluted net income per share:
Net income	$	266.9	$	216.8	$	1,163.2	$	873.7
Weighted average number of shares outstanding	222.2		224.9		223.9		228.9
Dilutive effect of stock options and restricted stock (as determined by applying the treasury stock method)	0.8		0.9		0.9		1.0
Weighted average number of shares and dilutive potential shares outstanding	223.0		225.8		224.8		229.9
Diluted net income per share	$	1.20	$	0.96	$	5.17	$	3.80

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Stock options and other stock-based awards of 2.3 million shares and 3.0 million shares were excluded from the calculation of diluted net income per share for the 13 and 39 weeks ended October 29, 2022, respectively, because their inclusion would be anti-dilutive. Stock options and other stock-based awards of 0.1 million shares and 1.1 million shares were excluded from the calculation of diluted net income per share for the 13 and 39 weeks ended October 30, 2021, respectively, because their inclusion would be anti-dilutive.

Note 5 - Stock-Based Compensation

For a discussion of our stock-based compensation plans, refer to “Note 10 - Stock-Based Compensation Plans” of our Annual Report on Form 10-K for the year ended January 29, 2022. Stock-based compensation expense was $90.8 million and $63.1 million during the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Restricted Stock

We issue service-based RSUs to employees and officers and issue PSUs to certain of our officers. We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years, on a straight-line basis or a shorter period based on the retirement eligibility of the grantee. The fair value of RSUs and PSUs is determined based on our closing stock price on the grant date.

Service-Based RSUs

The following table summarizes the status of service-based RSUs as of October 29, 2022 and changes during the 39 weeks then ended:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at January 29, 2022	1,096,066	$	94.16
Granted	437,874	158.63
Vested	(531,138)	93.63
Forfeited	(119,350)	119.22
Nonvested at October 29, 2022	883,452	$	123.04

PSUs

The following table summarizes the status of PSUs as of October 29, 2022 and changes during the 39 weeks then ended:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at January 29, 2022	584,972	$	91.86
Granted	206,044	159.27
Vested	(313,318)	90.98
Forfeited	(189,340)	116.40
Nonvested at October 29, 2022	288,358	$	123.66

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Stock Options

Stock options are valued using the Black-Scholes option pricing model and compensation expense is recognized on a straight-line basis over the requisite service period.

On March 19, 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock with a fair value of $135.6 million to the Executive Chairman of the Board. The grant of options was subject to the terms and conditions of a five-year Executive Agreement with the Executive Chairman. The option award has a ten-year term and is scheduled to vest in equal installments on each of the first five anniversaries of the grant date, subject to the Executive Chairman’s continued employment with the company through each vesting date. The assumptions used in the Black-Scholes option pricing model for this award are as follows:


Expected term (in years)	6.5
Expected stock price volatility	34.1	%
Dividend yield	—	%
Risk-free interest rate	2.15	%

The simplified method was used to estimate the expected term of the options due to our lack of historical option exercise experience and the “plain vanilla” characteristics of the option award. The simplified method results in an expected term equal to the average of the weighted average time-to-vesting and the contractual life of the options. The expected stock price volatility is based on the historical volatility of our common stock over a period matching the expected term of the options granted. The dividend yield reflects that we have never paid cash dividends. The risk-free interest rate represents the yield curve in effect at the time of grant for U.S. Treasury zero-coupon securities with maturities that approximate the expected term of the options.

The following table summarizes information about options outstanding at October 29, 2022 and changes during the 39 weeks then ended:


	Number of Shares	Weighted Average Per Share Exercise Price		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 29, 2022	24,541	$	90.38
Granted	2,252,979	157.16
Exercised	(370)	76.97

Outstanding at October 29, 2022	2,277,150	$	156.45	9.3	$	4.8
Exercisable at October 29, 2022	24,563	$	90.80	4.1	$	1.7

Note 6 - Shareholders’ Equity

We repurchased 2,859,200 and 4,613,696 shares of common stock on the open market for $397.5 million and $647.5 million during the 13 and 39 weeks ended October 29, 2022, respectively. We did not repurchase any shares of common stock on the open market during the 13 weeks ended October 30, 2021. We repurchased 9,156,898 shares of common stock on the open market for $950.0 million during the 39 weeks ended October 30, 2021. At October 29, 2022, we had $1.85 billion remaining under our Board repurchase authorization.

Note 7 - Segments and Disaggregated Revenue

We operate a chain of more than 16,200 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.

The Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $1.25. The Dollar Tree segment includes our operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 15 distribution centers in the United States and two distribution centers in Canada.

The Family Dollar segment operates a chain of general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores. The Family Dollar segment consists of our operations under the “Family Dollar” brand and 10 distribution centers. The Family Dollar segment Operating income includes advertising revenue, which is a component of Other revenue in the accompanying unaudited condensed consolidated income statements.

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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 center and the results of operations for our Summit Pointe property in Chesapeake, Virginia.

Information for our segments, as well as for Corporate, support and Other, including the reconciliation to Income before income taxes, is as follows:


	13 Weeks Ended				39 Weeks Ended
	October 29,		October 30,		October 29,		October 30,
(in millions)	2022		2021		2022		2021
Condensed Consolidated Income Statement Data:
Net sales:
Dollar Tree	$	3,756.1	$	3,417.4	$	11,109.0	$	10,003.0
Family Dollar	3,180.5		2,998.0		9,493.0		9,229.4
Consolidated Net sales	$	6,936.6	$	6,415.4	$	20,602.0	$	19,232.4



Gross profit:
Dollar Tree	$	1,328.3	$	1,031.1	$	4,197.9	$	3,207.1
Family Dollar	743.2		732.6		2,338.5		2,381.7
Consolidated Gross profit	$	2,071.5	$	1,763.7	$	6,536.4	$	5,588.8

Operating income (loss):
Dollar Tree	$	499.7	$	290.5	$	1,814.7	$	1,019.2
Family Dollar	(18.4)		88.6		126.1		456.3
Corporate, support and Other	(100.0)		(68.6)		(322.6)		(242.9)
Consolidated Operating income	381.3		310.5		1,618.2		1,232.6
Interest expense, net	32.7		33.4		97.3		99.4
Other expense, net	0.2		0.2		0.3		0.2
Income before income taxes	$	348.4	$	276.9	$	1,520.6	$	1,133.0


	As of
	October 29,		January 29,		October 30,
(in millions)	2022		2022		2021
Condensed Consolidated Balance Sheet Data:
Goodwill:
Dollar Tree	$	422.9	$	424.9	$	425.8
Family Dollar	1,559.5		1,559.5		1,559.5
Consolidated Goodwill	$	1,982.4	$	1,984.4	$	1,985.3

Total assets:
Dollar Tree	$	9,785.2	$	9,358.4	$	8,954.7
Family Dollar	12,631.1		11,871.8		11,869.8
Corporate, support and Other	493.2		491.6		565.5
Consolidated Total assets	$	22,909.5	$	21,721.8	$	21,390.0

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Disaggregated Revenue

The following table summarizes net sales by merchandise category for our segments:


	13 Weeks Ended								39 Weeks Ended
	October 29,				October 30,				October 29,				October 30,
(in millions)	2022				2021				2022				2021
Dollar Tree segment net sales by merchandise category:
Consumable	$	1,735.5	46.2	%	$	1,563.0	45.7	%	$	5,154.6	46.4	%	$	4,671.4	46.7	%
Variety	1,708.3		45.5	%	1,596.3		46.7	%	5,465.6		49.2	%	4,961.5		49.6	%
Seasonal	312.3		8.3	%	258.1		7.6	%	488.8		4.4	%	370.1		3.7	%
Total Dollar Tree segment net sales	$	3,756.1	100.0	%	$	3,417.4	100.0	%	$	11,109.0	100.0	%	$	10,003.0	100.0	%

Family Dollar segment net sales by merchandise category:
Consumable	$	2,515.8	79.1	%	$	2,359.4	78.7	%	$	7,417.9	78.1	%	$	7,065.3	76.6	%
Home products	238.5		7.5	%	228.7		7.6	%	720.7		7.6	%	777.0		8.4	%
Apparel and accessories	181.4		5.7	%	178.3		6.0	%	540.7		5.7	%	592.4		6.4	%
Seasonal and electronics	244.8		7.7	%	231.6		7.7	%	813.7		8.6	%	794.7		8.6	%
Total Family Dollar segment net sales	$	3,180.5	100.0	%	$	2,998.0	100.0	%	$	9,493.0	100.0	%	$	9,229.4	100.0	%

Note 8 - Long-Term Debt

Revolving Credit Facility

The following table summarizes information pertaining to our revolving credit facilities:


(in millions)	October 29, 2022		January 29, 2022		October 30, 2021
Revolving Credit Facility Capacity	$	1,500.0	$	1,500.0	$	1,250.0
Loans Outstanding	350.0		—		—
Standby Letters of Credit Outstanding	44.3		46.0		69.8
Available Capacity	1,105.7		1,454.0		1,180.2

The weighted-average interest rate for the $350.0 million of loans outstanding at October 29, 2022 was 4.69%.

Debt Covenants

As of October 29, 2022, we were in compliance with our debt covenants.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements: This document 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:

•Our expectations regarding the impact of continued supply chain challenges on our product availability, product mix, sales and merchandise margin, including uncertainties associated with delays in receiving imported merchandise from Asia and expected increases in our costs due to inventory levels exceeding the storage capacity of our distribution centers;

•Our expectations regarding oceanic shipping and domestic freight and fuel costs;

•Our expectations regarding consumer spending behavior and inflation-related cost increases, including the impact on our gross margins;

•Our expectations regarding increased expenses for higher wages and bonuses paid to associates, including increases in the minimum wage by States and localities and potential federal legislation increasing the minimum wage;

•Our expectations regarding the effect of general business or economic conditions on our business and results of operations, including the effects of inflation and labor shortages in our markets;

•The uncertainty of the impact of the COVID-19 pandemic and public health measures on our business, results of operations, customers and suppliers, including any future impact on our supply chain or sources of supply;

•The reliability of, and cost associated with, our sources of supply, particularly imported goods such as those sourced from China and higher cost domestic goods;

•The expected impact of labor disagreements and potential work disruptions or strikes, including at ports located in California, Oregon, and Washington, on shipping delays and the availability and cost of merchandise;

•The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations (including U.S. Food and Drug Administration matters), including with respect to the availability of indemnification or insurance;

•Our plans to renovate existing Family Dollar stores and build new stores in the H2 store format, and the performance of that format on our results of operations;

•Our plans and expectations relating to the introduction of additional price points above $1 in our Dollar Tree stores and our investments in new products, including the impact on our gross margins;

•Our plans and expectations relating to new store openings and new store concepts such as Dollar Tree Plus and our Combo Store format;

•Our plans and expectations regarding our current initiatives and future strategic investments and the uncertainty with respect to the amount, timing and impact of those initiatives and investments on our business and results of operations; and

•Our expectations regarding higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores, limitations on the availability of certain fixtures and equipment and construction, permitting and inspection delays related to new store openings.

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 Quarterly Report on Form 10-Q. 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 summarized below and the more detailed discussions in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, and in this Quarterly Report on Form 10-Q. The following risks could have a material adverse impact on our sales, costs, profitability, financial performance or implementation of strategic initiatives:

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•Our profitability is vulnerable to increases in oceanic shipping costs, domestic freight and fuel costs, wage and benefit costs and other operating costs.

•We are experiencing higher costs and disruptions in our distribution network, which have had and could have an adverse impact on our sales, margins and profitability.

•We may stop selling or recall certain products for safety-related or other issues.

•Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of consumer concerns about the quality and safety of our products.

•Inflation or other adverse change or downturn in economic conditions could impact our sales or profitability.

•If the COVID-19 pandemic and associated disruptions worsen or continue longer than expected, there could be a material adverse impact on our business and results of operations.

•Risks associated with our domestic and foreign suppliers could adversely affect our financial performance.

•Our supply chain may be disrupted by changes in United States trade policy with China.

•Our growth is dependent on our ability to increase sales in existing stores and to expand our square footage profitably.

•Our profitability is affected by the mix of products we sell.

•Pressure from competitors may reduce our sales and profits.

•Our business could be adversely affected if we fail to attract and retain qualified associates and key personnel.

•We may not be successful in implementing or in anticipating the impact of important strategic initiatives, and our plans for implementing such initiatives may be altered or delayed due to various factors, which may have an adverse impact on our business and financial results.

•We could incur losses due to impairment of long-lived assets, goodwill and intangible assets.

•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.

•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.

•Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations.

•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 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.

•The terms of the agreements governing our indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to pursue our business strategies, and could adversely affect our capital resources, financial condition and liquidity.

•Our variable-rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.

•Our business or the value of our common stock could be negatively affected as a result of actions by shareholders.

•The price of our common stock is subject to market and other conditions and may be volatile.

•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.

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.

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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-Q, 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.

Overview

We are a leading operator of more than 16,200 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 $1.25. 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 period 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.

At October 29, 2022, 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 39 weeks ended October 29, 2022 and October 30, 2021 is as follows:


	39 Weeks Ended
	October 29, 2022			October 30, 2021
	Dollar Tree	Family Dollar	Total	Dollar Tree	Family Dollar	Total
Store Count:
Beginning	8,061	8,016	16,077	7,805	7,880	15,685
New stores	97	244	341	214	148	362
Re-bannered stores	(5)	8	3	(1)	(1)	(2)
Closings	(39)	(89)	(128)	(34)	(45)	(79)
Ending	8,114	8,179	16,293	7,984	7,982	15,966
Relocations	21	61	82	45	55	100

Selling Square Feet (in millions):
Beginning	69.7	59.2	128.9	67.4	57.7	125.1
New stores	0.8	2.2	3.0	1.9	1.3	3.2
Re-bannered stores	—	0.1	0.1	—	—	—
Closings	(0.3)	(0.6)	(0.9)	(0.3)	(0.3)	(0.6)