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Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

The discount variety chain sells items for $1 or less and operates more than 15,000 stores throughout the U.S. and Canada. The dollar store sector was growing even before the pandemic, but now growth is explosive: Nearly half of all new store openings from large retail chains in the first four months of 2021 have been dollar stores.

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This year's Fortune 500 marks the 66th running of the list.

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The discount retailer operates thousands of stores in the U.S. and Canada.

This year's Fortune 500 marks the 65th running of the list.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Dollar Tree is a leading discount retailer offering a wide variety of everyday essentials, plus party supplies, seasonal decor, and household items—many at a primary price point of $1.25. It has 8,000 stores across the U.S. and Canada, selling everything from cleaning products and snacks to craft and school supplies. Dollar Tree was founded in 1986.

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Dollar Tree (DLTR): Company Profile, Stock Price, News, Rankings

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Dollar Tree

dollar tree

Greetings, and welcome to the Dollar Tree First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Mr.

Bob LaFleur, Senior Vice President, Investor Relations for Dollar Tree. Thank you. You may begin.

Good morning and thank you for joining us today to discuss Dollar Tree's first quarter fiscal twenty twenty five results. With me today are Dollar Tree's CEO, Mike Creedon and CFO, Stuart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans and future prospects are considered forward looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward looking statements. For information on the risks and uncertainties that could affect our actual results, please see the Risk Factors, Business and Management Discussion and Analysis of Financial Condition and Results of Operations section in our annual report on Form 10 ks filed on 03/26/2025, our most recent press release and Form eight ks and other filings with the SEC.

We caution against reliance on any forward looking statements made today, and we disclaim any obligation to update any forward looking statements except as required by law. Also during this call, we will discuss certain non GAAP financial measures. Reconciliations of these non GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a GAAP basis.

Additionally, unless otherwise stated, all comparisons discussed today for the first quarter of fiscal twenty twenty five are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike and Stuart will take your questions. Given the number of callers who would like to participate in today's session, we ask that you limit yourself to one question. I'd now like to turn the call over to Mike.

Good morning, everyone. Thank you for joining us today. Let me begin my comments by thanking our associates and leadership team for their efforts in delivering a strong first quarter result. In Q1, we delivered upside across every key metric and results exceeded the outlook we provided. Our expanded assortment strategy is having the intended impact of driving incremental traffic, ticket and comp.

We also continue to grow the Dollar Tree footprint, recently celebrating the opening of our 9,000 store located in Plano, Texas. As excited as we are to reach this milestone, we're just as excited about the growth runway ahead of us. Turning now to our Q1 results. We are pleased with our performance. Amid increasing volatility, we remain focused on the things that are within our control and our results demonstrate just how much progress our teams have made in areas like rolling out our expanded assortment, improving store conditions and achieving strong sell through of seasonal merchandise.

Q1 comps and net sales both exceeded the high end of our outlook range, driven by a strong Valentine's Day and Easter. Additionally, the revenue contribution from non comp stores was up nearly 90% year over year, led by ongoing strength in the former $0.99 only portfolio. Adjusted EPS from continuing operations came in a penny above our outlook range at 1.2 dollars reflecting strong sales and ongoing focus in expense management. Dollar Tree's five point four percent comp was nicely balanced with traffic up 2.5% and ticket up 2.8%. Category performance was strong across the board with consumables comp up 6.4% and discretionary comp up 4.6%, our highest discretionary comp since Q4 of twenty twenty two.

We always start with our customer, and today, our customers need us now more than ever. Each week, more shoppers across a diverse range of economic and demographic backgrounds are responding to the appeal of Dollar Tree's unique value, convenience and discovery proposition. Our gains in dollar and unit market share accelerated in Q1. In fact, we gained twice as much unit share in Q1 as we did in Q4. These gains are driven by strong trends in immediate consumption purchases like candy, snacks and beverages, as well as key discretionary categories.

New customers and increasing trip frequency are both driving share gains. We added 2,600,000 new customers in Q1 and the number of customers who visit a Dollar Tree store three times a month or more increased by 9%. Trade in trends remain strong as we attract customers from other retail channels. In recent quarters, higher income customers have been a meaningful growth driver for us. In Q1, we had measurable sales improvement across all income levels, with the most growth coming from our higher income customers.

In particular, we saw meaningful traffic increase from customers with household incomes of more than $100,000 demonstrating Dollar Tree's broad appeal. Dollar Tree is resonating with its customers. In the current environment, our low prices and smaller pack sizes are perfect for families trying to manage a tight household budget, and our expanded assortment is attractive to all customers across every income level. We believe that value, convenience and discovery is exactly the right formula for all of our customers. Q1 marked the one year anniversary of our MultiPrice three point zero launch.

Demonstrating the broader appeal of our expanded assortment, the three point zero portfolio continues to outperform our other store formats by providing a nice boost to traffic, ticket, comp and discretionary mix. During the quarter, we completed approximately 503 conversions, and we are still on track to have about half the store base converted by year end. Now let me shift to tariffs. As I detailed for you last quarter, our merchant and operations teams have spent the past several years developing contingency plans to address a wide range of potential disruptions to global trade, including tariffs. As a result of these efforts, we have multiple tools in place to address any challenges.

As a reminder, the five levers we have available to address cost inflation, including tariffs are negotiating with our suppliers, re specking products, moving country of origin, dropping non economic items and leveraging our expanded multi price capabilities. Today, we are actively engaged on multiple fronts to mitigate the impact of inflationary cost pressures, including tariffs. As we discussed last quarter, our teams effectively use these levers to offset 90% of the first round of tariffs, the initial 10% announced in February, and we are continuing to employ these levers to address the latest round. But the tariff landscape is highly fluid and changing week to week, so we are focused on agility and on improving that agility. As always, our goal is to use our significant scale combined with the uniqueness and flexibility of our assortment to secure the lowest landed cost on the products we source and provide our customers with compelling products at a great relative value.

Since our founding, we have been committed to delivering great value at low prices, and that mission is just as central to our business today as it was when Macon Brock, Doug Perry and Ray Compton opened the first dollar only store back in 1986. To put things in perspective, the average unit retail or AUR in our first dollar store was $1 Today, almost forty years later, our AUR is around $1.35 and 85% of the items in the store are still priced under $2 No other retailer has been able to sustain a value proposition like that for as long as we have. What has made us successful over the years is our ability to remain agile in how we deliver value. We are constantly adapting to the evolving needs of our customers, not just by what we offer, but by how we offer it. The evolution of our business model towards Multi Price has added a new dimension to our agility.

Multi Price allows us to expand our product assortment to give customers access to a wider variety of items at a wider variety of value centered price points. This way, our offerings remain attractive and relevant under a wide range of macro inflationary and tariff scenarios. And as the success of our three point zero stores suggests, our customers are responding positively. As we build on the ability to meet our customers' needs and deliver great value, we will continue to scale this model. This enables us to respond to our customers' needs, strengthen our value proposition and support profitable growth over the long term.

Given the volatility of today's operating environment, it is challenging to predict with precision the near term performance of the business in Q2, especially regarding tariff and other cost mitigation efforts. Stepping back and taking a full year view, we believe that by successfully deploying our five levers, we will be able to mitigate most, if not all, of the potential earnings impact from higher tariffs, assuming the current levels remain in place. To this end, we are updating our full year adjusted EPS outlook range to $5.15 to $5.65 which is essentially the outlook we provided last quarter adjusted for our year to date share repurchases. Stuart will share more details on our outlook shortly. Before I close, I wanted to update you on the Family Dollar sale.

We have received U. S. Regulatory approval for the transaction and we remain on track for an early summer close. As we work through the final logistics of separating the two companies, our leadership team remains focused on growing and strengthening the core Dollar Tree business. As I detailed last quarter, selling Family Dollar sharpens our operational focus, strengthens our balance sheet and is highly cash flow accretive.

In closing, we're proud of what we accomplished this quarter and we're even more excited about what lies ahead. Our strong performance in Q1 underscores the progress we've made against our strategic priorities and it is a clear signal that our customers are responding positively to that progress. From store operations to merchandising, from sourcing to in store execution, every part of our business is becoming more agile, better aligned and more resilient. The Dollar Tree model is uniquely positioned to succeed in times like these. Thanks to the hard work and commitment of our teams, I'm confident in our ability to navigate whatever near term challenges we may face.

Thank you and good morning. As Mike mentioned, our latest results reflect continued top line momentum and strong margin performance. Solid execution of our multi price strategy and expense management combined to deliver upside relative to our internal expectations and the Q1 outlook that we previously provided.

Unless otherwise noted, I'll focus my prepared comments on Dollar Tree's continuing operations. First quarter adjusted EPS from continuing operations was 1.26 which exceeded the high end of our outlook range of $1.1 to $1.25 Turning to results from continuing operations as compared to the same period of last year, our revenue increased by 11.3% driven by a 5.4 comparable store sales growth and a 7.4% increase in square footage from last year. Adjusted operating income was $388,000,000 a 1.4% increase from last year. Adjusted operating margin declined 80 basis points, driven by a 20 basis point increase in gross margin, offset by a 100 basis point increase in the adjusted SG and A rate. The gross margin improvement came from lower freight cost, improved mark on and lower occupancy due to sales leverage from the strong comps.

Our SG and A rate was negatively impacted by higher depreciation related to investments in our stores, wage related payroll increases, general liability claims and utility costs, partially offset by lower stock compensation expense and less temporary labor related to our three point zero conversions. Our adjusted effective tax rate was 26.1% compared to 24.6%, reflecting increased tax expense for share based payment awards. Adjusted net income was $270,000,000 compared to $268,000,000 Moving on to the balance sheet and free cash flow. Total inventory increased $247,000,000 or 10 percent to $2,700,000,000 on higher mark on and inventory receipts as we expanded our multi price assortment. We ended the quarter with $1,000,000,000 in cash and cash equivalents.

On the cash flow statement for continuing operations, for the quarter, we generated $379,000,000 in cash from operating activities, had capital expenditures of $249,000,000 and delivered $130,000,000 of free cash flow. We ended the quarter with no borrowings under our revolvers, no commercial paper outstanding and bank defined leverage below 2.5 times. Subsequent to the end of the first quarter, we paid off our $1,000,000,000 May 20 20 5 senior notes using commercial paper and available cash on hand. Recall that on last quarter's call, we announced a new $1,000,000,000 3 60 4 day revolver to address this maturity. In addition to extending our pre existing five year one point five billion dollars credit facility to 02/1930.

As a result, we continue to have ample liquidity between cash on hand and availability under these credit facilities to meet the ongoing capital needs of the business. As Mike mentioned, the proceeds from the Family Dollar sale will put us in an even stronger cash position. During the first quarter, we repurchased approximately 5,900,000.0 shares of common stock for approximately $437,000,000 including excise tax. Subsequent to quarter end, we purchased an additional 780,000 shares for approximately $68,000,000 Year to date, we have completed over $500,000,000 of share repurchases. The pending sale of Family Dollar remains on track and we expect the transaction to close during the second quarter.

As we indicated last quarter, we are in the process of establishing transition service agreements or TSAs for shared services. These agreements will allow us to provide ongoing support and services to the new buyers and to ensure business continuity for Family Dollar after the separation is complete. Recall that because Family Dollar is being treated as discontinued operations from an accounting perspective, Dollar Tree will be burdened by a full year of corporate SG and A, but we will not receive any TSA related income to offset these expenses until after the deal closes. This timing mismatch will negatively impact our first half and full year profitability. Our current outlook for TSA related income for fiscal twenty twenty five is approximately $85,000,000 to $90,000,000 subject to final adjustment at the time of deal close.

This figure is based on internal and third party estimates and will begin meaningfully running through the P and L in the third and fourth quarters. Now, let me provide our updated perspective on fiscal twenty twenty five. First, we are reiterating the full year comp and revenue outlook that we provided last quarter, namely net sales in the range of 18,500,000,000.0 to $19,100,000,000 and comparable same store sales growth of 3% to 5%. We are updating our outlook for full year adjusted EPS from continuing operations to $5.15 to $5.65 which is essentially the same net income range implied by our previous outlook adjusted to reflect our year to date share repurchases. Over the balance of this year, assuming tariffs remain at their current levels, we believe we can address the tariff and other cost pressures we face using the five levers that Mike discussed earlier.

In the near term, we do expect to see some volatility relating to timing issues as the various inputs and outputs work their way through our P and L. While we delayed some shipments in early April when the tariff adjustments were first announced, some products did arrive in The United States that were subject to the highest tariffs and some of those items will work their way through our system before the full breadth of our mitigation efforts are deployed. As such, we expect our second quarter profits to be meaningfully lower than last year in light of higher tariff and other costs, including some costs we absorbed during the 145% window on China tariffs. From a timing perspective, that is approximately $70,000,000 more of a COGS impact in the second quarter than what was contemplated in our original 2025 outlook. The precise timing of the full impact of our mitigation efforts, including the rollout of additional multi price items and adjusted price points is also fluid.

We now expect the initial round of labor and other cost investments associated with these efforts in the second quarter to be approximately $40,000,000 higher. We expect the benefits of these efforts will be largely realized on a go forward basis in the second half of the year. So on a net basis, we're expecting a transitory impact on our near term profitability as elevated costs run through our P and L in Q2, while the benefits and profit recovery from our mitigation efforts should materialize later in the year. As such, our Q2 adjusted EPS from continuing operations could be down as much as 45% to 50% year over year before reaccelerating in Q3 and Q4 to get us back on track to reach our full year target. We expect to recover these costs in the back half of the year given the lower tariff rates that are currently in effect and as we ramp up our commercial efforts and build on the strong business trends we saw in Q1.

It's worth noting that on a gross unmitigated basis, all the higher tariff rates announced this year amount to a year over year cost increase of approximately $200,000,000 across the balance of this fiscal year. To put this in context as a line item, this is less than our expected payroll inflation for the full year. So we're well equipped to deal with the tariffs as we address other cost increases as well. From a top line perspective, given trends to date and our outlook for the balance of the quarter, we believe Q2 comps will be towards the higher end of our full year outlook range of 3% to 5%. On a full year basis, assuming tariff rates remain at their current levels, we believe we can offset the negative earnings impact of inflationary costs including tariffs and deliver $5.15 to $5.65 of adjusted EPS.

With that, for the full year on a continuing operation basis, we expect gross margin improvement of approximately 50 to 75 basis points. For Dollar Tree segment SG and A, we anticipate approximately 100 to 110 basis points of year over year deleveraging. For corporate SG and A, prior to any TSA reimbursement, we expect costs to increase approximately 20% on a year over year basis. We expect TSA proceeds of approximately 85,000,000 to $90,000,000 subject to final adjustments. Finishing the P and L, we expect net interest and other income of approximately $95,000,000 and an effective tax rate of 25%.

We still expect capital expenditures to be in the range of 1,200,000,000.0 to $1,300,000,000 including approximately 400 new Dollar Tree store openings and approximately $110,000,000 as we start reconstruction of our DC in Marietta, Oklahoma. Here, I would also add that 2025 should be the peak in our multi year investment cycle. So we would expect CapEx to be lower in 2026 and 2027. With respect to cash, we ended the quarter with $1,000,000,000 of cash and cash equivalents on the balance sheet. We expect approximately $800,000,000 of net proceeds from the Family Dollar sale and $350,000,000 of cash tax benefits from the transaction.

Our capital allocation priorities remain investing in the growth of the business and then returning cash to shareholders. Our preferred vehicle remains share

repurchase. While 2025 is shaping up to be a more complicated year than we initially anticipated, we are encouraged by our strong sales trends driven by our attractive value proposition and multi price efforts and we remain confident in our ability to navigate our way through the current environment and still achieve our profitability goals for the year. We're looking forward to the closing the Family Dollar sale and we feel great about our cash position and the future growth prospects of our business. And with that, I'll turn the call back over to Mike.

History has shown that we have the resilience to emerge stronger from periods of economic uncertainty, and that strength comes from the dedication and adaptability of our associates. In today's rapidly evolving environment, we see a meaningful opportunity to build on that foundation by enhancing our merchandising efforts and further elevating the value we deliver to our customers. Thanks to the hard work and commitment of our teams, I'm confident in our ability to meet customers' needs with our exceptional value proposition, including Multi Price, and to navigate whatever near term challenges we may face. Finally, with the sale of Family Dollar set to close here shortly and Dollar Tree setting off on its new journey as a standalone business, we think it's appropriate to provide The Street with a refreshed view of our long term strategy and financial outlook. So we're planning to host an Investor Day in New York on October 15.

We'll provide all the invitation details a little closer to the event. And with that, we're ready to take your questions.

Thank Our first question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning. Thank you so much for taking my question. Given the about $110,000,000 of unanticipated costs between the 70,000,000 in gross margin and the 40,000,000 in SG and A that you will incur in the second quarter, what will be the offset that Dollar General is able to achieve in the back half of the year such that you're able to hold the guidance consistent with what you expected previously? And then on top of that, the only thing that we can say will be constant this year and into the next couple of years is going to be change in volatility. And given how dynamic the environment is and given how your guidance, it does seem like your model is going to be a little slower to react to some of this change such that it could create some more earnings volatility.

Thanks for the question, Michael. First, I'll address the volatility. We believe that over the past years, we've really created a more nimble and flexible company that's able to address the volatility when given enough time. If you look at the first round of tariffs we faced that we started planning for, we were able to offset 90% of that first ten percent. And then when you look at where we sit today over the course of the year, we're able to offset those tariffs as well and mitigate those cost pressures.

Using our five levers that we are able to absorb it and take care. And so when I look at it and say there's a near term piece of that where you have product flowing in that comes in at a higher tariff rate. Stuart outlined that in his comments. But over time, we're able to make the adjustments, leveraging our multiprice, leveraging country of origin, sometimes choosing not to sell a product and re specking and negotiating with our suppliers. So we feel that we're more flexible today than we've ever been.

And given the right amount of time, we're able to offset those pressures.

Yes. Thanks, Mike. Maybe I'll just jump in and just add a few extra comments on the first part of the question. Yes, look, mean, we've highlighted $110,000,000 that we're going to take in the second quarter. We wanted that to be clear for you.

Clearly, we've got mitigation strategies Mike has spoken to. And in any normal year, the back half of the year is a bigger part of the year, which gives us the ability to recover. It's probably also worth noting that in the first quarter, came in ahead and there is some benefit that will sweep from that quarter into the full year results. And finally, I'd point to the fact that we had a very strong set of comps in the first quarter and we're guiding to another set of strong comps in the second quarter. So the business itself is performing very well.

Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Hi. Good morning, everyone. So Dollar Tree has successfully operated a 35% to 36% gross margin for a very long time before you had multi price point. Are you telling us today that you expect to be able to maintain that level of margin despite current China tariffs at 30% over time? And as part of this, can you talk a bit more about the importance of the various levels levers of mitigation, especially pricing?

And what the rollout of that pricing looks like such that when do you expect you could be back at that level of margin?

Yes. So let me just jump in quickly on the gross margin side. I mean, we've given you guidance for the year. So clearly, we believe that we are in a position this year to deliver that gross margin. Some of that strength is coming through, as you mentioned, is freight.

But we think our merchants have done a terrific job of getting the right assortment. And they're very focused on making sure that the kind of margins that we deliver to the business are not by accident. These are products that are chosen specifically for the performance that we expect. And then when

you look at the five levers, they have to be used in Harmony. It's not one outranks the other. It really is taking all five of them and we order them appropriately. We'll first work with our vendors and negotiate. We'll look at re specking.

We've spent the last several years really improving our ability to move country of origin. Sometimes, we'll choose not to sell it. And then finally, Ed, yes, we leverage multiprice to be able to make sure that we deliver what our customer wants and needs, always starting with the customer, and they're the ones that get to vote in terms of us exceeding their expectations and delivering that value convenience

Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hey, thanks guys. Just a follow-up on Ed's question. Just as far as price points, can you maybe talk about what's happening at the 150 price point? And to what extent will that be used as part of the go forward plan to offset some of these tariffs? And then also just curious about your higher income consumer and what price points are they gravitating towards?

Are they steering more towards those price points above $2 when they first visit your store? Thanks.

Yes. In terms of the price points, Paul, we don't see this as a break the dollar moment. We're really focused on what the customer wants from us. And so we're strategic in terms of where we take that price. The five levers we have and especially multiprice gives us the flexibility to make sure that if a customer wants that product, we can have that product for them.

So this is not necessarily that big switch up the way it was in the past. This is all about us leveraging our five leverage and leveraging multiprice to deliver for the customer. I go back to that AUR comment, you're still at an AUR of 1.3585% of the store less than $2 And as far as the higher income customer, we love that we added 2,600,000 new customers in Q1. And when you look at the majority of that growth coming above $100,000 income, we believe they're loving the expanded assortment that multiprice provides. So the customer is getting what they want across all income cohorts.

And yes, the multiprice really resonates with that higher income customer.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Hey, good morning, everyone. So my first question, can you tell us Mike, you said the $1 to $1.35 evolution over time. Can you tell us or have you told us what the AUR is in the three point zero stores? And then not related, but regarding the TSA, is whatever you're incurring, you're going to get fully reimbursed? Or there is some risk that you spend money and you don't recoup that?

Is there something to negotiate within that TSA? Thank you.

I'll let Stuart handle the TSA question. On the AUR, we provide that for across the chain. The $1.35 is across the chain. It didn't break that up between the different three point zero, two point zero, one point zero. Stuart, do you want to handle the TSA?

Yes, absolutely. Maybe just I'm going to give you a little bit of an expanded answer just so you can look at the total. I mean, we've got a group of people who work in our shed center. Some of those people will go to Family Dollar. They will be conveyed to Family Dollar on the very first day.

That cost disappears from our P and L. There will be some people who remain inside of our business and who will perform services for Family Dollar. To the extent that they perform services related to Family Dollar, the costs of their salaries, other benefits and other related costs will all be reimbursed to us by Family Dollar. And at the end of that TSA period, some more of those people will then potentially go over to Family Dollar. After all that said and done, you'll recall in our last call last quarter, we're targeting over the medium term to get down to about 2% SG and A as a percentage of revenue.

Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.

So Mike, could you elaborate on the breakdown of your mid single digit first quarter comp? And maybe more specifically, I think what stood out is the almost equal contribution from traffic and ticket. Have you seen that balance continue into the second quarter? And if we were to bottoms up build your comp from here, should we expect both traffic and ticket to contribute as we think about the back half of the year and multiyear?

Yes. As I look back thanks, Matt. As I look back on Q1, we were very pleased. We got a lot of questions after the last call about the 3% to 5%. And really, we talked about a number of things.

The holiday calendar much better this year. Last year was the worst holiday calendar. You have it every seven years. And so we knew the holiday calendar, especially with Easter later, which allows for better weather for Easter, more outdoor activities, etcetera. And then for us, having that multiprice in the season remember, we only started multiprice.

We just anniversaried it in February. So having multiprice in the assortment really adds to the discretionary and adds to the seasons and the events that are the driver of Dollar Tree. So being able to bring holidays and seasonal events to the table with multiprice just makes it that much more attractive to our customers. As far as the balance, we want to see that balance. We know multiprice drives the ticket.

We want to see that expanded assortment driving people into our stores as well. We want to create a sticky relationship with that customer such that we can count on them in the future. So we really will strive to balance traffic and ticket as much as we can, knowing that multiprice does have an impact on that higher ticket.

Thank you. Next question comes from the line of Rupesh Parikh with Oppenheimer and Company. Please proceed with your question.

Good morning and thanks for taking my question. So just going back, I guess, to the sales and comp guidance for the year. You guys beat on you beat the high end of your Q1 comp guidance and you also guide to the high end of high end for Q2. Just curious why the reiteration of the guidance versus maybe raising it? Does it reflect conservatism or maybe some high level thoughts on why you maintain the range?

So Stuart here. Look, in the last quarter, got a bunch of questions about how could we put out such a range and somebody actually had the audacity to say, well, we're putting down a range that we wanted the Street to that the Street wanted to see. And I'd say, we were really pleased to see that the quarter turned out as strongly as it did. And we're pleased to see that that strength we believe will go through the second quarter. And I wouldn't there was no reason to take it up given that we still think that that's a good range for the year.

But we did want to make sure that for the second quarter, a quarter in which we were going to see some higher costs because of the current tariff and some investments in store, that you'd be able to see that this was being done in concert with a very strong performance from the business. And for that reason, we wanted to make sure you realize that we would be toward the upper end of the range.

Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Hey, thanks. Good morning. A couple questions for me. Just on multi price, can we talk about how the one point zero and two point zero stores are comping so far in the first quarter? And then Stuart, on the SG and A guide for the year, you took it up pretty significantly.

It looks like about $40,000,000 of that or 20 basis points is here in the second quarter. But can we talk about the overall increase and the factors driving that?

Yes. Just in terms of Chuck, in terms of the different formats, it gets tougher and tougher as we convert more and more of the chain over. But what we saw in the first quarter was our 3.0s continue to be our strongest performance, but the entire chain, the 1.0s, the 2.0s have all lifted. So if you look at the kind of gaps between them, they get a little bit tighter, but only because the one point zero and the two point zero are performing stronger. And our full multiprice three point zero store, which we continue to invest in, convert 500 stores, those continue to be the strongest performers.

And then Stuart, in terms of the SG and A, do you want to take

Yes, absolutely. I think that if you look at SG and A broadly, cost increases follow the kind of cost increases that we shared last quarter. But the biggest one of these and

just looked at them by a long shot, is store payroll and depreciation. And what you're seeing in the balance of the year is that increased investment in store, which we think will have a good payback. When you go back to last quarter, we said that we would have 50 to 80 basis points on the year and now we're saying it's 100 to 110. So just think about that as the uplift in the range. And as I said, I think this is really the expense in a manner that we expect to have a good return.

Thank you. Our next question comes from the line of Scott Ciccarelli with Tru Securities. Please proceed with your question.

Good morning, guys. Thanks for the time. A follow-up question on the $70,000,000 impact on COGS from the 145% tariff. You seem to be talking about it as kind of a one time ish item, but still guiding the full year to the same net income. So I guess my question is, are these costs you guys have to eat and somehow you're making it up later in the second half on operational basis, so that's an ongoing benefit or you somehow calling back those specific dollars in the back half?

Yes. I'll go first here. I think you've got to look at how we deploy our toolkit and our five levers. When you think about negotiating, when you think about respeccing, especially country of origin, those take a little more time. When given the right amount of time, we're able to mitigate these costs as we did with the first ten percent, as we will do with this 3010% over the course of the year.

In the near term, as you work all five levers, there is a period of time where you get some near term disruption. So that's what you're seeing from us. Stuart, I don't know if you want to add anything. Yes.

I mean, to go to some of the specific, I mean, this is not about all one time and all no ongoing. This is a sort of a mix of both, right? We have some costs, because of timing will be one time. We've talked about the investments we're making in store. We don't believe that those will be enduring.

So think about that as sort of more of a bubble in this year that perhaps has some decline next year. The tariffs, we don't know. We're assuming that those will be ongoing. So the actions we're taking in the back half are a bit of both. Some of it is clawback of one time and some of those changes that we're making, you will see will provide enduring benefit to the business.

Thank you. Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Great, thanks. Good morning, everyone. Obviously, very strong quarter. I am curious specifically on conversions. I just wanted to go back to that.

I think you mentioned 150 basis point lift this quarter. I'm not sure if that's exactly apples to apples with prior disclosure. But does it seem like that lift is moderating? Any more perspective on that? And then as you think about what happens after the first year of the conversion, how do you think these stores are going to comp?

In terms of the conversions, as I did say, it tightened a bit, but not because of the overall strength of the three point zero stores. They continue to perform incredibly well. But our two point zero and our one point zero stores are also improving. What gets harder and harder is we convert more of the store. And then our learnings from three point zero, we will deploy in other stores.

So if you think of the seasons and you think of Multiprice three point zero stores getting the Easter expanded assortment, every store got that. There's elements of Multiprice now that goes into every store. And so we're seeing great results from the one point zero and the two point zero. But in reality, the more we convert and the more we take our learnings of this expanded assortment across the entire chain, the harder it gets to kind of break them down. And then in terms of how they perform over time, we continue to see that the longer you're on multiprice, the stronger your comps perform.

We just hit an anniversary in February. We'll continue to take the learnings and apply them across the chain. And we're really pleased most importantly, we're pleased with what the customer is seeing and saying in terms of voting with their footsteps and with their basket.

Thank you. Our next question comes from the line of Jihyeon Ma with Bernstein. Please proceed with your question.

Dollar Tree (DLTR) Q1 2026 Earnings Call Transcript

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