See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
DOLLAR TREE, INC.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
DOLLAR TREE, INC.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
DOLLAR TREE, INC.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended August 3, 2019 |
| (in millions) | | Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Shareholders' Equity |
| Balance at May 4, 2019 | | 237.6 |
| | $ | 2.4 |
| | $ | 2,515.9 |
| | $ | (41.1 | ) | | $ | 3,278.7 |
| | $ | 5,755.9 |
|
| Net income | | — |
| | — |
| | — |
| | — |
| | 180.3 |
| | 180.3 |
|
| Total other comprehensive income | | — |
| | — |
| | — |
| | 1.5 |
| | — |
| | 1.5 |
|
Issuance of stock under Employee Stock Purchase Plan | | — |
| | — |
| | 2.1 |
| | — |
| | — |
| | 2.1 |
|
| Exercise of stock options | | — |
| | — |
| | 1.2 |
| | — |
| | — |
| | 1.2 |
|
| Stock-based compensation, net | | — |
| | — |
| | 13.1 |
| | — |
| | — |
| | 13.1 |
|
| Repurchase of stock | | (0.8 | ) | | — |
| | (88.4 | ) | | — |
| | — |
| | (88.4 | ) |
| Balance at August 3, 2019 | | 236.8 |
| | $ | 2.4 |
| | $ | 2,443.9 |
| | $ | (39.6 | ) | | $ | 3,459.0 |
| | $ | 5,865.7 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | 26 Weeks Ended August 3, 2019 |
| (in millions) | | Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Shareholders' Equity |
| Balance at February 2, 2019 | | 238.1 |
| | $ | 2.4 |
| | $ | 2,602.7 |
| | $ | (38.3 | ) | | $ | 3,076.1 |
| | $ | 5,642.9 |
|
Cumulative effect of adopted accounting standards, net | | — |
| | — |
| | — |
| | — |
| | (65.3 | ) | | (65.3 | ) |
| Net income | | — |
| | — |
| | — |
| | — |
| | 448.2 |
| | 448.2 |
|
| Total other comprehensive loss | | — |
| | — |
| | — |
| | (1.3 | ) | | — |
| | (1.3 | ) |
Issuance of stock under Employee Stock Purchase Plan | | 0.1 |
| | — |
| | 5.2 |
| | — |
| | — |
| | 5.2 |
|
| Exercise of stock options | | — |
| | — |
| | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Stock-based compensation, net | | 0.4 |
| | — |
| | 20.3 |
| | — |
| | — |
| | 20.3 |
|
| Repurchase of stock | | (1.8 | ) | | — |
| | (188.4 | ) | | — |
| | — |
| | (188.4 | ) |
| Balance at August 3, 2019 | | 236.8 |
| | $ | 2.4 |
| | $ | 2,443.9 |
| | $ | (39.6 | ) | | $ | 3,459.0 |
| | $ | 5,865.7 |
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
DOLLAR TREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | 26 Weeks Ended | | | 13 Weeks Ended |
| | | August 1, | | August 3, | | | May 1, | | May 2, |
| (in millions) | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 |
| Cash flows from operating activities: | | | | | Cash flows from operating activities: | | | | |
| Net income | | $ | 509.1 |
| | $ | 448.2 |
| Net income | | $ | 374.5 | | | $ | 247.6 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation and amortization | | 333.6 |
| | 306.3 |
| Depreciation and amortization | | 172.7 | | | 165.5 | |
| Provision for deferred income taxes | | 23.6 |
| | 9.0 |
| Provision for deferred income taxes | | 22.0 | | | 52.7 | |
| Stock-based compensation expense | | 55.7 |
| | 44.1 |
| Stock-based compensation expense | | 31.8 | | | 32.6 | |
| Amortization of debt discount and debt-issuance costs | | 2.1 |
| | 3.3 |
| Amortization of debt discount and debt-issuance costs | | 1.6 | | | 1.1 | |
| | Other non-cash adjustments to net income | | 3.7 |
| | 17.3 |
| Other non-cash adjustments to net income | | 1.2 | | | 2.0 | |
| | Changes in operating assets and liabilities | | 509.2 |
| | 15.8 |
| Changes in operating assets and liabilities | | (47.6) | | | 457.5 | |
| Net cash provided by operating activities | | 1,437.0 |
| | 844.0 |
| Net cash provided by operating activities | | 556.2 | | | 959.0 | |
| Cash flows from investing activities: | | |
| | |
| Cash flows from investing activities: | | | | |
| Capital expenditures | | (468.3 | ) | | (502.5 | ) | Capital expenditures | | (224.9) | | | (235.8) | |
| | Proceeds from governmental grant | | — |
| | 16.5 |
| Proceeds from governmental grant | | 2.3 | | | 0 | |
| Payments for fixed asset disposition | | (2.8 | ) | | (2.7 | ) | Payments for fixed asset disposition | | (0.2) | | | (0.1) | |
| Net cash used in investing activities | | (471.1 | ) | | (488.7 | ) | Net cash used in investing activities | | (222.8) | | | (235.9) | |
| Cash flows from financing activities: | | |
| | |
| Cash flows from financing activities: | | | | |
| | Principal payments for long-term debt | | (250.0 | ) | | — |
| Principal payments for long-term debt | | 0 | | | (250.0) | |
| | Proceeds from revolving credit facility | | 750.0 |
| | — |
| Proceeds from revolving credit facility | | 0 | | | 750.0 | |
| Repayments of revolving credit facility | | (250.0 | ) | | — |
| |
| | Proceeds from stock issued pursuant to stock-based compensation plans | | 11.8 |
| | 9.1 |
| Proceeds from stock issued pursuant to stock-based compensation plans | | 4.0 | | | 9.7 | |
| Cash paid for taxes on exercises/vesting of stock-based compensation | | (16.4 | ) | | (23.9 | ) | Cash paid for taxes on exercises/vesting of stock-based compensation | | (39.3) | | | (16.1) | |
| Payments for repurchase of stock | | — |
| | (139.2 | ) | Payments for repurchase of stock | | (241.3) | | | 0 | |
| Net cash provided by (used in) financing activities | | 245.4 |
| | (154.0 | ) | Net cash provided by (used in) financing activities | | (276.6) | | | 493.6 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (0.1 | ) | | 0.3 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 0.4 | | | (0.7) | |
| Net increase in cash, cash equivalents and restricted cash | | 1,211.2 |
| | 201.6 |
| Net increase in cash, cash equivalents and restricted cash | | 57.2 | | | 1,216.0 | |
| Cash, cash equivalents and restricted cash at beginning of period | | 586.0 |
| | 446.7 |
| Cash, cash equivalents and restricted cash at beginning of period | | 1,463.6 | | | 586.0 | |
| Cash, cash equivalents and restricted cash at end of period | | $ | 1,797.2 |
| | $ | 648.3 |
| Cash, cash equivalents and restricted cash at end of period | | $ | 1,520.8 | | | $ | 1,802.0 | |
| Supplemental disclosure of cash flow information: | | |
| | |
| Supplemental disclosure of cash flow information: | | | | |
| Cash paid for: | | |
| | |
| Cash paid for: | | | | |
| Interest, net of amounts capitalized | | $ | 70.9 |
| | $ | 84.2 |
| Interest, net of amounts capitalized | | $ | 0.3 | | | $ | 3.2 | |
| Income taxes | | $ | 201.6 |
| | $ | 220.1 |
| Income taxes | | $ | 6.3 | | | $ | 2.9 | |
| Non-cash transactions: | | | | | Non-cash transactions: | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | Right-of-use assets obtained in exchange for new operating lease liabilities | | $ | 368.3 | | | $ | 261.0 | |
| Accrued capital expenditures | | $ | 43.0 |
| | $ | 55.7 |
| Accrued capital expenditures | | $ | 51.1 | | | $ | 54.2 | |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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 February 1, 2020.January 30, 2021. The results of operations for the 13 and 26 weeks ended AugustMay 1, 20202021 are not necessarily indicative of the results to be expected for the entire fiscal year ending January 30, 2021.29, 2022.
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 AugustMay 1, 20202021 and August 3, 2019May 2, 2020 and the results of our operations and cash flows for the periods presented. The February 1, 2020January 30, 2021 balance sheet information was derived from the audited consolidated financial statements as of that date.
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Note 2 - Legal Proceedings
We are defendants in legal proceedings including a Food and Drug Administration (“FDA”) proceeding and the class, collective, representative and large cases described below as well as individual claims in arbitration. We will vigorously defend ourselves in all matters referred to in this Note 2.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 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.
Dollar Tree Active Matters
The FDAFood and Drug Administration (“FDA”) has alleged that we improperly sold certain topically applied, over the counter (“OTC”) products manufactured by certain Chinese factories that were on an import “alert” restriction issued by the FDA. We responded to the FDA by proposing enhanced procedures and processes for any OTC products we import from China.
In December 2018, 2 former employeesActual or threatened California state court lawsuits have been filed against Dollar Tree and Family Dollar for similar employment-related claims brought aunder Private Attorney General Act (“PAGA”) suit in California state court alleging that Dollar Tree Stores, Inc. and Dollar Tree Distribution, Inc. failed. These cases may allege violations such as failure to provide non-exempt California store and distribution center employees with compliant rest and meal breaks, suitable seating and overtime pay, reimburse business expenses, pay minimum wagewages for all time worked, reporting time pay,provide accurate wage statements, and timely payment ofpay wages during and upon termination of employment, failed to reimburse business expenses, and made unlawful deductions from wage payments.as well as other potential labor code violations.
In January 2020, a consumer class action was filed against us in New York alleging Almond Milk sold by us with “Vanilla” featured prominently on its packaging is mislabeled because it does not contain the expected amount, type, and proportion of vanilla relative to non-vanilla flavor components. The legal claims include New York consumer protection laws, negligent misrepresentations, breach of warranties, fraud and unjust enrichment.
In June 2020, a current employee filed a class action in California state court on behalf of herself and other non-exempt store employees in California alleging we failed to provide an effective illness and injury prevention program in our California stores and failed to provide personal protective equipment to our store employees thereby engaging in unfair business practices and creating a public nuisance.
Several lawsuitsLawsuits have been filed against Dollar Tree, Family Dollar and our vendors alleging that personal talc powder products caused cancer. We do not believe the products we sold caused the illnesses. We believe these lawsuits are insured and we are being indemnified by our third party vendors.
Dollar Tree Resolved Matters
In April 2015,December 2020, a distribution center employee filedformer store manager brought a class action in California state court with allegations concerning wages, meal and rest breaks, recovery periods, wage statements and timely termination pay. We have reached an agreement and received preliminary approval from the court.
In August 2018, a former employee brought suit in California state court as a class action and as a PAGA representative suit alleging we failed to provide all non-exempt California storereimburse employees with compliant restfor business expenses and meal breaks, accrued vacation, accurate wage statements and final pay upon terminationin so failing, engaged in unfair competition. The case has been resolved on a single plaintiff basis.
Family Dollar Active Matters
Beginning in 2019,In August 2020, a law firm has filed lawsuits around the country, including purported nationwide and state class actions, alleging we violated the public accommodation requirements of the Americans with Disabilities Act or its state law equivalent, by systemically blocking the aisles with merchandise.
In October 2019, a state and federalconsumer class action was filed against us in New York 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. The legal claims include New York consumer protection laws, negligent misrepresentations, breach of warranties, fraud and unjust enrichment.
In late 2019 and early 2020, personal injury and consumer class actions were filed alleging that we sold Zantac containing N-Nitrosodimethylamine,N- Nitrosodimethylamine, which is classified by the FDA as a probable carcinogen. The suit allegesAlthough all the suits were dismissed in December 2020, on February 8, 2021, an Amended Master Personal Injury Complaint was filed against us and other retailers, manufacturers, and distributors alleging unjust enrichment, physical harm, loss of consortium, and death.
In January and April 2021, state-wide consumer class actions were filed against us by the same law firm in Georgia and Alabama, respectively, for breach of warranty fraud, unjust enrichment,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.
Please see the description above for talc and violation of New York’s General Business Law. We believe we are fully indemnified by our supplier.PAGA lawsuits against Family Dollar.
In January 2020, a former employee brought a PAGA action in state court in California alleging we failed to provide compliant rest and meal periods, pay all required overtime, pay minimum wages for all time worked, provide compliant wage statements and reimburse business expenses.
In May 2020, a former employee filed a class action complaint in state court in California on behalf of all non-exempt California store employees alleging we failed to provide compliant rest and meal breaks, suitable seating, accurate wage statements, pay during security checks and to pay all wages due upon termination of employment.
In July 2020, a former employee brought a class action in state court in California on behalf of all non-exempt California store employees alleging we failed to provide compliant rest breaks, pay timely wages, reimburse business expenses and provide accurate wage statements.
Family Dollar Resolved Matters
In January 2017, a customer filed a class action in federal court in Illinois alleging we violated various state consumer fraud laws as well as express and implied warranties by selling a product that purported to contain aloe when it did not. The requested class is limited to the state of Illinois. The court has dismissed the lawsuit.
Note 3 - Long-Term Debt
In the first quarter of fiscal 2020, we paid the remaining $250.0 million outstanding under our Senior Floating Rate Notes due 2020.
Additionally, in the first quarter of fiscal 2020, we preemptively drew 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. At August 1, 2020, we had $500.0 million outstanding and $614.3 million available for borrowing under our Revolving Credit Facility.
As of August 1, 2020, we were in compliance with our debt covenants.
Note 43 - 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 significant impairment charges during the 13 or 26 weeks ended AugustMay 1, 20202021 and August 3, 2019.May 2, 2020.
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 aggregate fair values and carrying values of our long-term borrowings were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | August 1, 2020 | | February 1, 2020 | | August 3, 2019 |
| (in millions) | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Level 1 | | | | | | | | | | | | |
| Senior Notes | | $ | 3,999.9 |
| | $ | 3,530.8 |
| | $ | 4,064.5 |
| | $ | 3,779.9 |
| | $ | 4,460.8 |
| | $ | 4,277.5 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | May 1, 2021 | | January 30, 2021 | | May 2, 2020 |
| (in millions) | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Level 1 | | | | | | | | | | | | |
| Senior Notes | | $ | 3,581.9 | | | $ | 3,232.5 | | | $ | 3,654.4 | | | $ | 3,231.5 | | | $ | 3,764.9 | | | $ | 3,530.5 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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. The table above excludes amounts related tocarrying value of our Revolving Credit Facility as the carrying value approximates its fair value because the interest rates vary with market interest rates.
Note 54 - Net Income Per Share
The following table sets forth the calculations of basic and diluted net income per share:
|
| | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | 26 Weeks Ended |
| | | August 1, | | August 3, | | August 1, | | August 3, |
| (in millions, except per share data) | | 2020 | | 2019 | | 2020 | | 2019 |
| Basic net income per share: | | | | | | | | |
| Net income | | $ | 261.5 |
| | $ | 180.3 |
| | $ | 509.1 |
| | $ | 448.2 |
|
| Weighted average number of shares outstanding | | 237.3 |
| | 237.6 |
| | 237.1 |
| | 237.8 |
|
| Basic net income per share | | $ | 1.10 |
| | $ | 0.76 |
| | $ | 2.15 |
| | $ | 1.88 |
|
| Diluted net income per share: | | | | | | | | |
| Net income | | $ | 261.5 |
| | $ | 180.3 |
| | $ | 509.1 |
| | $ | 448.2 |
|
| Weighted average number of shares outstanding | | 237.3 |
| | 237.6 |
| | 237.1 |
| | 237.8 |
|
Dilutive effect of stock options and restricted stock (as
determined by applying the treasury stock method) | | 0.8 |
| | 0.7 |
| | 0.7 |
| | 0.9 |
|
Weighted average number of shares and dilutive potential
shares outstanding | | 238.1 |
| | 238.3 |
| | 237.8 |
| | 238.7 |
|
| Diluted net income per share | | $ | 1.10 |
| | $ | 0.76 |
| | $ | 2.14 |
| | $ | 1.88 |
|
| | | | | | | | | | | | | | | | | | |
| | 13 Weeks Ended | | |
| | May 1, | | May 2, | | | | |
| (in millions, except per share data) | | 2021 | | 2020 | | | | |
| Basic net income per share: | | | | | | | | |
| Net income | | $ | 374.5 | | | $ | 247.6 | | | | | |
| Weighted average number of shares outstanding | | 233.2 | | | 236.9 | | | | | |
| Basic net income per share | | $ | 1.61 | | | $ | 1.05 | | | | | |
| Diluted net income per share: | | | | | | | | |
| Net income | | $ | 374.5 | | | $ | 247.6 | | | | | |
| Weighted average number of shares outstanding | | 233.2 | | | 236.9 | | | | | |
Dilutive effect of stock options and restricted stock (as
determined by applying the treasury stock method) | | 1.2 | | | 0.5 | | | | | |
Weighted average number of shares and dilutive potential
shares outstanding | | 234.4 | | | 237.4 | | | | | |
| Diluted net income per share | | $ | 1.60 | | | $ | 1.04 | | | | | |
For the 13 and 26 weeks ended AugustMay 1, 20202021 and August 3, 2019,May 2, 2020, substantially all of the stock options outstanding were included in the calculation of the weighted average number of shares and dilutive potential shares outstanding.
Note 65 - Stock-Based Compensation
For a discussion of our stock-based compensation plans, refer to “Note 11 - Stock-Based Compensation Plans” of our Annual Report on Form 10-K for the year ended February 1, 2020.January 30, 2021. Stock-based compensation expense was $55.7$31.8 million and $44.1$32.6 million during the 2613 weeks ended AugustMay 1, 20202021 and August 3, 2019,May 2, 2020, 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 using our closing stock price on the date of grant.
Service-Based RSUs
The following table summarizes the status of service-based RSUs as of AugustMay 1, 20202021 and changes during the 2613 weeks then ended:
| | | | | | | | | | | | | | |
| | Number of Shares | | Weighted Average
Grant Date
Fair Value |
| Nonvested at January 30, 2021 | | 1,265,216 | | | $ | 83.16 | |
| Granted | | 625,097 | | | 109.04 | |
| Vested | | (574,719) | | | 87.08 | |
| Forfeited | | (31,160) | | | 90.20 | |
| Nonvested at May 1, 2021 | | 1,284,434 | | | $ | 93.83 | |
|
| | | | | | | |
| | | Number of Shares | | Weighted Average Grant Date Fair Value |
| Nonvested at February 1, 2020 | | 1,049,081 |
| | $ | 95.17 |
|
| Granted | | 844,654 |
| | 73.06 |
|
| Vested | | (519,205 | ) | | 91.18 |
|
| Forfeited | | (54,915 | ) | | 84.21 |
|
| Nonvested at August 1, 2020 | | 1,319,615 |
| | $ | 83.04 |
|
PSUs
The following table summarizes the status of PSUs as of AugustMay 1, 20202021 and changes during the 2613 weeks then ended:
|
| | | | | | | |
| | | Number of Shares | | Weighted Average Grant Date Fair Value |
| Nonvested at February 1, 2020 | | 320,500 |
| | $ | 99.29 |
|
| Granted | | 400,932 |
| | 73.08 |
|
| Vested | | (72,606 | ) | | 97.70 |
|
| Forfeited | | (68,826 | ) | | 93.42 |
|
| Nonvested at August 1, 2020 | | 580,000 |
| | $ | 81.95 |
|
| | | | | | | | | | | | | | |
| | Number of Shares | | Weighted Average
Grant Date
Fair Value |
| Nonvested at January 30, 2021 | | 423,272 | | | $ | 82.67 | |
| Granted | | 422,524 | | | 95.04 | |
| Vested | | (182,812) | | | 77.40 | |
| Forfeited | | (40,300) | | | 94.90 | |
| Nonvested at May 1, 2021 | | 622,684 | | | $ | 91.82 | |
Note 7 - Leases
Our lease portfolio primarily consists of leases for our retail store locations and we also lease vehicles and trailers, as well as distribution center space and equipment.
The lease cost for operating leases that was recognized in the accompanying unaudited condensed consolidated income statements for the 13 and 26 weeks ended August 1, 2020 and August 3, 2019 was as follows:
|
| | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | 26 Weeks Ended |
| (in millions) | | August 1, 2020 | | August 3, 2019 | | August 1, 2020 | | August 3, 2019 |
| Operating lease cost | | $ | 387.9 |
| | $ | 380.2 |
| | $ | 768.8 |
| | $ | 761.6 |
|
| Variable lease cost | | 94.3 |
| | 92.1 |
| | 192.7 |
| | 177.5 |
|
| Total lease cost* | | $ | 482.2 |
| | $ | 472.3 |
| | $ | 961.5 |
| | $ | 939.1 |
|
| | | | | | | | | |
| *Excludes short-term lease cost and sublease income, which are immaterial |
As of August 1, 2020, maturities of lease liabilities were as follows:
|
| | | | |
| | | (in millions) |
| Remainder of 2020 | | $ | 685.0 |
|
| 2021 | | 1,428.1 |
|
| 2022 | | 1,233.2 |
|
| 2023 | | 1,018.0 |
|
| 2024 | | 803.9 |
|
| Thereafter | | 2,008.3 |
|
| Total undiscounted lease payments | | 7,176.5 |
|
| Less interest | | 910.3 |
|
| Present value of lease liabilities | | $ | 6,266.2 |
|
The future minimum lease payments above exclude $216.0 million of legally binding minimum lease payments for leases signed but not yet commenced as of August 1, 2020.
Information regarding the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of August 1, 2020 and August 3, 2019 is as follows:
|
| | | | | | |
| | | August 1, 2020 | | August 3, 2019 |
| Weighted-average remaining lease term (years) | | 6.3 |
| | 6.6 |
|
| Weighted-average discount rate | | 4.1 | % | | 4.4 | % |
The following represents supplemental information pertaining to our operating lease arrangements for the 13 and 26 weeks ended August 1, 2020 and August 3, 2019:
|
| | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | 26 Weeks Ended |
| (in millions) | | August 1, 2020 | | August 3, 2019 | | August 1, 2020 | | August 3, 2019 |
Cash paid for amounts included in the measurement
of lease liabilities: | | | | | | | | |
| Operating cash flows from operating leases | | $ | 333.6 |
| | $ | 364.4 |
| | $ | 749.4 |
| | $ | 731.6 |
|
Right-of-use assets obtained in exchange for new
operating lease liabilities | | 384.6 |
| | 213.9 |
| | 645.6 |
| | 429.3 |
|
Note 86 - Shareholders’ Equity
We repurchased 2,150,572 shares of common stock on the open market for approximately $250.0 million during the 13 weeks ended May 1, 2021. Approximately $8.7 million in share repurchases had not settled as of May 1, 2021. This amount was accrued and is reflected in “Other current liabilities” within the accompanying unaudited condensed consolidated balance sheet as of May 1, 2021. We did not repurchase any shares of common stock in the 13 and 26 weeks ended August 1,May 2, 2020. We repurchased 881,624 and 1,842,307 shares of common stock on the open market for approximately $88.4 million and $188.4 million during the 13 and 26 weeks ended August 3, 2019, respectively. Approximately $49.2 million in share repurchases had not settled as of August 3, 2019 and this amount was accrued in the accompanying unaudited condensed consolidated balance sheet as of August 3, 2019. As of AugustMay 1, 2020,2021, we have $800.0 million$2.15 billion remaining under Board repurchase authorization.
Note 97 - Income Taxes
On March 27, 2020, the Coronavirus Aid, Relief,Segments and Economic Security Act (“CARES Act”) was signed into law. The CARES Act retroactively changed the recovery period for Qualified Improvement Property to 15 years for eligible property placed in service subsequent to December 31, 2017. In the first quarter of 2020, we reclassified $67.0 million to the Deferred income taxes, net liability from Income taxes payable to reflect the additional currently deductible depreciation associated with the change in recovery period for Qualified Improvement Property.
Note 10 - SegmentsDisaggregated Revenue
We operate a chain of more than 15,40015,700 retail discount stores in 48 states and 5 Canadian provinces. Our operations are conducted in 2 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 $1.00. The Dollar Tree segment includes our operations under the “Dollar Tree” and “Dollar Tree Canada” brands, 1315 distribution centers in the United States and 2 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 11 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.
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 support costs consistOther consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our 2 reporting business segments. These costs include operating expenses for our store support centerscenter and the results of operations for our Summit Pointe property 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. We continue to own our facility in Matthews, North Carolina.
Information for our segments, as well as for Corporate, support and support,Other, including the reconciliation to Income before income taxes, is as follows:
| | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | |
| | | May 1, | | May 2, | | | | |
| (in millions) | | 2021 | | 2020 | | | | |
| Condensed Consolidated Income Statement Data: | | | | | | | | |
| Net sales: | | | | | | | | |
| Dollar Tree | | $ | 3,321.3 | | | $ | 3,077.5 | | | | | |
| Family Dollar | | 3,155.5 | | | 3,209.3 | | | | | |
| | | | | | | | |
| Consolidated Net sales | | $ | 6,476.8 | | | $ | 6,286.8 | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | 13 Weeks Ended | | 26 Weeks Ended | | | 13 Weeks Ended | |
| | | August 1, | | August 3, | | August 1, | | August 3, | | | May 1, | | May 2, | |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 | |
| Condensed Consolidated Income Statement Data: | | | | | | | | | Condensed Consolidated Income Statement Data: | | | | | |
| Net sales: | | | | | | | | | |
| Dollar Tree | | $ | 3,176.9 |
| | $ | 2,957.7 |
| | $ | 6,254.4 |
| | $ | 5,917.1 |
| |
| Family Dollar | | 3,100.7 |
| | 2,782.9 |
| | 6,310.0 |
| | 5,632.2 |
| |
| Consolidated Net sales | | $ | 6,277.6 |
| | $ | 5,740.6 |
| | $ | 12,564.4 |
| | $ | 11,549.3 |
| |
| | | | | | | | | | |
| Gross profit: | | | | | | | | | Gross profit: | | |
| Dollar Tree | | $ | 1,071.9 |
| | $ | 999.0 |
| | $ | 2,052.6 |
| | $ | 2,020.2 |
| Dollar Tree | | $ | 1,118.3 | | | $ | 980.7 | | |
| Family Dollar | | 844.3 |
| | 649.5 |
| | 1,658.5 |
| | 1,355.5 |
| Family Dollar | | 845.8 | | | 814.2 | | |
| | Consolidated Gross profit | | $ | 1,916.2 |
| | $ | 1,648.5 |
| | $ | 3,711.1 |
| | $ | 3,375.7 |
| Consolidated Gross profit | | $ | 1,964.1 | | | $ | 1,794.9 | | |
| | | | | | | | | | | | | | |
| Operating income (loss): | | | | | | | | | Operating income (loss): | | |
| Dollar Tree | | $ | 306.6 |
| | $ | 337.1 |
| | $ | 588.6 |
| | $ | 731.3 |
| Dollar Tree | | $ | 400.3 | | | $ | 282.0 | | |
| Family Dollar | | 165.1 |
| | 16.8 |
| | 340.6 |
| | 108.7 |
| Family Dollar | | 211.4 | | | 175.5 | | |
| Corporate and support | | (96.8 | ) | | (85.0 | ) | | (188.4 | ) | | (185.6 | ) | |
| Corporate, support and Other | | Corporate, support and Other | | (91.8) | | | (91.6) | | |
| Consolidated Operating income | | 374.9 |
| | 268.9 |
| | 740.8 |
| | 654.4 |
| Consolidated Operating income | | 519.9 | | | 365.9 | | |
| Interest expense, net | | 34.8 |
| | 40.1 |
| | 75.0 |
| | 81.5 |
| Interest expense, net | | 33.0 | | | 40.2 | | |
| Other expense, net | | 0.2 |
| | 0.4 |
| | 0.7 |
| | 0.6 |
| Other expense, net | | 0 | | | 0.5 | | |
| Income before income taxes | | $ | 339.9 |
| | $ | 228.4 |
| | $ | 665.1 |
| | $ | 572.3 |
| Income before income taxes | | $ | 486.9 | | | $ | 325.2 | | |
| | | | | | | | | | | | | | | | | | | | |
| | | As of |
| | | May 1, | | January 30, | | May 2, |
| (in millions) | | 2021 | | 2021 | | 2020 |
| Condensed Consolidated Balance Sheet Data: | | | | | | |
| Goodwill: | | | | | | |
| Dollar Tree | | $ | 426.1 | | | $ | 424.9 | | | $ | 421.9 | |
| Family Dollar | | 1,559.5 | | | 1,559.5 | | | 1,559.5 | |
| Consolidated Goodwill | | $ | 1,985.6 | | | $ | 1,984.4 | | | $ | 1,981.4 | |
| | | | | | |
| Total assets: | | | | | | |
| Dollar Tree | | $ | 8,963.8 | | | $ | 8,669.3 | | | $ | 8,504.7 | |
| Family Dollar | | 11,611.0 | | | 11,562.2 | | | 11,540.7 | |
| Corporate, support and Other | | 475.9 | | | 464.5 | | | 426.4 | |
| Consolidated Total assets | | $ | 21,050.7 | | | $ | 20,696.0 | | | $ | 20,471.8 | |
|
| | | | | | | | | | | | |
| | | As of |
| | | August 1, | | February 1, | | August 3, |
| (in millions) | | 2020 | | 2020 | | 2019 |
| Condensed Consolidated Balance Sheet Data: | | | | | | |
| Goodwill: | | | | | | |
| Dollar Tree | | $ | 423.5 |
| | $ | 423.8 |
| | $ | 412.3 |
|
| Family Dollar | | 1,559.5 |
| | 1,559.5 |
| | 1,884.0 |
|
| Consolidated Goodwill | | $ | 1,983.0 |
| | $ | 1,983.3 |
| | $ | 2,296.3 |
|
| | | | | | | |
| Total assets: | | | | | | |
| Dollar Tree | | $ | 8,531.2 |
| | $ | 7,694.0 |
| | $ | 7,147.2 |
|
| Family Dollar | | 11,689.7 |
| | 11,484.9 |
| | 11,982.2 |
|
| Corporate and support | | 450.1 |
| | 395.7 |
| | 364.4 |
|
| Consolidated Total assets | | $ | 20,671.0 |
| | $ | 19,574.6 |
| | $ | 19,493.8 |
|
| | | | | | | |
*Goodwill is reassigned between segments when previously acquired stores are re-bannered between segments. The goodwill related to previously acquired re-bannered stores in the 26 weeks ended August 1, 2020 was 0t material. In the 26 weeks ended August 3, 2019, we reassigned $36.1 million
Disaggregated Revenue
The following table summarizes net sales by merchandise category for our segments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | |
| | | May 1, | | May 2, | | | | |
| (in millions) | | 2021 | | 2020 | | | | |
Dollar Tree segment net sales by
merchandise category: | | | | | | | | | | | | | | | | |
| Consumable | | $ | 1,584.3 | | | 47.7 | % | | $ | 1,686.5 | | | 54.8 | % | | | | | | | | |
| Variety | | 1,627.4 | | | 49.0 | % | | 1,311.0 | | | 42.6 | % | | | | | | | | |
| Seasonal | | 109.6 | | | 3.3 | % | | 80.0 | | | 2.6 | % | | | | | | | | |
| Total Dollar Tree segment net sales | | $ | 3,321.3 | | | 100.0 | % | | $ | 3,077.5 | | | 100.0 | % | | | | | | | | |
| | | | | | | | | | | | | | | | |
Family Dollar segment net sales by
merchandise category: | | | | | | | | | | | | | | | | |
| Consumable | | $ | 2,373.5 | | | 75.2 | % | | $ | 2,532.1 | | | 78.9 | % | | | | | | | | |
| Home products | | 301.0 | | | 9.5 | % | | 272.8 | | | 8.5 | % | | | | | | | | |
| Apparel and accessories | | 205.2 | | | 6.5 | % | | 154.1 | | | 4.8 | % | | | | | | | | |
| Seasonal and electronics | | 275.8 | | | 8.8 | % | | 250.3 | | | 7.8 | % | | | | | | | | |
| Total Family Dollar segment net sales | | $ | 3,155.5 | | | 100.0 | % | | $ | 3,209.3 | | | 100.0 | % | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | 26 Weeks Ended |
| | | August 1, | | August 3, | | August 1, | | August 3, |
| (in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
Dollar Tree segment net sales by merchandise category: | | | | | | | | | | | | | | | | |
| Consumable | | $ | 1,528.2 |
| | 48.1 | % | | $ | 1,514.4 |
| | 51.2 | % | | $ | 3,214.7 |
| | 51.4 | % | | $ | 3,011.8 |
| | 50.9 | % |
| Variety | | 1,641.1 |
| | 51.7 | % | | 1,440.4 |
| | 48.7 | % | | 2,952.1 |
| | 47.2 | % | | 2,798.8 |
| | 47.3 | % |
| Seasonal | | 7.6 |
| | 0.2 | % | | 2.9 |
| | 0.1 | % | | 87.6 |
| | 1.4 | % | | 106.5 |
| | 1.8 | % |
| Total Dollar Tree segment net sales | | $ | 3,176.9 |
| | 100.0 | % | | $ | 2,957.7 |
| | 100.0 | % | | $ | 6,254.4 |
| | 100.0 | % | | $ | 5,917.1 |
| | 100.0 | % |
| | | | | | | | | | | | | | | | | |
Family Dollar segment net sales by merchandise category: | | | | | | | | | | | | | | | | |
| Consumable | | $ | 2,289.7 |
| | 73.8 | % | | $ | 2,144.6 |
| | 77.1 | % | | $ | 4,821.8 |
| | 76.4 | % | | $ | 4,347.2 |
| | 77.2 | % |
| Home products | | 289.8 |
| | 9.3 | % | | 204.2 |
| | 7.3 | % | | 562.6 |
| | 8.9 | % | | 446.3 |
| | 7.9 | % |
| Apparel and accessories | | 206.3 |
| | 6.7 | % | | 176.5 |
| | 6.3 | % | | 360.4 |
| | 5.7 | % | | 350.3 |
| | 6.2 | % |
| Seasonal and electronics | | 314.9 |
| | 10.2 | % | | 257.6 |
| | 9.3 | % | | 565.2 |
| | 9.0 | % | | 488.4 |
| | 8.7 | % |
| Total Family Dollar segment net sales | | $ | 3,100.7 |
| | 100.0 | % | | $ | 2,782.9 |
| | 100.0 | % | | $ | 6,310.0 |
| | 100.0 | % | | $ | 5,632.2 |
| | 100.0 | % |
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:
•The effect of higher costs and delays in importing merchandise from Asia, the capacity of our distribution centers to transport delayed goods to the stores on an expedited basis given current labor shortages, and the potential impact on our sales and merchandise margin;
•The reliability of, and cost associated with, our sources of supply, particularly imported goods such as those sourced from Asia and higher cost domestic goods;
•Our expectations regarding cost increases, including additional costs in fiscal 2021 as a result of higher shipping and domestic freight and fuel costs, increases in the minimum wage by States and localities, potential federal legislation increasing the minimum wage, and proposals to raise federal corporate tax rates;
•The potential effect of general business or economic conditions on our business including the direct and indirect effects of the COVID-19 pandemic-related recession,pandemic, inflation, labor shortages, consumer spending levels, unemployment, and the cost of COVID-19 initiatives;
The uncertainty of the future impact of the COVID-19 pandemic and public health measures on our business and results of operations, including uncertainties surrounding 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 possible disruptions in our supply chain or sources of supply;
Our plans and expectations in response to the COVID-19 pandemic, including increased expenses for higher wages and bonuses paid to associatesassociates;
•Our expectations regarding reductions in COVID-19-related expenses and the costlevel of personal protective equipmentshrink in fiscal 2021;
•Our seasonal and additional cleaning suppliesweekly sales patterns and protocols forcustomer demand including those relating to the safetyimportant holiday selling seasons;
•Our plans to renovate existing Family Dollar stores and build new stores in the H2 store format, including an increase in the number of stores with adult beverages, and the performance of that format on our associates, and expected delays inresults of operations;
•Our plans relating to new store openings; openings and new store concepts such as Dollar Tree Plus! and our Combination Store format; and
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, and other potential impediments to imports;
Our growth plans, including our plans to add, renovate, re-banner, expand, remodel, relocate or close stores and any related costs or charges;
•The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental actions, includinginvestigations (including the proceeding by the FDA;
The average sizeFood and productivity of our stores, including those to be added in 2020 and beyond;
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 lower margin consumable and higher margin discretionary 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 at Family Dollar and Snack Zone and Crafter’s Square at Dollar Tree, on our results of operations;
Our seasonal sales patterns and customer demand including those relating to the important holiday selling seasons and party merchandise;
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; and
Our expectations regarding compliance with debt covenants and our stock repurchase program.Drug Administration).
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 February 1, 2020, our Quarterly Report on Form 10-Q for the quarterly period ended May 2, 2020,January 30, 2021, and in this Quarterly Report on Form 10-Q.
The continuing COVID-19 pandemic and related public health measuresfollowing risks could have caused economic disruptions that have adversely affected, and are expected to continue to adversely affect, elements of our business. If the COVID-19 pandemic worsens and new, more restrictive public health measures are implemented, there could be a material adverse impact on our businesssales, costs, profitability, or financial performance:
•Our profitability is vulnerable to cost increases such as wages and results of operations.operating costs.
•We may continue to encounter higher costs in our supply chain, including higher shipping, freight and fuel costs, and disruptions in our distribution network including merchandise delays and shortages and labor shortages that could result in lower sales or higher costs for substituted goods.
•Risks associated with our domestic and foreign suppliers, including tariffs or restrictions on trade or disruptions in trade arising from the COVID-19 pandemic or otherwise.
•Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of a deepening pandemic-related recession or political uncertainties,continued unfavorable economic conditions, for example because government stabilization effortsassistance to households and businesses terminate or are reduced prematurely.reduced.
Our profitability is vulnerable to cost increases•A downturn or adverse change in economic conditions, such as wages. For example, this year we have incurred increased costs associated with responding to the COVID-19 pandemic; and this year and over the last several years we have incurred increased distribution costs and shrink costs.inflation, could impact our sales or profitability.
Our profitability is affected by the mix
We could continue to encounter higher costs and disruptions in our distribution network.
•Our financial performance could be adversely affected if our supply chain is affected ormay be disrupted by changes in United States trade policy with China, including tariffs or restrictions on trade affecting our foreign suppliers, or by disruptions arising from the outbreak of the COVID-19 pandemic.China.
Our growth is dependent•We may not be successful in implementing important strategic initiatives, which may have an adverse impact on our ability to increase sales in existing storesbusiness and to expand our square footage profitably.financial results.
•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.
If we suffer a data breach•The potential unauthorized access to customer information may violate privacy laws and are unable to protect 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, which could damage our business reputation, subject us to negative publicity, litigation and costs, and adversely affect our results of operations or business.
We could incur losses due to impairment of long-lived assets, goodwill•Litigation and intangible assets.
Litigation, arbitration and regulatory actions may adversely affect our business, financial condition and results of operations.
The terms•Changes in laws and government regulations, including any increase in federal corporate tax rates, or our failure to adequately estimate the impact of the agreements governingsuch changes, could increase our indebtedness may restrict our current and future operations, particularly our abilityexpenses, expose us to respond to changeslegal risks or to pursue our business strategies, and couldotherwise adversely affect our capital resources, financial condition and liquidity.us.
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-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.
The Impact of COVID-19
The COVID-19 pandemic has 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 arein 2020 were materially different than whatin prior years. During March 2020, our Dollar Tree and Family Dollar stores began to experience a significant increase in customer demand and sales of 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 2020 Easter selling season, comparable store net sales at our Dollar Tree stores decreased. After the 2020 Easter selling season, in both banners, we expected. We have experienced fewer customer visitsan increase in demand for and higher average ticket. sales of discretionary products and our seasonal business for the other holidays throughout 2020 was strong. Easter sales were strong in both banners during 2021. Our results of operations for the first quarter of fiscal 2020 include approximately $73.2 million of COVID-19-related expenses; these expenses totaled $7.4 million in the first quarter of fiscal 2021.
The mix and profit marginfuture impact of products being purchased byCOVID-19 on our customers has been different and has changed during the first half of 2020. As demand for essential goods, including cleaning supplies and sanitizer, household products, paper goods, food and over-the-counter medicine, increasedour business is difficult 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 for the remainderpredict. The course of the year. The effectpandemic, the effectiveness of COVID-19-related stimulus purchases for some other non-essential itemshealth measures such as vaccines, and the impact of ongoing economic stabilization efforts is uncertain and government assistance payments may create additional disruptions. The balance of our product, including imports, continues to operate as we planned.
We have hired more than 25,000 net new associates since early March and we have implemented several changesnot provide enough funding to support our associates in adheringcurrent spending. The American Rescue Plan Act of 2021 (“Rescue Act”), which was enacted on March 11, 2021, provides U.S. government funding to Centersaddress the continuing impact of COVID-19 on the economy, public health, individuals and businesses. Among other things, the Rescue Act provides for Disease Control and Prevention (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;
Equipped stores, distribution centers and the store support center with necessary supplies for enhanced cleaning protocol;
Provided a $2 per hour wage premium 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$1,400 direct payments to our POS systemsindividuals, 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 our customers;
Followed local municipality, county,rent and state guidelinesutility assistance, and regulations needed to be open as an essential business;
Encouraged safe social distancing protocols for our customers with signing, graphicsfunds COVID-19 vaccinations, testing, treatment 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.
We also made changes to reduce our exposure to potential short-term liquidity risk in the banking system, including preemptively drawing $750 million under our Revolving Credit Facility, of which $250 million was repaid in the second quarter, and suspending share repurchases under the remaining $800 million of Board authorization. We are in compliance with our debt covenants and, based on a continuation of current operating results, we expect to be in compliance for the remainder of fiscal 2020.
prevention. 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
For further discussion of the impacts that we have seen and the factors which could influence our future performance.
Sales
During March, 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 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 2019COVID-19 had passed. In the 13 weeks ended May 2, 2020, enterprise comparable store net sales increased 7.0% resulting from an increase in average ticket of 15.5%, partially offset by a decrease in traffic of 7.4%. In the 13 weeks ended August 1, 2020, enterprise comparable store net sales increased 7.2% resulting from an increase in average ticket of 24.7%, partially offset by a decrease in traffic of 14.0%.
The future impact of COVID-19 on our customers is difficult to predict as the effectiveness of economic stabilization efforts is uncertainfinancial condition and government assistance payments may not provide enough funding to support current spending and the incremental unemployment benefits lapsed on July 31, 2020. In addition, we cannot predict the impact of the spread of COVID-19 on the health and well-being of our customers and associates.
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.
Gross Profit
As noted, in the 13 weeks ended May 2, 2020, the demand for essential products, which typically sell at a lower margin than our discretionary products, increased significantly. In addition, Easter sales in our Dollar Tree segment were materially lower than expected resulting in higher merchandise cost, including freight, and higher markdowns to clear the unsold Easter product. During April, demand for discretionary products increased in both segments.
During the 13 weeks ended August 1, 2020, the higher demand for discretionary products continued in both our Dollar Tree and Family Dollar segments resulting in a reduction in our merchandise cost compared with the same period in 2019. The favorable mix change has continued into the third quarter of 2020; however, the benefit is not as high as we experienced during the second quarter of 2020.
Our distribution costs included $6.4 million and $11.4 million in the 13 weeks ended May 2, 2020 and the 13 weeks ended August 1, 2020, respectively, of incremental wage premiums in recognition of the team’s extraordinary efforts. The incremental wage premium payments will continue for at least the first eight weeks of the third quarter of 2020.
During the COVID-19 pandemic, the trade dispute between the United States and China is ongoing and should additional tariffs or other sanctions be imposed on imported goods, our business or results of operations induring fiscal 2020, could be adversely affected.
Selling, Generalrefer to “Item 7. Management’s Discussion and Administrative Expenses
We paid incremental wage premiums toAnalysis of Financial Condition and Results of Operations” of our hourly store associates, minimum guaranteed bonuses and a Thank You bonus to our store managers and other bonuses to certain field operations managers totaling $57.5 million and $114.6 million in the 13 weeks ended May 2, 2020 and the 13 weeks ended August 1, 2020, respectively. The incremental wage premium payments were reduced from $2 per hour to $1 per hour beginning in the third quarter of 2020 and will continue for at least the first eight weeks of the third quarter.
In addition,Annual Report on Form 10-K for the safetyyear ended January 30, 2021.
Store Openings and Initiatives
During the first half of fiscal 2020, we opened 167 new Dollar Tree stores and 63 new Family Dollar stores; however, we have experienced construction-related delays due to challenges with the permitting process which has resulted in delays in our planned store openings. We now plan to open 325 Dollar Tree stores and 175 Family Dollar stores in fiscal 2020.
As a result of the complications inherent in operating our stores during the COVID-19 pandemic, during the first quarter of 2020, we paused the roll-out of our Snack Zone layout to our Dollar Tree stores. We resumed the installation of our Snack Zone layout to Dollar Tree stores during the second quarter of 2020 and we plan to add this assortment to 300 Dollar Tree stores in fiscal 2020.
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, but resumed the roll-out of the H2 format to Family Dollar stores during the second quarter of 2020. We expect to renovate approximately 750 stores to this format in fiscal 2020. Also, as a result of permitting delays, we now expect to add adult beverage product to approximately 800 stores in fiscal 2020.
Overview
We are a leading operator of more than 15,40015,700 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 point 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 or adding new stores through mergers or acquisitions.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 AugustMay 1, 2020,2021, 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 2613 weeks ended AugustMay 1, 20202021 and August 3, 2019May 2, 2020 is as follows:
| | | | 26 Weeks Ended | | 13 Weeks Ended |
| | August 1, 2020 | | August 3, 2019 | | May 1, 2021 | | May 2, 2020 |
| | Dollar Tree | | Family Dollar | | Total | | Dollar Tree | | Family Dollar | | Total | | Dollar Tree | | Family Dollar | | Total | | Dollar Tree | | Family Dollar | | Total |
| Store Count: | | | | | | | | | | | | Store Count: | | | | | | | | | | | |
| Beginning | 7,505 |
| | 7,783 |
| | 15,288 |
| | 7,001 |
| | 8,236 |
| | 15,237 |
| Beginning | 7,805 | | | 7,880 | | | 15,685 | | | 7,505 | | | 7,783 | | | 15,288 | |
| New stores | 167 |
| | 63 |
| | 230 |
| | 172 |
| | 69 |
| | 241 |
| New stores | 65 | | | 41 | | | 106 | | | 67 | | | 32 | | | 99 | |
| Re-bannered stores | (3 | ) | | 4 |
| | 1 |
| | 151 |
| | (184 | ) | | (33 | ) | Re-bannered stores | — | | | — | | | — | | | (3) | | | — | | | (3) | |
| Closings | (17 | ) | | (23 | ) | | (40 | ) | | (18 | ) | | (312 | ) | | (330 | ) | Closings | (3) | | | (16) | | | (19) | | | (7) | | | (7) | | | (14) | |
| Ending | 7,652 |
| | 7,827 |
| | 15,479 |
| | 7,306 |
| | 7,809 |
| | 15,115 |
| Ending | 7,867 | | | 7,905 | | | 15,772 | | | 7,562 | | | 7,808 | | | 15,370 | |
| Relocations | 29 |
| | 14 |
| | 43 |
| | 23 |
| | 7 |
| | 30 |
| Relocations | 18 | | | 18 | | | 36 | | | 15 | | | 6 | | | 21 | |
| | | | | | | | | | | | | |
| Selling Square Feet (in millions): | Selling Square Feet (in millions): | | | | | | | | | | | Selling Square Feet (in millions): | |
| Beginning | 64.6 |
| | 56.7 |
| | 121.3 |
| | 60.3 |
| | 59.8 |
| | 120.1 |
| Beginning | 67.4 | | | 57.7 | | | 125.1 | | | 64.6 | | | 56.7 | | | 121.3 | |
| New stores | 1.5 |
| | 0.5 |
| | 2.0 |
| | 1.5 |
| | 0.5 |
| | 2.0 |
| New stores | 0.5 | | | 0.4 | | | 0.9 | | | 0.6 | | | 0.2 | | | 0.8 | |
| Re-bannered stores | (0.1 | ) | | 0.1 |
| | — |
| | 1.1 |
| | (1.3 | ) | | (0.2 | ) | |
| | Closings | (0.1 | ) | | (0.2 | ) | | (0.3 | ) | | (0.1 | ) | | (2.2 | ) | | (2.3 | ) | Closings | — | | | (0.1) | | | (0.1) | | | (0.1) | | | — | | | (0.1) | |
| Relocations | 0.1 |
| | — |
| | 0.1 |
| | 0.1 |
| | — |
| | 0.1 |
| Relocations | — | | | — | | | — | | | 0.1 | | | — | | | 0.1 | |
| Ending | 66.0 |
| | 57.1 |
| | 123.1 |
| | 62.9 |
| | 56.8 |
| | 119.7 |
| Ending | 67.9 | | | 58.0 | | | 125.9 | | | 65.2 | | | 56.9 | | | 122.1 | |
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 during the 2613 weeks ended AugustMay 1, 20202021 was approximately 8,6908,520 selling square feet for the Dollar Tree segment and 8,1309,110 selling 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.
The percentage change in comparable store net sales on a constant currency basis for the 13 and 26 weeks ended AugustMay 1, 2020,2021, as compared with the preceding year, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13 Weeks Ended May 1, 2021 | | |
| | Sales Growth | | Change in
Customer Traffic | | Change in
Average Ticket | | | | | | |
| Consolidated | | 0.8 | % | | (8.0) | % | | 9.6 | % | | | | | | |
| Dollar Tree Segment | | 4.7 | % | | (4.4) | % | | 9.5 | % | | | | | | |
| Family Dollar Segment | | (2.8) | % | | (12.7) | % | | 11.3 | % | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended August 1, 2020 | | 26 Weeks Ended August 1, 2020 |
| | | Sales Growth | | Change in Customer Traffic | | Change in Average Ticket | | Sales Growth | | Change in Customer Traffic | | Change in Average Ticket |
| Consolidated | | 7.2 | % | | (14.0 | )% | | 24.7 | % | | 7.1 | % | | (10.8 | )% | | 20.0 | % |
| Dollar Tree Segment | | 3.1 | % | | (15.9 | )% | | 22.6 | % | | 1.1 | % | | (13.8 | )% | | 17.3 | % |
| Family Dollar Segment | | 11.6 | % | | (11.3 | )% | | 25.9 | % | | 13.6 | % | | (6.4 | )% | | 21.4 | % |
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 continue to be positively affected by our Dollar Tree initiatives. We continued the roll-out of frozen and refrigerated merchandise to more of our Dollar Tree stores in the second quarter of 2020 and as of August 1, 2020, the Dollar Tree segment had frozen and refrigerated merchandise in approximately 6,300 stores compared to approximately 5,970 stores at August 3, 2019. Beginning in fiscal 2018, we rolled out a new layout to a number of our Dollar Tree stores, which we call our Snack Zone. This layout highlights our immediate consumption snack offerings in the front of the store near the checkout areas. As of August 1, 2020, we
have Snack Zone in approximately 2,530 Dollar Tree stores.sales. In fiscal 2019, we introduced our Crafter’s Square initiative in more than 650 stores. This sectionoffering 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! 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 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. As of May 1, 2021, we have this assortment incorporated in more than 240 locations and initial feedback for this iteration is even more positive than in the prior test stores. We have begun expanding this programexpanded Dollar Tree Plus! into select locations in Colorado, as well as states in the southeast such as Georgia, Alabama, Louisiana and have rolled it out tothe Carolinas. The newest iteration of the concept is experiencing a sales lift of more than 3,100 stores asdouble the prior versions. Due to the stronger than forecasted sell-through combined with a potential for delayed shipments of August 1, 2020. We plan to include Crafter’s Square in additional stores inimport merchandise, the future.timing of our reaching our 500 store target may shift. 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. ThisThe 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 AugustMay 1, 2020,2021, we have approximately 1,7902,800 H2 stores. We plan to renovate approximately 750at least 1,250 stores to the H2this format in fiscal 2020.2021 and also plan to build new stores in this format. In addition, we installed adult beverage product in approximately 250more than 160 stores in the first halfquarter of 20202021 and plan to add it to approximately 570 more800 stores in 2020.total 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. As of May 1, 2021, we have approximately 60 Combination Stores.
Other Items
Additionally, the following trends or uncertainties have already impacted or could impact our business or results of operations during 2021 or in the future:
•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. We expect these costs to be approximately $30.0 million in fiscal 2021.
•We expect shrink at cost as a percentage of net sales to be significantly lower in fiscal 2021 than fiscal 2020.
•In 2021, the minimum wage will increase in certain States and localities and may increase nationally depending on the outcome of future legislation proposed in Congress. Minimum wage increases in States and localities are expected to increase our costs by $45.0 to $50.0 million in 2021.
•We are experiencing significantly higher shipping costs as well as shipping delays as a result of Trans-Pacific shipping capacity shortage and port congestion.
◦We now expect the increase in shipping and domestic freight costs in the last three quarters of fiscal 2021 compared to the last three quarters of fiscal 2020 to be $220.0 to $250.0 million, which is significantly higher than previously estimated.
◦If the shipping delays do not improve they could potentially have a material adverse impact on our sales or on our merchandise margin. Sales could be negatively impacted if imported goods do not arrive in time to stock our stores. If higher cost domestic goods are substituted for delayed imports, our merchandise margin could be adversely impacted. We also are experiencing a shortage of associates and applicants to fill staffing requirements at our distribution centers due to the current labor shortage affecting retail businesses. Transporting delayed goods to our stores on an expedited basis could be challenging if we are unable to increase the staffing of our distribution centers.
Results of Operations
Our results of operations as a percentage of net sales and period-over-period changes are discussed in the following section. Note that gross profit margin is calculated as gross profit (i.e., net sales less cost of sales) divided by net sales. The selling, general and administrative expense rate and operating income margin are calculated by dividing the applicable amount by total revenue.
Net Sales
| | | | | 13 Weeks Ended | | | | 26 Weeks Ended | | | | 13 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change | | May 1, | | May 2, | | Percentage
Change | |
| (dollars in millions) | | 2020 | | 2019 | | 2020 | | 2019 | | (dollars in millions) | | 2021 | | 2020 | | |
| Net sales | | $ | 6,277.6 |
| | $ | 5,740.6 |
| | 9.4 | % | | $ | 12,564.4 |
| | $ | 11,549.3 |
| | 8.8 | % | Net sales | | $ | 6,476.8 | | | $ | 6,286.8 | | | 3.0 | % | |
| Comparable store net sales change | | 7.2 | % | | 2.4 | % | | | | 7.1 | % | | 2.3 | % | | | |
Comparable store net sales change,
on a constant currency basis | | Comparable store net sales change,
on a constant currency basis | | 0.8 | % | | 7.0 | % | | |
The increase in net sales in the 13 weeks ended AugustMay 1, 20202021 was a result of a comparable store net sales increasesincrease in boththe Dollar Tree segment and sales of $169.8 million at new stores, partially offset by a decrease in comparable store net sales in the Family Dollar and Dollar Tree segments and sales of $212.3 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.segment.
Enterprise comparable store net sales increased 7.2%0.8% on a constant currency basis in the 13 weeks ended AugustMay 1, 2020,2021, as a result of a 24.7%9.6% increase in average ticket and a 14.0%an 8.0% decrease in customer traffic. Comparable store net sales increased the same 7.2%0.9% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 11.6%4.7% in the Dollar Tree segment and decreased 2.8% in the Family Dollar segment. In the first quarter of 2020, at the beginning of the COVID-19 pandemic, the Family Dollar segment and 3.1% in the Dollar Tree segment. 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.
The increase in net sales in the 26 weeks ended August 1, 2020 washad a result of comparable store net sales increasesincrease of 15.5% as we saw an increase in demand for essential products. For the Family Dollar andfirst quarter of 2020, the Dollar Tree segments and sales of $447.0 million at new stores. These sales increases were partially offset by lost sales resulting from store closures during fiscal 2019segment had a decrease in connection with our Family Dollar segment store optimization program.
Enterprise comparable store net sales increased 7.1% on a constant currency basis in the 26 weeks ended August 1, 2020, as a result of a 20.0% increase in average ticket and a 10.8% decrease in customer traffic. Comparable store net sales increased the same 7.1% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 13.6% in the Family Dollar segment and 1.1% in the Dollar Tree segment. Lower0.9%, resulting from lower traffic resulting from the COVID-19 pandemic which negatively affected Easter sales in the Dollar Tree segment in the first quarter of fiscal 2020.
segment.
Gross Profit
| | | | | 13 Weeks Ended | | | | 26 Weeks Ended | | | | 13 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change | | May 1, | | May 2, | | Percentage
Change | |
| (dollars in millions) | | 2020 | | 2019 | | 2020 | | 2019 | | (dollars in millions) | | 2021 | | 2020 | | |
| Gross profit | | $ | 1,916.2 |
| | $ | 1,648.5 |
| | 16.2 | % | | $ | 3,711.1 |
| | $ | 3,375.7 |
| | 9.9 | % | Gross profit | | $ | 1,964.1 | | | $ | 1,794.9 | | | 9.4 | % | |
| Gross profit margin | | 30.5 | % | | 28.7 | % | | 1.8 | % | | 29.5 | % | | 29.2 | % | | 0.3 | % | Gross profit margin | | 30.3 | % | | 28.5 | % | | 1.8 | % | |
The increase in gross profit margin in the 13 weeks ended AugustMay 1, 20202021 was a result of the following:
•Merchandise cost, including freight, decreased approximately 120105 basis points resulting from higher sales of higher margin discretionary merchandise, including higher Easter sales in both segments and improved initial mark-on and lower freight costs, partially offset by incremental tariffs of approximately $10.8 million.
Occupancy costs decreased approximately 55 basis points as a result of the leverage from the increase in comparable store net sales.
Markdown costs decreased approximately 40 basis points resulting primarily from the prior year including markdowns related to Family Dollar store closures and clearance sales and lower promotional activity in the current year onfor the Family Dollar segment, as a result of the increase in sales. Partially offsetting this decrease was $9.8 million of uninsured markdown costs for stores affectedpartially offset by civil unrest.higher freight costs.
•Shrink costs decreased approximately 1555 basis points resulting from favorable inventory reconciliations onresults in relation to accruals and decreases in the shrink accrual rates in both the Family Dollar segmentand Dollar Tree segments in the current quarter.
•Markdown costs decreased 15 basis points primarily due to lower seasonal markdowns in the Dollar Tree segment resulting from the improved sell-through of Easter merchandise in the current quarter.
•Distribution costs decreased 5 basis points resulting from the prior year quarter including COVID-19 premium pay of $2 per hour for all hourly associates for hours worked beginning March 8, 2020, partially offset by unfavorable inventory reconciliations on the Dollar Tree segment.
Distribution costs increased approximately 45 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associatescosts in the Dollar Tree segment.
Selling, General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 13 Weeks Ended | | | | | | |
| | May 1, | | May 2, | | Percentage
Change | | | | | | |
| (dollars in millions) | | 2021 | | 2020 | | | | | | |
Selling, general and administrative
expenses | | $ | 1,447.1 | | | $ | 1,429.0 | | | 1.3 | % | | | | | | |
Selling, general and administrative
expense rate | | 22.3 | % | | 22.7 | % | | (0.4) | % | | | | | | |
The decrease in the selling, general and administrative expense rate in the 13 weeks ended May 1, 2021 was the result of the net of the following:
•Payroll expenses decreased 55 basis points primarily due to lower COVID-19-related store payroll costs, partially offset by deleveraging resulting from the comparable store net sales decrease on the Family Dollar segment. The 13 weeks ended May 2, 2020 included approximately $57.5 million, or 90 basis points, of store payroll costs for a $2 per hour premium for all hours worked during the 13 weeks ended August 1, 2020. Total distribution center COVID-19-related expenses were approximately $11.4 million, or 20 basis points of this increase.
The increase in gross profit margin in the 26 weeks ended August 1, 2020 was a result of the following:
Occupancy costs decreased approximately 50 basis points as a result of the leverage from the increase in comparable store net sales.
Markdown costs decreased approximately 10 basis points resulting primarily from the prior year including markdowns related to Family Dollar store closures and clearance sales and lower promotional activity on the Family Dollar segment as a result of the increase in sales. This decrease was partially offset by $9.8 million of uninsured markdown costs for stores affected by civil unrest and higher seasonal markdowns in the Dollar Tree segment due to the lower than planned sell-through on Easter merchandise as a result of the COVID-19 pandemic.
Shrink costs decreased approximately 10 basis points resulting from favorable inventory reconciliations on the Family Dollar segment in the current year, partially offset by unfavorable inventory reconciliations on the Dollar Tree segment.
Merchandise cost, including freight, as a percentage of net sales, was consistent in the 26 weeks ended August 1, 2020 and the same period last year. Incremental tariff costs of approximately $33.8 million and sales of lower margin consumable merchandise were offset by improved initial mark-on and lower freight costs.
Distribution costs increased approximately 35 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associates a $2 per hour premium for all hours worked since March 8, 2020. Total distribution center COVID-19-related expenses were approximately $17.8 million, or 15 basis points of this increase.
Selling, General and Administrative Expenses
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | 13 Weeks Ended | | | | 26 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change |
| (dollars in millions) | | 2020 | | 2019 | | | 2020 | | 2019 | |
Selling, general and administrative
expenses | | $ | 1,541.3 |
| | $ | 1,379.6 |
| | 11.7 | % | | $ | 2,970.3 |
| | $ | 2,721.3 |
| | 9.2 | % |
| As a percentage of Net sales | | 24.5 | % | | 24.0 | % | | 0.5 | % | | 23.6 | % | | 23.6 | % | | — | % |
The increase in selling, general and administrative expenses, as a percentage of net sales, in the 13 weeks ended August 1, 2020 was a result of the following:
Payroll expenses increased approximately 130 basis points primarily due to incremental costs associated with the COVID-19 pandemic and an increase in incentive compensation and stock compensation costs resulting from improved operating performance in the Family Dollar segment. These increases were partially offset by leverage from the comparable store net sales increase and decreases in workers’ compensation expenses and benefits costs, as well as 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 quarter and other leadership changes made in the fourth quarter of fiscal 2019. Payroll expenses also included $0.6 million in pay continuation for associates whose stores were closed due to civil unrest. Incremental payroll costs associated with the COVID-19 pandemic, including a $2 per hour premium paid to all store hourly associates for all hours worked during the 13 weeks ended August 1,beginning March 8, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonusespayments for store managers quarantine pay and sick pay as well as the related payroll taxes, totaled $114.6 million, or approximately 185 basis points.field management bonuses.
•Other selling, general and administrative expenses decreased approximately 555 basis points as a result of the leverageresulting primarily from the comparablelower 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, decreases in promotional advertising on the Family Dollar segment and in travel due to the COVID-19 pandemic and higher costs in the prior year for the store support center consolidation. These improvements weresupplies expense, partially offset by an increase in insurance costs related to unfavorable development of general liability claims.increased inventory service expenses. The 13 weeks ended August 1, 2020 included approximately $8.1 million, or 10 basis points, of costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic and approximately $2.5 million of expenses, primarily for fixed asset disposals, related to stores damaged in civil unrest.
Store facility costs decreased approximately 20 basis points due to leverage from the comparable store net sales increase and lower electricity costs. The 13 weeks ended August 1, 2020 included approximately $3.9 million, primarily for uninsured repairs, related to stores damaged in civil unrest and approximately $0.9 million of COVID-19-related expenses.
Selling, general and administrative expenses, as a percentage of net sales, was 23.6% in both the 26 weeks ended August 1, 2020 and August 3, 2019. The changes in selling, general and administrative expenses were as follows:
Payroll expenses increased approximately 80 basis points primarily due to incremental costs associated with the COVID-19 pandemic and an increase in incentive compensation, stock compensation costs and store sales bonuses resulting from improved operating performance in the Family Dollar segment. These increases were partially offset by leverage from the comparable store net sales increase and decreases in workers’ compensation and benefits costs, as well as 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 quarter and other leadership changes made in the fourth quarter of fiscal 2019. Incremental payroll costs associated with the COVID-19 pandemic, including a $2 per hour premium paid to all store hourly associates for all hours worked since March 8, 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 $172.1 million, or approximately 135 basis points.
Other selling, general and administrative expenses decreased approximately 45 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, decreases in promotional advertising on the Family Dollar segment and in travel due to the COVID-19 pandemic and higher costs in the prior year for the store support center consolidation. These improvements were partially offset by an increase in insurance costs related to unfavorable development of general liability claims. The 26 weeks ended August 1, 2020 included approximately $17.2 million, or 15 basis points, of costs for the installation of plexiglass sneeze guards at all registers in our stores and incrementalhigher costs for masks, gloves and cleaning supplies due to
the COVID-19 pandemic, and approximately $2.5 millionpandemic. Also in the prior year quarter, inventory service expenses were lower resulting from the postponement of expenses, primarily for fixed asset disposals, relatedinventories from March 15, 2020 through the end of the quarter due to stores damaged in civil unrest.the COVID-19 pandemic.
•Store facility costs decreased approximately 25increased 20 basis points primarily due to leverage fromincreased repairs and maintenance costs. Higher repairs and maintenance costs included higher snow removal costs in the comparable store net sales increase and lower electricity costs. The 26 weeks ended August 1, 2020 included approximately $3.9 million primarily for uninsured repairs related to stores damagedcurrent year. Also, in civil unrest and approximately $1.0 millionthe prior year quarter, we postponed certain maintenance activities as a result of COVID-19-related expenses.the COVID-19 pandemic.
Operating Income
| | | | | 13 Weeks Ended | | | | 26 Weeks Ended | | | | 13 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change | | May 1, | | May 2, | | Percentage
Change | |
| (dollars in millions) | | 2020 | | 2019 | | 2020 | | 2019 | | (dollars in millions) | | 2021 | | 2020 | | |
| Operating income | | $ | 374.9 |
| | $ | 268.9 |
| | 39.4 | % | | $ | 740.8 |
| | $ | 654.4 |
| | 13.2 | % | Operating income | | $ | 519.9 | | | $ | 365.9 | | | 42.1 | % | |
| Operating income margin | | 6.0 | % | | 4.7 | % | | 1.3 | % | | 5.9 | % | | 5.7 | % | | 0.2 | % | Operating income margin | | 8.0 | % | | 5.8 | % | | 2.2 | % | |
Operating income margin increased to 6.0%8.0% for the 13 weeks ended AugustMay 1, 20202021 compared to 4.7%5.8% for the same period last year as operating income margin in the Dollar Tree segment increased 290 basis points and the Family Dollar segment increased approximately 470120 basis points. The increase was partially offset by a 170 basis point decrease in the Dollar Tree segment operating income margin. Operating income in the 13 weeks ended August 1,May 2, 2020 includes approximately $134.9included $73.2 million of COVID-19-related expenses and $16.8 million of uninsured expenses related to civil unrest.
Operating income margin increased to 5.9% for the 26 weeks ended August 1, 2020 compared to 5.7% for the same period last year as operating income margin in the Family Dollar segment increased approximately 350 basis points. The increase was partially offset by a 300 basis point decrease in the Dollar Tree segment operating income margin. Operating income in the 26 weeks ended August 1, 2020 includes approximately $208.0 million of COVID-19-related expenses and $16.8 million of uninsured expenses related to civil unrest.expenses.
Interest Expense, Net
| | | | | 13 Weeks Ended | | | | 26 Weeks Ended | | | | 13 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change | | May 1, | | May 2, | | Percentage
Change | |
| (dollars in millions) | | 2020 | | 2019 | | 2020 | | 2019 | | (dollars in millions) | | 2021 | | 2020 | | |
| Interest expense, net | | $ | 34.8 |
| | $ | 40.1 |
| | (13.2 | )% | | $ | 75.0 |
| | $ | 81.5 |
| | (8.0 | )% | Interest expense, net | | $ | 33.0 | | | $ | 40.2 | | | (17.9) | % | |
|
Interest expense, net decreased $5.3$7.2 million in the 13 weeks ended AugustMay 1, 20202021 compared to the same period last year, resulting from lower average debt outstanding in the current year quarter compared to the same quarter last year.quarter.
Interest expense decreased $6.5 million in the 26 weeks ended August 1, 2020 compared to the same period last year, resulting from lower average debt outstanding in the current year, partially offset by lower interest income.
Provision for Income Taxes
| | | | | 13 Weeks Ended | | | | 26 Weeks Ended | | | | 13 Weeks Ended | | |
| | | August 1, | | August 3, | | Percentage Change | | August 1, | | August 3, | | Percentage Change | | May 1, | | May 2, | | Percentage
Change | |
| (dollars in millions) | | 2020 | | 2019 | | 2020 | | 2019 | | (dollars in millions) | | 2021 | | 2020 | | |
| Provision for income taxes | | $ | 78.4 |
| | $ | 48.1 |
| | 63.0 | % | | $ | 156.0 |
| | $ | 124.1 |
| | 25.7 | % | Provision for income taxes | | $ | 112.4 | | | $ | 77.6 | | | 44.8 | % | |
| Effective tax rate | | 23.1 | % | | 21.1 | % | | 2.0 | % | | 23.5 | % | | 21.7 | % | | 1.8 | % | Effective tax rate | | 23.1 | % | | 23.9 | % | | (0.8) | % | |
The effective tax rate for the 13 weeks ended AugustMay 1, 20202021 was 23.1% compared to 21.1%23.9% for the same period last year. The 2019 rate reflects a reductionyear resulting from additional tax deductions in the reserve for uncertaincurrent year related to restricted stock vesting while last year the restricted stock vesting resulted in an increase in tax positions resulting from statute expirations of $5.8 million.
The effectiveexpense. This benefit to the tax rate for the 26 weeks ended August 1, 2020 was 23.5% compared to 21.7% for the same period last year. The 2019 rate reflectspartially offset by higher state tax rates and lower Work Opportunity Tax Credits as a reductionpercentage of pre-tax income in the reserve for uncertain tax positions resulting from statute expirations of $5.8 million. The current year rate includes 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.quarter.
Segment Information
Our operating results for the Dollar Tree and Family Dollar segments as a percentage of net sales and period-over-period changes are discussed in the following sections.
Dollar Tree
The following table summarizes the operating results of the Dollar Tree segment: | | | | | | | | | | | | | | | | | | | | 13 Weeks Ended | | |
| | | 13 Weeks Ended | | 26 Weeks Ended | | May 1, | | May 2, | | Percentage
Change | |
| | | August 1, 2020 | | August 3, 2019 | | August 1, 2020 | | August 3, 2019 | |
| (in millions) | | $ | | % of Net Sales | | $ | | % of Net Sales | | $ | | % of Net Sales | | $ | | % of Net Sales | |
| (dollars in millions) | | (dollars in millions) | | 2021 | | 2020 | | Percentage
Change | |
| Net sales | | $ | 3,176.9 |
| | | | $ | 2,957.7 |
| | | | $ | 6,254.4 |
| | | | $ | 5,917.1 |
| | | Net sales | | $ | 3,321.3 | | | $ | 3,077.5 | | | |
| Gross profit | | 1,071.9 |
| | 33.7 | % | | 999.0 |
| | 33.8 | % | | 2,052.6 |
| | 32.8 | % | | 2,020.2 |
| | 34.1 | % | Gross profit | | 1,118.3 | | | 980.7 | | | 14.0 | % | |
| Gross profit margin | | Gross profit margin | | 33.7 | % | | 31.9 | % | | 1.8 | % | |
| Operating income | | 306.6 |
| | 9.7 | % | | 337.1 |
| | 11.4 | % | | 588.6 |
| | 9.4 | % | | 731.3 |
| | 12.4 | % | Operating income | | $ | 400.3 | | | $ | 282.0 | | | 42.0 | % | |
| Operation income margin | | Operation income margin | | 12.1 | % | | 9.2 | % | | 2.9 | % | |
Net sales for the Dollar Tree segment increased $219.2$243.8 million, or 7.4%7.9%, for the 13 weeks ended AugustMay 1, 2020,2021 compared to the same period last year. The increase was due to a 3.1%4.7% increase in comparable store net sales and sales from new stores of $150.1$112.2 million. Average ticket increased 22.6%9.5% and customer traffic declined 15.9%4.4%.
Net sales for the Dollar Tree segment increased $337.3 million, or 5.7%, for the 26 weeks ended August 1, 2020, compared to the same period last year. The increase was due to sales from new stores of $313.3 million and a 1.1% increase in comparable store net sales. Average ticket increased 17.3% and customer traffic declined 13.8%.
Gross profit margin for the Dollar Tree segment decreasedincreased to 33.7% for the 13 weeks ended AugustMay 1, 20202021 compared to 33.8%31.9% for the same period last year as a result of the net of the following:
Distribution costs increased approximately 70 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associates a $2 per hour premium for all hours worked during the 13 weeks ended August 1, 2020. Total distribution center COVID-19-related expenses were approximately $6.7 million, or 20 basis points of this increase.
Shrink costs increased 15 basis points resulting from unfavorable inventory reconciliations in the current quarter and an increase in the shrink accrual rate.
Markdown costs were flat, as a percentage of net sales, for the 13 weeks ended August 1, 2020 compared to the same period last year as lower store initiated markdowns were offset by $2.8 million of uninsured markdown costs for stores affected by civil unrest.
•Merchandise cost, including freight, decreased approximately 6585 basis points primarily due to increased sales of higher margin discretionary merchandise, lower freight costs and increased initial mark-on,including a higher Easter sell-through, partially offset by incremental tariffshigher freight costs. Easter sales were significantly lower as a result of approximately $8.2 million.the COVID-19 pandemic in the first quarter of 2020.
•Shrink costs decreased 50 basis points resulting from favorable inventory results in relation to accruals in the current quarter and a decrease in the shrink accrual rate.
•Markdown costs decreased 30 basis points resulting from lower seasonal markdowns due to the higher Easter sell-through in the current year quarter.
•Occupancy costs decreased approximately 1525 basis points resulting primarily from theas a result of leverage due to the comparable store net sales increase in the quarter.
Gross profit margin for the Dollar Tree segment decreased to 32.8% for the 26 weeks ended August 1, 2020 compared to 34.1% for the same period last year as a result of the following:
•Distribution costs increased approximately 50 basis points resulting primarily from higher distribution center payroll and depreciation costs. We paid our hourly distribution center associates a $2 per hour premium for all hours worked since March 8, 2020. Total distribution center COVID-19-related expenses were approximately $10.3 million, or 15 basis points of this increase.
Merchandise cost, including freight, increased approximately 40 basis points primarily due to incremental tariffs of approximately $26.2 million and increased sales of higher cost consumable merchandise, particularly during the Easter selling season, as a result of the COVID-19 pandemic, partially offset by improved initial mark-on.
Shrink costs increased 2010 basis points resulting from unfavorable inventory reconciliationshigher distribution payroll and depreciation costs in the current year and an increase in the shrink accrual rate.
Markdown costs increased 20 basis points resulting from increased seasonal markdowns from the lower than planned sell-through on Easter merchandise as a result of the COVID-19 pandemic and $2.8 million of uninsured markdown costs for stores affected by civil unrest.quarter.
Operating income margin for the Dollar Tree segment decreasedincreased to 9.7%12.1% for the 13 weeks ended AugustMay 1, 20202021 from 11.4%9.2% for the same period last year. The decreaseincrease in operating income margin in the 13 weeks ended AugustMay 1, 20202021 was the result of higherthe gross margin increase noted above, and a decrease in the selling, general and administrative expenses, as a percentage of net sales, and the gross profit margin decrease noted above. Selling,expense rate. The selling, general and administrative expenses increasedexpense rate decreased to 24.0% as a percentage of net sales21.6% in the 13 weeks ended AugustMay 1, 20202021 compared to 22.4%22.7% for the same period last year as a result of the net of the following:
•Payroll expenses increased approximately 175decreased 110 basis points primarily due to incrementallower COVID-19-related store payroll costs associated with the COVID-19 pandemic. The COVID-19-related increases were partially offset byand leverage from the comparable store net sales increase and decreases in workers’ compensation expenses and benefits costs. Payroll expenses alsoincrease. The 13 weeks ended May 2, 2020 included $0.2approximately $33.7 million in pay continuation for associates whose stores were closed due to civil unrest. Incrementalof store payroll costs associated with the COVID-19 pandemic, includingfor a $2 per hour premium paid tofor all store hourly associates for all hours worked during the 13 weeks ended August 1,beginning March 8, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonusespayments for store managers quarantine pay and sick pay as well as the related payroll taxes, totaled $66.0 million, or approximately 210 basis points.field management bonuses.
•Other selling, general and administrative expenses increased approximatelydecreased 5 basis points as a result of an increase in insurance costs related to unfavorable development of general liability claims,resulting primarily from lower store supplies expense, partially offset by lower travel costs due to the COVID-19 pandemic and lower legalincreased inventory service expenses. The 13 weeks ended August 1, 2020prior year quarter included approximately $3.5 million, or 10 basis points, of costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic.
Store facility costs decreased approximately 10 basis points due to leverage from the comparable store net sales increase and lower electricity costs. The 13 weeks ended August 1, 2020 included expenses for repairs to stores damaged by civil unrest.
Operating income in the 13 weeks ended August 1, 2020 includes approximately $76.6 million of COVID-19-related expenses and $5.1 million of uninsured costs related to civil unrest.
Operating income margin for the Dollar Tree segment decreased to 9.4% for the 26 weeks ended August 1, 2020 from 12.4% for the same period last year. The decrease in operating income margin in the 26 weeks ended August 1, 2020 was the result of higher selling, general and administrative expenses, as a percentage of net sales, and the gross profit margin decrease noted above. Selling, general and administrative expenses increased to 23.4% as a percentage of net sales in the 26 weeks ended August 1, 2020 compared to 21.7% for the same period last year as a result of the net of the following:
Payroll expenses increased approximately 160 basis points primarily due to incremental costs associated with the COVID-19 pandemic, including a $2 per hour premium paid to all store hourly associates for all hours worked since March 8, 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 $99.7 million for the 26 weeks ended August 1, 2020.
Other selling, general and administrative expenses increased approximately 5 basis points as a result of an increase in insurance costs related to unfavorable development of general liability claims, partially offset by lower travel costs due to the COVID-19 pandemic. The 26 weeks ended August 1, 2020 included approximately $8.3 million, or 15 basis points, of costs for the installation of plexiglass sneeze guards at all registers in our stores and incrementalhigher costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic. Also in the prior year quarter, inventory service expenses were lower resulting from the postponement of inventories from March 15, 2020 through the end of the quarter due to the COVID-19 pandemic.
•Store facility costs decreased approximatelyincreased 10 basis points primarily due to leverage fromhigher repairs and maintenance expenses. Repairs and maintenance expenses were lower in the comparable store net sales increase. The 26 weeks ended August 1, 2020 included expenses for repairsprior year due to stores damaged in civil unrest.the cancellation or postponement of certain services at the onset of the COVID-19 pandemic.
Operating income in the 2613 weeks ended August 1,May 2, 2020 includes approximately $118.8included $42.2 million of COVID-19-related expenses and $5.1 million of uninsured costs related to civil unrest.expenses.
Family Dollar
The following table summarizes the operating results of the Family Dollar segment:
| | | | | | | | | | | | | | | | | | | | 13 Weeks Ended | | |
| | | 13 Weeks Ended | | 26 Weeks Ended | | May 1, | | May 2, | | Percentage
Change | |
| | | August 1, 2020 | | August 3, 2019 | | August 1, 2020 | | August 3, 2019 | |
| (in millions) | | $ | | % of Net Sales | | $ | | % of Net Sales | | $ | | % of Net Sales | | $ | | % of Net Sales | |
| (dollars in millions) | | (dollars in millions) | | 2021 | | 2020 | | Percentage
Change | |
| Net sales | | $ | 3,100.7 |
| | | | $ | 2,782.9 |
| | | | $ | 6,310.0 |
| | | | $ | 5,632.2 |
| | | Net sales | | $ | 3,155.5 | | | $ | 3,209.3 | | | |
| Gross profit | | 844.3 |
| | 27.2 | % | | 649.5 |
| | 23.3 | % | | 1,658.5 |
| | 26.3 | % | | 1,355.5 |
| | 24.1 | % | Gross profit | | 845.8 | | | 814.2 | | | 3.9 | % | |
| Gross profit margin | | Gross profit margin | | 26.8 | % | | 25.4 | % | | 1.4 | % | |
| Operating income | | 165.1 |
| | 5.3 | % | | 16.8 |
| | 0.6 | % | | 340.6 |
| | 5.4 | % | | 108.7 |
| | 1.9 | % | Operating income | | $ | 211.4 | | | $ | 175.5 | | | 20.5 | % | |
| Operation income margin | | Operation income margin | | 6.7 | % | | 5.5 | % | | 1.2 | % | |
Net sales for the Family Dollar segment increased $317.8decreased $53.8 million, or 11.4%1.7%, for the 13 weeks ended AugustMay 1, 20202021 compared to the same period last year. The increasedecrease was due to a comparable store net sales increasedecrease of 11.6% and $62.22.8%, offset partially by $57.6 million of new store sales, partially offset by lost sales resulting from store closures during fiscal 2019 in connection with our store optimization program.sales. For the 13 weeks ended AugustMay 1, 2020,2021, average ticket increased 25.9%11.3% and customer traffic declined 11.3%.
Net sales for the Family Dollar segment increased $677.8 million or 12.0% for the 26 weeks ended August 1, 2020 compared to the same period last year. The increase was due to a comparable store net sales increase of 13.6% and $133.7 million of new store sales, partially offset by lost sales resulting from store closures during fiscal 2019 in connection with our store optimization program. For the 26 weeks ended August 1, 2020, average ticket increased 21.4% and customer traffic declined 6.4%12.7%.
Gross profit margin for the Family Dollar segment increased to 27.2%26.8% for the 13 weeks ended AugustMay 1, 20202021 compared to 23.3%25.4% for the same period last year. The increase is due to the net of the following:
•Merchandise cost, including freight, decreased approximately 19085 basis points primarily due to increased sales of higher margin discretionary merchandise improvedand higher initial mark-on, offset partially by higher freight costs.
•Shrink expense decreased 60 basis points resulting from favorable physical inventory results in relation to accruals in the current year quarter and lower freight costs, partially offset by incremental tariffs of approximately $2.6 million.a decrease in the shrink accrual rate.
Occupancy•Distribution costs decreased approximately 95 basis points as a result of the leverage from the comparable store net sales increase.
Markdowns at cost decreased approximately 8520 basis points primarily due to store closure and clearance sale markdowns in the prior year quarter and lower promotional activity in the current year, partially offset by $7.0 million of uninsured markdown costs for stores affected by civil unrest.
Shrink expense decreased approximately 40 basis points resulting from favorable inventory reconciliations in the current year and the prior year including an increase in the accrual rate and unfavorable inventory reconciliations.
Distribution costs increased approximately 25 basis points resulting primarily from higherCOVID-19-related distribution center payroll costs. We paid our hourlyThe 13 weeks ended May 2, 2020 included $2.7 million of incremental distribution center associatespayroll costs, including a $2 per hour premium for all distribution center hourly associates for all hours worked during the current quarter. Total distribution center COVID-19-related expenses were approximately $4.7 million, or 15 basis points of this increase.beginning March 8, 2020.
Gross profit margin for the Family Dollar segment increased to 26.3% for the 26 weeks ended August 1, 2020 compared to 24.1% for the same period last year. The increase is due to the net of the following:
•Occupancy costs decreased approximately 100increased 15 basis points as a result of the leveragedeleverage from the comparable store net sales increase and the higher expense in the prior year related to the accelerated amortization of the right-of-use assets for stores we closed during 2019.
Merchandise cost, including freight, decreased approximately 65 basis points primarily due to increased sales of higher margin discretionary merchandise, improved initial mark-on and lower freight costs, partially offset by incremental tariffs of approximately $7.6 million.
Markdowns at cost decreased approximately 40 basis points primarily due to store closure and clearance sale markdowns in the prior year and lower promotional activity in the current year, partially offset by $7.0 million of uninsured markdown costs for stores affected by civil unrest.
Shrink expense decreased approximately 35 basis points resulting from favorable inventory reconciliations in the current year and the prior year, including an increase in the accrual rate and unfavorable inventory reconciliations.
Distribution costs increased approximately 20 basis points resulting primarily from higher distribution center payroll costs. We paid our hourly distribution center associates a $2 per hour premium for all hours worked since March 8, 2020. Total distribution center COVID-19-related expenses were approximately $7.5 million, or 10 basis points of this increase.decrease.
Operating income margin for the Family Dollar segment increased to 5.3%6.7% for the 13 weeks ended AugustMay 1, 20202021 from 0.6%5.5% for the same period last year resulting from the gross margin increase noted above, and a decreaseoffset partially by an increase in the selling, general and administrative expenses as a percentage of net sales. Selling,expense rate. The selling, general and administrative expenses were 21.9% as a percentage of net salesexpense rate was 20.2% in the 13 weeks ended AugustMay 1, 20202021 compared to 22.7%19.9% for the same period last year. The current quarter decreaseincrease in the selling, general and administrative expenses, as a percentage of net sales,expense rate was due to the net of the following:
•Store facility costs increased 25 basis points primarily due to higher snow removal costs in the current quarter and lower repairs and maintenance expenses in the prior year due to the cancellation or postponement of certain services at the onset of the COVID-19 pandemic.
•Other selling, general and administrative expenses decreased approximately 90increased 20 basis points primarily due to higher costsdeleverage from the comparable store net sales decrease and lower inventory service expenses in the prior year relatedas a result of postponement of physical inventories due to the disposal of fixed assets in connection withCOVID-19 pandemic.
•Depreciation and amortization expense increased 5 basis points primarily due to deleverage from the store optimization program, a decrease in promotional advertising and travel during the COVID-19 pandemic and leverage associated with the increase in comparable store net sales during the period, partially offset by an increase in insurance costs related to unfavorable development of general liability claims. The 13 weeks ended August 1, 2020 included $3.9 million or 15 basis points of costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic and $1.9 million ofdecrease.
•Payroll expenses primarily for fixed asset disposals for stores damaged by civil unrest.
Store facility costs decreased approximately 25 basis points primarily due to leveragelower COVID-19-related store payroll costs and lower incentive compensation, partially offset by deleverage from the comparable store net sales increase and lower electricity costs.decrease. The 13 weeks ended August 1,May 2, 2020 included $2.4$23.8 million, or 1075 basis points, of incremental repairs and maintenance expenses for stores damaged by civil unrest.
Payroll expenses increased approximately 40 basis points primarily duepayroll costs related to incremental costs associated with the COVID-19 pandemic and an increase in incentive compensation resulting from the improved Family Dollar operating performance, partially offset by leverage from the comparable store net sales increase and decreases in workers’ compensation expenses and benefits costs, as well as lower temporary help expenses as a result of the prior year including higher expenses to support store-level initiatives. Incremental costs associated with the COVID-19 pandemic, including a $2 per hour premium paid tofor all store hourly associates for all hours worked during the 13 weeks ended August 1, 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 $48.2 million or 155 basis points.beginning March 8, 2020.
Operating income in the 13 weeks ended August 1,May 2, 2020 includes approximately $57.1 million for COVID-19-related expenses and $11.7included $30.4 million of uninsured costs related to civil unrest.COVID-19-related expenses.
Operating income margin for the Family Dollar segment increased to 5.4% for the 26 weeks ended August 1, 2020 from 1.9% for the same period last year 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 20.9% as a percentage of net sales in the 26 weeks ended August 1, 2020 compared to 22.2% for the same period last year. 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 approximately 65 basis points primarily due to a decrease in promotional advertising 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 and leverage associated with the increase in comparable store net sales during the period, partially offset by an increase in insurance costs related to unfavorable development of general liability claims. The 26 weeks ended August 1, 2020 included $7.7 million or 10 basis points of costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic and $1.9 million of expenses primarily for fixed asset disposals for stores damaged by civil unrest.
Store facility costs decreased approximately 40 basis points primarily due to leverage from the comparable store net sales increase and lower electricity costs. The 26 weeks ended August 1, 2020 included $2.4 million of incremental repairs and maintenance expenses for stores damaged by civil unrest.
Payroll expenses decreased approximately 15 basis points primarily due to leverage from the comparable store net sales increase and decreases in workers’ compensation expenses and benefits costs, as well as lower temporary help expenses as a result of the prior year including higher expenses to support store-level initiatives, partially offset by incremental costs associated with the COVID-19 pandemic and an increase in incentive compensation resulting from the improved Family Dollar operating performance. Incremental costs associated with the COVID-19 pandemic, including a $2 per hour premium paid to all store hourly associates for all hours worked since March 8, 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 approximately $72.0 million or 115 basis points.
Operating income in the 26 weeks ended August 1, 2020 includes approximately $87.5 million for COVID-19-related expenses and $11.7 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 and expand 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 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 2613 weeks ended AugustMay 1, 20202021 and August 3, 2019:May 2, 2020:
| | | | | 26 Weeks Ended | | | 13 Weeks Ended |
| | | August 1, | | August 3, | | | May 1, | | May 2, |
| (in millions) | | 2020 | | 2019 | (in millions) | | 2021 | | 2020 |
| Net cash provided by (used in): | | | | | Net cash provided by (used in): | | | | |
| Operating activities | | $ | 1,437.0 |
| | $ | 844.0 |
| Operating activities | | $ | 556.2 | | | $ | 959.0 | |
| Investing activities | | (471.1 | ) | | (488.7 | ) | Investing activities | | (222.8) | | | (235.9) | |
| Financing activities | | 245.4 |
| | (154.0 | ) | Financing activities | | (276.6) | | | 493.6 | |
Net cash provided by operating activities increased $593.0decreased $402.8 million primarily as a result of lower inventory levels as well as higher accounts payable, current liabilities and other liabilities at August 1, 2020, and increased earnings before depreciation and amortizationdue to increases in the current year.merchandise inventories.
Net cash used in investing activities decreased $17.6$13.1 million primarily due to higherlower capital expenditures in the prior year for the Family Dollar store optimization program, including H2 renovations and re-banners. H2 renovations have been 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.quarter.
For the 2613 weeks ended AugustMay 1, 2020,2021, cash used in financing activities was $276.6 million compared to cash provided by financing activities was $245.4of $493.6 million compared tofor the 13 weeks ended May 2, 2020. The cash used in financing activities of $154.0 million for the 26 weeks ended August 3, 2019. The cash provided by financing activities in the current yearquarter is the result of the preemptive draw on our Revolving Credit Facility of $750.0 million partially offset by the final $250.0 million payment on the Senior Floating Rate Notesprimarily due 2020 and a $250.0 million repayment of the Revolving Credit Facility draw. The prior year quarter included $139.2to $241.3 million of cash paid for stock repurchases.
In the prior year first quarter of fiscal 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. pandemic, which was partially offset by the final $250.0 million payment on the Senior Floating Rate Notes.
At AugustMay 1, 2020,2021, our totallong-term borrowings were $4.1$3.25 billion and we had $614.3 million$1.15 billion available under our Revolving Credit Facility. We also have $346.5$390.0 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which approximately $308.5$348.1 million was committed to letters of credit issued for routine purchases of imported merchandise as of AugustMay 1, 2020.
There were no shares repurchased on the open market during the 26 weeks ended August 1, 2020, and we have temporarily suspended share repurchases under the Board repurchase authorization.2021.
We repurchased 1,842,3072,150,572 shares of common stock on the open market for approximately $188.4$250.0 million during the 2613 weeks ended August 3, 2019.May 1, 2021. Approximately $8.7 million in share repurchases had not settled as of May 1, 2021 and this amount was accrued in the accompanying unaudited condensed consolidated balance sheet as of May 1, 2021. We did not repurchase any shares of common stock in the 13 weeks ended May 2, 2020. As of AugustMay 1, 2020,2021, we had $800.0 millionhave $2.15 billion remaining under Board repurchase authorization.
Item 3. 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. DuringAt May 1, 2021, there were no borrowings outstanding under the first quarter of 2020, we preemptively drew on our Revolving Credit Facility in the amount of $750.0 million as a result of the COVID-19 pandemic, of which $500.0 million was outstanding at August 1, 2020. A hypothetical increase of one percentage point on such borrowings would not materially affect our results of operations or cash flows.Facility.
Item 4. Controls and Procedures.
Our management has carried out, with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of AugustMay 1, 2020,2021, our disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
In the first quarter of 2021, we implemented a new lease administration and accounting system that integrates these functions across the company. In conjunction with the implementation, we developed new controls to connect the new system with our existing general ledger system and modified our processes to facilitate the recognition, measurement and disclosure of leases under the applicable accounting standards using the new system. There have been no other changes in our internal control over financial reporting during the fiscal quarter ended AugustMay 1, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. 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 2 - Legal Proceedings to our unaudited condensed consolidated financial statements. 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 1A. Risk Factors.
This section supplements and updates certain ofThere have been no material changes to the information found under Part I, Itemrisk factors described in “Item 1A. “RiskRisk Factors” of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 filed with the Securities and Exchange Commission on March 20, 2020, and under Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the period ended May 2, 2020 filed with the Securities and Exchange Commission on May 28, 2020, and is based on the information currently known to us and recent developments since the dates of those filings. The matters discussed below should be read in conjunction with the risk factors included in those filings.
However, the risks and uncertainties that we face are not limited to those described below and thoseJanuary 30, 2021, other than as set forth in our SEC filings. Additional risksthe discussion of risk factors in the “Cautionary Note Regarding Forward-Looking Statements” section and uncertainties not presently known to usin the discussion of certain items that have impacted or that we currently believe to be immaterial may also adversely affectcould impact our business and the trading price of our common stock, particularly in light of the changing nature of the COVID-19 pandemic and related economic disruptions.
If the COVID-19 pandemic worsens and new, more restrictive public health measures are implemented, there could be a material adverse impact on our business and results of operations.
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. To date, we have not experienced a sustained decline in overall sales, although the sales of certain categories, such as higher margin Easter merchandise at the Dollar Tree banner, were materially and adversely impacted.
If the pandemic worsens, governments may reinstate or extend business or personal restrictions, and we could be forced to curtail or restrict operations. We might also experience new disruptions in our supply chain and sources of supply or suffer facility closures. 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 Easter and party merchandise in the Dollar Tree segment, and an increase in consumer demand for household cleaning supplies and corresponding
difficulty in our ability to maintain those items in stock, and an increase in demand for online sales (which is an insignificant part of our business) and home 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 crisis will have on upcoming holiday merchandise sales such as Christmas.
Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of a deepening pandemic-related recessionduring 2021 or political uncertainties, for example because government stabilization efforts terminate or are reduced prematurely.
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 pandemic and the related recession and increase in unemployment. We believe the economic intervention has materially benefited our sales. Some of these measures have been exhausted and replaced with lesser measures and we anticipate others will eventually be modified, reduced or discontinued in whole or in part. There can be no assurance that any on-going efforts to stabilize the economy will be sufficient to mitigate the economic crisis. 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.
To date, the pandemic has not created material disruptions in the functioning of the credit or financial markets or impacted our credit ratings. However, we can provide no assurances that material disruptions in the credit or financial markets will not occur in the future or that such disruptions would not adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.
We are unable to predict the full extent to which COVID-19 and the resulting recession, or the timing or extent of any economic recovery, will affect our customers, associates, suppliers, vendors, other business partners or our business, results of operations and financial condition. If the pandemic-related recession is prolonged and/or worsens, it could amplify many of the other risks describedas set forth in the “Risk Factors”“Other Items” section within “Item 2. Management’s Discussion and Analysis of our most recentFinancial Condition and Results of Operations” of this Form 10-K.10-Q.
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, which represents a material benefit to us. While U.S. and Chinese senior officials have stated that they are committed to implementing the agreement, President Trump has questioned whether China is living up to its obligations and has further alluded to possible action against China for its role in the COVID-19 crisis.
Recently, the U.S. and Chinese governments have taken certain actions that appear to indicate worsening relations between the two countries. Such actions include:
The signing of an Executive Order by President Trump revoking Hong Kong’s preferential trade status with the U.S.;
The closing of the Chinese diplomatic consulate in Houston, Texas and of the U.S. consulate in the city of Chengdu, China and the imposition of sanctions by the U.S. on officials of China and Hong Kong and by the Chinese government on certain U.S. lawmakers; and
Steps by the U.S. government to restrict access by Chinese companies to U.S.-developed semiconductor technology and to require a Chinese digital company to divest operations in the United States.
There is a risk that these actions will further escalate trade tensions between the U.S. and China, resulting in a weakening or disruption in trade relations between the two countries, which could adversely affect our ability to source merchandise from our Chinese suppliers in a timely manner and at a favorable cost.
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 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We did notThe following table presents our share repurchase any sharesactivity during the first quarter of common stock on the open market in the 13 weeks ended August 1, 2020. 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Period | | Total number of shares purchased | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) |
| January 31, 2021 - February 27, 2021 | | — | | | $ | — | | | — | | | $ | 2,400.0 | |
| February 28, 2021 - April 3, 2021 | | 359,842 | | | 115.61 | | | 359,842 | | | 2,358.4 | |
| April 4, 2021 - May 1, 2021 | | 1,790,730 | | | 116.38 | | | 1,790,730 | | | 2,150.0 | |
| Total | | 2,150,572 | | | $ | 116.25 | | | 2,150,572 | | | $ | 2,150.0 | |
As of AugustMay 1, 2020,2021, we had approximately $800.0 million$2.15 billion remaining under Board repurchase authorization.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
On August 24, 2020, we entered into an Amendment to Retention Agreement (“Amendment”) with Michael A. Witynski, who was promoted from Enterprise President to President and Chief Executive OfficerNone.
The Amendment increases the multiplier that would be used to calculate a severance payment to Mr. Witynski, under specified circumstances, in the event of his termination of employment following a change in control of the company, from 1.5 times his reference salary plus reference bonus (as defined in the Retention Agreement) to 2.5 times. This change is consistent with our previously disclosed policy regarding the amount of severance to be provided to our Chief Executive Officer.
The current form of Retention Agreement for executive officers, including Mr. Witynski, is attached as Exhibit 10.1 to our Form 10-Q for the quarter ended November 3, 2018, filed with the Securities and Exchange Commission on November 29, 2018.
Item 6. Exhibits.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference | | |
| Exhibit | | Exhibit Description | | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 3.1 | | | | 8-K | | 3.1 | | 6/21/2013 | | |
| 3.2 | | | | 8-K | | 3.1 | | 12/3/2020 | | |
| 10.1 | | | | | | | | | | X |
| 31.1 | | | | | | | | | | X |
| 31.2 | | | | | | | | | | X |
| 32.1 | | | | | | | | | | X |
| 32.2 | | | | | | | | | | X |
| 101 | | The following financial statements from our Form 10-Q for the fiscal quarter ended May 1, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Income Statements, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Condensed Consolidated Financial Statements | | | | | | | | X |
| 104 | | The cover page from our Form 10-Q for the fiscal quarter ended May 1, 2021, formatted in Inline XBRL and contained in Exhibit 101 | | | | | | | | X |
|
|
| | | | | | | | | | |
| | | | | Incorporated by Reference | | |
| Exhibit | | Exhibit Description | | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 3.1 | | | | 8-K | | 3.1 | | 6/21/2013 | | |
| 3.2 | | | | 8-K | | 3.1 | | 6/12/2020 | | |
| 31.1 | | | | | | | | | | X |
| 31.2 | | | | | | | | | | X |
| 32.1 | | | | | | | | | | X |
| 32.2 | | | | | | | | | | X |
| 101 | | The following financial statements from our Form 10-Q for the fiscal quarter ended August 1, 2020, formatted in Inline XBRL: (i) Condensed Consolidated Income Statements, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements | | | | | | | | X |
| 104 | | The cover page from our Form 10-Q for the fiscal quarter ended August 1, 2020, formatted in Inline XBRL and contained in Exhibit 101 | | | | | | | | X |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | DOLLAR TREE, INC. |
| | | |
| Date: | May 27, 2021 | By: | DOLLAR TREE, INC. |
| | | |
Date: | August 27, 2020 | By: | /s/ Kevin S. Wampler |
| | | Kevin S. Wampler |
| | | Chief Financial Officer |
| | | (principal financial officer) |
