Q3 2025 Dollar Tree Inc Earnings Call

Speaker #1: Greetings. Welcome to the Dollar Tree Q3 2025 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation.

Speaker #1: Greetings. moment. Welcome to the DOLLAR TREE, Q3, 2025 earnings conference call. At this time, all participants formal presentation. If anyone should require operator assistance during the conference, please question-and-answer session will follow the press star zero on your telephone are in a listen-only mode.

Operator: Greetings. Welcome to the Dollar Tree Q3 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Bob LaFleur, Senior Vice President of Investor Relations. Thank you. You may begin.

Speaker #1: the conference over to Bob LaFleur, Senior VP of Investor Relations. Thank you. You may begin.

Robert LaFleur: Good morning, and thank you for joining us to discuss Dollar Tree's third quarter fiscal 2025 results. With me today are Dollar Tree CEO Mike Creedon and CFO Stewart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans, and future prospects are considered forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements.

Speaker #2: 2025 results. With me today Good morning, and thank you for joining us to are DOLLAR TREE CEO Mike Creedon and CFO Stuart Glendinning. Before we begin, I would like to remind everyone

Speaker #2: Today, we will discuss the company's considered forward-looking statements under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995, focusing on Dollar Tree's third quarter of fiscal 2025.

Speaker #2: These statements are subject to expectations, plans, and future prospects, and are that some of the remarks that we will make regarding risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements.

Speaker #2: For information on the risks and uncertainties that could affect our actual results, please see the risk factors, business, and management's discussion and analysis of financial condition and results of report on Form 10-K filed on March 26, 2025, our most recent press release, and Form 8-K, and other filings with the operations sections in our annual SEC.

Robert LaFleur: For information on the risks and uncertainties that could affect our actual results, please see the risk factors, business, and management's discussion and analysis of financial condition and results of operations sections in our annual report on Form 10-K filed on 26 March 2025, our most recent press release, and Form 8-K and other filings with the SEC. We caution against any reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a GAAP basis.

Speaker #2: We caution against any reliance on any forward-looking statements made today and we disclaim any obligation to update any forward-looking statements except as required by law.

Speaker #2: Also, during this financial measures, reconciliations call, we will discuss certain non-GAAP of these non-GAAP items to the most directly comparable GAAP financial measures, our provided in today's earnings release, available on the IR section of non-GAAP measures are not intended to be a substitute for GAAP results.

Speaker #2: Unless otherwise stated, we will refer to our website. These are our financial results on a GAAP basis. Additionally, unless otherwise stated, all discussions today refer to our results from continuing operations, and all comparisons discussed today for the third quarter of fiscal 2025 are against the same period a year ago.

Robert LaFleur: Additionally, unless otherwise stated, all discussions today refer to our results from continuing operations, and all comparisons discussed today for the third quarter of fiscal 2025 are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike and Stewart will take your questions. Given the number of callers who would like to participate in today's session, we ask that you limit yourself to one question. I'd now like to turn the call over to Mike.

Speaker #2: Please note that selected operating metrics is available on the IR section of our website. Following our prepared a supplemental slide deck outlining remarks, Mike and Stuart will take your participate in today's session, we questions.

Speaker #2: ask that you limit yourself to one

Michael Creedon: Thanks, Bob. Good morning, everyone, and thank you for joining us to discuss our third quarter results. It's great to be with you again. When we recently gathered in New York for Investor Day, I said this was the start of a new era for Dollar Tree: one company, one brand, one focus. Our energy is now directed towards strengthening and growing the Dollar Tree business. We delivered a high-quality quarter accompanied by mid-single-digit comps, above-outlook earnings, and strong end-of-quarter momentum heading into the holidays. These results speak to our disciplined execution and focused strategy. Let me start by framing the quarter at a high level, and then Stewart will take you through the financial details. First, I'd like to highlight the strength of our discretionary business, which showed its first positive year-over-year mix shift since Q1 of 2022.

Speaker #3: results. It's great to be with you again. When we recently gathered in New York for Investor Day, I said this was the start of a new era for

Speaker #3: DOLLAR TREE, one company, one brand, one focus. Our energy is now directed towards strengthening and growing the DOLLAR TREE business. We delivered a Given the number of callers who would like to high-quality quarter, accompanied by joining us to discuss our third quarter mid-single-digit comps, end-of-quarter momentum heading into the above-outlook earnings, and strong holidays.

Speaker #3: These results speak to our disciplined execution and focused strategy. Let me start by framing the quarter at a high level, and then Stuart will take you through the financial details.

Speaker #3: First, I'd like to highlight the strength of our discretionary business, which showed its first positive year-over-year mixed shift since Q1 of believe this strength illustrates how proposition, including our growing multi-price our exceptional value assortment, is resonating with our shoppers by helping them meet their needs and desires in the budget-constrained environment that many today.

Michael Creedon: We believe this strength illustrates how our exceptional value proposition, including our growing multi-price assortment, is resonating with our shoppers by helping them meet their needs and desires in the budget-constrained environment that many consumers find themselves today. The three pillars that define Dollar Tree are value, convenience, and discovery. Those are not slogans; they're how we win. They describe a brand that offers customers compelling values across a variety of price points that help them do more with less in stores that are easy to shop and full of surprises worth discovering. While the consumer landscape remains uneven, the underlying story remains consistent: all consumers are seeking value. Marrying that value-seeking behavior with convenience and discovery is the intersection where Dollar Tree thrives. The evidence is clear.

Speaker #3: that define DOLLAR TREE are value, convenience, and The three pillars discovery. Those are not consumers find themselves They describe a brand that offers variety of price points that help them customers compelling values across a do more with less.

Speaker #3: that define DOLLAR TREE are value, convenience, and The three pillars discovery. Those are not consumers find themselves They describe a brand that offers variety of price points that help them customers compelling values across a slogans.

Speaker #3: In stores that are easy to shop and full of surprises worth discovering. While the consumer landscape remains uneven, the They're how we win. underlying story remains consistent.

Speaker #3: All consumers are seeking value. Marrying that convenience and discovery is the intersection where DOLLAR TREE thrives. And the evidence is clear. DOLLAR TREE continues to value-seeking behavior with gain share and attract new shoppers while continuing to serve its large and loyal base of core customers.

Michael Creedon: Dollar Tree continues to gain share and attract new shoppers while continuing to serve its large and loyal base of core customers. Today, we serve an increasingly broad spectrum of shoppers, from core value-focused households to middle and higher-income shoppers who are making deliberate choices about how and where they spend. We had 3 million more households shop with us in Q3 this year compared to Q3 last year. Approximately 60% of these incremental shoppers came from higher-income households, those earning over $100,000, 30% from middle-income households, those earning between $60,000 to $100,000, with the rest from lower-income households, those earning under $60,000. Importantly, Q3 spending growth was broad-based across all income sub-cohorts, including households earning below $20,000. To us, this demonstrates that Dollar Tree isn't just for tough times or for those with limited resources.

Speaker #3: Today, we serve an increasingly broad spectrum of value-focused households to middle-income shoppers, from core, higher-income shoppers who are making deliberate choices about how and where they spend.

30% from middle-income households, those earning between $60,000 and $100,000, with the rest from lower-income households, those earning under $60,000.

Importantly, Q3 spending growth was broad-based across all income subco, including households earning below $20,000.

Michael Creedon: Dollar Tree is for smart shoppers across all income brackets where value, convenience, and discovery matter. At the same time, higher-income households are trading into Dollar Tree. Lower-income households are depending on us more than ever. For example, the average spend for lower-income households grew more than twice as fast in the third quarter as the average spend for higher-income households. While part of this reflects the fact that higher-income households are typically earlier in their customer lifecycle with us, the data clearly shows that our core customer remains loyal and deeply engaged. She's balancing her household budget carefully and continues to count on Dollar Tree for essentials and, increasingly, for the seasonal and discretionary items that bring joy to her and her family. Over time, our goal is to inspire the same level of loyalty in our newer, higher-income customers that we see in our core customers.

To us this demonstrates, the Dollar Tree isn't just for a tough times or for those with limited resources.

Dollar Tree is for smart shoppers across all income brackets, where value, convenience, and discovery matter.

At the same time, higher-income households are trading into Dollar Tree, while lower-income households are depending on us more than ever.

For example, the average spend for lower-income households grew more than twice as fast in the third quarter as the average spend for higher-income households.

Well, part of this reflects the fact that higher income households are typically earlier in their customer life cycle with us.

The data clearly shows that our core customer remains loyal and deeply engaged. She's balancing her household budget carefully and continues to count on Dollar Tree for essentials, and increasingly for the seasonal and discretionary items that bring joy to her and her family.

Michael Creedon: While the average per household spend for our higher-income customers is currently lower, even given their higher income, larger average basket size, and ability to spend more, this is a simple function of trip frequency. Because many of our higher-income customers are still early in their relationship with Dollar Tree, their purchase frequency has significant room to grow. Over time, we believe that growing trip frequency among these higher-income customers, given their propensity to build bigger baskets, will be a powerful growth driver for Dollar Tree. This is why our brand promise matters so much right now. We make it easier for customers to do more with less without trading down on quality or experience. That is what keeps our traffic and baskets healthy in a cautious consumer environment. With that, let's take a look at some of our Q3 highlights.

Well, the average per household spend for our higher-income customers is currently lower, even given their higher income, larger average basket size, and ability to spend more. This is a simple function of trip frequency.

Because many of our higher income customers are still early in their relationship with Dollar Tree. Their purchase frequency has significant room to grow.

Over time, we believe that growing trip frequency among these higher-income customers, given their propensity to build bigger baskets, will be a powerful growth driver for Dollar Tree.

This is why our brand promise matters so much right now.

We make it easier for customers to do more with less without trading down on quality or experience.

And that is what keeps our traffic and baskets healthy in a cautious consumer environment.

Michael Creedon: Comparable sales increased 4.2%, a nice acceleration from the quarter-to-date trend of 3.8% we shared in mid-October. As the results suggest, October finished strong, driven by momentum in our multi-price assortment and a great Halloween. Our Q3 comp was all ticket-driven as traffic was slightly negative. Discretionary mix improved 40 basis points to 50.5%. Comp increased 4.8% in discretionary and 3.5% in consumables. Gross margin performance exceeded expectations, reflecting strong operational execution and cost discipline. Adjusted EPS of $1.21 was nicely above our outlook, and Stewart will go through the drivers behind this upside in his remarks. We believe these results reflect our sharper focus and more disciplined execution. Multi-price was a key driver of our Q3 momentum. As a reminder, multi-price is a deliberate, long-term, data-driven strategy that began back in 2019 to make Dollar Tree more relevant, flexible, and profitable.

And with that, let's take a look at some of our Q3 highlights.

As the results suggest October finished strong driven by momentum in our multi-price, assortment and a great Halloween.

Our Q3 comp was all ticket driven, as traffic was slightly negative. Discretionary mix improved 40 basis points to 50.5%.

Comp sales increased 4.8% in discretionary and 3.5% in consumables.

Gross margin performance exceeded expectations, reflecting strong operational execution and cost discipline.

Adjusted EPS of $1.21 was nicely above our outlook, and Stuart will go through the drivers behind this upside in his remarks.

We believe these results reflect our sharper focus and more disciplined execution.

Multi-price was a key driver of our Q3 momentum.

Michael Creedon: Multi-price is about evolving our assortment over time to include new, more relevant, and attractively valued items that we could not offer at a fixed price point of $1 or $1.25. Multi-price is one of the most important strategic shifts in Dollar Tree's modern history, and it's working. As we highlighted at our Investor Day, the roughly 5.5% annual comp we've averaged since breaking the dollar in 2022 is among the very best in all of retail. Those of you who attended our Investor Day may recall a slide from Stewart's presentation where he demonstrated how expanded multi-price penetration in categories like electronics, hardware, and Easter had a meaningfully positive impact on sales and per-unit profitability. We've reproduced a similar analysis on our multi-price Halloween assortment this year, which we've included in our supplemental presentation available on our Investor Relations website.

As a reminder, multi-price is a deliberate long-term data-driven strategy that began back in 2019 to make Dollar Tree more relevant flexible and profitable.

Multi-price is about evolving. Our assortment over time to include new more relevant and attractively valued items that we could not offer at a fixed price point of a dollar or a $1.25.

Multi-price is one of the most important strategic shifts in Dollar Tree's modern history.

And it's working.

As we highlighted at our Investor Day, the roughly 5.5% annual comp we've averaged since breaking the dollar in 2022 is among the very best in all of retail.

Those of you who attended our investor day may recall, a slide from Stewart's presentation where he demonstrated, how expanded multi-price, penetration in categories, like Electronics, hardware and Easter had a meaningfully positive impact on sales and per unit profitability.

Analysis on our multi-price. Halloween assortment this year.

Michael Creedon: Our Halloween performance this year is another clear example of the power of multi-price. This year, our Halloween assortment generated over $200 million in sales, an all-time record. But to see the full impact of multi-price, let's go back to Halloween 2022, when multi-price was still in its infancy. That year, multi-price represented about 3% of units sold, 10% of sales, and 7% of merchandise gross margin across our full Halloween assortment. Fast forward to 2025, on a 25% larger base of sales, where multi-price accounted for roughly 1/4 of our total Halloween sales and merchandise gross margin, but only 8% of Halloween units sold. We are continually engineering incremental value and profitability drivers into our multi-price assortment. Across Halloween this year, each multi-price item that we sold generated 3.5x more profit than each non-multi-price item we sold.

Which we've included in our supplemental presentation available, on our investor relations website.

Our Halloween performance this year is another clear example of the power of multi-price. This year our Halloween assortment generated over million dollars in sales and all-time record.

But to see the full impact of multi-price, let's go back to Halloween 2022. When multi-price was still in its infancy that year, multi-price represented about 3% of units, sold 10% of sales, and 7% of merchandise. Gross margin across our full Halloween assortment, fast forward to 2025, on a 25% larger base of sales, where multi-price accounted for roughly a quarter of our total Halloween sales and merchandise gross margin, but only 8% of Halloween units sold.

we are continually engineering incremental value and profitability drivers into our multi-person assortment

Michael Creedon: This is a full turn higher than Halloween 2022. By combining this increased per-unit profitability with a higher multi-price mix, we were able to generate approximately 25% more margin dollars from our Halloween assortment this year compared to 2022, while selling approximately 10% fewer units. This is just the positive impact on merchandise margin. It doesn't take into consideration any labor or distribution cost savings that come from handling fewer units. Looking at it this way, multi-price is a powerful growth and profitability driver. It broadens our value proposition and relevance to our customers, allows us to compete more effectively, helps drive cost leverage, and sets the business up for long-term success. More importantly, we are just getting started. Multi-price is not a one-and-done proposition. We expect these dynamics to play out across every holiday and special occasion and strengthen as our multi-price penetration expands.

A cross Halloween this year. Each multi-price item that we sold generated 3 and a half times more profit than each non multi-price item. We sold.

This is a full turn higher than Halloween 2022.

By combining this increased per unit profitability with a higher multi-price. Mix. We were able to generate approximately, 25% more margin dollars from our Halloween assortment this year compared to 2022 while selling approximately 10% fewer units.

And this is just the positive impact on merchandise margin.

It doesn't take into consideration any labor or distribution cost savings that come from handling fewer units.

Looking at it this way, multi-price is a powerful growth and profitability driver. It broadens our value proposition and relevance to our customers, allowing us to compete more effectively, helping drive cost leverage, and setting the business up for long-term success.

Michael Creedon: Over time, our customers will let us know what the right multi-price mix ultimately is, but we're confident that it's meaningfully higher than where we are today. So let's take a look at some broader merchandising highlights from the quarter. Discretionary categories accelerated through the quarter with standout performances in party and home decor. Consumables were steady, led by household cleaning, personal care, snacks, and cookies. Seasonal performance was strong, particularly towards the end of the quarter. We planned the inventory carefully, had strong in-store execution, and are pleased with our sell-through. Those wins are proof points for our merchandising strategy and ever-changing, more relevant assortment that drives trip completion and, more importantly, enhances profitability and margin performance. Today, with a wider assortment of multi-price merchandise and restickering largely complete, 85% of the items in our store are still priced at $2 or below.

More importantly, we are just getting started. Multi-price is not a 1 and done proposition. We expect these Dynamics to play out across every holiday and special occasion and strengthen as our multi-price. Penetration expands

Over time, our customers will let us know what the Right multi-price. Mix ultimately is.

But we're confident that it's meaningfully higher than where we are today.

So, let's take a look at some broader merchandising highlights from the quarter.

Discretionary categories accelerated through the quarter with standout performances in party and Home Decor. Consumables were steady led by household, cleaning Personal Care, snacks and cookies.

Seasonal performance was strong, particularly towards the end of the quarter. We planned the inventory carefully, had strong in-store execution, and are pleased with our sell-through.

Those winds are proof points for our merchandising strategy and ever-changing relevance. Assortment that drives trip completion, and more importantly, enhances profitability and margin performance.

Michael Creedon: Offering a broad range of price points while staying firmly grounded in value preserves the integrity of the Dollar Tree brand. We believe time, convenience, pack size, and quality are all part of our customer's value calculation, and so is an expanded range of products that address a wide range of shopping occasions. When a customer can fill a basket with snacks, cleaning supplies, home decor items, and seasonal products all at a great value, that's when the Dollar Tree magic is on full display. Q3 results were also powered by strong execution in our stores, supply chain, and support functions. At Investor Day, Jocie Conrad spoke about our commitment to simplify work, elevate standards, and empower our people. In Q3, we saw measurable improvement in these key areas. On store standards, we've rolled out new tools and training that simplify store routines and improve accountability.

Today with a wider assortment of multi-price, merchandise and re stickering largely complete 85% of the items in our store are still priced at $2 or below.

Offering a broad range of price points. While staying firmly, grounded in value preserves, the Integrity of the Dollar Tree brand.

We believe time, convenience, pack size, and quality are all part of our customers' value calculation.

And so is an expanded range of products that address a wide range of shopping occasions.

When a customer can fill a basket with snacks, cleaning supplies home, decor items and seasonal products all at a great value.

That's when the Dollar Tree magic is on Full display.

Q3 results were also powered by strong execution in our stores, supply chain, and support functions.

At Investor Day, Jossie Conrad spoke about our commitment to simplify work, elevate standards, and empower our people. In Q3, we saw measurable improvement in these key areas.

Michael Creedon: The results are visible with cleaner aisles, stock shelves, and faster checkouts, with more to come. On associate engagement, our Race to Gold initiative continues to gain traction. As we've increased our investment in training and career progression, we've seen continued improvement in turnover. In supply chain, the network is performing at a very high level. Service levels and in-stocks coming out of this year's peak season are among the highest we've seen, and our planned increases in distribution capacity over the next several years should allow us to unlock even greater operating efficiencies and distribution cost savings. In technology, we continue to modernize our back-office systems and upgrade store infrastructure. These investments are simplifying work and enabling smarter decision-making in merchandising and replenishment. All of this comes down to one thing: making it easier for our teams to deliver a consistently great experience for our customers.

On store standards, we've rolled out new tools and training that simplify store routines and improve accountability.

In technology, we continue to modernize our back office systems and upgrade store infrastructure. These Investments are simplifying work and enabling smarter decision-making in merchandising and replenishment. All of this comes down to 1 Thing. Making it easier for our teams to deliver a consistently great experience for our customers.

Michael Creedon: With the Family Dollar sale behind us, we are already seeing measurable improvements in our culture and performance. We are fully aligned behind one brand, one set of priorities, and one mission, with leadership and investment focus concentrated on growing Dollar Tree. Every decision across product, stores, technology, supply chain, and people is aligned to strengthening one business. That alignment brings speed and accountability. Teams test, learn, and scale faster, and we now measure progress across a single set of metrics directly tied to creating shareholder value. We are moving forward with purpose, clarity, and conviction, guided by the five strategic priorities we laid out at our Investor Day. Surprise and delight our customer with an expanded, more relevant assortment. Manage expenses with agility by controlling the cost of the goods we sell and managing our SG&A with discipline to drive operating leverage and profitability.

With the Family Dollar sale behind us, we are already seeing measurable improvements in our culture and performance. We are fully aligned by one brand, one set of priorities, and one mission.

With leadership and investment Focus concentrated on growing Dollar Tree.

Every decision.

Across product stores, technology, supply chain, and people is a line to strengthening one business.

That alignment brings speed and accountability teams, test, learn and scale, faster. And we now measure progress across a single set of metrics directly tied to creating shareholder value.

We are moving forward with purpose, clarity, and conviction, guided by the 5.

Strategic priorities. We laid out at our investor day.

Surprise and delight our customers with an expanded, more relevant assortment.

Michael Creedon: Create a strong connection with our customers with cost-effective, quick-return, data-driven marketing. Open more stores and improve the condition of our fleet. And finally, improve the in-store experience for our customers by raising the bar on our store standards. At the foundation of these priorities are a fast, flexible, and efficient supply chain and disciplined financial management that focuses on high-return investments and smart capital allocation. And at the forefront of our success is our people, the more than 150,000 associates who show up every day to serve our customers, support their colleagues, and strengthen the communities where we operate. They are the reason we do what we do and the driving force behind every decision we make. As you heard me emphasize at Investor Day, we manage this business with a focus on what I call the say-do ratio, making clear commitments and delivering on those commitments.

Manage expenses with agility by controlling the cost of the goods we sell and managing our sgna with discipline to drive operating leverage and profitability.

Create a strong connection with our customers with cost-effective quick, return, data-driven marketing.

Open more stores and improve the condition of our Fleet.

Finally improve the in-store experience for our customers by raising the bar on our store standards.

At the foundation of these priorities are a fast flexible and efficient supply chain and disciplined financial management that focuses on high return Investments and smart Capital, allocation.

And at the Forefront of our success is our people.

The more than 150,000 Associates who show up every day to serve our customers support their colleagues and strengthen the communities where we operate.

they are the reason we do what we do in the driving force behind every decision, we make

As you heard me emphasize at investor day, we manage this business with a focus on what I call the say-do ratio.

Michael Creedon: This mindset builds trust and accountability across the organization, and we believe that maintaining alignment between what we say and what we do is how we deliver consistent performance over time. In summary, we are pleased with our Q3 results. We're building a stronger foundation for the future, and we're confident about the direction we're heading. With that, I'll turn it over to Stewart. Thanks, Mike, and good morning, everyone. Q3 comp sales increased 4.2%, and adjusted EPS was $1.21. Both our comp performance and our adjusted EPS were ahead of the expectations we shared in mid-October. The 40 basis points of Q3 comp acceleration between the middle and end of October was driven by a late but strong performance in Halloween sales on the back of a deeper multi-price assortment and excellent execution across our stores. Dollar Tree's seasonal assortment and value resonated strongly with shoppers.

Making clear commitments and delivering on those commitments.

This mindset builds trust and accountability across the organization and we believe that maintaining alignment between what we say and what we do is how we deliver consistent performance over time.

In summary, we are pleased with our Q3 results.

We're building a stronger foundation for the future, and we're confident about the direction we're heading.

With that, I'll turn it over to Stuart.

Thanks, Mike, and good morning, everyone.

Q3 comp sales increased 4.2%, and adjusted EPS was $1.21.

Both our comp performance and our adjusted EPS were ahead of the expectations we shared in mid-October.

The 40 basis points of Q3 comp acceleration between the middle and end of October was driven by a late but strong performance in Halloween sales, on the back of a deeper multi-price assortment and excellent execution across our stores.

Michael Creedon: Our EPS improvement versus expectations was largely driven by freight, higher discretionary sales mix, and SG&A. With that, let's go over the details of our third-quarter results. Q3 net sales increased 9.4% to $4.7 billion. Consistent with our expectations, Q3 comp growth was primarily ticket-driven as traffic was slightly negative. Average ticket growth was supported by increased multi-price penetration, particularly across our Halloween assortment and the pricing actions we began rolling out last quarter. Importantly, strong execution around merchandise cost, tariff mitigation, freight, and operating expenses helped drive profitability. Q3 gross margin expanded 40 basis points to 35.8%. These results reflect the strength of our assortment and the agility of our merchandising, supply chain, and store operations teams.

Dollar Tree is seasonal, assortment and value. Resonated strongly with shoppers.

Our EPS Improvement versus expectations was largely driven by Freight higher discretionary, sales, mix and sgna.

With that, let's go over the details of our third quarter results.

Q3 net sales increased 9.4% to 4.7 billion dollars.

Consistent with our expectations. Q3 comp growth was primarily ticket driven as traffic was slightly negative.

Average ticket growth was supported by price penetration, particularly across our Halloween assortment and the pricing actions we began rolling out last quarter. Importantly, strong execution around merchandise, cost tariff mitigation, freight, and operating expenses helped drive profitability.

Q3 gross margin expanded 40 basis points to 35.8%.

Michael Creedon: The key drivers of this improvement were merchandise margin, successful execution of our five merchant levers, renegotiation, re-engineering, shifting country of origin, discontinuing, and targeted price changes, all contributed to our ability to manage increased costs from tariffs. Freight, import, and inbound freight rates were favorable versus prior year, with lower spot market utilization and better container flow-through at our DCs. Domestic transportation costs were also favorable. Mix, discretionary and seasonal categories, particularly Halloween, were stronger than expected, increasing the realized mark-on. Markdowns, as part of the ongoing strategic initiative to increase shelf productivity that we outlined at Investor Day, we identified and wrote off various slow-turning SKUs. This will create room for more productive items and help optimize storage space utilization in our stores and DCs. The total impact to Q3 earnings was approximately $56 million, or approximately $0.21 of EPS.

These results reflect the strength of our assortment, and the agility of our merchandising supply chain and store operations teams.

The key drivers of this improvement were.

Merchandise margin.

Successful execution of our 5 merchant levers: renegotiation and re-engineering.

Freight.

An inbound Freight rates were favorable versus prior year with lower spot Market, utilization and better container flow through at our DCs.

Domestic transportation costs were also favorable, resulting in a positive mix.

Discretionary and seasonal categories, particularly Halloween.

was stronger than expected. Increasing the realized mark on the

markdowns as part of the ongoing strategic initiative to increase Shell productivity that we outlined at Investor Day. We identified and wrote off various slow-turning SKUs.

This will create room for more productive items and help optimize storage space utilization in our stores and DCs.

The total impact to Q3 earnings was approximately $56 million.

Michael Creedon: We believe we will see increased sales and profits per store going forward as we bring in new items or reallocate shelf space to existing but faster-turning products. Shrink, overall, shrink was higher than last year, but in line with our expectations. These drivers, taken together, drove the Q3 gross margin performance. At the Dollar Tree segment level, our Q3 adjusted SG&A rate increased 160 basis points to 26.2%, driven by higher store payroll related to wage increases and restickering, general liability claims costs, and DNA from elevated store investments. These were partially offset by sales leverage. As a reminder, we do not expect costs related to restickering and other price-related activities to be repeated next year. Also, the wage-related payroll increases this year were expected and planned. Looking forward to next year, we expect wage growth to moderate.

Or approximately $0.21 of EPS.

We believe We will see increased sales and profits per store going forward as we bring in new items, or reallocate shell space, to existing, but faster, turning products

Shrink.

Overall shrink was higher than last year, but in line with our expectations.

These drivers taken together drove the Q3 gross margin performance.

At the Dollar Tree, segment level, our Q3 adjusted sgna rate. Increased 160, basis points to 26.2%.

Driven by higher store payroll related to wage increases and restoring general liability claims costs and DNA from elevated store investments.

These were partially offset by sales Leverage.

As a reminder, we do not expect costs related to restricting and other price related activities to be repeated next year.

Also, the wage related payroll increases this year were expected and planned.

Michael Creedon: As we discussed at Investor Day, on a go-forward basis, our goal is to grow Dollar Tree segment SG&A per store below the rate of inflation while reinvesting selectively in high-return initiatives that enhance the customer experience and the long-term profitability of our store base. We believe this will result in future SG&A cost leverage. Adjusted corporate SG&A should be considered net of TSA income because of the costs we carry in order to service the Family Dollar transition. Using this lens, our adjusted corporate SG&A rate, net of the $24 million of TSA income, leveraged 80 basis points to 2.4%, a positive step toward our goal of reducing corporate SG&A to 2% of sales by fiscal 2028. Adjusted operating income increased 4.1% to $345 million.

Looking forward to next year, we expect wage growth to moderate.

As we discussed at investor day on a go forward basis. Our goal is to grow Dollar Tree segment, sgna per store below the rate of inflation. While reinvesting selectively in high return initiatives, that enhance the customer experience and the long-term profitability of our store base, we believe this will result in future sgna cost. Leverage

Adjusted corporate SG&A should be considered net of TSA income because of the costs we carry in order to service the Family Dollar transition.

Using this lens are adjusted corporate sgna rate, net of the 24 million of kiaa income, leveraged, 80 basis points to 2.4% a positive step toward our goal of reducing corporate sgna to 2% of sales by fiscal 2028.

Michael Creedon: Our operating margin contracted by 30 basis points to 7.3%, reflecting the offset between the gross margin expansion and SG&A deleveraging, partially driven by cost headwinds such as restickering that will not repeat in 2026. Keep in mind our comments with respect to anticipated SG&A leverage next year at both the Dollar Tree segment and the corporate level. Net interest expense and our adjusted tax rate were broadly in line with expectations. Adjusted EPS from continuing operations increased 12% to $1.21. Moving on to the balance sheet and free cash flow. Inventory was down $143 million, or 5% versus prior year, while sales increased by 9.4%. Our store count increased by 4.5%, and we ramped up our DCs in Ocala and Odessa. This reduction reflects our focused efforts to increase inventory turns and improve shelf productivity.

Adjusted operating income increased 4.1% to $345 million.

Our operating margin contracted by 30 basis points to 7.3%, reflecting the offset between the gross margin expansion and SG&A deleveraging.

Partially driven by cost headwinds, such as restoring that will not repeat in 2026.

Keep in mind our comments with respect to anticipated SG&A leverage next year at both the Dollar Tree segment and the corporate level.

net interest expense and our adjusted tax rate will broadly in line with expectations.

Adjusted EPS from continuing operations, increased 12% to $1.21.

Michael Creedon: We ended the quarter with $620 million of commercial paper notes outstanding and $595 million in cash and cash equivalents. On the Q3 cash flow statement, we generated $319 million in cash from operating activities and had capital expenditures of $376 million. This resulted in negative free cash flow in the quarter of $57 million. Year to date, we've generated $88 million of free cash flow. As a reminder, the fourth quarter is our highest cash-generating quarter because of normally high levels of sales and because our capital expenditures skew towards the first three quarters of the year. In Q3, we purchased 4.1 million shares for $399 million, including excise tax. Subsequent to quarter end, we repurchased an additional 1.7 million shares for $176 million. Year to date, we've completed $1.5 billion of share repurchases, or approximately 16.7 million shares at an average price of $90 per share.

Moving on to the balance sheet and free cash flow: inventory was down $143 million, or 5%, versus the prior year, while sales increased by 9.4%. Our store count increased by 4.5%, and we ramped up our DCs in Ocala and Odessa. This reduction reflects our focused efforts to increase inventory turns and improve shelf productivity.

we ended the quarter with 620 million of commercial paper, notes outstanding in 595 million, in cash and cash equivalents

On the Q3 cash flow statement.

This resulted in negative free cash flow in the quarter of $57 million year to date. We've generated $88 million of free cash flow, as a reminder. The fourth quarter is our highest cash-generating quarter because of normally higher levels of sales and because our capital expenditures skew towards the first three quarters of the year.

In Q3, we purchased 4.1 million shares for 3999 million, including excise tax.

Subsequent to quarter end. We repurchased an additional 1.7 million shares for 176 million.

Michael Creedon: This represents approximately 8% of the shares we had outstanding at the beginning of the year. Our liquidity remains healthy, our balance sheet remains flexible, and we have ample capacity to fund our growth and return significant capital to shareholders. Our capital allocation priorities remain unchanged. Number one, invest in growth. Number two, maintain a strong and flexible balance sheet. And number three, return capital to shareholders. Looking ahead, we expect Q4 comps will come in between 4% and 6%, which should support net sales of $5.4 to $5.5 billion and adjusted EPS in the range of $2.40 to $2.60. On a full-year basis, this would raise our comp outlook to between 5% and 5.5% and our adjusted EPS outlook to $5.60 to $5.80.

Or approximately 16.7 million shares and an average price of $90 per share.

This represents approximately 8% of the shares, we had outstanding at the beginning of the year.

Our liquidity remains healthy, our balance sheet remains flexible, and we have ample capacity to fund our growth and return significant Capital to shareholders.

Our Capital allocation priorities remain unchanged. Number 1, investing growth. Number 2, maintaining a strong and flexible balance sheet and number 3 return Capital to shareholders.

Looking ahead. We expect Q4 comps will come in between 4 and 6 percent which should support net sales of 5.4 to 5.5 billion and adjusted EPS in the range of $2.40 to $2.60.

Michael Creedon: The underlying assumptions incorporated into our full-year outlook are as follows: net sales of approximately $19.35 to 19.45 billion, gross margin expansion of approximately 50 to 60 basis points, reflecting sustained favorability in merchandise margin, freight, and occupancy leverage, with some offset from markdown and shrink. Dollar Tree segment SG&A deleverage of approximately 120 basis points, primarily driven by higher store payroll related to wage increases and restickering and, to a lesser extent, facilities costs and DNA. Corporate SG&A costs we expect corporate SG&A net of $55 million of TSA income to decrease by approximately 3% year over year. Net interest expense of approximately $85 to 90 million, which is about $10 to 15 million below our prior outlook. An effective tax rate of approximately 25%. Shares outstanding of approximately 206.4 million, reflecting our share repurchase activity through 2 December.

On a full year basis. This would raise our comp Outlook to between 5 and 5 and a half percent and our adjusted EPS Outlook to $5.60 to $5.80.

The underlying assumptions incorporated into our full year outlook are as follows.

Net sales of approximately 19.35 to 19.45 billion.

Gross margin expansion of approximately 50 to 60 basis points, reflecting sustained favorability in merchandise margin, freight, and occupancy leverage, with some offset from markdown and shrink.

Dollar Tree segment SG&A de-lever of approximately 120 basis points.

Primarily driven by higher store, payroll related to wage increases and restoring and to a lesser extent facilities costs in DNA.

Corporate sgna costs. We expect corporate sgna net of 55 million of TSA income to decrease by approximately 3% year-over-year.

To $90 million, which is about $10 to $15 million below our prior outlook.

An effective tax rate of approximately 25%.

Michael Creedon: We remain on track to meet our full-year CapEx target of $1.2 to $1.3 billion. We understand that at this point, many of you are shifting your attention to next year. As is customary, we intend to give a detailed outlook for 2026 on our next earnings call in March. With that said, I will remind you of the directional outlook we provided at our Investor Day, where we outlined an algorithm for adjusted EPS to grow at a 12 to 15% CAGR through 2028, supported by underlying EPS growth of 8 to 10%, with the balance being driven by the unwind of certain discrete items, mostly affecting 2026, with some residual carryover into 2027. To review the underlying details of the algorithm, I direct you to our Investor Day presentation, which is archived on our IR site, and we will give you more specifics and any updates next quarter.

Shares outstanding of approximately 206.4 million, reflecting our share repurchase activity through December 2.

We remain on track to meet our full year capex, Target of 1.2 to 1.3 billion.

We understand that at this point, many of you are shifting your attention to next year, as is customary. We intend to give a detailed outlook for 2026 on our next earnings call in March.

With that said, I will remind you of the directional outlook we provided at our Investor Day, where we outlined an algorithm for adjusted EPS to grow at a 12% to 15% CAGR through 2028.

Supported by underlying EPS growth of 8% to 10%, with the balance being driven by the unwind of certain discrete items, mostly affecting 2026, with some residual carryover into 2027.

Michael Creedon: To wrap up, we're executing well against the roadmap we shared with you in mid-October. Each day, we continue to see tangible proof that the fundamental appeal of this business, value, convenience, and discovery is resonating with customers and translating into strong financial results. With that, I'll turn things back over to Mike. Mike. Thanks, Stewart. Let me wrap up by putting Q3 in the broader context of where we are and where we're going. When we shared our roadmap at Investor Day, we said this transformation was about focus, consistency, and accountability. We believe Q3 was a strong proof point that our strategy is working. We delivered above-market comps, expanded gross margin, and continued to make meaningful cultural progress across the organization. Today, Dollar Tree is a pure-play value retailer with the scale and focus to compete at the highest level.

To review the underlying details of the algorithm, I direct you to our investor Day presentation, which is archived on our IR site and we will give you more specifics in any updates next quarter.

To wrap up, we're executing well against the roadmap we shared with you in mid-October. Each day, we continue to see tangible proof that the fundamental appeal of this business—value, convenience, and discovery—is resonating with customers and translating into strong financial results. With that, I'll turn things back over to Mike. Mike.

Thanks, Stuart. Let me wrap up by putting Q3 in the broader context of where we are and where we're going.

When we shared our roadmap and investor day, we said this transformation was about focus, consistency, and accountability.

We Believe Q3 was a strong proof point that our strategy is working.

We delivered above Market comps. Expanded gross, margin and continued to make meaningful cultural progress across the organization.

Michael Creedon: Post Family Dollar, we have clarity of purpose, and our teams are responding with renewed intensity. As we look to Q4, the setup is solid. Halloween was great, and our Thanksgiving and Christmas assortments are resonating with our customers as we remain focused on consistently delivering unbeatable wow value and the thrill of the hunt experience. As 2025 winds down, let me wrap up by saying first to our associates, thank you. Your dedication, creativity, and pride in the work you do are what makes Dollar Tree special. To our customers, thank you for your trust and loyalty, for choosing us for the moments, big and small, that matter the most in your daily lives. And to our shareholders, thank you for your continued confidence and partnership. With that, Stewart and I are happy to take your questions. Thank you. We will now be conducting a question-and-answer session.

Today, Dollar Tree is a pure-play value retailer with the scale and focus to compete at the highest level.

Post Family Dollar, we have clarity of purpose, and our teams are responding with renewed intensity.

As we look to Q4, the setup is solid. Halloween was great, and our Thanksgiving and Christmas assortments are resonating with our customers as we remain focused on consistently delivering unbeatable, wow value and the thrill of the hunt experience.

That's 2025 winds down. Let me wrap up by saying first to our Associates. Thank you.

What makes Dollar Tree special?

To our customers: Thank you for your trust and loyalty.

For choosing us for the moments, big and small, that matter the most in your daily lives.

And to our shareholders, thank you for your continued confidence and partnership.

With that Stuart and I are happy to take your questions.

Michael Creedon: If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. We ask that you please limit yourself to one question. One moment, please, for our first question. Our first question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question. Great. Thanks, and congrats on another nice quarter. So maybe two parts. Mike, could you elaborate on drivers of the same-store sales acceleration that you saw in October, speak to comp trends that you've seen in November that support the four to six fourth-quarter comp guide?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question. One moment, please, for our first question.

Our first question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.

Great, thanks. And congrats on another nice quarter.

Michael Creedon: And then, Stewart, could you just help break down Gross Margin expansion opportunities in the fourth quarter and how best to think about Gross Margin puts and takes maybe at a high level for next year? Yeah, sure, Matt. As we looked at how the quarter unfolded, Halloween was just a great finish to the quarter. It did come, as we see in times like this, people buying for need and a little closer to need. So it came a little later, but it came incredibly powerfully, and it came with a record number. If you go back, Easter performed that way. A great Easter, a great Halloween. And our setup for Thanksgiving and Christmas is just fantastic. So we really look at what we've done with multi-price and how the assortment's gotten better.

So maybe, maybe, maybe, maybe two parts. Um, Mike, could you elaborate on drivers of the same-store sales acceleration that you saw in October? Speak to comp trends that you've seen in November that support the 4% to 6% fourth quarter comp guide. And then, Stuart, could you just help break down gross margin expansion opportunities in the fourth quarter, and how best to think about gross margin puts and takes, maybe at a high level for next year?

Michael Creedon: Our customer across all incomes is really resonating with that and providing just fantastic sales for us. So we feel really good about our guide on the four to six. Matt, let me pick up on the gross margin for the fourth quarter and then just talk a little bit about next year. So first of all, as we think about the fourth quarter, the same kind of levers that you saw in the third quarter, we detailed some of that in our supplementary materials as well as in my prepared remarks, are going to be drivers in the fourth quarter. You will see a very powerful fourth quarter on the back of those drivers. If you look to next year and just think about next year, freight is a benefit; certainly in that fourth quarter it came through in the third quarter.

Yeah, sure. Matt, as we looked at how the quarter unfolded the, the the Halloween was just a, a great finish, uh, to the quarter. Uh, it did come as we see in times like this, uh, people buying 4 need in a little closer than a need. So it came a little later, but it, it came incredibly powerful and, uh, it came with a, with a record number. Um, if you go back Easter perform, that way, uh, a great Easter, a great Halloween and our setup for Thanksgiving. And Christmas is, is just fantastic. So we really look at, uh, what we've done with multi-price and how the assortments gotten better and our customer across all incomes is is really resonating with that, uh, and providing just fantastic seasons for us. So so we feel really good about, um, our our guide on the, on the 4, to 6.

Michael Creedon: As you look to next year, both freight and markdowns are the areas that we'll be watching. If you think about how we operate our business, we buy to a margin. So when we set up our goal for next year, we shared with you that we said we would be equivalent to this year's margin ±50 basis points, and that's the place that we're targeting. There may be continued benefit in freight as we move into next year. There is some belief that perhaps on the freight side, we'll see a tightening of capacity later in the year, and we are watching the potential shortage of drivers. But understand that the reason I bring up the targeted gross margin is because we use those five merchant levers to achieve that margin. So I think the margin you can take to the bank for next year.

Man, let me pick up on the gross margin for the uh, fourth quarter. And then just talk a little bit about about next year. So first of all, as uh, as we think about the fourth quarter of the same kind of levers that you saw in the third quarter, we detailed some of that in our supplementary materials as well as you know in my prepared remarks are going to be drivers in the fourth quarter. Uh you will see a very powerful fourth quarter uh on the back of of those drivers. Um you if you looked at next year and just think about uh next year Freight is a benefit certainly in that fourth quarter it came through in the third quarter uh as you look to next year both Freight and

Markdowns are the areas that we'll be watching. If you think about,

Uh, how we operate our business: we buy to a margin.

And so, when we set up our goal for next year, we shared with you that we said we would be...

Equivalent to this year's margin plus or minus 50 basis points. And that's the place that we're we're targeting

There may be continued benefit in Freight as we move into next year.

There are some there are, there is there's some belief that, perhaps on the freight side, we'll see a tightening of capacity later in the year, and we are watching the potential shortage of drivers. But understand that the reason I bring up the...

Michael Creedon: The second piece is to refer back to the Investor Day materials that we had. In our recent Investor Day, we shared with you an algorithm that said we would achieve high teens improvement next year. That's on the basis of that same gross margin achievement and based on some of the discrete items that we're expecting to see in the coming year. So we're set up well for next year, and I think that probably gives you the main drivers. Thank you. Our next question comes from the line of Michael Lassar with UBS. Please proceed with your question. Good morning. Thank you so much for taking my question. It's on traffic, and obviously, this was the first decline in traffic that Dollar Tree has experienced in a while.

Targeted gross margin is because we use those five Merchant Needs leaders to achieve that margin. So I think the margin you can take, you can take to the bank for next year. The second piece is to refer back to the investor day materials that we had.

And in our fourth, in our recent investor day, we shared with you an algorithm that said we would achieve High Teens uh uh Improvement next year. That's on the basis of that same, uh, uh, gross margin and based on some of the discrete items that we are. We're expecting uh, to see in the coming years. So, uh, we set up well for next year and I think that probably gives you the main main drivers

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

Michael Creedon: To what degree is that as a result of some of the legacy households pushing back on the price increases that have been taken in the last couple of quarters? And if that's the case, does that give you any pause on your ability to achieve this high teens EPS growth next year in light of the prospect that you might have to make some investments in order to recapture those households that are just dissatisfied with the pricing changes? Thank you so much. Yeah, Michael, we really see traffic as a mix between some internal activity, namely the restickering, and some broader retail trends. We don't see it as a pushback from our customer. And if you look at our performance in the quarter, we had great growth across all income cohorts, and our core customer really had our highest comp.

Good morning, thank you so much for taking my question, it's on traffic. And obviously, this was the first decline in traffic that dollar tree has experienced in a while to what degree is that. As a result of some of the Legacy households pushing back on the price increases that have been taken in the last couple of quarters. And if that's the case,

Any pause on your ability to achieve this high teens EPS growth next year, in light of the prospect that you might have to make some investments in order to recapture those households?

That are just dissatisfied with the pricing changes. Thank you so much.

Michael Creedon: So we look at it and say we saw the traffic decelerate in that August, September timeframe. That was the peak of our restickering, those red stickers. That was the peak distraction for us. And then it was good to see traffic strengthen towards the end of the quarter, really on the backs of that Halloween and that great strength in Halloween. So we believe there was some broad-based retail traffic decel around back to school, some of the sticker shock around back to school. But as we got into the real core of what Dollar Tree does and does, we think, better than anyone, we saw the strength in our Halloween, and we're very excited about what Thanksgiving, Christmas, and all the seasons can do for us. Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

Yeah, Michael, we, we really see traffic as a, as a mix between some internal activity, namely, the restoring, uh, and and some broader retail Trends, we don't see it as a, a push back from our customer. And if you look at our performance in the quarter, we had great growth across all income cohorts, uh, and our core customer really had our highest cough. Um, so we look at it and say we saw the traffic to decelerate in that August September time frame. That was the peak of our re stickering, uh, those red stickers. That was the peak distraction for us. And then it was good to see traffic strength in uh towards the end of the corner, really on the backs of that Halloween and that great strength and Halloween. Um, so we believe there was some, you know, broad-based retail traffic. Decel around back to school. Some of the sticker shock around back to school. Uh but as we got into the real core of what Dollar Tree does and and does we think better than anyone? Um, we

Saw the strength in our Halloween and we're very excited about what, uh, what Thanksgiving and Christmas and all the seasons, uh, can do for us.

Thank you. Our next question comes from the line of John Hine-Buckle with Guggenheim Partners. Please proceed with your question.

Michael Creedon: And Mike, two quick ones. When you think about traffic or divergence between traffic and units, so sort of the idea traffic will be strong, units maybe to a lesser degree because you're basically trading people into higher price point items. Talk about that divergence in your mind. And then secondly, if the units are going to grow at a slower pace, how do you think about space allocation and replanogramming the stores over maybe the intermediate to longer term? First of all, thanks, Rob. We'll always follow our customer on that. We believe that the customer is resonating incredibly well with multi-price. We're hearing that in the surveys we're doing. We're seeing it in how our customers are performing in the store and that real strength in the comp of that core customer.

Hey, Mike, 2 2, quick ones. Um, when you think about traffic or Divergence between traffic and units, so you sort of is the idea of traffic will be strong units, maybe to a lesser degree because your your basically trading people into higher higher price point items talk about that that Divergence in your mind and then secondly you know if if the units are going to grow at a slower Pace, how do you think about space allocation and re-plan the stores? You know over maybe the intermediate to longer term.

First of all, we'd all like to say thanks. Yeah, we'll always.

Customer on that.

Michael Creedon: So yes, when we look at the store, when we take multi-price, we'll take away sections of $1.25. And so your units will naturally decline there as you take that space and make that space more productive. So we do see some of that. But we believe the proof point we have from Break the Dollar was that you took up the price of the whole store. There were elements of the store that just didn't work, and our merchant team took the next buying cycles to really recover that.

Customer is resonating incredibly well with multi-price. Um, we're hearing that in the in the surveys. We're doing we're seeing it and how our customers are performing in the store and that real strength in the cop of that core of that core customer. So yes, when we look at the store, when we take multi-price, we'll take away sections of a 1.25. Uh, and so your units will naturally decline there as you take that space and make that space more productive. Uh, so we do see, we do see some of that. Uh, but we believe

Michael Creedon: What we've seen here in this multi-price evolution and some of the restickering we did based on the inflationary cost environment is that the units have performed better, the traffic has performed better, and we're confident that we can continue to drive that value in our product across these price points and continue to give the customer exactly what they need. So we see that coming together very well for us, and we'll respond to the customer and their trends with how we set up the store. Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Please proceed with your question. Yeah, hi. Good morning. Thank you for taking my question. I wanted to ask you about the mix of multi-price as you think about next year. Just looking out, it does seem like you'll have more conversions.

You know, the the proof point we have from break the dollar, um, was that you took up the price of the whole store. There were elements of the store that that just didn't work. And our Merchants team took the next buying cycle to really recover that what we've seen here in this multi-price Evolution and some of the rest stickering we did based on you know the inflationary cost environment is that the units are performed better, the traffic is performed better. Uh and we're confident that we can continue to drive that value uh, in our product across these price points and continue to give the customer exactly what they need. So we see that coming together very well for us and we'll respond to the customer uh, and their Trends with how we set up the store.

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

Michael Creedon: I would imagine you're still doing more merchandising around improving the multiprice mix. So how do you think the stores look from the standpoint of the multiprice offering as we think about next year? And then how does that play into the way that you are thinking about driving comp next year in terms of traffic versus ticket? Thank you. Yeah, thanks, Ed. I mean, I really want to start with saying 85% of the store is still $2 or less. So we're still early in this multiprice game. And when you look at what the seasons have done, we're going to continue to benefit in those seasons from the multiprice assortment. And we're really looking at everyday essentials and where we can benefit in the assortment there and the shift towards multiprice.

Yeah, hi. Good morning. Thank you for taking my question. Uh, I wanted to ask you about the mix of multi price as you think about next year, um, you know, just looking out, uh, it does seem you'll have more conversions. I would imagine you're still doing more merchandising around, uh, improving the multi.

Mix. So you how do you think the stores look from uh the standpoint of the multi price offering uh as we think about next year and then how does that play into the way that you are thinking about driving comp next year in terms of traffic versus ticket? Thank you.

Michael Creedon: Where it ultimately goes, our customers will respond to us, and we'll respond to them in terms of building it out. But I know it's higher than where we are today, and it's something that we believe sets up a multi-year run where we're able to respond to our customers, wow them with new discovery, and not just at the seasons, but new discovery every day because multiprice contains something on a wow table for us or on an end cap that shows them something they couldn't believe they could get at that price, even though it's a price higher than $2. So we're delivering the everyday value with the majority of the store still at that 2 bucks or less, and we're wowing the customer in what we bring into the multiprice assortment. Thank you. Our next question comes from the line of Paul Lejuez with Citi.

Multi-year run where we're able to respond to our customers. Wow, them with new discovery and not just at the seasons but new discovery every day. Because multi-price contains something on a wow table for us or on an end cap that shows them they something, they couldn't believe they could get at that price, uh, even though it's a price, you know, higher than higher than 2 dollars. So we're delivering the everyday value with the majority of the store. Still at that 2 bucks or less. And we're wowing the customer in what we bring into the multi-person assortment

Michael Creedon: Please proceed with your question. Hey, thanks, guys. Curious if you could talk about Thanksgiving weekend and what you saw from a traffic versus ticket perspective. It sounded like you saw a pickup in traffic around the Halloween period. Curious what you saw Thanksgiving week and weekend. And then that 85% number, I think you're talking in terms of units, in terms of the percent of the store that's still $2 and below. What percent of sales should we think about being above that $2 level? And how does it split between discretionary and consumables? Thanks. Yeah, Paul, let me clear up the first one. So first of all, it's sales dollars that are at the 85% of the store is $2 and less. That is on sales dollars. As we look at how the quarter has started, I said in my prepared remarks, we're really pleased.

Thank you. Our next question comes from the line of Paul, who is with City. Please proceed with your question.

Hey, thanks guys. Um, curious. If you could talk about Thanksgiving weekend and what you saw from a traffic versus ticket perspective, it sounded like you saw a pickup in traffic around the Halloween, uh, period curious. What you saw Thanksgiving week and weekend and then that 85% number. Uh, I think you're talking in terms of units in terms of the percent of the store that's still $2 and Below what percent of sales. Uh would we be? Should we think about being above that 2 dollar level on? How does it split between discretionary and consumables. Thanks.

Michael Creedon: We look at the strength of the seasons, the Thanksgiving, the setup for Christmas, what we've seen so far in Christmas. So we feel really good about the guide for the fourth quarter. We've got one period in, and we're feeling really good about where we sit. Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question. Good morning. Thanks for taking a question. I also have a two-part one. So just on the elasticity front, just curious on the categories you took pricing related to tariff risk and price increases. Just curious how that played out. And then if we do get tariff relief, how do you guys approach that, whether passing on those savings or letting it flow to the bottom line? Thank you. Yeah, thanks, Rupesh. I mean, the elasticity has really come in as we've modeled it.

Yeah, Paul let let me clear up the first 1. So first of all, it's it's sales dollars that are at, uh, the, the 85% of the stores 2 dollars left. That is on that is on sales dollars. Um, as we look at how the quarter has started, uh, you know, I said, in my prepared remarks, we're really, we're really pleased. Uh, we look at, uh, the, the strength of the seasons. The Thanksgiving, the setup for Christmas, what we've seen so far in Christmas. Uh, so we feel really good about the the guide for the fourth quarter. Uh, you know, we've got 1 period in and we're feeling really good about about where we sit.

Thank you. Our next question comes from the line of Rupesh Pri with Oppenheimer. Please proceed with your question. Good morning and thanks for taking my question. I also have a two-part question. Uh, so just on the elasticity front, I'm just curious about the categories where you took pricing related to Tower Trip and the price increases. Just curious how that played out. And then, if we do get tower relief, you know, how do you guys approach that? Whether passing on those savings or letting it go to the bottom line? Thank you.

Michael Creedon: It's very manageable. It's really offset by the mix we see in the multi-price. But most importantly, the value perception is intact. Our customers responding across all income cohorts, core customers, new customers, the 60% of the new three million that have come in making more than $100,000. So we believe that the elasticity is very manageable. And then I do think it's important to go back to that Break the Dollar moment. What we saw there, it's a proof point. You can go back and look, see what happened with traffic. And now our performance, we believe, and what we're seeing in our numbers is better than that and gives us the confidence in the path we're on on this. As for the tariffs, I know it's been a lot in the news. We have, I think, one of the very best global sourcing teams in the business.

Yeah, thanks for your question. I mean, the elasticity has really, you know, it's coming as we've modeled it. Um, it's very manageable. Um, it's it's really offset by the mix. We see and the multi price. But most importantly, the value perception is intact. Uh, our customers responding across all income cohorts core customers, new customers, the 60%

% of the new 3 million that have come in, uh, making more than dollars. So, we believe that the elasticity is, is very manageable. And then I do think it's important to go back to that break the dollar moment. What we saw there, it's a proof point. You can go back and look, see what happened with traffic. And now our performance, we believe, and and what we're seeing in our numbers is, is better than that and gives us the confidence, uh, in the path. We're on on this, uh, you know, as for the tariffs I know it's it's been a lot in the news. Um, we have

Michael Creedon: They are all over this. They've got great partners watching this. We'll see how it unfolds with the Supreme Court, and we'll take action from there. Thank you. Our next question comes from the line of Simeon Gutmann with Morgan Stanley. Please proceed with your question. Hi, this is Zach Fadem on for Simeon. Thanks for taking your questions. Just a couple from our end. Back to the traffic question, is there a way you could compare your frequent and most loyal customers to those who are more episodic? And would you say there's a similar deceleration in traffic trends between both of those groups, or is there a gap in the trend? Yeah, when we break it down, we really look at more our sales across all those income cohorts.

I, I think 1 of the very best Global sourcing teams in the business, they are all over this, uh, they've got great Partners watching this. Uh, we'll see how it unfolds, uh, with the Supreme Court. Uh, and, uh, we'll take action from there.

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

Hi. This is Zach on, for Simeon. Thanks for taking your questions. Just, uh, a couple from our end back to the. The traffic question is, is there a way you could, uh, compare your frequent and most loyal customers to those who are more episodic? And, and you know, would you say there's the similar deceleration in traffic Trends between both of those groups, or is there a Gap in, in the trend?

Michael Creedon: It's really important to us to make sure that as we know multi-price skews and attracts more towards higher income, that we are committed to the base of our business, which is that core customer, that customer that makes around $60,000 a year. We were particularly pleased with how our comps performed at that core customer. They had our highest comps in that customer. So we think that our customer, whether you're new to Dollar Tree or you shop us several times a month, that you're finding what you need as you seek out affordability, you're finding exactly what you need at Dollar Tree. Thank you. Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question. Good morning, guys. Scott Ciccarelli. I think we all understand that there was some internal disruption as you restickered product.

Whether you're new to Dollar Tree or you shop us, you know several times a month uh that you're finding what you need is you seek. Uh if you seek out affordability, you're finding exactly what you need a Dollar Tree.

Thank you. Our next question comes from the line of Scott Terrelli with Truist. Please proceed with your questions.

Michael Creedon: But with the negative traffic this quarter and the expectation to keep expanding MPP, should we just expect Q4 and next year to have a similar mix of traffic and ticket that we saw in Q3? In other words, all of the comp is primarily driven by ticket. Thanks. Yeah, Scott, it's hard to say. We can go back, and we know what we saw in Break the Dollar. You saw the multiple quarters and how the traffic performed there. We believe this time around we were much more strategic. Back then, the only choice was raising everything to $1.25. And as I've mentioned, you had a healthy percentage of the store that just didn't work at that new level. And the merchant team had to go over several buying cycles and re-engineer product, renegotiate, and get product that did work. And you saw what happened with traffic recovery.

Uh, good morning, guys. Gotcha Corelli. Um, I think we all understand that there was some internal disruption as you restricted product, but with the negative traffic this quarter and the expectation to keep expanding MPP, should we just expect 4 q in next year to have a similar mix of traffic and ticket that we saw in 3Q. In other words, it's Prime uh all the compass primarily driven by ticket. Thanks.

Yeah.

Michael Creedon: This time, we were much more strategic in how we took that. We really feel that we have found the right value places to take price. And our customers responded. If you look at the value we took in Halloween or in Christmas, I mean, our customers responded incredibly well to that move. So I look at it and say, I think we were more strategic this time, or we at least had a more strategic opportunity available to us this time. And we'll see how the traffic plays out. Yeah.

It's hard to say, um, we can go back and we know what we saw in in break the dollar. You saw the, the multiple quarters, uh, and how the traffic performed there. We believe this time around, we were much more strategic. I've been back then. The only choice was Raising everything to a dollar 255 and, and as I've mentioned, you had a, a healthy percentage of the store that just didn't work at that new level and the merchant team had to go, uh, over several buying cycles and re-engineer product, and renegotiate, and get product that did work. Uh, and you saw what happened with traffic recovery. This time, we were much more strategic in how we took that, we really feel that we have found the right value places to take price and our customers responded. Uh, if you look

Michael Creedon: And maybe one other thing, just to supplement, I think if you go back to the investment materials we laid out, I mean, that entire strategy is set up to drive higher sales in stores via productivity on the shelves, via the way we intend to market to customers, and based on the way we intend to run better stores. I think that entire setup really is organized to enhance the traffic and the ticket flow. Thank you. Our next question comes from the line of Michael Montani with Evercore. Please proceed with your question. Michael, could you please check if you're self-muted? Yes, hi. Good morning. Thanks for taking the question. I was going to ask if you could share what the average selling price was in Q3 versus this time a year ago.

Look at the value we took in in Halloween or or in Christmas. I mean, our customers responded incredibly well to that move. Uh, so I look at it and say, I think we were more strategic this time. Uh, or we, at least had a, a more strategic opportunity available to us, this time, uh, and we'll see how the traffic plays out. Yeah.

Maybe 1 other thing, just to to supplement, I think even if you go back to the investor materials we laid out, I mean that entire strategy is set up to drive higher sales and stores by via productivity on the shelves via the way we intend to Market to customers and based on the way we intend to run better stores, I think that entire setup really is organized to, to enhance the traffic and the ticket flow.

Thank you. Our next question comes from the line of Michael Montani with Evercore. Please proceed with your question.

Michael could you please check if you're self muted?

Michael Creedon: And then, curious if you think that you'd be able to get that level of price increase again in 2026 to drive comp. Yeah, our AUR right now, right about $1.50. When you look at that value over time, it's pretty remarkable considering what this company's done, what other prices have done. So we look at it and say, our customer is going to tell us with their comps, with their wallets, that we're hitting the right points in terms of value, convenience, and discovery. One of the things that we really turn to is that expanded, more relevant assortment. So yes, it comes at a higher ticket, but it's still an incredible wow for the customer. It fits their occasion, the purpose for their trip, and whether it's a great pack size for them that helps them or just an item that helps them celebrate and they love it.

Yes. Hi, good morning, thanks for taking the question. I was going to ask. If you could share what the average selling price was and 3 Q versus this time a year ago. And then curious, if you think that you'd be able to get that level of price increase again in 2026 to drive comp,

Michael Creedon: So we feel that while the AUR moves up, it does so locked squarely into that value play for the customer. Keep in mind one other item is that obviously as our multiprice penetration increases, so that will also move AUR that is not price dependent. And I think if you looked at the supplementary materials and you look at how well the multiprice worked in Halloween this year, it'll give you a sense for the kind of benefit we might see going forward as we drive that multiprice harder. Thank you. Our next question comes from the line of Tihan Ma with Bernstein. Please proceed with your question. Great. Thank you. Just one quick clarification on corporate expenses. Did it come in a bit better than your prior expectations? If you can provide a bit more color there, that'll be really helpful.

Yeah. Our Aur right now uh write about above a buck 50. Um, when you look at that value over time, it's it's pretty remarkable. Uh considering you know what? What this company's done, what other prices have done. Um, so we look at it and say our customer is going to tell us uh with their comps with their wallets that we're hitting the right points in terms of value, convenience and Discovery. 1 of the things that we really turn to is that expanded more relevant assortment. So, yes, it comes at a higher ticket but it's still an incredible. Wow. For the customer, uh, it fits their, their occasion, the, the purpose, for their trip, uh, and whether it's a great pack size for them, that helps them or just an item, that helps them celebrate and they, and they love it. So, we feel that while the Aur moves up, um, it does so locked squarely in to that value. Play for the customer,

Keep in mind, 1 of the item is that, uh, obviously as our multi price penetration increases so that we'll also move Aur that is not price dependent. And I think if you looked at the supplementary materials and you look at how well the multi-purpose, uh, worked in Halloween this year, it'll give you a sense for the kind of benefit. We might see going forward as we, as we drive that multi price, uh, harder

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

Michael Creedon: And then a quick one on next year. Given the trade down you have seen from middle- to higher-income consumers, what does the tax refund, the incremental tax refund next year, do to middle- to high-income consumers' shopping behaviors in your mind? Thank you. Yeah, I'll pick up on the first part, Stewart here. The SG&A did come in better than we expected. As we get ready to set ourselves up for next year and achieve some of the aggressive savings targets we've set up, we've been squeezing down on SG&A. Some of those savings came in a little bit faster than we had expected. Yeah. And then I'll take the second one. I look at the tax refunds of the OB3, Big Beautiful Bill. When you offer the best value in retail, you benefit when people have more money in their wallet.

Great. Thank you. Uh, just want to Quick clarification on corporate expenses, uh, did it come in a bit better than your prior expectations, if you can provide a bit more color there, that would be really helpful. And then a quick 1 on next year, uh, given the trade in you have seen from middle to higher income consumers.

Yeah, I'll pick up on the first part still here. Um, the uh, the sgna did come in better than we expected as we get ready to to set ourselves up for next year and achieve some of the aggressive savings targets we've set up. Uh, we've been squeezing down on sgna. Some of those savings came in a little bit faster than we uh, than we had expected.

Yeah, and then I’ll take the second.

Michael Creedon: Dollar Tree has the best value retail has, and we think we'll benefit as they get more money in their pocket. Thank you. Our next question comes from the line of Kelly Banya with BMO Capital Markets. Please proceed with your question. Good morning. Thanks for taking our questions. Wanted to ask about the consumables, the market share trends there from a unit perspective. They seemed quite strong in the first half, but really shifted in the third quarter here. I was just curious if you had any explanation of what you think is happening there. Is that attributable to the restickering impact or any other color on the market share trends there? Yeah, Kelly, the red dots is kind of how I'll answer that. It really peaked for us in this Q3. It was the mass distraction.

And look at the tax refunds of the OB3, big, beautiful bill. Um, you know, would you offer the best value in retail? You benefit when people have more money in their wallet?

And Dollar Tree has the best value retail has, and we think will benefit as they get more money in their pocket.

Thank you. Our next question comes from the line of Kelly Baena with BMO Capital Markets. Please proceed with your question.

Good morning. Thanks for, uh, taking our questions. I wanted to ask about the consumables, uh, the market share trends there from a unit perspective. They seemed quite strong in the first half, um, but really shifted in the third quarter. Here, uh, I was just curious if you had any explanation for what you think is happening there. Is that attributable to the stickering, um, impact or any other color on the market share trends there?

Michael Creedon: I will tell you, though, as we've seen trends from our customer post that, we track via customer surveys, via scrapes of website and star ratings, and all that. The sentiment of our customer that really peaked negative in that August, September has improved every week. So the fewer mentions of pricing, more positivity, less negativity. We've been watching that, and every week that's gotten better. So we don't love that we had to create that environment for our customer. It was a necessary evil to continue to deliver for them and give them product at a value. But it is what it is, and it's behind us now. The restickering is basically done. You get a little bit as you take some pack away, but it's basically done. The distraction's behind us, and our stores and customers are responding very favorably. Thank you.

Yeah. Kelly. You know the the the red dots is kind of how I'll answer that. Uh, it really peaked for us. Uh, in this Q3 it was the, the mass distraction. I I will tell you though as we've seen Trends from our customer post that um, you know, we track via customer surveys via scrapes of of website and and, you know, star ratings and all that the sentiment of our customer that really piqued negative in that August. September's gotten better. Uh, so, you know, we don't, we don't love, uh, that we had to create that environment for our customer. It was a necessary evil to continue to deliver for them and give them product uh at a value. Uh, but uh, you know it's it, it is what it is and uh, it's behind us now uh the red stickering is is basically

Done. You get a little bit as you take some pack away, but it's basically done. The distractions are behind us, and our stores and customers are responding very favorably.

Michael Creedon: Our next question comes from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your question. Yeah, thanks for taking the question, guys. When you talked about that higher-income consumer trying to get them to visit more often with more frequency, I'm just wondering how you guys plan to go about that. Maybe, is it more stimulus from a marketing standpoint, or I don't know what other methods that you might be thinking of, but how do you get them to come more frequently? Thanks. Yeah, we love that this customer's finding us. We want to create a very sticky relationship with them, and we believe it is the more relevant assortment. So continuing to wow them each season that they come up and for their everyday essentials with items they just can't believe they found.

Thank you. Our next question comes from the line of Joe Feldman, with The Advisory Group. Please proceed with your question.

Yeah, thanks for taking the question, guys. Um, when you talked about the, um, that higher income consumer that, you know, trying to get them to visit more often with more frequency, I was just wondering how you guys plan to go about that. Maybe is it more stimulus from a marketing standpoint, or, um, I don't know, other methods that you might be thinking of. But, um, how do you get them to come more frequently? Thanks.

Michael Creedon: Remember, you don't come into Dollar Tree with a list and your head down, and I have to get this. You come in with your head moving around, looking at all the things that are wowing you. So that relevant assortment creates a sticky relationship, and then there is nothing more important than running better stores. Our store standards are on the move up, and we believe that as we continue to improve the in-store experience, those customers are going to want to come more and more often. Thank you. Our next question comes from the line of Robbie Ohmes with Bank of America. Please proceed with your question. Oh, hey, thanks for taking my question. I wanted to follow up on the last question. Just, it's impressive how you guys are gaining all the new customers and the info you gave us on that.

Yeah, we we love that this customer's finding us, we want to create a very sticky relationship with them and we believe it is the more relevant assortment so continuing to wow them each season that they come up and for their everyday essentials with items they they just can't believe they. They found remember you don't come in to Dollar Tree with a list and your head down and I have to get this, you come in with your head moving around, looking at all the things that are that are wowing. You so that relevant, assortment creates a sticky relationship. And then there is nothing more important than running better stores. Our store standards are on the move up and we believe that as we continue to improve the in-store experience, those customers uh, are going to want to come more and more often

Thank you. Our next question comes from the line of Robbie Ohms with Bank of America. Please proceed with your question.

Michael Creedon: Just help me understand gaining all these new customers at all these income cohorts versus negative traffic. How does that happen? Are there cohorts dropping out or coming a lot less frequently? And that's offsetting all these new customers that you guys have gotten to come to the stores? Maybe a little more color on what's happening there. Yeah, Robbie, it's really a question of frequency. So you're driving new customers to the store, which is fantastic. I mean, 3 million new households. Yes, they're skewing a bit higher income, but the strength of our business is still in that core customer, their purchase frequency, and their comp dollars. We believe that these new customers come in, we can increase their trip frequency too when they find better-run stores and they find an assortment that keeps them coming back.

Oh, hey, thanks for, um, taking my question. I wanted to follow up on the last question, just the, um, it's impressive how you guys are gaining, you know, all the new customers and the info you gave us on that just helped me understand gaining all these new customers at all these income cohorts.

You know, versus negative traffic. I'm like, how does that happen? Is somebody—are their cohorts dropping out, or coming a lot less frequently? And that's, you know, offsetting all these new customers that you guys have gotten to come to the stores? Maybe a little more color on, like, what's happening there.

Michael Creedon: So right now, they're coming in because of a Halloween, or they're coming in for a great season, and then what they find in the store when they're there, in health and beauty, and in everyday essentials, that's what keeps them coming back. If you look at Dollar Tree compared to some of the folks we aspire to be, the difference is not in our ticket. The difference is in trip frequency. We believe we've got an opportunity to unlock increased trip frequency with these great newer trade-in customers. Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Please proceed with your question. Hey, good morning, guys. Thanks for taking the question. Just curious if you can expand a little bit more on Shrink and where you are in that journey of bending that line item?

Purchase frequency, they're they're you know, comp dollars. Um, we believe that these new customers come in, we can increase their trip trip frequency too when they find better run stores and they find an assortment that keeps them coming back. So, right now they're coming in, you know, because of a Halloween or they're coming in for a great season and then what they find in the store, when they're there in in health and beauty, and in everyday essentials, that's what keeps them coming back. Uh, if you look at Dollar Tree compared to some of the folks, we aspire to be the difference is is not in our tip, ticket. The difference is in trip frequency, we believe we've got an opportunity to unlock increased trip frequency with these great newer trade-in customers.

Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Please proceed with your question.

Michael Creedon: And then I don't think it was discussed at the investor day, but what is embedded in the multi-year outlook for Shrink? Is that elevated rates versus pre-COVID, or is it a return to 2019 rates? Yeah, I'll start with that, with the focus we have. We learned a lot about Shrink from Family Dollar. Family Dollar has a higher Shrink threshold, if you will, and we were able to bend the curve over there. And so we've really reorganized how we're addressing Shrink at Dollar Tree. It's not as simple for us as it is other; we can't just go rip out a bunch of self-checkouts and improve our Shrink. We don't have self-checkout in any large capacity. So for us, it has to be leveraging training of our people, leveraging technology to address Shrink over time.

Hey, good morning guys, thanks for taking the question. Just curious, if you can expand a little bit more on shrink and where you are in that journey of bending that line item. And then I don't think it was discussed at the investor day, but what is embedded in the multi-year outlook for shrink is that elevator rates first preco, or is it a return to 2019 rates?

Michael Creedon: And then in terms of how it builds to, so Bobby, Stewart, we have built in some improvement in Shrink as we move forward. I mean, we've made these changes to people and process. We're investing money in our asset protection, and we expect that to bend the trend. So that is built into the forward expectations. Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Hey, thanks a lot. I have just a question on the SG&A line. In slide 9, you talk about the unit trend going from 100 to 89. So there's a clear benefit from running less units through the store on freight and handling expenses. But when we look at the core SG&A line, can we unpack the 160 basis point increase in SG&A?

Yeah, I I'll I'll start with that with the the focus we have. Um you know we learned a lot about shrink from Family Dollar Family Dollar, has you know, a higher shrink threshold if you will. Um and we were able to bend the curve over there, uh, and so we've really reorganized how we're addressing shrink at Dollar Tree. Um, it's not as simple for us as it is other. We can't just go rip out a bunch of self-checkouts and improve our shrink. Uh, we don't have self-checkout, uh, in any large capacity. So, for us, it has to be leveraging training of our people, uh, leveraging technology to address shrink over time. And then, in terms of how it builds through. So Bobby Stewart, uh, we have built in some some improvement in shrink as we move forward. I mean, we've made these changes to people and process. We're investing money in our secure, in our asset protection. And we expect that to, uh, to bend the trends. So that is built into the, um, the forward expectations.

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

Michael Creedon: Then also looking ahead to Q4, how are you thinking about the complexion of both gross margins and SG&A in Q4? Yeah, so Chuck, Stewart, when you really look at SG&A in total, the big driver for SG&A increases is really in store payroll in that whole space. We do have some increases, as we said before, both in DNA based on store investments and also in general liability claims. Those are probably the big areas to think about. If I unpack the store payroll for you a little bit earlier in the year, we commented on the fact that first we were faced with some rate increases. A number of those were driven by state minimum wage increases.

Hey, thanks a lot. Um, I have just a question on the sgna line, you know, in slide 9 you talk about uh, the unit Trend, um, going from 100 to 89. So there's a clear benefit, you know, from from running less units through through the store on freight and handling expenses. But when we look at the core sgna line, can we unpack the 160 basis point increase in sg&a? And then also looking at ahead to the 4.

Quarter. How are you thinking about the complexion of both gross margins and SG&A in the last quarter of the year?

Michael Creedon: And second, we had decided at the beginning of this year that we would put some more hours back into the stores because we felt that if we invested some hours in stores, we could drive a better comp. Certainly, we set that out as an aggressive goal for the year: 3% to 5% comp. We're obviously at the top end of that. The last piece, of course, is the tariff-related stickering activities, which is a pretty substantial add. So if you think about the increase in payroll, which again, the biggest driver of the SG&A, it was about 1/3, 1/3, 1/3. A third was the rate, 1/3 was the increased investment in hours, and 1/3 was stickering. Let me come back now to your unit point because I want to look forward to next year.

Yeah, it's got Chuck Stewart. Um, when you really look at sgna in total, the Big Driver for sgna increases is really in store payroll in that whole Space. We do have some increases as we said before both in DNA, based on store Investments and also, in general liability claims. Those are probably the big big areas to think about if I impact the store payroll for you a little bit earlier, in the year, we commented on the fact that, uh, first, we were faced with some some rate increases those. Uh, a number of those were driven by, uh, State minimum wage increases. Uh, and second, we had decided at the beginning of the year that we would put, uh, some more hours back into the stores because we thought that if we invested some hours in stores, we could drive a better comp and certainly we set that on as an aggressive goal for the year 3 to 5 uh percent comp and we're obviously at the top end of that.

Michael Creedon: If you're thinking about next year, the restickering is sort of largely gone. So that piece is not going to be pushing on our P&L. In fact, that's a benefit. The rate increases, we believe that that rate's going to start to moderate, and that's going to help us next year. And then the last piece on the hour side, actually on the hour side, is exactly the point you've just made. The success of multi-price, in fact, allows us to move fewer units through the store, and that'll give us the flexibility to decide: do we take the units, do we take the hours down, or do we invest some more hours in running stores better? But I think it puts us in a better position overall. Hopefully, that gives you a good flavor for your question. Thank you. We have reached the end of our question and answer session.

At the last piece of the course is the tariff-related stickering activities, which is a pretty substantial add. So if you think about the increase in payroll — which again, the biggest driver of the SG&A — it was about a third, a third, a third. A third was the rate, a third was the increase in investment in R&D, and a third was stickering. Let me come back now to your unit point, because I want to look forward to next year. If you're thinking about...

Michael Creedon: I would now like to turn the floor back over to Mike Creedon for any closing comments. Hey, thanks for joining us today, and we wish everyone a safe and healthy holiday season. Thanks so much. Ladies and gentlemen, thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to my colleague for any closing comments.

Hey, thanks for joining us today and uh we wish everyone a safe and healthy holiday season. Thanks so much.

Ladies and gentlemen, thank you. This does conclude today's teleconference, we appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Operator: Greetings. Welcome to the Dollar Tree Q3 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Bob LaFleur, Senior Vice President of Investor Relations. Thank you. You may begin.

Robert LaFleur: Good morning, and thank you for joining us to discuss Dollar Tree's third quarter fiscal 2025 results. With me today are Dollar Tree CEO Mike Creedon and CFO Stewart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans, and future prospects are considered forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements.

For information on the risks and uncertainties that could affect our actual results, please see the risk factors, business, and management's discussion and analysis of financial condition and results of operations sections in our annual report on Form 10-K filed on 26 March 2025, our most recent press release, and Form 8-K and other filings with the SEC. We caution against any reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements except as required by law. Also, during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a GAAP basis.

Additionally, unless otherwise stated, all discussions today refer to our results from continuing operations, and all comparisons discussed today for the third quarter of fiscal 2025 are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike and Stewart will take your questions. Given the number of callers who would like to participate in today's session, we ask that you limit yourself to one question. I'd now like to turn the call over to Mike.

Michael Creedon: Thanks, Bob. Good morning, everyone, and thank you for joining us to discuss our third quarter results. It's great to be with you again. When we recently gathered in New York for Investor Day, I said this was the start of a new era for Dollar Tree: one company, one brand, one focus. Our energy is now directed towards strengthening and growing the Dollar Tree business. We delivered a high-quality quarter accompanied by mid-single-digit comps, above-outlook earnings, and strong end-of-quarter momentum heading into the holidays. These results speak to our disciplined execution and focused strategy. Let me start by framing the quarter at a high level, and then Stewart will take you through the financial details. First, I'd like to highlight the strength of our discretionary business, which showed its first positive year-over-year mix shift since Q1 of 2022.

We believe this strength illustrates how our exceptional value proposition, including our growing multi-price assortment, is resonating with our shoppers by helping them meet their needs and desires in the budget-constrained environment that many consumers find themselves today. The three pillars that define Dollar Tree are value, convenience, and discovery. Those are not slogans; they're how we win. They describe a brand that offers customers compelling values across a variety of price points that help them do more with less in stores that are easy to shop and full of surprises worth discovering. While the consumer landscape remains uneven, the underlying story remains consistent: all consumers are seeking value. Marrying that value-seeking behavior with convenience and discovery is the intersection where Dollar Tree thrives. The evidence is clear.

Dollar Tree continues to gain share and attract new shoppers while continuing to serve its large and loyal base of core customers. Today, we serve an increasingly broad spectrum of shoppers, from core value-focused households to middle and higher-income shoppers who are making deliberate choices about how and where they spend. We had 3 million more households shop with us in Q3 this year compared to Q3 last year. Approximately 60% of these incremental shoppers came from higher-income households, those earning over $100,000, 30% from middle-income households, those earning between $60,000 to $100,000, with the rest from lower-income households, those earning under $60,000. Importantly, Q3 spending growth was broad-based across all income sub-cohorts, including households earning below $20,000. To us, this demonstrates that Dollar Tree isn't just for tough times or for those with limited resources.

Dollar Tree is for smart shoppers across all income brackets where value, convenience, and discovery matter. At the same time, higher-income households are trading into Dollar Tree. Lower-income households are depending on us more than ever. For example, the average spend for lower-income households grew more than twice as fast in the third quarter as the average spend for higher-income households. While part of this reflects the fact that higher-income households are typically earlier in their customer lifecycle with us, the data clearly shows that our core customer remains loyal and deeply engaged. She's balancing her household budget carefully and continues to count on Dollar Tree for essentials and, increasingly, for the seasonal and discretionary items that bring joy to her and her family. Over time, our goal is to inspire the same level of loyalty in our newer, higher-income customers that we see in our core customers.

While the average per household spend for our higher-income customers is currently lower, even given their higher income, larger average basket size, and ability to spend more, this is a simple function of trip frequency. Because many of our higher-income customers are still early in their relationship with Dollar Tree, their purchase frequency has significant room to grow. Over time, we believe that growing trip frequency among these higher-income customers, given their propensity to build bigger baskets, will be a powerful growth driver for Dollar Tree. This is why our brand promise matters so much right now. We make it easier for customers to do more with less without trading down on quality or experience. That is what keeps our traffic and baskets healthy in a cautious consumer environment. With that, let's take a look at some of our Q3 highlights.

Comparable sales increased 4.2%, a nice acceleration from the quarter-to-date trend of 3.8% we shared in mid-October. As the results suggest, October finished strong, driven by momentum in our multi-price assortment and a great Halloween. Our Q3 comp was all ticket-driven as traffic was slightly negative. Discretionary mix improved 40 basis points to 50.5%. Comp increased 4.8% in discretionary and 3.5% in consumables. Gross margin performance exceeded expectations, reflecting strong operational execution and cost discipline. Adjusted EPS of $1.21 was nicely above our outlook, and Stewart will go through the drivers behind this upside in his remarks. We believe these results reflect our sharper focus and more disciplined execution. Multi-price was a key driver of our Q3 momentum. As a reminder, multi-price is a deliberate, long-term, data-driven strategy that began back in 2019 to make Dollar Tree more relevant, flexible, and profitable.

Multi-price is about evolving our assortment over time to include new, more relevant, and attractively valued items that we could not offer at a fixed price point of $1 or $1.25. Multi-price is one of the most important strategic shifts in Dollar Tree's modern history, and it's working. As we highlighted at our Investor Day, the roughly 5.5% annual comp we've averaged since breaking the dollar in 2022 is among the very best in all of retail. Those of you who attended our Investor Day may recall a slide from Stewart's presentation where he demonstrated how expanded multi-price penetration in categories like electronics, hardware, and Easter had a meaningfully positive impact on sales and per-unit profitability. We've reproduced a similar analysis on our multi-price Halloween assortment this year, which we've included in our supplemental presentation available on our Investor Relations website.

Our Halloween performance this year is another clear example of the power of multi-price. This year, our Halloween assortment generated over $200 million in sales, an all-time record. But to see the full impact of multi-price, let's go back to Halloween 2022, when multi-price was still in its infancy. That year, multi-price represented about 3% of units sold, 10% of sales, and 7% of merchandise gross margin across our full Halloween assortment. Fast forward to 2025, on a 25% larger base of sales, where multi-price accounted for roughly 1/4 of our total Halloween sales and merchandise gross margin, but only 8% of Halloween units sold. We are continually engineering incremental value and profitability drivers into our multi-price assortment. Across Halloween this year, each multi-price item that we sold generated 3.5x more profit than each non-multi-price item we sold.

This is a full turn higher than Halloween 2022. By combining this increased per-unit profitability with a higher multi-price mix, we were able to generate approximately 25% more margin dollars from our Halloween assortment this year compared to 2022, while selling approximately 10% fewer units. This is just the positive impact on merchandise margin. It doesn't take into consideration any labor or distribution cost savings that come from handling fewer units. Looking at it this way, multi-price is a powerful growth and profitability driver. It broadens our value proposition and relevance to our customers, allows us to compete more effectively, helps drive cost leverage, and sets the business up for long-term success. More importantly, we are just getting started. Multi-price is not a one-and-done proposition. We expect these dynamics to play out across every holiday and special occasion and strengthen as our multi-price penetration expands.

Over time, our customers will let us know what the right multi-price mix ultimately is, but we're confident that it's meaningfully higher than where we are today. So let's take a look at some broader merchandising highlights from the quarter. Discretionary categories accelerated through the quarter with standout performances in party and home decor. Consumables were steady, led by household cleaning, personal care, snacks, and cookies. Seasonal performance was strong, particularly towards the end of the quarter. We planned the inventory carefully, had strong in-store execution, and are pleased with our sell-through. Those wins are proof points for our merchandising strategy and ever-changing, more relevant assortment that drives trip completion and, more importantly, enhances profitability and margin performance. Today, with a wider assortment of multi-price merchandise and restickering largely complete, 85% of the items in our store are still priced at $2 or below.

Offering a broad range of price points while staying firmly grounded in value preserves the integrity of the Dollar Tree brand. We believe time, convenience, pack size, and quality are all part of our customer's value calculation, and so is an expanded range of products that address a wide range of shopping occasions. When a customer can fill a basket with snacks, cleaning supplies, home decor items, and seasonal products all at a great value, that's when the Dollar Tree magic is on full display. Q3 results were also powered by strong execution in our stores, supply chain, and support functions. At Investor Day, Jocie Conrad spoke about our commitment to simplify work, elevate standards, and empower our people. In Q3, we saw measurable improvement in these key areas. On store standards, we've rolled out new tools and training that simplify store routines and improve accountability.

The results are visible with cleaner aisles, stock shelves, and faster checkouts, with more to come. On associate engagement, our Race to Gold initiative continues to gain traction. As we've increased our investment in training and career progression, we've seen continued improvement in turnover. In supply chain, the network is performing at a very high level. Service levels and in-stocks coming out of this year's peak season are among the highest we've seen, and our planned increases in distribution capacity over the next several years should allow us to unlock even greater operating efficiencies and distribution cost savings. In technology, we continue to modernize our back-office systems and upgrade store infrastructure. These investments are simplifying work and enabling smarter decision-making in merchandising and replenishment. All of this comes down to one thing: making it easier for our teams to deliver a consistently great experience for our customers.

With the Family Dollar sale behind us, we are already seeing measurable improvements in our culture and performance. We are fully aligned behind one brand, one set of priorities, and one mission, with leadership and investment focus concentrated on growing Dollar Tree. Every decision across product, stores, technology, supply chain, and people is aligned to strengthening one business. That alignment brings speed and accountability. Teams test, learn, and scale faster, and we now measure progress across a single set of metrics directly tied to creating shareholder value. We are moving forward with purpose, clarity, and conviction, guided by the five strategic priorities we laid out at our Investor Day. Surprise and delight our customer with an expanded, more relevant assortment. Manage expenses with agility by controlling the cost of the goods we sell and managing our SG&A with discipline to drive operating leverage and profitability.

Create a strong connection with our customers with cost-effective, quick-return, data-driven marketing. Open more stores and improve the condition of our fleet. And finally, improve the in-store experience for our customers by raising the bar on our store standards. At the foundation of these priorities are a fast, flexible, and efficient supply chain and disciplined financial management that focuses on high-return investments and smart capital allocation. And at the forefront of our success is our people, the more than 150,000 associates who show up every day to serve our customers, support their colleagues, and strengthen the communities where we operate. They are the reason we do what we do and the driving force behind every decision we make. As you heard me emphasize at Investor Day, we manage this business with a focus on what I call the say-do ratio, making clear commitments and delivering on those commitments.

This mindset builds trust and accountability across the organization, and we believe that maintaining alignment between what we say and what we do is how we deliver consistent performance over time. In summary, we are pleased with our Q3 results. We're building a stronger foundation for the future, and we're confident about the direction we're heading. With that, I'll turn it over to Stewart.

Stewart Glendinning: Thanks, Mike, and good morning, everyone. Q3 comp sales increased 4.2%, and adjusted EPS was $1.21. Both our comp performance and our adjusted EPS were ahead of the expectations we shared in mid-October. The 40 basis points of Q3 comp acceleration between the middle and end of October was driven by a late but strong performance in Halloween sales on the back of a deeper multi-price assortment and excellent execution across our stores. Dollar Tree's seasonal assortment and value resonated strongly with shoppers.

Our EPS improvement versus expectations was largely driven by freight, higher discretionary sales mix, and SG&A. With that, let's go over the details of our third-quarter results. Q3 net sales increased 9.4% to $4.7 billion. Consistent with our expectations, Q3 comp growth was primarily ticket-driven as traffic was slightly negative. Average ticket growth was supported by increased multi-price penetration, particularly across our Halloween assortment and the pricing actions we began rolling out last quarter. Importantly, strong execution around merchandise cost, tariff mitigation, freight, and operating expenses helped drive profitability. Q3 gross margin expanded 40 basis points to 35.8%. These results reflect the strength of our assortment and the agility of our merchandising, supply chain, and store operations teams.

The key drivers of this improvement were merchandise margin, successful execution of our five merchant levers, renegotiation, re-engineering, shifting country of origin, discontinuing, and targeted price changes, all contributed to our ability to manage increased costs from tariffs. Freight, import, and inbound freight rates were favorable versus prior year, with lower spot market utilization and better container flow-through at our DCs. Domestic transportation costs were also favorable. Mix, discretionary and seasonal categories, particularly Halloween, were stronger than expected, increasing the realized mark-on. Markdowns, as part of the ongoing strategic initiative to increase shelf productivity that we outlined at Investor Day, we identified and wrote off various slow-turning SKUs. This will create room for more productive items and help optimize storage space utilization in our stores and DCs. The total impact to Q3 earnings was approximately $56 million, or approximately $0.21 of EPS.

We believe we will see increased sales and profits per store going forward as we bring in new items or reallocate shelf space to existing but faster-turning products. Shrink, overall, shrink was higher than last year, but in line with our expectations. These drivers, taken together, drove the Q3 gross margin performance. At the Dollar Tree segment level, our Q3 adjusted SG&A rate increased 160 basis points to 26.2%, driven by higher store payroll related to wage increases and restickering, general liability claims costs, and DNA from elevated store investments. These were partially offset by sales leverage. As a reminder, we do not expect costs related to restickering and other price-related activities to be repeated next year. Also, the wage-related payroll increases this year were expected and planned. Looking forward to next year, we expect wage growth to moderate.

As we discussed at Investor Day, on a go-forward basis, our goal is to grow Dollar Tree segment SG&A per store below the rate of inflation while reinvesting selectively in high-return initiatives that enhance the customer experience and the long-term profitability of our store base. We believe this will result in future SG&A cost leverage. Adjusted corporate SG&A should be considered net of TSA income because of the costs we carry in order to service the Family Dollar transition. Using this lens, our adjusted corporate SG&A rate, net of the $24 million of TSA income, leveraged 80 basis points to 2.4%, a positive step toward our goal of reducing corporate SG&A to 2% of sales by fiscal 2028. Adjusted operating income increased 4.1% to $345 million.

Our operating margin contracted by 30 basis points to 7.3%, reflecting the offset between the gross margin expansion and SG&A deleveraging, partially driven by cost headwinds such as restickering that will not repeat in 2026. Keep in mind our comments with respect to anticipated SG&A leverage next year at both the Dollar Tree segment and the corporate level. Net interest expense and our adjusted tax rate were broadly in line with expectations. Adjusted EPS from continuing operations increased 12% to $1.21. Moving on to the balance sheet and free cash flow. Inventory was down $143 million, or 5% versus prior year, while sales increased by 9.4%. Our store count increased by 4.5%, and we ramped up our DCs in Ocala and Odessa. This reduction reflects our focused efforts to increase inventory turns and improve shelf productivity.

We ended the quarter with $620 million of commercial paper notes outstanding and $595 million in cash and cash equivalents. On the Q3 cash flow statement, we generated $319 million in cash from operating activities and had capital expenditures of $376 million. This resulted in negative free cash flow in the quarter of $57 million. Year to date, we've generated $88 million of free cash flow. As a reminder, the fourth quarter is our highest cash-generating quarter because of normally high levels of sales and because our capital expenditures skew towards the first three quarters of the year. In Q3, we purchased 4.1 million shares for $399 million, including excise tax. Subsequent to quarter end, we repurchased an additional 1.7 million shares for $176 million. Year to date, we've completed $1.5 billion of share repurchases, or approximately 16.7 million shares at an average price of $90 per share.

This represents approximately 8% of the shares we had outstanding at the beginning of the year. Our liquidity remains healthy, our balance sheet remains flexible, and we have ample capacity to fund our growth and return significant capital to shareholders. Our capital allocation priorities remain unchanged. Number one, invest in growth. Number two, maintain a strong and flexible balance sheet. And number three, return capital to shareholders. Looking ahead, we expect Q4 comps will come in between 4% and 6%, which should support net sales of $5.4 to $5.5 billion and adjusted EPS in the range of $2.40 to $2.60. On a full-year basis, this would raise our comp outlook to between 5% and 5.5% and our adjusted EPS outlook to $5.60 to $5.80.

The underlying assumptions incorporated into our full-year outlook are as follows: net sales of approximately $19.35 to 19.45 billion, gross margin expansion of approximately 50 to 60 basis points, reflecting sustained favorability in merchandise margin, freight, and occupancy leverage, with some offset from markdown and shrink. Dollar Tree segment SG&A deleverage of approximately 120 basis points, primarily driven by higher store payroll related to wage increases and restickering and, to a lesser extent, facilities costs and DNA. Corporate SG&A costs we expect corporate SG&A net of $55 million of TSA income to decrease by approximately 3% year over year. Net interest expense of approximately $85 to 90 million, which is about $10 to 15 million below our prior outlook. An effective tax rate of approximately 25%. Shares outstanding of approximately 206.4 million, reflecting our share repurchase activity through 2 December.

We remain on track to meet our full-year CapEx target of $1.2 to $1.3 billion. We understand that at this point, many of you are shifting your attention to next year. As is customary, we intend to give a detailed outlook for 2026 on our next earnings call in March. With that said, I will remind you of the directional outlook we provided at our Investor Day, where we outlined an algorithm for adjusted EPS to grow at a 12 to 15% CAGR through 2028, supported by underlying EPS growth of 8 to 10%, with the balance being driven by the unwind of certain discrete items, mostly affecting 2026, with some residual carryover into 2027. To review the underlying details of the algorithm, I direct you to our Investor Day presentation, which is archived on our IR site, and we will give you more specifics and any updates next quarter.

To wrap up, we're executing well against the roadmap we shared with you in mid-October. Each day, we continue to see tangible proof that the fundamental appeal of this business, value, convenience, and discovery is resonating with customers and translating into strong financial results. With that, I'll turn things back over to Mike. Mike.

Michael Creedon: Thanks, Stewart. Let me wrap up by putting Q3 in the broader context of where we are and where we're going. When we shared our roadmap at Investor Day, we said this transformation was about focus, consistency, and accountability. We believe Q3 was a strong proof point that our strategy is working. We delivered above-market comps, expanded gross margin, and continued to make meaningful cultural progress across the organization. Today, Dollar Tree is a pure-play value retailer with the scale and focus to compete at the highest level.

Post Family Dollar, we have clarity of purpose, and our teams are responding with renewed intensity. As we look to Q4, the setup is solid. Halloween was great, and our Thanksgiving and Christmas assortments are resonating with our customers as we remain focused on consistently delivering unbeatable wow value and the thrill of the hunt experience. As 2025 winds down, let me wrap up by saying first to our associates, thank you. Your dedication, creativity, and pride in the work you do are what makes Dollar Tree special. To our customers, thank you for your trust and loyalty, for choosing us for the moments, big and small, that matter the most in your daily lives. And to our shareholders, thank you for your continued confidence and partnership. With that, Stewart and I are happy to take your questions.

Operator: Thank you. We will now be conducting a question-and-answer session.

If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. We ask that you please limit yourself to one question. One moment, please, for our first question. Our first question comes from the line of Matthew Boss with J.P. Morgan. Please proceed with your question.

Matt Boss: Great. Thanks, and congrats on another nice quarter. So maybe two parts. Mike, could you elaborate on drivers of the same-store sales acceleration that you saw in October, speak to comp trends that you've seen in November that support the four to six fourth-quarter comp guide?

And then, Stewart, could you just help break down Gross Margin expansion opportunities in the fourth quarter and how best to think about Gross Margin puts and takes maybe at a high level for next year?

Michael Creedon: Yeah, sure, Matt. As we looked at how the quarter unfolded, Halloween was just a great finish to the quarter. It did come, as we see in times like this, people buying for need and a little closer to need. So it came a little later, but it came incredibly powerfully, and it came with a record number. If you go back, Easter performed that way. A great Easter, a great Halloween. And our setup for Thanksgiving and Christmas is just fantastic. So we really look at what we've done with multi-price and how the assortment's gotten better.

Our customer across all incomes is really resonating with that and providing just fantastic sales for us. So we feel really good about our guide on the four to six.

Stewart Glendinning: Matt, let me pick up on the gross margin for the fourth quarter and then just talk a little bit about next year. So first of all, as we think about the fourth quarter, the same kind of levers that you saw in the third quarter, we detailed some of that in our supplementary materials as well as in my prepared remarks, are going to be drivers in the fourth quarter. You will see a very powerful fourth quarter on the back of those drivers. If you look to next year and just think about next year, freight is a benefit; certainly in that fourth quarter it came through in the third quarter.

As you look to next year, both freight and markdowns are the areas that we'll be watching. If you think about how we operate our business, we buy to a margin. So when we set up our goal for next year, we shared with you that we said we would be equivalent to this year's margin ±50 basis points, and that's the place that we're targeting. There may be continued benefit in freight as we move into next year. There is some belief that perhaps on the freight side, we'll see a tightening of capacity later in the year, and we are watching the potential shortage of drivers. But understand that the reason I bring up the targeted gross margin is because we use those five merchant levers to achieve that margin. So I think the margin you can take to the bank for next year.

The second piece is to refer back to the Investor Day materials that we had. In our recent Investor Day, we shared with you an algorithm that said we would achieve high teens improvement next year. That's on the basis of that same gross margin achievement and based on some of the discrete items that we're expecting to see in the coming year. So we're set up well for next year, and I think that probably gives you the main drivers.

Operator: Thank you. Our next question comes from the line of Michael Lassar with UBS. Please proceed with your question.

Michael Lasser: Good morning. Thank you so much for taking my question. It's on traffic, and obviously, this was the first decline in traffic that Dollar Tree has experienced in a while.

To what degree is that as a result of some of the legacy households pushing back on the price increases that have been taken in the last couple of quarters? And if that's the case, does that give you any pause on your ability to achieve this high teens EPS growth next year in light of the prospect that you might have to make some investments in order to recapture those households that are just dissatisfied with the pricing changes? Thank you so much.

Michael Creedon: Yeah, Michael, we really see traffic as a mix between some internal activity, namely the restickering, and some broader retail trends. We don't see it as a pushback from our customer. And if you look at our performance in the quarter, we had great growth across all income cohorts, and our core customer really had our highest comp.

So we look at it and say we saw the traffic decelerate in that August, September timeframe. That was the peak of our restickering, those red stickers. That was the peak distraction for us. And then it was good to see traffic strengthen towards the end of the quarter, really on the backs of that Halloween and that great strength in Halloween. So we believe there was some broad-based retail traffic decel around back to school, some of the sticker shock around back to school. But as we got into the real core of what Dollar Tree does and does, we think, better than anyone, we saw the strength in our Halloween, and we're very excited about what Thanksgiving, Christmas, and all the seasons can do for us.

Operator: Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

John Heinbockel: And Mike, two quick ones. When you think about traffic or divergence between traffic and units, so sort of the idea traffic will be strong, units maybe to a lesser degree because you're basically trading people into higher price point items. Talk about that divergence in your mind. And then secondly, if the units are going to grow at a slower pace, how do you think about space allocation and replanogramming the stores over maybe the intermediate to longer term?

Michael Creedon: First of all, thanks, Rob. We'll always follow our customer on that. We believe that the customer is resonating incredibly well with multi-price. We're hearing that in the surveys we're doing. We're seeing it in how our customers are performing in the store and that real strength in the comp of that core customer.

So yes, when we look at the store, when we take multi-price, we'll take away sections of $1.25. And so your units will naturally decline there as you take that space and make that space more productive. So we do see some of that. But we believe the proof point we have from Break the Dollar was that you took up the price of the whole store. There were elements of the store that just didn't work, and our merchant team took the next buying cycles to really recover that.

What we've seen here in this multi-price evolution and some of the restickering we did based on the inflationary cost environment is that the units have performed better, the traffic has performed better, and we're confident that we can continue to drive that value in our product across these price points and continue to give the customer exactly what they need. So we see that coming together very well for us, and we'll respond to the customer and their trends with how we set up the store.

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

Edward Kelly: Yeah, hi. Good morning. Thank you for taking my question. I wanted to ask you about the mix of multi-price as you think about next year. Just looking out, it does seem like you'll have more conversions.

I would imagine you're still doing more merchandising around improving the multiprice mix. So how do you think the stores look from the standpoint of the multiprice offering as we think about next year? And then how does that play into the way that you are thinking about driving comp next year in terms of traffic versus ticket? Thank you.

Michael Creedon: Yeah, thanks, Ed. I mean, I really want to start with saying 85% of the store is still $2 or less. So we're still early in this multiprice game. And when you look at what the seasons have done, we're going to continue to benefit in those seasons from the multiprice assortment. And we're really looking at everyday essentials and where we can benefit in the assortment there and the shift towards multiprice.

Where it ultimately goes, our customers will respond to us, and we'll respond to them in terms of building it out. But I know it's higher than where we are today, and it's something that we believe sets up a multi-year run where we're able to respond to our customers, wow them with new discovery, and not just at the seasons, but new discovery every day because multiprice contains something on a wow table for us or on an end cap that shows them something they couldn't believe they could get at that price, even though it's a price higher than $2. So we're delivering the everyday value with the majority of the store still at that 2 bucks or less, and we're wowing the customer in what we bring into the multiprice assortment.

Operator: Thank you. Our next question comes from the line of Paul Lejuez with Citi.

Please proceed with your question.

Paul Lejuez: Hey, thanks, guys. Curious if you could talk about Thanksgiving weekend and what you saw from a traffic versus ticket perspective. It sounded like you saw a pickup in traffic around the Halloween period. Curious what you saw Thanksgiving week and weekend. And then that 85% number, I think you're talking in terms of units, in terms of the percent of the store that's still $2 and below. What percent of sales should we think about being above that $2 level? And how does it split between discretionary and consumables? Thanks.

Michael Creedon: Yeah, Paul, let me clear up the first one. So first of all, it's sales dollars that are at the 85% of the store is $2 and less. That is on sales dollars. As we look at how the quarter has started, I said in my prepared remarks, we're really pleased.

We look at the strength of the seasons, the Thanksgiving, the setup for Christmas, what we've seen so far in Christmas. So we feel really good about the guide for the fourth quarter. We've got one period in, and we're feeling really good about where we sit.

Operator: Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Rupesh Parikh: Good morning. Thanks for taking a question. I also have a two-part one. So just on the elasticity front, just curious on the categories you took pricing related to tariff risk and price increases. Just curious how that played out. And then if we do get tariff relief, how do you guys approach that, whether passing on those savings or letting it flow to the bottom line? Thank you.

Michael Creedon: Yeah, thanks, Rupesh. I mean, the elasticity has really come in as we've modeled it.

It's very manageable. It's really offset by the mix we see in the multi-price. But most importantly, the value perception is intact. Our customers responding across all income cohorts, core customers, new customers, the 60% of the new three million that have come in making more than $100,000. So we believe that the elasticity is very manageable. And then I do think it's important to go back to that Break the Dollar moment. What we saw there, it's a proof point. You can go back and look, see what happened with traffic. And now our performance, we believe, and what we're seeing in our numbers is better than that and gives us the confidence in the path we're on on this. As for the tariffs, I know it's been a lot in the news. We have, I think, one of the very best global sourcing teams in the business.

They are all over this. They've got great partners watching this. We'll see how it unfolds with the Supreme Court, and we'll take action from there.

Thank you. Our next question comes from the line of Simeon Gutmann with Morgan Stanley. Please proceed with your question. Hi, this is Zach Fadem on for Simeon. Thanks for taking your questions. Just a couple from our end. Back to the traffic question, is there a way you could compare your frequent and most loyal customers to those who are more episodic? And would you say there's a similar deceleration in traffic trends between both of those groups, or is there a gap in the trend? Yeah, when we break it down, we really look at more our sales across all those income cohorts.

Michael Creedon: It's really important to us to make sure that as we know multi-price skews and attracts more towards higher income, that we are committed to the base of our business, which is that core customer, that customer that makes around $60,000 a year. We were particularly pleased with how our comps performed at that core customer. They had our highest comps in that customer. So we think that our customer, whether you're new to Dollar Tree or you shop us several times a month, that you're finding what you need as you seek out affordability, you're finding exactly what you need at Dollar Tree. Thank you. Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question. Good morning, guys. Scott Ciccarelli. I think we all understand that there was some internal disruption as you restickered product.

Michael Creedon: But with the negative traffic this quarter and the expectation to keep expanding MPP, should we just expect Q4 and next year to have a similar mix of traffic and ticket that we saw in Q3? In other words, all of the comp is primarily driven by ticket. Thanks. Yeah, Scott, it's hard to say. We can go back, and we know what we saw in Break the Dollar. You saw the multiple quarters and how the traffic performed there. We believe this time around we were much more strategic. Back then, the only choice was raising everything to $1.25. And as I've mentioned, you had a healthy percentage of the store that just didn't work at that new level. And the merchant team had to go over several buying cycles and re-engineer product, renegotiate, and get product that did work. And you saw what happened with traffic recovery.

Michael Creedon: This time, we were much more strategic in how we took that. We really feel that we have found the right value places to take price. And our customers responded. If you look at the value we took in Halloween or in Christmas, I mean, our customers responded incredibly well to that move. So I look at it and say, I think we were more strategic this time, or we at least had a more strategic opportunity available to us this time. And we'll see how the traffic plays out. Yeah.

Michael Creedon: And maybe one other thing, just to supplement, I think if you go back to the investment materials we laid out, I mean, that entire strategy is set up to drive higher sales in stores via productivity on the shelves, via the way we intend to market to customers, and based on the way we intend to run better stores. I think that entire setup really is organized to enhance the traffic and the ticket flow. Thank you. Our next question comes from the line of Michael Montani with Evercore. Please proceed with your question. Michael, could you please check if you're self-muted? Yes, hi. Good morning. Thanks for taking the question. I was going to ask if you could share what the average selling price was in Q3 versus this time a year ago.

Michael Creedon: And then, curious if you think that you'd be able to get that level of price increase again in 2026 to drive comp. Yeah, our AUR right now, right about $1.50. When you look at that value over time, it's pretty remarkable considering what this company's done, what other prices have done. So we look at it and say, our customer is going to tell us with their comps, with their wallets, that we're hitting the right points in terms of value, convenience, and discovery. One of the things that we really turn to is that expanded, more relevant assortment. So yes, it comes at a higher ticket, but it's still an incredible wow for the customer. It fits their occasion, the purpose for their trip, and whether it's a great pack size for them that helps them or just an item that helps them celebrate and they love it.

Michael Creedon: So we feel that while the AUR moves up, it does so locked squarely into that value play for the customer. Keep in mind one other item is that obviously as our multiprice penetration increases, so that will also move AUR that is not price dependent. And I think if you looked at the supplementary materials and you look at how well the multiprice worked in Halloween this year, it'll give you a sense for the kind of benefit we might see going forward as we drive that multiprice harder. Thank you. Our next question comes from the line of Tihan Ma with Bernstein. Please proceed with your question. Great. Thank you. Just one quick clarification on corporate expenses. Did it come in a bit better than your prior expectations? If you can provide a bit more color there, that'll be really helpful.

Michael Creedon: And then a quick one on next year. Given the trade down you have seen from middle- to higher-income consumers, what does the tax refund, the incremental tax refund next year, do to middle- to high-income consumers' shopping behaviors in your mind? Thank you. Yeah, I'll pick up on the first part, Stewart here. The SG&A did come in better than we expected. As we get ready to set ourselves up for next year and achieve some of the aggressive savings targets we've set up, we've been squeezing down on SG&A. Some of those savings came in a little bit faster than we had expected. Yeah. And then I'll take the second one. I look at the tax refunds of the OB3, Big Beautiful Bill. When you offer the best value in retail, you benefit when people have more money in their wallet.

Michael Creedon: Dollar Tree has the best value retail has, and we think we'll benefit as they get more money in their pocket. Thank you. Our next question comes from the line of Kelly Banya with BMO Capital Markets. Please proceed with your question. Good morning. Thanks for taking our questions. Wanted to ask about the consumables, the market share trends there from a unit perspective. They seemed quite strong in the first half, but really shifted in the third quarter here. I was just curious if you had any explanation of what you think is happening there. Is that attributable to the restickering impact or any other color on the market share trends there? Yeah, Kelly, the red dots is kind of how I'll answer that. It really peaked for us in this Q3. It was the mass distraction.

Michael Creedon: I will tell you, though, as we've seen trends from our customer post that, we track via customer surveys, via scrapes of website and star ratings, and all that. The sentiment of our customer that really peaked negative in that August, September has improved every week. So the fewer mentions of pricing, more positivity, less negativity. We've been watching that, and every week that's gotten better. So we don't love that we had to create that environment for our customer. It was a necessary evil to continue to deliver for them and give them product at a value. But it is what it is, and it's behind us now. The restickering is basically done. You get a little bit as you take some pack away, but it's basically done. The distraction's behind us, and our stores and customers are responding very favorably. Thank you.

Michael Creedon: Our next question comes from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your question. Yeah, thanks for taking the question, guys. When you talked about that higher-income consumer trying to get them to visit more often with more frequency, I'm just wondering how you guys plan to go about that. Maybe, is it more stimulus from a marketing standpoint, or I don't know what other methods that you might be thinking of, but how do you get them to come more frequently? Thanks. Yeah, we love that this customer's finding us. We want to create a very sticky relationship with them, and we believe it is the more relevant assortment. So continuing to wow them each season that they come up and for their everyday essentials with items they just can't believe they found.

Michael Creedon: Remember, you don't come into Dollar Tree with a list and your head down, saying "I have to get this." You come in with your head moving around, looking at all the things that are wowing you. So that relevant assortment creates a sticky relationship, and then there is nothing more important than running better stores. Our store standards are on the move up, and we believe that as we continue to improve the in-store experience, those customers are going to want to come more and more often. Thank you. Our next question comes from the line of Robbie Ohmes with Bank of America. Please proceed with your question. Oh, hey, thanks for taking my question. I wanted to follow up on the last question. Just, it's impressive how you guys are gaining all the new customers and the info you gave us on that.

Michael Creedon: Just help me understand gaining all these new customers at all these income cohorts versus negative traffic. How does that happen? Are there cohorts dropping out or coming a lot less frequently? And that's offsetting all these new customers that you guys have gotten to come to the stores? Maybe a little more color on what's happening there. Yeah, Robbie, it's really a question of frequency. So you're driving new customers to the store, which is fantastic. I mean, 3 million new households. Yes, they're skewing a bit higher income, but the strength of our business is still in that core customer, their purchase frequency, and their comp dollars. We believe that these new customers come in, we can increase their trip frequency too when they find better-run stores and they find an assortment that keeps them coming back.

Michael Creedon: So right now, they're coming in because of a Halloween, or they're coming in for a great season, and then what they find in the store when they're there, in health and beauty, and in everyday essentials, that's what keeps them coming back. If you look at Dollar Tree compared to some of the folks we aspire to be, the difference is not in our ticket. The difference is in trip frequency. We believe we've got an opportunity to unlock increased trip frequency with these great newer trade-in customers. Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Please proceed with your question. Hey, good morning, guys. Thanks for taking the question. Just curious if you can expand a little bit more on Shrink and where you are in that journey of bending that line item?

Michael Creedon: And then I don't think it was discussed at the investor day, but what is embedded in the multi-year outlook for Shrink? Is that elevated rates versus pre-COVID, or is it a return to 2019 rates? Yeah, I'll start with that, with the focus we have. We learned a lot about Shrink from Family Dollar. Family Dollar has a higher Shrink threshold, if you will, and we were able to bend the curve over there. And so we've really reorganized how we're addressing Shrink at Dollar Tree. It's not as simple for us as it is other; we can't just go rip out a bunch of self-checkouts and improve our Shrink. We don't have self-checkout in any large capacity. So for us, it has to be leveraging training of our people, leveraging technology to address Shrink over time.

Michael Creedon: And then in terms of how it builds to, so Bobby, Stewart, we have built in some improvement in Shrink as we move forward. I mean, we've made these changes to people and process. We're investing money in our asset protection, and we expect that to bend the trend. So that is built into the forward expectations. Thank you. Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Hey, thanks a lot. I have just a question on the SG&A line. In slide 9, you talk about the unit trend going from 100 to 89. So there's a clear benefit from running less units through the store on freight and handling expenses. But when we look at the core SG&A line, can we unpack the 160 basis point increase in SG&A?

Michael Creedon: Then also looking ahead to Q4, how are you thinking about the complexion of both gross margins and SG&A in Q4? Yeah, so Chuck, Stewart, when you really look at SG&A in total, the big driver for SG&A increases is really in store payroll in that whole space. We do have some increases, as we said before, both in DNA based on store investments and also in general liability claims. Those are probably the big areas to think about. If I unpack the store payroll for you a little bit earlier in the year, we commented on the fact that first we were faced with some rate increases. A number of those were driven by state minimum wage increases.

Michael Creedon: And second, we had decided at the beginning of this year that we would put some more hours back into the stores because we felt that if we invested some hours in stores, we could drive a better comp. Certainly, we set that out as an aggressive goal for the year: 3% to 5% comp. We're obviously at the top end of that. The last piece, of course, is the tariff-related stickering activities, which is a pretty substantial add. So if you think about the increase in payroll, which again, the biggest driver of the SG&A, it was about 1/3, 1/3, 1/3. A third was the rate, 1/3 was the increased investment in hours, and 1/3 was stickering. Let me come back now to your unit point because I want to look forward to next year.

Michael Creedon: If you're thinking about next year, the restickering is sort of largely gone. So that piece is not going to be pushing on our P&L. In fact, that's a benefit. The rate increases, we believe that that rate's going to start to moderate, and that's going to help us next year. And then the last piece on the hour side, actually on the hour side, is exactly the point you've just made. The success of multi-price, in fact, allows us to move fewer units through the store, and that'll give us the flexibility to decide: do we take the units, do we take the hours down, or do we invest some more hours in running stores better? But I think it puts us in a better position overall. Hopefully, that gives you a good flavor for your question. Thank you. We have reached the end of our question and answer session.

Michael Creedon: I would now like to turn the floor back over to Mike Creedon for any closing comments. Hey, thanks for joining us today, and we wish everyone a safe and healthy holiday season. Thanks so much. Ladies and gentlemen, thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.