Q2 2026 Dollar Tree Inc Earnings Call

August 27, 2026

Speaker #1: Greetings, and welcome to the Dollar Tree Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator 2: Greetings, and welcome to the Dollar Tree Q2 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to turn the call over to Daniel Del Rosario, Senior Vice President, Investor Relations and Treasurer. Daniel, please go ahead.

Operator: Greetings, and welcome to the Dollar Tree Q2 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to turn the call over to Daniel Del Rosario, Senior Vice President, Investor Relations and Treasurer. Daniel, please go ahead.

Speaker #1: You may be placed into the question queue at any time by pressing *1 on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue.

Speaker #1: As a reminder, this conference is being recorded. If anyone should require operator assistance, please press *0 on your telephone keypad. It is now my pleasure to turn the call over to Daniel De Rosario, Senior Vice President, Investor Relations and Treasurer.

Speaker #1: Daniel, please go ahead.

Speaker #2: Thank you, operator. Good morning, everyone, and thank you for joining us today to discuss Dollar Tree's second quarter fiscal 2026 results. With me today are Dollar Tree's CEO, Mike Creedon, and CFO, Stewart Glendinning.

Daniel Delrosario: Thank you, operator. Good morning, everyone, and thank you for joining us today to discuss Dollar Tree's Q2 fiscal 2026 results. With me today are Dollar Tree's CEO, Mike Creedon, and CFO, Stuart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans, and future prospects are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements.

Speaker #2: Before we begin, I would like to remind everyone that some of the remarks 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.

Speaker #2: 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 section in our annual report on Form 10-K filed on March 16, 2026.

Daniel Delrosario: 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 section in our annual report on Form 10-K filed on 16 March 2026, our most recent press release in Form 8-K, and other filings with the SEC. We caution against reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a non-GAAP basis.

Speaker #2: In our most recent press release in Form 8-K and other filings with the SEC, we caution against reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements, except as required by law.

Speaker #2: 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.

Speaker #2: 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 non-GAAP basis.

Speaker #2: Additionally, unless otherwise stated, all discussions today refer to our results from continuing operations, and all comparisons discussed today for the second quarter of fiscal 2026 are against the same period a year ago.

Daniel Delrosario: Additionally, unless otherwise stated, all discussions today refer to our results from continuing operations, and all comparisons discussed today for the Q2 of fiscal 2026 are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike and Stuart will take your questions. Please limit yourself to one question and one follow-up question. With that, I'll turn the call over to Mike.

Speaker #2: 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.

Speaker #2: Please limit yourself to one question and one follow-up question. And with that, I'll turn the call over to Mike.

Michael C. Creedon Jr.: Thanks, Daniel, and good morning, everyone. I want to start by recognizing the more than 150,000 associates across Dollar Tree whose commitment to our customers drives everything we do. They're creating a more relevant shopping experience through a better assortment, better-run stores, more consistent execution, and a customer-first mindset that was reflected in our results this quarter. The Q2 represented another period of progress for Dollar Tree. Improved execution across the business drove financial results above the high end of our outlook range. We're building a stronger business by investing and strengthening the value, convenience, and discovery we provide our customers. The quarter's results reflect those efforts. The Dollar Tree team delivered robust top and bottom-line results. Net sales growth increased 7% to $4.9 billion. Comp store sales growth increased 3.7%, exceeding our expectations. Customer traffic was positive, 0.4%, while average ticket increased 3.3%.

Mike Creedon: Thanks, Daniel, and good morning, everyone. I want to start by recognizing the more than 150,000 associates across Dollar Tree whose commitment to our customers drives everything we do. They're creating a more relevant shopping experience through a better assortment, better-run stores, more consistent execution, and a customer-first mindset that was reflected in our results this quarter. The Q2 represented another period of progress for Dollar Tree. Improved execution across the business drove financial results above the high end of our outlook range. We're building a stronger business by investing and strengthening the value, convenience, and discovery we provide our customers. The quarter's results reflect those efforts. The Dollar Tree team delivered robust top and bottom-line results. Net sales growth increased 7% to $4.9 billion. Comp store sales growth increased 3.7%, exceeding our expectations. Customer traffic was positive, 0.4%, while average ticket increased 3.3%.

Speaker #3: Good morning, everyone. I want to start by recognizing the more than 150,000 associates across Dollar Tree whose commitment to our customers drives everything we do.

Speaker #3: They're creating a more relevant shopping experience through a better assortment, better-run stores, more consistent execution, and a customer-first mindset that was reflected in our results this quarter.

Speaker #3: The second quarter represented another period of progress for Dollar Tree: improved execution across the business drove financial results above the high end of our outlook range.

Speaker #3: We're building a stronger business by investing in and strengthening the value, convenience, and discovery we provide our customers. And the quarter's results reflect those efforts.

Speaker #3: The Dollar Tree team delivered robust top- and bottom-line results. Net sales growth increased 7% to $4.9 billion. Comparable store sales growth increased 3.7%, exceeding our expectations.

Speaker #3: Customer traffic was positive 0.4%, while average ticket increased 3.3%. Diluted earnings per share were $2.70. That includes $1.31 from the combined net impact of tariff refunds, reinvestments, and certain duties on aluminum pans and paper plates.

Michael C. Creedon Jr.: Diluted earnings per share were $2.70. That includes $1.31 from the combined net impact of tariff refunds, reinvestments, and certain duties on aluminum pans and paper plates. Beyond these discrete impacts, the underlying business continues to strengthen. We are driving a better assortment in more and better-run stores and speaking to our customers in ways we never have before. While it is still early, the customer response and performance we are seeing gives us confidence in these initiatives and in the long-term opportunity ahead. Improving the fundamentals of a nearly 9,500 small-box retail business takes time. It starts with getting the basic blocking and tackling right. We are running cleaner, brighter, and better-stocked stores. We are encouraged that those everyday operational improvements are becoming more visible in both our customer metrics and financial results. We are pleased with our performance this quarter.

Mike Creedon: Diluted earnings per share were $2.70. That includes $1.31 from the combined net impact of tariff refunds, reinvestments, and certain duties on aluminum pans and paper plates. Beyond these discrete impacts, the underlying business continues to strengthen. We are driving a better assortment in more and better-run stores and speaking to our customers in ways we never have before. While it is still early, the customer response and performance we are seeing gives us confidence in these initiatives and in the long-term opportunity ahead. Improving the fundamentals of a nearly 9,500 small-box retail business takes time. It starts with getting the basic blocking and tackling right. We are running cleaner, brighter, and better-stocked stores. We are encouraged that those everyday operational improvements are becoming more visible in both our customer metrics and financial results. We are pleased with our performance this quarter.

Speaker #3: Beyond these discrete impacts, the underlying business continues to strengthen. We are driving a better assortment in more and better-run stores, and speaking to our customers in ways we never have before.

Speaker #3: While it's still early, the customer response and performance we're seeing give us confidence in these initiatives and in the long-term opportunity ahead. Improving the fundamentals of a nearly 9,500 small-box retail business takes time.

Speaker #3: It starts with getting the basic blocking and tackling right. We are running cleaner, brighter, and better-stocked stores. We're encouraged that those everyday operational improvements are becoming more visible in both our customer metrics and financial results.

Speaker #3: We're pleased with our performance this quarter. We delivered some of our most compelling comp results in several years, with positive traffic earlier than we expected and strong comp growth on top of the 6.5% comp we delivered in the second quarter last year.

Michael C. Creedon Jr.: We delivered some of our most compelling comp results in several years, with positive traffic earlier than we expected and strong comp growth on top of the 6.5% comp we delivered in the second quarter last year. That performance is a strong indication that the strategies we have put in place are gaining traction and that we are building real momentum in the business. Last year, we outlined strategies for re-accelerating traffic and top-line growth. The sequential traffic improvement helped drive our best two-year comp stack since 2023. We are also encouraged by traffic trends that strengthened on both a one-year and two-year basis as we moved throughout the quarter. We believe those trends speak to the underlying momentum in the business and the progress we are making in driving more consistent, sustainable top-line growth.

Mike Creedon: We delivered some of our most compelling comp results in several years, with positive traffic earlier than we expected and strong comp growth on top of the 6.5% comp we delivered in the second quarter last year. That performance is a strong indication that the strategies we have put in place are gaining traction and that we are building real momentum in the business. Last year, we outlined strategies for re-accelerating traffic and top-line growth. The sequential traffic improvement helped drive our best two-year comp stack since 2023. We are also encouraged by traffic trends that strengthened on both a one-year and two-year basis as we moved throughout the quarter. We believe those trends speak to the underlying momentum in the business and the progress we are making in driving more consistent, sustainable top-line growth.

Speaker #3: That performance is a strong indication that the strategies we've put in place are gaining traction, and that we're building real momentum in the business.

Speaker #3: Last year, we outlined strategies for re-accelerating traffic and top-line growth. The sequential traffic improvement helped drive our best two-year comp stack since 2023. We're also encouraged by traffic trends that strengthened on both a one-year and two-year basis as we move throughout the quarter.

Speaker #3: We believe those trends speak to the underlying momentum in the business, and the progress we are making in driving more consistent, sustainable top-line growth.

Speaker #3: We achieved this performance by staying focused on the fundamentals and executing against the priorities we outlined earlier this year. I want to remind you of a few of those priorities.

Michael C. Creedon Jr.: We achieved this performance by staying focused on the fundamentals and executing against the priorities we outlined earlier this year. I want to remind you of a few of those priorities and the progress we are making against them. First, we leaned into those categories and price points where customers are responding most positively. We are enhancing our assortment accordingly so that it is broader and appeals to a wider spectrum of income levels. It is the combination of a compelling opening price point, deep value, greater choice, trusted brands, and new categories that makes the Dollar Tree value proposition so powerful and that brings our customers back to the store. Multi-price penetration increased approximately 400 basis points year over year to 17% of total sales. We are bringing more excitement, discovery, relevance, and choice to the shopping experience while maintaining the value that has always defined Dollar Tree.

Mike Creedon: We achieved this performance by staying focused on the fundamentals and executing against the priorities we outlined earlier this year. I want to remind you of a few of those priorities and the progress we are making against them. First, we leaned into those categories and price points where customers are responding most positively. We are enhancing our assortment accordingly so that it is broader and appeals to a wider spectrum of income levels. It is the combination of a compelling opening price point, deep value, greater choice, trusted brands, and new categories that makes the Dollar Tree value proposition so powerful and that brings our customers back to the store. Multi-price penetration increased approximately 400 basis points year over year to 17% of total sales. We are bringing more excitement, discovery, relevance, and choice to the shopping experience while maintaining the value that has always defined Dollar Tree.

Speaker #3: And the progress we're making against them. First, we leaned into those categories and price points where customers are responding most positively. We are enhancing our assortment accordingly, so that it is broader and appeals to a wider spectrum of income levels.

Speaker #3: It's the combination of a compelling opening price point, deep value, greater choice, trusted brands, and new categories that makes the Dollar Tree value proposition so powerful.

Speaker #3: And that brings our customers back to the store. Multi-price penetration increased approximately 400 basis points year over year to 17% of total sales. We are bringing more excitement, discovery, relevance, and choice to the shopping experience, while maintaining the value that has always defined Dollar Tree.

Speaker #3: When you combine a more relevant assortment with a cleaner, better-run store, the customers’ response is even greater. That is reflected in the strengthening traffic trends we saw during the quarter and gives us confidence that the actions we are taking are resonating with shoppers.

Michael C. Creedon Jr.: When you combine a more relevant assortment with a cleaner, better-run store, the customer's response is even greater. That is reflected in the strengthening traffic trends we saw during the quarter and gives us confidence that the actions we are taking are resonating with shoppers. Second, we continued strengthening our marketing capabilities and customer outreach. We doubled down on our value message through our 40th anniversary celebration, reinforcing what has made Dollar Tree special for four decades: value, convenience, and discovery, while showcasing how the brand is evolving to offer customers even more choice, relevance, and that thrill of the hunt. We are bringing the Dollar Tree value proposition to life in new ways and giving customers more reasons to visit our stores more often. Third, we remain focused on operational execution.

Mike Creedon: When you combine a more relevant assortment with a cleaner, better-run store, the customer's response is even greater. That is reflected in the strengthening traffic trends we saw during the quarter and gives us confidence that the actions we are taking are resonating with shoppers. Second, we continued strengthening our marketing capabilities and customer outreach. We doubled down on our value message through our 40th anniversary celebration, reinforcing what has made Dollar Tree special for four decades: value, convenience, and discovery, while showcasing how the brand is evolving to offer customers even more choice, relevance, and that thrill of the hunt. We are bringing the Dollar Tree value proposition to life in new ways and giving customers more reasons to visit our stores more often. Third, we remain focused on operational execution.

Speaker #3: Second, we continued strengthening our marketing capabilities and customer outreach. We doubled down on our value message through our 40th anniversary celebration, reinforcing what has made Dollar Tree special for four decades.

Speaker #3: Value, convenience, and discovery. While showcasing how the brand has evolved to offer customers even more choice, relevance, and that thrill of the hunt. We are bringing the Dollar Tree value proposition to life in new ways and giving customers more reasons to visit our stores more often.

Speaker #3: Third, we remain focused on operational execution. We continued reinforcing our gold standards and partnering with our field teams to deliver a more consistent customer experience across the fleet.

Michael C. Creedon Jr.: We continued reinforcing our gold standards and partnering with our field teams to deliver a more consistent customer experience across the fleet. Over the past year, we have made measurable progress in elevating the shopping experience across our stores. At Investor Day last October, we shared that approximately half of our stores were in the opportunity for improvement category, meaning that they fell below our standards. Today, that number is about one-third of the fleet, reflecting the significant work our operators have done to improve execution, store conditions, and consistency. We are not satisfied with that progress. As our stores improve, we are continuing to raise the bar and make our standards more rigorous. We are seeing that improvement reflected not only in our internal measures, but also in improving customer sentiment around the shopping experience.

Mike Creedon: We continued reinforcing our gold standards and partnering with our field teams to deliver a more consistent customer experience across the fleet. Over the past year, we have made measurable progress in elevating the shopping experience across our stores. At Investor Day last October, we shared that approximately half of our stores were in the opportunity for improvement category, meaning that they fell below our standards. Today, that number is about one-third of the fleet, reflecting the significant work our operators have done to improve execution, store conditions, and consistency. We are not satisfied with that progress. As our stores improve, we are continuing to raise the bar and make our standards more rigorous. We are seeing that improvement reflected not only in our internal measures, but also in improving customer sentiment around the shopping experience.

Speaker #3: Over the past year, we've made measurable progress in elevating the shopping experience across our stores. At Investor Day last October, we shared that approximately half of our stores were in the opportunity-for-improvement category, meaning that they fell below our standards.

Speaker #3: Today, that number is about one-third of the fleet, reflecting the significant work our operators have done to improve execution, store conditions, and consistency. But we're not satisfied with that progress.

Speaker #3: As our stores improve, we are continuing to raise the bar and make our standards more rigorous. We're seeing that improvement reflected not only in our internal measures, but also in improving customer sentiment around the shopping experience.

Speaker #3: There is still more work to do, but we are holding ourselves to a higher standard and building a more consistent experience across the fleet.

Michael C. Creedon Jr.: There is still more work to do, but we are holding ourselves to a higher standard and building a more consistent experience across the fleet. While we still have opportunities to improve stores that remain below our standards, we believe the larger value creation opportunity is in sustaining the gains we have made and continuing to raise the level of execution across the fleet. The next phase is about making those improvements durable and repeatable. We are embedding stronger operating disciplines across the organization so that better execution becomes the standard, not the exception. Over time, we believe that will translate into a more productive store base, a better and more consistent customer experience, and stronger financial performance. We strengthened key areas, including in-stock levels, shopability, store recovery, and store level planning.

Mike Creedon: There is still more work to do, but we are holding ourselves to a higher standard and building a more consistent experience across the fleet. While we still have opportunities to improve stores that remain below our standards, we believe the larger value creation opportunity is in sustaining the gains we have made and continuing to raise the level of execution across the fleet. The next phase is about making those improvements durable and repeatable. We are embedding stronger operating disciplines across the organization so that better execution becomes the standard, not the exception. Over time, we believe that will translate into a more productive store base, a better and more consistent customer experience, and stronger financial performance. We strengthened key areas, including in-stock levels, shopability, store recovery, and store level planning.

Speaker #3: While we still have opportunities to improve stores that remain below our standards, we believe the larger value creation opportunity is in sustaining the gains we've made and continuing to raise the level of execution across the fleet.

Speaker #3: The next phase is about making those improvements durable and repeatable. We are embedding stronger operating disciplines across the organization so that better execution becomes the standard, not the exception.

Speaker #3: Over time, we believe that will translate into a more productive store base, a better and more consistent customer experience, and stronger financial performance. We strengthened key areas, including in-stock levels, shopability, store recovery, and store-level planning.

Speaker #3: When stores are well-run, they're easier to shop, better for our associates and customers, and more productive for the business. The same operating disciplines that create a better shopping experience also improve inventory control, merchandise protection, and compliance with our standards.

Michael C. Creedon Jr.: When stores are well run, they are easier to shop, better for our associates and customers, and more productive for the business. The same operating disciplines that create a better shopping experience also improve inventory control, merchandise protection, and compliance with our standards. This shows up in our shrink statistics. Shrink was favorable during the quarter and contributed to our improvement and profitability. Finally, we continued to improve the shopping experience through targeted store refreshes and renovations designed to make our stores cleaner, brighter, and easier to shop. These updates help ensure the shopping environment better reflects the strength of the Dollar Tree brand. While it is still early and we are continuing to evaluate the results and refine our approach, we see an attractive opportunity to strengthen the existing fleet and improve the customer experience over time. Let us turn now to the macro. The consumer environment remains dynamic.

Mike Creedon: When stores are well run, they are easier to shop, better for our associates and customers, and more productive for the business. The same operating disciplines that create a better shopping experience also improve inventory control, merchandise protection, and compliance with our standards. This shows up in our shrink statistics. Shrink was favorable during the quarter and contributed to our improvement and profitability. Finally, we continued to improve the shopping experience through targeted store refreshes and renovations designed to make our stores cleaner, brighter, and easier to shop. These updates help ensure the shopping environment better reflects the strength of the Dollar Tree brand. While it is still early and we are continuing to evaluate the results and refine our approach, we see an attractive opportunity to strengthen the existing fleet and improve the customer experience over time. Let us turn now to the macro. The consumer environment remains dynamic.

Speaker #3: And this shows up in our shrink statistics. Shrink was favorable during the quarter and contributed to our improvement in profitability. Finally, we continue to improve the shopping experience through targeted store refreshes and renovations designed to make our stores cleaner, brighter, and easier to shop.

Speaker #3: These updates help ensure the shopping environment better reflects the strength of the Dollar Tree brand. While it is still early and we are continuing to evaluate the results and refine our approach, we see an attractive opportunity to strengthen the existing fleet and improve the customer experience over time.

Speaker #3: Let's turn now to the macro. The consumer environment remains dynamic. Customers continue managing household budgets carefully, shopping with purpose, and prioritizing value and affordability.

Michael C. Creedon Jr.: Customers continue managing household budgets carefully, shopping with purpose, and prioritizing value and affordability. Our data shows we grew sales across all income cohorts. Households we serve were up nicely year over year with gains skewing to the middle and higher income households. Comp strength was broad-based across the assortment with personal care and toys notable outperformers. Discretionary performed well, and consumables delivered exceptional comp growth. A couple of points are worth highlighting. First, the inflationary backdrop continues to pressure all household budgets, particularly for lower-income consumers. As our customers look for ways to stretch their dollars, they are increasingly turning to Dollar Tree for everyday essentials at compelling opening price points and pack sizes that help them manage their budgets. At the same time, our value and convenience and the breadth of our assortment is resonating across all income cohorts.

Mike Creedon: Customers continue managing household budgets carefully, shopping with purpose, and prioritizing value and affordability. Our data shows we grew sales across all income cohorts. Households we serve were up nicely year over year with gains skewing to the middle and higher income households. Comp strength was broad-based across the assortment with personal care and toys notable outperformers. Discretionary performed well, and consumables delivered exceptional comp growth. A couple of points are worth highlighting. First, the inflationary backdrop continues to pressure all household budgets, particularly for lower-income consumers. As our customers look for ways to stretch their dollars, they are increasingly turning to Dollar Tree for everyday essentials at compelling opening price points and pack sizes that help them manage their budgets. At the same time, our value and convenience and the breadth of our assortment is resonating across all income cohorts.

Speaker #3: Our data shows we grew sales across all income cohorts. Households we serve were up nicely year over year, with gains skewing to the middle and higher-income households.

Speaker #3: Comp strength was broad-based across the assortment, with personal care and toys notable outperformers. Discretionary performed well, and consumables delivered exceptional comp growth. A couple of points are worth highlighting.

Speaker #3: First, the inflationary backdrop continues to pressure all household budgets, particularly for lower-income consumers. As our customers look for ways to stretch their dollars, they are increasingly turning to Dollar Tree for everyday essentials, at compelling opening price points and pack sizes that help them manage their budgets.

Speaker #3: At the same time, our value, convenience, and the breadth of our assortment are resonating across all income cohorts. Second, we were pleased with discretionary performance despite pockets of helium shortages across our store fleet, which created a modest headwind during the quarter.

Michael C. Creedon Jr.: Second, we were pleased with discretionary performance despite pockets of helium shortages across our store fleet, which created a modest headwind during the quarter. We estimate helium-related in-stock challenges reduced total sales by approximately $15 million, or about 30 basis points of comp. We continue to work closely with our vendors to understand the expected recovery of supply. Against that backdrop, the performance of discretionary reinforces our confidence in the broader strength we are seeing across the assortment. Let me turn to tariffs and the tariff refunds we received during the quarter. We received approximately $383 million, giving us a meaningful opportunity to reinvest in the business and further strengthen our value proposition for our customers. We are putting those funds to work in areas where we believe they can have the greatest and most lasting impact.

Mike Creedon: Second, we were pleased with discretionary performance despite pockets of helium shortages across our store fleet, which created a modest headwind during the quarter. We estimate helium-related in-stock challenges reduced total sales by approximately $15 million, or about 30 basis points of comp. We continue to work closely with our vendors to understand the expected recovery of supply. Against that backdrop, the performance of discretionary reinforces our confidence in the broader strength we are seeing across the assortment. Let me turn to tariffs and the tariff refunds we received during the quarter. We received approximately $383 million, giving us a meaningful opportunity to reinvest in the business and further strengthen our value proposition for our customers. We are putting those funds to work in areas where we believe they can have the greatest and most lasting impact.

Speaker #3: We estimate helium-related in-stock challenges reduced total sales by approximately $15 million, or about 30 basis points of comp. We continue to work closely with our vendors to understand the expected recovery of supply.

Speaker #3: Against that backdrop, the performance of discretionary reinforces our confidence in the broader strength we are seeing across the assortment. Let me turn to tariffs and the tariff refunds we received during the quarter.

Speaker #3: We received approximately $383 million, giving us a meaningful opportunity to reinvest in the business and further strengthen our value proposition for our customers. We are putting those funds to work in areas where we believe they can have the greatest and most lasting impact.

Speaker #3: We are focusing those dollars on targeted pricing strategies, marketing, store operations, and store conditions—areas that can benefit our customers today while strengthening the business for the long term.

Michael C. Creedon Jr.: We are focusing those dollars on targeted pricing strategies, marketing, store operations, and store conditions, areas that can benefit our customers today while strengthening the business for the long term. Additionally, we are closely monitoring the competitive environment and our relative values in the marketplace. Dollar Tree is committed to delivering outstanding value, convenience, and discovery at all times for our customers. Stepping back, we are pleased with our Q2 performance. Comp sales exceeded the high end of our outlook, traffic improved, our assortment gained traction, store execution strengthened, and our teams delivered better results across our supply chain. We believe our investments in merchandising, pricing, marketing, and store execution have strengthened customer relationships and improved the long-term earnings power of the business.

Mike Creedon: We are focusing those dollars on targeted pricing strategies, marketing, store operations, and store conditions, areas that can benefit our customers today while strengthening the business for the long term. Additionally, we are closely monitoring the competitive environment and our relative values in the marketplace. Dollar Tree is committed to delivering outstanding value, convenience, and discovery at all times for our customers. Stepping back, we are pleased with our Q2 performance. Comp sales exceeded the high end of our outlook, traffic improved, our assortment gained traction, store execution strengthened, and our teams delivered better results across our supply chain. We believe our investments in merchandising, pricing, marketing, and store execution have strengthened customer relationships and improved the long-term earnings power of the business.

Speaker #3: Additionally, we are closely monitoring the competitive environment and our relative values in the marketplace. Dollar Tree is committed to delivering outstanding value, convenience, and discovery at all times for our customers.

Speaker #3: Stepping back, we are pleased with our second quarter performance. Comp sales exceeded the high end of our outlook, traffic improved, our assortment gained traction, store execution strengthened, and our teams delivered better results across our supply chain.

Speaker #3: We believe our investments in merchandising, pricing, marketing, and store execution have strengthened customer relationships and improved the long-term earnings power of the business. Across these areas, we remain focused on delivering what we believe matters most to customers.

Michael C. Creedon Jr.: Across these areas, we remain focused on delivering what we believe matters most to customers, exceptional value, greater convenience, and the sense of discovery that has always differentiated Dollar Tree. Those priorities continue to guide our merchandising, pricing, and operational decisions, and we believe they position us well to deepen customer loyalty. We are investing our tariff proceeds in a way that is consistent with that philosophy. As we look ahead, our priorities remain unchanged, better serve and engage with our customers, execute more consistently, allocate capital with discipline, and build a stronger Dollar Tree position to deliver sustainable, profitable growth over the long term. We are engaging with and learning from our customers in new ways and using those insights to inform how we evolve the business. We are encouraged by the progress we have made, but we also recognize there is more work ahead.

Mike Creedon: Across these areas, we remain focused on delivering what we believe matters most to customers, exceptional value, greater convenience, and the sense of discovery that has always differentiated Dollar Tree. Those priorities continue to guide our merchandising, pricing, and operational decisions, and we believe they position us well to deepen customer loyalty. We are investing our tariff proceeds in a way that is consistent with that philosophy. As we look ahead, our priorities remain unchanged, better serve and engage with our customers, execute more consistently, allocate capital with discipline, and build a stronger Dollar Tree position to deliver sustainable, profitable growth over the long term. We are engaging with and learning from our customers in new ways and using those insights to inform how we evolve the business. We are encouraged by the progress we have made, but we also recognize there is more work ahead.

Speaker #3: Exceptional value, greater convenience, and the sense of discovery have always differentiated Dollar Tree. Those priorities continue to guide our merchandising, pricing, and operational decisions, and we believe they position us well to deepen customer loyalty.

Speaker #3: And we are investing our tariff proceeds in a way that is consistent with that philosophy. As we look ahead, our priorities remain unchanged: better serve and engage with our customers, execute more consistently, allocate capital with discipline, and build a stronger Dollar Tree positioned to deliver sustainable, profitable growth over the long term.

Speaker #3: We are engaging with, and learning from, our customers in new ways, and using those insights to inform how we evolve the business. We're encouraged by the progress we've made, but we also recognize there is more work ahead.

Speaker #3: In closing, we are navigating a highly uncertain macro environment. As we said in the past, Dollar Tree is built for times like this. Our strategies are unlocking a better assortment and better-run stores, while engaging with our customers in more relevant and compelling ways.

Michael C. Creedon Jr.: In closing, we are navigating a highly uncertain macro environment. As we said in the past, Dollar Tree is built for times like this. Our strategies are unlocking a better assortment and better run stores while engaging with our customers in more relevant and compelling ways. We look forward to building on our strong operating momentum in the H2 of the year. Finally, I am excited to share that as we mark Dollar Tree's 40th anniversary, we are committing $40 million through our Dollar Tree Community Impact Program to support local organizations that make a meaningful difference in people's lives. Reinvesting our tariff refunds in these communities will help expand access to essentials, create opportunities, and strengthen the communities we serve. With that, I will turn the call over to Stuart to discuss the financial results and outlook in more detail.

Mike Creedon: In closing, we are navigating a highly uncertain macro environment. As we said in the past, Dollar Tree is built for times like this. Our strategies are unlocking a better assortment and better run stores while engaging with our customers in more relevant and compelling ways. We look forward to building on our strong operating momentum in the H2 of the year. Finally, I am excited to share that as we mark Dollar Tree's 40th anniversary, we are committing $40 million through our Dollar Tree Community Impact Program to support local organizations that make a meaningful difference in people's lives. Reinvesting our tariff refunds in these communities will help expand access to essentials, create opportunities, and strengthen the communities we serve. With that, I will turn the call over to Stuart to discuss the financial results and outlook in more detail.

Speaker #3: We look forward to building on our strong operating momentum in the second half of the year. And finally, I'm excited to share that as we mark Dollar Tree's 40th anniversary, we're committing $40 million through our Dollar Tree Impact Fund to support local organizations that make a meaningful difference in people's lives.

Speaker #3: Reinvesting our tariff refunds in these communities will help expand access to essentials, create opportunities, and strengthen the communities we serve. With that, I'll turn the call over to Stewart to discuss the financial results and outlook in more detail.

Speaker #1: Thanks, Mike, and good morning, everyone. In the second quarter, we saw continued improvement in the underlying financial performance of the business. Second quarter adjusted diluted earnings per share was $2.70, of which $1.31 was attributable to the combined impact of tariff refunds, tariff refund reinvestments, and offsetting certain duties.

Stewart Glendinning: Thanks, Mike, and good morning, everyone. In the Q2, we saw continued improvement in the underlying financial performance of the business. Q2 adjusted diluted earnings per share was $2.70, of which $1.31 was attributable to the combined impact of tariff refunds, tariff refund reinvestments, and offsetting certain duties. Adjusted EPS is well ahead of our outlook range. Before reviewing our financial results further, I would like to provide an overview of the tariff refunds. Given the impact of tariff refunds and our related reinvestments on the P&L, we think it is important to provide additional context on what we know today, recognizing the timing and magnitude of these items could impact our reported results. During the Q2, we received $383 million of tariff refund proceeds. The benefit to gross profit and other income was $369 million and $14 million, respectively.

Speaker #1: Adjusted EPS is well ahead of our outlook range. Before reviewing our financial results further, I would like to provide an overview of the tariff refunds.

Speaker #1: Given the impact of tariff refunds and our related reinvestments on the P&L, we think it's important to provide additional context on what we know today.

Speaker #1: Recognizing the timing and magnitude of these items could impact our reported results. During the second quarter, we received $383 million of tariff refund proceeds.

Speaker #1: The benefit to gross profit and other income was $369 million and $14 million, respectively. Additionally, gross profit was negatively impacted by $13 million of certain duties.

Stewart Glendinning: Additionally, gross profit was negatively impacted by $13 million of certain duties. In the quarter, we reinvested $37 million of those proceeds, including $22 million in cost of sales and $15 million in SG&A. As Mike described earlier, these investments were targeted at discrete customer-facing and operational initiatives, such as our 40th anniversary celebration, marketing, and store conditions, all of which are designed to enhance value, convenience, and discovery for our customers. Now, let me walk you through the Q2 financial details and then discuss our updated outlook. Net sales increased 7% to $4.9 billion, driven by a 3.7% increase in comparable store sales and a 3.3% contribution from net new store growth. Comps were driven by a 3.3% increase in average ticket on the back of last year's pricing actions and higher multi-price penetration. Traffic increased 0.4%, a sequential improvement relative to the Q1 trend.

Speaker #1: In the quarter, we reinvested $37 million of those proceeds, including $22 million in cost of sales and $15 million in SG&A. As Mike described earlier, these investments were targeted at discrete, customer-facing and operational initiatives.

Speaker #1: Such as our 40th anniversary celebration, marketing, and store conditions, all of which are designed to enhance value, convenience, and discovery for our customers. Now, let me walk you through the second quarter financial details and then discuss our updated outlook.

Speaker #1: Net sales increased 7% to $4.9 billion, driven by a 3.7% increase in comparable store sales and a 3.3% contribution from net new store growth.

Speaker #1: Comps were driven by a 3.3% increase in average ticket on the back of last year's pricing actions and higher multi-price penetration. Traffic increased 0.4%, a sequential improvement relative to the Q1 trend.

Speaker #1: By category, consumables delivered a 5.8% comp, while discretionary delivered 1.6%. As Mike mentioned, category performance was broad-based, and we overcame an estimated $15 million sales headwind from supply constraints in helium.

Stewart Glendinning: By category, consumables delivered a 5.8% comp, while discretionary delivered 1.6%. As Mike mentioned, category performance was broad-based, and we overcame an estimated $15 million sales headwind from supply constraints in helium. Gross margin expanded 850 basis points to 42.9% and included a 680 basis point benefit related to the net impact of tariff refunds, reinvestments, and certain duties. Gross margin expansion was driven by tariff refunds, lower tariff rates, favorable shrink results, and occupancy leverage, partially offset by reinvestments primarily related to our 40th anniversary celebration, certain duties, and a mix to lower-margin consumables. As Mike mentioned, our shrink performance remained favorable during the quarter and reflects adjustments to the overall enterprise-wide results from our most recent counts. Moving down the P&L, total SG&A, inclusive of TSA income, levered 50 basis points and included a 30 basis point impact from tariff refund reinvestments.

Speaker #1: Gross margin expanded 850 basis points to 42.9% and included a 680 basis point benefit related to the net impact of tariff refunds, reinvestments, and certain duties.

Speaker #1: Gross margin expansion was driven by tariff refunds, lower tariff rates, favorable shrink results, and occupancy leverage, partially offset by reinvestments—primarily related to our 40th anniversary celebration—certain duties, and a mix to lower-margin consumables.

Speaker #1: As Mike mentioned, our shrink performance remained favorable during the quarter and reflects adjustments to the overall enterprise-wide results from our most recent counts. Moving down the P&L, total SG&A, inclusive of TSA income, levered 50 basis points and included a 30 basis point impact from tariff refund reinvestments.

Speaker #1: The improvement in total SG&A rate, inclusive of TSA income, was primarily driven by payroll, partially offset by higher marketing and depreciation costs. Adjusted operating margin expanded 890 basis points to 14.1% and included a 650 basis point net benefit related to tariff refunds, reinvestments, and certain duties.

Stewart Glendinning: The improvement in total SG&A rate, inclusive of TSA income, was primarily driven by payroll, partially offset by higher marketing and depreciation costs. Adjusted operating margin expanded 890 basis points to 14.1% and included a 650 basis point net benefit related to tariff refunds, reinvestments, and certain duties. Below the operating line, net interest expense was slightly favorable, and the effective tax rate was in line with our expectations. Turning to the balance sheet, inventory declined 9% versus the prior year, while sales increased 7%, resulting in a favorable inventory-to-sales spread. We continue to manage inventory tightly, which supports fresher assortments for our customers, working capital efficiency, and stronger free cash flow generation. We ended the quarter with $1.06 billion in cash and no commercial paper outstanding. We generated $922 million in cash from operations and invested $246 million in capital expenditures, resulting in free cash flow of $675 million.

Speaker #1: Below the operating line, net interest expense was slightly favorable, and the effective tax rate was in line with our expectations. Turning to the balance sheet, inventory declined 9% versus the prior year, while sales increased 7%, resulting in a favorable inventory-to-sales spread.

Speaker #1: We continue to manage inventory tightly, which supports fresher assortments for our customers, working capital efficiency, and stronger free cash flow generation. We ended the quarter with $1.06 billion in cash and no commercial paper outstanding.

Speaker #1: We generated $922 million in cash from operations and invested $246 million in capital expenditures, resulting in free cash flow of $675 million. During the quarter, we repurchased 5.6 million shares for $605 million.

Stewart Glendinning: During the quarter, we repurchased 5.6 million shares for $605 million. Looking back over the last 12 months, we have reduced our share count by approximately 8% and returned over $1.8 billion to investors through share repurchases. As you look ahead, I would like to walk you through our outlook for the remainder of the year. There are a number of moving parts which are important to understand as you look at the business going forward. These include the tariff refunds and their partial reinvestment, the ongoing tariffs following the recent rate adjustments, and the impact of ongoing fuel costs. Let me share the current assumptions and expected impact on the business. As we shared earlier in the call, the full year will include $383 million of tariff refunds received in Q2. We are not assuming additional refunds. Offsetting these refunds, we currently anticipate reinvestment of approximately $210 million.

Speaker #1: Looking back over the last 12 months, we've reduced our share count by approximately 8% and returned over $1.8 billion to investors through share repurchases.

Speaker #1: As you look ahead, I'd like to walk you through our outlook for the remainder of the year. There are a number of moving parts, which are important to understand as you look at the business going forward.

Speaker #1: These include the tariff refunds and their partial reinvestment, the ongoing tariffs following the recent rate adjustments, and the impact of ongoing fuel costs. Let me share the current assumptions and expected impact on the business.

Speaker #1: As we shared earlier in the call, the full year will include $383 million of tariff refunds received in Q2. We're not assuming additional refunds.

Speaker #1: Offsetting these refunds, we currently anticipate reinvestment of approximately $210 million. As it relates to tariff rates, on our Q1 call, I shared that we expected the tariff rates to return to their previous levels.

Stewart Glendinning: As it relates to tariff rates, on our Q1 call, I shared that we expected the tariff rates to return to their previous levels. The newly established rates have moved higher but are now lower than what we had assumed. With respect to fuel, the outlook for fuel rates is elevated relative to when we last spoke in May and therefore an incremental headwind. Turning to our updated outlook for the year. We expect net sales in the range of $20.5 billion to $20.7 billion, reflecting comparable sales growth of 3% to 4%. We expect adjusted corporate SG&A of $515 million to $535 million, including our $40 million charitable contribution. We now expect TSA income of $65 million, or $5 million lower than we previously assumed. This is primarily the result of the timing of various TSAs rolling off.

Speaker #1: The newly established rates have moved higher, but are now lower than what we had assumed. With respect to fuel, the outlook for fuel rates is elevated relative to when we last spoke in May and therefore presents an incremental headwind.

Speaker #1: Turning to our updated outlook for the year, we expect net sales in the range of $20.5 billion to $20.7 billion, reflecting comparable sales growth of 3% to 4%.

Speaker #1: We expect adjusted corporate SG&A of $515 million to $535 million, including our $40 million charitable contribution. We now expect TSA income of $65 million, or $5 million lower than we previously assumed.

Speaker #1: This is primarily the result of the timing of various TSAs rolling off. With respect to net interest expense, we now expect $70 million, or $15 million lower than we previously assumed.

Stewart Glendinning: With respect to net interest expense, we now expect $70 million, or $15 million lower than we previously assumed. This reflects a higher average cash balance and higher interest income. Given the second quarter performance, updated tariff regime and net tariff refund benefit, updated TSA income, and net interest expense assumption, we now expect adjusted diluted earnings per share in the range of $7.70 to $8.05, including an approximately 60-cent benefit related to the net impact of tariff refunds. Please note this outlook incorporates an outstanding share count of 191 million shares, which reflects share repurchases through today's date. Turning to the third quarter, we expect net sales in the range of $5 billion to $5.1 billion, reflecting comparable store sales growth of 3% to 4%.

Speaker #1: This reflects a higher average cash balance and higher interest income. Given the second quarter performance, updated tariff regime and net tariff refund benefit, updated TSA income, and net interest expense assumption, we now expect adjusted diluted earnings per share in the range of $7.70 to $8.05, including an approximately $0.60 benefit related to the net impact of tariff refunds.

Speaker #1: Please note this outlook incorporates an outstanding share count of 191 million shares, which reflects share repurchases through today's date. Turning to the third quarter, we expect net sales in the range of $5.0 billion to $5.1 billion, reflecting comparable store sales growth of 3% to 4%.

Speaker #1: Adjusted diluted earnings per share are expected to be in the range of $0.80 to $0.95, including a negative impact of approximately $0.50 related to tariff refund reinvestments.

Stewart Glendinning: Adjusted diluted earnings per share are expected to be in the range of $0.80 to $0.95, including a negative impact of approximately $0.50 related to tariff refund reinvestments. In closing, we delivered a strong second quarter and continue to execute against our strategic priorities. Our team's focus, operational discipline, and improving business performance position us well for the balance of the year as we work to generate consistent, profitable growth and create long-term value for our shareholders. With that, I will turn the call back over to Mike.

Speaker #1: In closing, we delivered a strong second quarter and continue to execute against our strategic priorities. Our team's focus, operational discipline, and improving business performance position us well for the balance of the year as we work to generate consistent, profitable growth and create long-term value for our shareholders.

Speaker #1: With that, I'll turn the call back over to Mike.

Speaker #2: Thanks, Stewart. As we step back from the quarter, what gives us confidence is not any single metric or one-time event. It's that we're seeing progress across every area of the business.

Michael C. Creedon Jr.: Thanks, Stuart. As we step back from the quarter, what gives us confidence is not any single metric or one-time event. It is that we are seeing progress across every area of the business. Customer engagement is improving, merchandising is becoming more agile, operational execution continues to strengthen, and the investments we have made over the past year are beginning to reinforce one another. While we recognize that there is still work ahead, we believe Dollar Tree is becoming a stronger, more competitive retailer with a greater ability to deliver sustainable, profitable growth over the long term. With that, we are happy to take your questions.

Mike Creedon: Thanks, Stuart. As we step back from the quarter, what gives us confidence is not any single metric or one-time event. It is that we are seeing progress across every area of the business. Customer engagement is improving, merchandising is becoming more agile, operational execution continues to strengthen, and the investments we have made over the past year are beginning to reinforce one another. While we recognize that there is still work ahead, we believe Dollar Tree is becoming a stronger, more competitive retailer with a greater ability to deliver sustainable, profitable growth over the long term. With that, we are happy to take your questions.

Speaker #2: Customer engagement is improving, merchandising is becoming more agile, operational execution continues to strengthen, and the investments we've made over the past year are beginning to reinforce one another.

Speaker #2: While we recognize that there's still work ahead, we believe Dollar Tree is becoming a stronger, more competitive retailer with a greater ability to deliver sustainable, profitable growth over the long term.

Speaker #2: With that, we're happy to take your questions.

Speaker #3: Thank you. And I'll be conducting your question-and-answer session. If you'd like to be placed into the question queue, please press star one on your telephone keypad.

Operator 2: Thank you. We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. As a reminder, we ask you, please ask one question, one follow-up, then return to the queue. Our first question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. As a reminder, we ask you, please ask one question, one follow-up, then return to the queue. Our first question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. As a reminder, we ask that you please ask one question and one follow-up, then return to the queue.

Speaker #3: Our first question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Speaker #4: Thanks, and congrats on a nice quarter.

Matthew Boss: Thanks, and congrats on a nice quarter.

Speaker #5: Thanks, Matt.

Michael C. Creedon Jr.: Thanks, Matt.

Mike Creedon: Thanks, Matt.

Speaker #4: So, Mike, can you elaborate on the cadence of the comp trend you saw in the quarter? Traffic turned positive a quarter earlier than you had planned three months ago.

Matthew Boss: Mike, can you elaborate on the cadence of the comp trend you saw in the quarter? Traffic turned positive a quarter earlier than your plan 3 months ago. Can you talk to drivers of that outperformance and impact from the 40th anniversary $1 price points? Lastly, can you share where your comp stands quarter to date today?

Speaker #4: So can you talk to the drivers of that outperformance and the impact from the 40th Anniversary $1 price points? And lastly, can you share where your comp stands quarter-to-date today?

Speaker #5: Sure, Matt. Thanks. First of all, let me start by saying the team did a fantastic job in Q2. If we rewind the clock to the beginning of the year, we had the right strategy given the set-up, and we were confident traffic would turn positive much quicker than it did with Break the Dollar.

Michael C. Creedon Jr.: Sure, Matt, thanks. First of all, let me start by saying the team did a fantastic job in Q2. If we rewind the clock to the beginning of the year, we had the right strategy given the setup, and we were confident traffic would turn positive much quicker than it did with Break the Dollar. What we saw in Q2 is proof point that a better assortment and better run stores while talking to our customers in ways we never have before really drives the business. Traffic was the headline in Q2. The comp strengthened as the quarter progressed, and traffic improved sequentially and ultimately turned positive. The most encouraging aspect of the performance was that it wasn't driven by any one category or one event.

Mike Creedon: Sure, Matt, thanks. First of all, let me start by saying the team did a fantastic job in Q2. If we rewind the clock to the beginning of the year, we had the right strategy given the setup, and we were confident traffic would turn positive much quicker than it did with Break the Dollar. What we saw in Q2 is proof point that a better assortment and better run stores while talking to our customers in ways we never have before really drives the business. Traffic was the headline in Q2. The comp strengthened as the quarter progressed, and traffic improved sequentially and ultimately turned positive. The most encouraging aspect of the performance was that it wasn't driven by any one category or one event.

Speaker #5: What we saw in Q2 is a proof point that a better assortment and better run stores, while talking to our customers in ways we never have before, really drives the business.

Speaker #5: And traffic was the headline in Q2. The comp strengthened as the quarter progressed, and traffic improved sequentially and ultimately turned positive. The most encouraging aspect of the performance was that it wasn't driven by any one category or one event.

Speaker #5: And we saw broad-based improvement across the business, and that gives us a ton of confidence in the strength of the underlying trend and the underlying business.

Michael C. Creedon Jr.: We saw broad-based improvement across the business, and that gives us a ton of confidence in the strength of the underlying trend and the underlying business. As I mentioned in my script, not only did we see traffic trends get stronger by month, the 2-year traffic trend also strengthened. Relative to our previous expectations of positive traffic in the H2, we're running about a quarter early. When I step back, I really like what I see. I like that the strategies we've laid out are working. On the 40th anniversary dollar price points, I think it's important to know that these are really small in scale. For those of you, and I know you do shop our stores, it's a handful of rotating SKUs and end caps. When we look at the data, we definitely think the 40th brought some excitement, some newness.

Mike Creedon: We saw broad-based improvement across the business, and that gives us a ton of confidence in the strength of the underlying trend and the underlying business. As I mentioned in my script, not only did we see traffic trends get stronger by month, the 2-year traffic trend also strengthened. Relative to our previous expectations of positive traffic in the H2, we're running about a quarter early. When I step back, I really like what I see. I like that the strategies we've laid out are working. On the 40th anniversary dollar price points, I think it's important to know that these are really small in scale. For those of you, and I know you do shop our stores, it's a handful of rotating SKUs and end caps. When we look at the data, we definitely think the 40th brought some excitement, some newness.

Speaker #5: As I mentioned in my script, not only did we see traffic trends get stronger by month, the two-year traffic trend also strengthened. So, relative to our previous expectations of positive traffic in the back half, we're running about a quarter early.

Speaker #5: And when I step back, I really like what I see. I like that the strategies we've laid out are working. On the 40th anniversary dollar price points, I think it's important to note that these are really small in scale.

Speaker #5: For those of you—and I know you do—shop our stores, it's a handful of rotating SKUs and end caps. And when we look at the data, we definitely think the 40th brought some excitement, some newness.

Michael C. Creedon Jr.: There's a halo that goes with that, but wasn't really a key driver of the comp. On quarter to date trends, I don't typically comment on that, but what I would say is that as we put our outlook together, we incorporate everything we know today, and I'm really encouraged by the momentum we continue to see in the business. The team will stay focused on execution and delivering value, making sure we're convenient with great checkout, and that thrill of the hunt discovery that Dollar Tree's known for.

Mike Creedon: There's a halo that goes with that, but wasn't really a key driver of the comp. On quarter to date trends, I don't typically comment on that, but what I would say is that as we put our outlook together, we incorporate everything we know today, and I'm really encouraged by the momentum we continue to see in the business. The team will stay focused on execution and delivering value, making sure we're convenient with great checkout, and that thrill of the hunt discovery that Dollar Tree's known for.

Speaker #5: There's a halo that goes with that, but it wasn't really a key driver of the comp. On quarter-to-date trends, I don't typically comment on that, but what I would say is that as we put our outlook together, we incorporate everything we know today, and I'm really encouraged by the momentum we continue to see in the business.

Speaker #5: The team will stay focused on execution and delivering value, making sure we're convenient with great checkout, and that thrill-of-the-hunt discovery that Dollar Tree is known for.

Speaker #4: Great. And then, Stewart, a lot of moving parts on margins this quarter. Excluding the net tariff impact, can you walk through what drove the underlying earnings beat relative to your outlook that you shared back in May?

Matthew Boss: Great. Stuart, a lot of moving parts on margins this quarter. Excluding the net tariff impact, can you walk through what drove the underlying earnings beat relative to your outlook that you shared back in May?

Speaker #5: Thanks, Matt. Yeah, look, lots of moving parts. There's a great deal of complexity. We're going to try to make that simple. Look, the short answer to the question here is that, ignoring the net tariffs—the benefit of those tariffs—we sold more than we expected, and we did that at better margins.

Stewart Glendinning: Thanks, Matt. Yeah, look, lots of moving parts. There is a great deal of complexity. We are going to try to make that simple. Look, the short answer to the question here is that ignoring the net tariffs, the benefit of those tariffs, we sold more than we expected, and we did that at better margins. So that is the good news. On sales, the 3.7 comp was above the high end of the Q2 outlook, and that drove additional gross margin dollars, a positive. The more meaningful driver of our performance was in our margin delivery. Relative to, if you look back at our Q2 outlook, we had three main areas of gross margin favorability, shrink, freight, and fixed costs. On shrink, as we highlight in the prepared remarks, we continue to run better stores, and that is showing up in favorable inventory counts.

Speaker #5: So that's the good news. On sales, the 3.7% comp was above the high end of the Q2 outlook, and that drove additional gross margin dollars—a positive.

Speaker #5: But the more meaningful driver of our performance was in our margin delivery. And if you look back at our Q2 outlook, we had three main areas of gross margin favorability.

Speaker #5: Shrink, freight, and fixed costs. On shrink, as we highlight in the prepared remarks, we continue to run better stores, and that's showing up in favorable inventory counts.

Speaker #5: Shrink was much better than last year, and even better than we expected. Shrink also, by the way, benefited from a cumulative adjustment to the reserve which provided a benefit in the quarter and just to help with that.

Stewart Glendinning: Shrink was much better than last year and even better than we expected. Shrink also, by the way, benefited from a cumulative adjustment to the reserve, which provided a benefit in the quarter. Just to help with that, the split here is about two-thirds from the inventory results and about one-third from the reserve adjustment. Freight was modestly better than we assumed, and that was mainly because we had better than expected fuel rates. The higher sales comp actually allowed us to drive leverage on our fixed costs, which included occupancy and distribution costs. On SG&A, since we generated a higher comp, we also generated higher fixed cost leverage on that SG&A. So we had better sales, we had better gross margin, and we had better operating margin.

Speaker #5: The split here is about two-thirds from the inventory results and about one-third from the reserve adjustment. Freight was modestly better than we assumed, and that was mainly because we had better than expected fuel rates.

Speaker #5: But the prior sales comp actually allowed us to drive leverage on our fixed costs, which included occupancy and distribution costs. And then, on SG&A, since we generated a higher comp, we also generated higher fixed cost leverage on that SG&A.

Speaker #5: So we had better sales, we had better gross margin, and we had better operating margin. I also want to point out that the share count did not have any meaningful impact on the results that I've just spoken to.

Stewart Glendinning: I want to point out also that the share count did not have any meaningful impact on the results that I have just spoken to.

Speaker #4: That's great color. Best of luck.

Matthew Boss: It's great color. Best of luck.

Speaker #3: Thank you. Next question is coming from Seth Sigman from Barclays. Your line is now live.

Operator 2: Thank you. Next question is coming from Seth Sigman from Barclays. Your line is now live.

Operator: Thank you. Next question is coming from Seth Sigman from Barclays. Your line is now live.

Speaker #6: Great. Good morning, everyone. Nice quarter. It looks like the new high end of your EPS outlook, the 805 or I guess it's 745X, the net tariff refunds, it mostly just flows through the Q2 beat and the lower share count.

Seth Sigman: Great. Good morning, everyone. Nice quarter. It looks like the new high end of your EPS outlook, the $8.05 or I guess it's $7.45 ex the net tariff refunds. I just want to make sure that's right. And then related to that, your prior outlook embedded a higher tariff rate versus the current 12.5% that you mentioned. Where is that upside from lower tariff rates? How is that flowing through? Thanks.

Speaker #6: I just want to make sure that's right. And then related to that, your prior outlook embedded a higher tariff rate. Versus the current 12 and a half that you mentioned, where is that upside from lower tariff rates?

Speaker #6: How is that flowing through? Thanks.

Speaker #5: Yeah, good morning, Stewart here. A good question. So, first of all, you're correct. We did pass through the beat and the benefits of the lower share count in our outlook.

Stewart Glendinning: Yeah. Good morning. Stuart here. A good question. First of all, you're correct. We did pass through the beat and the benefits of the lower share count in our outlook, despite the current market volatility and inflation. If you strip out the net impact of the tariffs, which was $1.31 in the quarter, you get to $1.39 for underlying EPS in the second quarter. That of course is well ahead of the $1 to $1.15 outlook. The way I calculate it is if you take the $0.24 beat at the high point, and I'm using the high point because we shrunk the range, add about $0.11 of benefit to that $0.24 from the lower share count for the year.

Speaker #5: Despite the current market volatility, and inflation. And if you strip out the net tariff impact of the tariffs, which was a dollar 31 in the quarter, you get to a dollar 39 for underlying EPS in the second quarter.

Speaker #5: And that, of course, is well ahead of the dollar-to-dollar '15 outlook. And the way I calculate it is if you take the $0.24 beat at the high point—and I'm using the high point because we shrunk the range—add about $0.11 of benefit to that $0.24 from the lower share count for the year.

Speaker #5: And then add another $0.04 for the net benefit of lower TSA with the positive impact from lower interest expense. And you get to about a $0.39 benefit coming out of Q2.

Stewart Glendinning: And then add another $0.04 for the net benefit of lower TSA with the positive impact from lower interest expense, and you get to about a $0.39 benefit coming out of Q2. Since last quarter, the high point of our outlook was $7.10. You take that $0.39, add it to the $7.10, then you take the net full year benefit of $0.60 for tariffs, and you get right up against the high point of the EPS outlook. I know there's a lot in that, but that's how you do the math. More importantly, let me address just the tariffs. I'll remind you that for the back part of the year, we had assumed a 20% tariff rate when we reported back in May. That is what the administration was telling us.

Speaker #5: And since last quarter, the high point of our outlook was $7.10. You take that $0.39, add it to the $7.10, and then you take the net full-year benefit of $0.60 for tariffs, and you get right up against the high point of the EPS outlook.

Speaker #5: So I know there's a lot in there, but that's how you do the math. More importantly, let me address just the tariffs. I'll remind you that for the back part of the year, we had assumed a 20% tariff rate when we reported back in May.

Speaker #5: That is what the administration was telling us. And as you know, the tariff rates now are lower, somewhere around 12.5%.

Stewart Glendinning: As you know, the tariff rates now are lower, somewhere around 12.5%. So we get some benefit from that lower tariff rate in the H2 of the year. But there are two offsetting factors in COGS which absorb that benefit. First, we are anticipating that the sales growth in the H2 skews a little bit higher in consumables. While that is really a great positive outcome from a traffic and customer relevance standpoint, that higher consumables will drive a slightly lower margin mix. So some of that mix dynamic is absorbing tariff benefits. More powerfully, we've really been focused in the H2 on protecting value for the customer. While tariff rates have come down, we're also navigating some higher inflation on portions of our assortment. We're seeing some pressure in supply chain, of course, because of fuel.

Speaker #5: So, we get some benefit from that lower tariff rate in the back half of the year, but there are two offsetting factors in cost of sales which absorb that benefit.

Speaker #5: First, we are anticipating that the sales growth in the back half skews a little bit higher in consumables. And while that is really a great positive outcome from a traffic and customer relevance standpoint, that higher consumables mix will drive the slightly lower margin mix.

Speaker #5: And so some of that mix dynamic is absorbing tariff benefits. More importantly, we really have been focused in the back half on protecting value for the customer.

Speaker #5: And so, while tariff rates have come down, we're also navigating some higher inflation on portions of our assortment, and we're seeing some pressure in the supply chain, of course, because of fuel.

Speaker #5: So rather than passing those costs on to the customer, we've taken advantage of the fact that we're getting that lower tariff rate in, and that tariff rate is absorbing inflation.

Stewart Glendinning: Rather than passing those costs on to the customer, we've taken advantage of the fact that we're getting that lower tariff rate in, and that tariff rate is absorbing inflation and helping us to maintain value across key categories. We think that's helping our traffic, and of course, we think that's also driving market share gains. Looking at this, I think we've got the right balance between driving the near term results and strengthening the business. The good news, I mean, this is really good news, is that our outlook has not included the tariff refunds to offset any of the current inflation. We're taking those higher costs in our run rate, and we're offsetting that higher volatility. Again, I know there's a lot there in the financials this quarter, but hopefully that lays that out for you.

Speaker #5: And helping us to maintain value across key categories. We think that's helping our traffic, and, of course, we think that's also driving market share gains.

Speaker #5: So, looking at this, I think we've got the right balance between driving the near-term results and strengthening the business. And the good news—I mean, this is really good news—is that our outlook has not included the tariff refunds to offset any of the current inflation.

Speaker #5: We're taking those higher costs in our run rate, and we're offsetting that higher volatility. So again, I know there's a lot there in the financials this quarter, but hopefully that lays it out for you.

Speaker #6: Okay, yeah, that's very helpful. I did want to follow up on the tariff refunds, and perhaps you can give us a little bit more color on how you're deploying those funds and what type of return you are assuming in this guidance for the spending of that.

Seth Sigman: Okay. Yeah, that's very helpful. I did want to follow up on the tariff refunds, and perhaps you can give us a little bit more color on how you're deploying those funds and what type of return are you assuming in this guidance for the spending of that, and if there's any context on how that's already started to play out as you start to deploy that. Thanks so much.

Speaker #6: And if there's any context on how that's already started to play out as you start to deploy that, thanks so much.

Speaker #5: Yeah, sure. Seth, I'll start, and then Stewart, if you want to jump in on the returns. As we talked about in the script, we're thinking about tariff refunds as a way to really enhance our strategy.

Michael C. Creedon Jr.: Yeah, sure, Seth. I will start and then Stuart, if you want to jump in on the returns. As we talked about in the script, we are thinking about tariff refunds as a way to really enhance our strategy. What it gives us is the opportunity to take the initiatives we have laid out and accelerate them. We also use a small portion of the refunds tactically to fund our 40th anniversary Dollar Tree price point strategy, which as I mentioned, created a ton of buzz and excitement for our customers. It really supports that thrill of the hunt. The investments are focused.

Mike Creedon: Yeah, sure, Seth. I will start and then Stuart, if you want to jump in on the returns. As we talked about in the script, we are thinking about tariff refunds as a way to really enhance our strategy. What it gives us is the opportunity to take the initiatives we have laid out and accelerate them. We also use a small portion of the refunds tactically to fund our 40th anniversary Dollar Tree price point strategy, which as I mentioned, created a ton of buzz and excitement for our customers. It really supports that thrill of the hunt. The investments are focused.

Speaker #5: What it gives us is the opportunity to take the initiatives we've laid out and accelerate them. We also use a small portion of the refunds tactically to fund our 40th anniversary dollar price point strategy, which, as I mentioned, created a ton of buzz and excitement for our customers and really supports that thrill of the hunt.

Speaker #5: The investments are focused, as we all are, on enhancing value, convenience, and discovery. So that includes improving our assortment with incredible values, making our stores easier to shop by upgrading in-store signage, and then the marketing piece of it, where we're talking to our customers in ways we really never have before.

Michael C. Creedon Jr.: As we all are on enhancing value, convenience, and discovery. So that includes improving our assortment with incredible values, making our stores easier to shop by upgrading in-store signage, and then the marketing piece of it, where we are talking to our customers in ways we really never have before, and scaling those marketing and digital capabilities. These are all areas that we believe can really increase customer engagement and accelerate our traffic flywheel. The refunds were significant. We are trying to be as thoughtful as we can about how to deploy them so that investments today provide a lasting return. Stuart, if you want to touch on those returns.

Mike Creedon: As we all are on enhancing value, convenience, and discovery. So that includes improving our assortment with incredible values, making our stores easier to shop by upgrading in-store signage, and then the marketing piece of it, where we are talking to our customers in ways we really never have before, and scaling those marketing and digital capabilities. These are all areas that we believe can really increase customer engagement and accelerate our traffic flywheel. The refunds were significant. We are trying to be as thoughtful as we can about how to deploy them so that investments today provide a lasting return. Stuart, if you want to touch on those returns.

Speaker #5: And scaling those marketing and digital capabilities—these are all areas that we believe can really increase customer engagement and accelerate our traffic flywheel. The refunds were significant. We're trying to be as thoughtful as we can about how to deploy them so that investments today provide a lasting return.

Speaker #5: And Stewart, if you want to touch on those returns.

Speaker #3: Yeah, thanks, Mike. Look, just a couple of quick points. We really did not make any real return on the incremental spend, and there were two reasons for that.

Stewart Glendinning: Yeah. Thanks, Mike. Look, just a couple quick points. We really did not take any real return in the incremental spend, and there were two reasons for that. First, we are in an environment where many retailers are reinvesting back in price, and we want to remain competitive. All boats may end up in the same space. Second, a number of the investments we are actually making are in areas, particularly the SG&A, where we are talking about store standards or where we are talking about messaging. These are places that are going to help to build momentum in the business. You would not ordinarily expect to see a sudden rush of benefit in. But the way we looked at those is to try to make sure that these are costs that are going to have lasting benefit, but that are not lasting in terms of expense.

Speaker #3: First, we were in an environment where many retailers are reinvesting back into price, and we want to remain competitive. And so all boats may end up in the same space.

Speaker #3: Second, a number of the investments we're actually making are in areas—particularly in SG&A—where we're talking about store standards or where we're talking about messaging.

Speaker #3: These are places that are going to help build momentum in the business, and you wouldn't ordinarily expect to see a sudden rush of benefit in.

Speaker #3: But the way we've looked at those is to try to make sure that these are costs that are going to have lasting benefit, but that are not lasting in terms of expense.

Speaker #3: So, as Mike said, we're using this as an opportunity to accelerate and enhance the investments. We are making it our business to drive initiatives across our stores.

Stewart Glendinning: So, as Mike said, we are using this as an opportunity to accelerate and enhance the investments we are making in our business to drive initiatives across our stores. There could be some upside in this, but I think for the moment, it is a better approach to saying that we are going to be cautious in the way that we estimate our outcomes.

Speaker #3: There could be some upside in this, but I think for the moment, it's a better approach to say that we're going to be cautious in the way that we estimate our outcomes.

Speaker #6: Okay, thanks, guys. Good luck in the back half.

Seth Sigman: Okay, thanks, guys. Good luck in the H2.

Speaker #5: Thanks.

Michael C. Creedon Jr.: Thanks.

Mike Creedon: Thanks.

Speaker #3: Thank you.

Stewart Glendinning: Thank you.

Speaker #4: Thank you. Next question is coming from Rupesh Parikh from Oppenheimer. Your line is now live.

Operator 2: Thank you. Next question is coming from Rupesh Parikh from Oppenheimer. Your line is now live.

Operator: Thank you. Next question is coming from Rupesh Parikh from Oppenheimer. Your line is now live.

Speaker #7: Good morning, and thanks for taking my questions. Also, congratulations on the next quarter. So, on store standards—you mentioned that about one-third of stores are not meeting your internal benchmarks, down from about half last October.

Rupesh Parikh: Good morning, and thanks for taking my questions, and also congrats on a nice quarter. On store standards.

Michael C. Creedon Jr.: Thanks

Mike Creedon: Thanks

Rupesh Parikh: You mentioned that about one-third of stores are not meeting your internal benchmarks, down from about half last October. How should we think about the opportunity from here to not only maintain those standards but improve them?

Speaker #7: How should we think about the opportunity from here to not only maintain those standards, but also improve them?

Speaker #5: Yeah, Rupesh, thank you. At Investor Day last year, this was a critical point that we made. We were really clear that when you improve store standards, you improve the entire foundation of the company.

Michael C. Creedon Jr.: Yeah, Rupesh, thank you. At Investor Day last year, this was a critical point that we made. We were really clear that when you improve store standards, you improve the entire foundation of the company, and it is the transformation that unlocks the full potential of this business. We knew we had meaningful opportunity across the fleet, and we laid out a very disciplined approach to address it. We have got a chart in the investor slide deck that shows what this team has accomplished so far, and so I want to make a few points on this. First, the progress we have made is encouraging. But we certainly do not view getting from roughly half the chain to about a third of the stores, from the opportunity bucket up, as crossing the finish line. We view this as evidence that what we are doing is working and gaining traction.

Mike Creedon: Yeah, Rupesh, thank you. At Investor Day last year, this was a critical point that we made. We were really clear that when you improve store standards, you improve the entire foundation of the company, and it is the transformation that unlocks the full potential of this business. We knew we had meaningful opportunity across the fleet, and we laid out a very disciplined approach to address it. We have got a chart in the investor slide deck that shows what this team has accomplished so far, and so I want to make a few points on this. First, the progress we have made is encouraging. But we certainly do not view getting from roughly half the chain to about a third of the stores, from the opportunity bucket up, as crossing the finish line. We view this as evidence that what we are doing is working and gaining traction.

Speaker #5: And it's the transformation that unlocks the full potential of this business. We knew we had meaningful opportunity across the fleet, and we laid out a very disciplined approach to address it.

Speaker #5: We've got a chart in the investor slide deck that shows what this team has accomplished so far, and so I want to make a few points on this.

Speaker #5: First, the progress we've made is encouraging. But we certainly don't view getting from roughly half the chain to about a third of the stores from the opportunity bucket up as crossing the finish line.

Speaker #5: We view this as evidence that what we're doing is working and gaining traction. So, if you think about this, early on, a lot of your efforts are just focused on addressing the most visible opportunities.

Michael C. Creedon Jr.: If you would think about this, early on, a lot of your efforts are just focused on addressing the most visible opportunities. And we have made meaningful progress there. But there is still a significant opportunity to elevate the standards across the entire fleet. Even many of our better-performing stores have room to improve, whether that is merch execution or in-stock levels, recovery, just the overall shopping experience. And those incremental improvements, when you are talking about 9,500 stores, really matters. It is not just about going from an opportunity store to a good store. We want to go from good to great and great to gold. We want to raise the bar on the entire fleet. And when you do that is the difference-maker for Dollar Tree. And just the other point I would make is I think a lot of retailers can make progress. They can get focused and make short-term progress.

Mike Creedon: If you would think about this, early on, a lot of your efforts are just focused on addressing the most visible opportunities. And we have made meaningful progress there. But there is still a significant opportunity to elevate the standards across the entire fleet. Even many of our better-performing stores have room to improve, whether that is merch execution or in-stock levels, recovery, just the overall shopping experience.

Speaker #5: And we've made meaningful progress there, but there is still a significant opportunity to elevate the standards across the entire fleet. Even many of our better-performing stores have room to improve.

Speaker #5: Whether that's merch execution, in-stock levels, recovery, or just the overall shopping experience, those incremental improvements really matter when you're talking about 9,500 stores.

Mike Creedon: And those incremental improvements, when you are talking about 9,500 stores, really matters. It is not just about going from an opportunity store to a good store. We want to go from good to great and great to gold. We want to raise the bar on the entire fleet. And when you do that is the difference-maker for Dollar Tree. And just the other point I would make is I think a lot of retailers can make progress. They can get focused and make short-term progress.

Speaker #5: It's not just about going from an opportunity store to a good store. We want to go from good to great, and great to gold.

Speaker #5: We want to raise the bar on the entire fleet. And when you do that, that's the difference maker for Dollar Tree. And just the other point I'd make is I think a lot of retailers can make progress.

Speaker #5: They can get focused and make short-term progress. The key to all this, and the way we've built it, is that we're going to sustain these elevated standards.

Michael C. Creedon Jr.: The key to all this, and the way we built it, is that we are going to sustain these elevated standards. That is the harder challenge. When you look at gold and our gold standards, we know where we want to get our stores, we know where we want to keep our stores, and our culture of accountability around execution, it is what gives us confidence that we will get there. Ultimately, you run better stores, you give a better customer experience, that drives traffic, sales, and productivity over time. The positive traffic trends we saw this quarter give us confidence that customers are noticing the improvements, and with a long runway to go, it gives us confidence in what we are doing in our future. I am very passionate about this point.

Mike Creedon: The key to all this, and the way we built it, is that we are going to sustain these elevated standards. That is the harder challenge. When you look at gold and our gold standards, we know where we want to get our stores, we know where we want to keep our stores, and our culture of accountability around execution, it is what gives us confidence that we will get there. Ultimately, you run better stores, you give a better customer experience, that drives traffic, sales, and productivity over time. The positive traffic trends we saw this quarter give us confidence that customers are noticing the improvements, and with a long runway to go, it gives us confidence in what we are doing in our future. I am very passionate about this point.

Speaker #5: That's the harder challenge. When you look at gold and our gold standards, we know where we want to get our stores. We know where we want to keep our stores.

Speaker #5: And our culture of accountability around execution is what gives us confidence that we'll get there. Ultimately, you run better stores, you give a better customer experience. That drives traffic, sales, and productivity over time.

Speaker #5: The positive traffic trends we saw this quarter give us confidence that customers are noticing the improvements. And with a long runway to go, it gives us confidence in what we're doing for our future.

Speaker #5: I'm very passionate about this point.

Speaker #7: Great. Then I have a quick follow-up question for Stewart. So, in terms of the updated outlook, can you help us think through some of the puts and takes on the gross margin and SG&A line for Q3 and Q4?

Rupesh Parikh: Great. I have a quick follow-up question for Stuart. In terms of the updated outlook, can you help us think through some of the puts and takes on the gross margin and SG&A line for Q3 and Q4? It will be helpful if you can provide any color, mix impact, freight, fuel, tariffs, and shrink as well. Thank you.

Speaker #7: It'll be helpful if you can provide any color on mix impact, freight, fuel, tariffs, and shrink as well. Thank you.

Speaker #3: Yeah, thanks, Rupesh. You said a quick question—there's a lot here, so I'm not sure if it'll be a quick answer, but let me unpack this.

Stewart Glendinning: Yeah. Thanks, Rupesh. You said a quick question. There is a lot here, so I am not sure if it will be a quick answer, but let me unpack this. I really want to take some time to talk about the tariffs, because we have had a great quarter. We are delivering a little bit faster, and I do not want to confuse the reinvestment with really the underlying performance of the business, which is good. Let me take this apart here. We spent a lot of time trying to unpack the tariffs so that there is transparency, and you can see the business that sits underneath that. If you look at the supplemental deck, we laid out the full year in that deck so that you could understand what the tariff impacts are, and you can separate them from what I am saying about the rest of the business.

Speaker #3: And I really want to take some time to talk about the tariffs because we've had a great quarter. We're delivering a little bit faster.

Speaker #3: And I don't want to confuse the reinvestment with really the underlying performance of the business, which is good. So let me take this apart here.

Speaker #3: We spend a lot of time trying to unpack the tariffs so that there's transparency, and you can see the business that sits underneath that.

Speaker #3: And if you look at the supplemental deck, we laid out the full year in that deck so that you could understand what the tariff impacts are, and you can separate them from what I'm saying.

Speaker #3: About the rest of the business—so let me just take you through the items, starting with the refunds, the reinvestment, then to the duties, so you get a picture of that.

Stewart Glendinning: Let me just take you through the items, starting with the refunds, the reinvestments and the duties. You get a picture of that. Then I will come, and I will talk about the gross margin and the SG&A, and give you color on some of the other items that you have asked about. When I talked about the prepared remarks, we had received about $369 million of refund in Q2, and that benefited gross margin in Q2. For the full year, we currently expect to reinvest approximately $210 million. You get a big benefit in Q2, and you get the expenses coming in the back part of the year. That is $210 million that we are going to reinvest for the full year. That is $80 million impacting gross margin and $130 million impacting SG&A.

Speaker #3: And then I'll come and I'll talk about the gross margin and the SG&A, and give you color on some of the other items that you've asked about.

Speaker #3: So, when I talk about the prepared remarks, we'd received about $369 million of refund in Q2, and that benefited gross margin in Q2.

Speaker #3: And for the full year, we currently expect to reinvest approximately $210 million. So you get a big benefit in Q2, and you get the expenses coming in the back part of the year.

Speaker #3: So, $210 million that we're going to reinvest for the full year—that's $80 million impacting gross margin and $130 million impacting SG&A.

Speaker #3: But of the 210 million dollars, you'll recall or maybe as I went past that in the prepared remarks, we reinvested 37 million dollars in Q2.

Stewart Glendinning: But of the $210 million, you will recall, or maybe as I went past that in the prepared remarks, we reinvested $37 million in Q2. That had $22 million in COGS and $15 million in SG&A. Think about that. The back half then, I will just give you the numbers. The back half will have a gross margin impact of $58 million in COGS, in gross margin, and $115 million in SG&A. Keep in mind that the last number, the SG&A number, includes the $40 million of charity donation that Mike talked about. When you combine all these items on an EPS basis, the net benefit is about $0.60 for the year. That includes, by the way, $14 million or so that I spoke to in positive income in the $383 million refund. But $0.60 for the full year.

Speaker #3: That had $22 million in COGS and $15 million in SG&A. So, think about that. The back-off—then I'll just give you the numbers.

Speaker #3: The back-off will have a gross margin impact of $58 million in COGS, in gross margin, and $115 million in SG&A. And keep in mind that the last number, the SG&A number, includes the $40 million charity donation that Mike talked about.

Speaker #3: So when you combine all these items, on an EPS basis, the net benefit's about $0.60 for the year. And that includes, by the way, $14 million or so of the, I spoke to, positive income in the $383 million refund.

Speaker #3: But so 60 cents for the full year. So if you now accept that all the tariffs, you put those aside, the color I'm now going to give you completely excludes any of the puts and takes I've just given you on tariffs.

Stewart Glendinning: If you now accept that all the tariffs, you put those aside, the color I am now going to give you completely excludes any of the puts and takes I have just given you on tariffs. We said we expected gross margin to be up for the year, and that means up modestly for the year. That means that there is going to be some pressure in the back half. Specifically, we expect the gross margin to be flattish in Q3, which benefits from cycling last year's inventory write-off, and we expect Q4, that gross margin will be down. What drives that? In both quarters, we have higher freight costs driven by higher fuel prices, and we had last year, recall, in the back half of the year, very low freight prices.

Speaker #3: We said we expected gross margin to be up for the year, and that means up modestly for the year. That means that there's going to be some pressure in the back half.

Speaker #3: And specifically, we expect the gross margin to be flattish in Q3, which benefits from cycling last year's inventory write-off. And we expect in Q4 that gross margin will be down.

Speaker #3: Now, what drives that? In both quarters, we have higher freight costs driven by higher fuel prices. And recall, last year, in the back half of the year, we had very low freight prices.

Speaker #3: So we're cycling some of that, and we have that broad-based inflation that's coming through our merch costs. I think a lot of that is tied probably to fuel, but we're seeing broad-based inflation.

Stewart Glendinning: We are cycling some of that, and we have that broad-based inflation that is coming through our merch costs. I think a lot of that is tied probably to fuel, but we are seeing broad-based inflation. There is a lesser impact on the mix shift to consumables. It is mostly driven by the other two. While you get a little bit of benefit from the current lower tariffs, they are helping, but they do not offset the negative impacts of freight inflation. When I am talking about tariffs, I am not talking about the refunds now, I am talking about the ongoing tariff rates. There is a lot here. Forgive me. I want to be really clear on the merch costs, because if we are talking about these higher freight costs, we are talking about these higher fuel prices, to the extent that those are sticky, and of course, the market is volatile.

Speaker #3: There's a lesser impact from the mix shift to consumables. It's mostly driven by the other two. And so, while you get a little bit of benefit from the current lower tariffs—they're helping—they don't offset the negative impacts of freight and inflation.

Speaker #3: And when I'm talking about tariffs, I'm not talking about the refunds now. I'm talking about the ongoing tariff rates. So there's a lot here.

Stewart Glendinning: When I am talking about tariffs, I am not talking about the refunds now, I am talking about the ongoing tariff rates. There is a lot here. Forgive me. I want to be really clear on the merch costs, because if we are talking about these higher freight costs, we are talking about these higher fuel prices, to the extent that those are sticky, and of course, the market is volatile.

Speaker #3: Forgive me. I want to be really clear on the merch costs, because if we're talking about these higher freight costs, we're talking about these higher fuel prices—to the extent that those are sticky, and of course, the market is volatile.

Speaker #3: To the extent those are sticky, we'll deploy the five levers. We've done that repeatedly over the last couple of years. You can see that we know how to manage to the margin.

Stewart Glendinning: To the extent those are sticky, we will deploy the five levers. We have done that repeatedly over the last couple of years. You can see that we know how to manage to the margin. On shrink, of course, we are not expecting the same magnitude in the back half of the year because most of the inventories have been taken. I think that is the picture on gross margin. Let me go to your last point, which is SG&A. I am talking about SG&A inclusive of the TSA income. We said in the past, we are cycling the red stickering initiatives from last year, and that is about $33 million a quarter. We see several offsets to this benefit, which includes lower TSA income as we wind down the TSA. We have got some higher utility costs, and we have got some higher marketing costs where we have chosen to invest.

Speaker #3: On shrink, of course, we're not expecting the same magnitude in the back half of the year because most of the inventories have been taken.

Speaker #3: So I think that's a picture on gross margin. Let me go to your last point, which is SG&A. And I'm talking about SG&A inclusive of the TSA income.

Speaker #3: We said in the past, we're cycling the red stickering initiatives from last year. And that's about $33 million a quarter. We see several offsets to those benefits, which include lower TSA income as we wind down the TSA.

Stewart Glendinning: We said in the past, we are cycling the red stickering initiatives from last year, and that is about $33 million a quarter. We see several offsets to this benefit, which includes lower TSA income as we wind down the TSA. We have got some higher utility costs, and we have got some higher marketing costs where we have chosen to invest.

Speaker #3: We've got some higher utility costs, and we've got some higher marketing costs where we've chosen to invest. But the good news on SG&A is we are controlling the controllables, and we continue to see opportunity.

Stewart Glendinning: But the good news on SG&A is we are controlling the controllables in SG&A, and we continue to see opportunity. There is a lot there. But if I just summarize it by saying I have broken out the tariffs, you will see those higher reinvestments in the back part of the year, which will reduce our EPS in each of the quarters. You should add that back, and that is probably about two-thirds, one-third, just as a rough guide. On the margins, we are managing these higher costs as part of our run rates. I have laid those out for you. On SG&A, we are in charge of the SG&A items that are controllable.

Speaker #3: So, there’s a lot there. But if I just summarize it by saying I’ve broken out the tariffs, you will see those higher reinvestments in the back part of the year, which will reduce our EPS in each of the quarters.

Speaker #3: You should add that back. And that's probably about two-thirds, one-third, just as a rough guide. On the margins, we're managing these higher costs as part of our run rates.

Speaker #3: I've laid those out for you. And on SG&A, we're in charge of the SG&A items that are controllable.

Speaker #1: Great. Thank you for all the color. That's very helpful.

Rupesh Parikh: Great. Thank you for all the color. That is very helpful.

Speaker #2: Thank you. Next question is coming from Bobby Griffin from Raymond James. Your line is now live.

Operator 2: Thank you. Next question is coming from Bobby Griffin from Raymond James. Your line is now live.

Operator: Thank you. Next question is coming from Bobby Griffin from Raymond James. Your line is now live.

Speaker #4: Good morning, buddy. Thanks for taking the questions, and congrats on a good quarter, I guess. Mike, I wanted to circle back first on the dollar price points that you referenced.

Bobby Griffin: Good morning, Bobby. Thanks for taking the questions, and congrats on a good quarter.

Stewart Glendinning: Thanks, Bobby.

Stewart Glendinning: Mike, I wanted to circle up first on the dollar price points that you referenced. Is that something we should expect on a go-forward basis? How are you thinking about those items in the context of the multi-price strategy? Anything that would prevent that from being part of the assortment going forward?

Speaker #4: Is that something we should expect on a go-forward basis? And how are you thinking about those items in the context of the multi-price strategy?

Speaker #4: Is there anything that would prevent that from being part of the assortment going forward?

Speaker #5: Yeah, it's a good question, Bobby. I'll tell you. Like our founders, everything we do is designed around delivering value, convenience, and discovery for our customers.

Michael C. Creedon Jr.: Yeah. It's a good question, Bobby. I'll tell you, like our founders, everything we do is designed around delivering value, convenience, and discovery for our customers. Those are the principles at the heart of Dollar Tree, and they guide every pricing decision we make. We're pleased with where our multi-price strategy stands today.

Mike Creedon: Yeah. It's a good question, Bobby. I'll tell you, like our founders, everything we do is designed around delivering value, convenience, and discovery for our customers. Those are the principles at the heart of Dollar Tree, and they guide every pricing decision we make. We're pleased with where our multi-price strategy stands today.

Speaker #5: Those are the principles at the heart of Dollar Tree, and they guide every pricing decision we make. We're pleased with where our multi-price strategy stands today.

Speaker #5: Multi-price gives us the flexibility to deliver the right item at the right price, while always maintaining that compelling value proposition across the store. So, the thrill of the hunt can come from finding a $5 hammer, a $3 seasonal item, or a $1 pool noodle.

Michael C. Creedon Jr.: Multi-price gives us the flexibility to deliver the right item at the right price, while always maintaining that compelling value proposition across the store. So the thrill of the hunt can come from finding a $5 hammer or a $3 seasonal item or a dollar pool noodle. What matters is that the customers know they're getting outstanding value no matter what the price point is. With that context, looking ahead, there's nothing preventing us from maintaining a dollar price point within the assortment. As Stuart said before, we buy to a margin. When we can offer a dollar item and still deliver the value and economics we're looking for, we'll absolutely do that. Ultimately, multi-price is not about moving away from our heritage. It's about giving us more flexibility to drive the value, convenience, and discovery that has always been our heritage and will always be our heritage.

Mike Creedon: Multi-price gives us the flexibility to deliver the right item at the right price, while always maintaining that compelling value proposition across the store. So the thrill of the hunt can come from finding a $5 hammer or a $3 seasonal item or a dollar pool noodle. What matters is that the customers know they're getting outstanding value no matter what the price point is. With that context, looking ahead, there's nothing preventing us from maintaining a dollar price point within the assortment. As Stuart said before, we buy to a margin. When we can offer a dollar item and still deliver the value and economics we're looking for, we'll absolutely do that. Ultimately, multi-price is not about moving away from our heritage. It's about giving us more flexibility to drive the value, convenience, and discovery that has always been our heritage and will always be our heritage.

Speaker #5: What matters is that the customers know they're getting outstanding value, no matter what the price point is. So, with that context, looking ahead, there's nothing preventing us from maintaining a dollar price point within the assortment.

Speaker #5: As Stewart said before, we buy to a margin. When we can offer a dollar item and still deliver the value and economics we're looking for, we'll absolutely do that.

Speaker #5: Ultimately, multi-price is not about moving away from our heritage. It's about giving us more flexibility to drive the value, convenience, and discovery that has always been our heritage and will always be our heritage.

Speaker #4: Okay, that's helpful. I appreciate it. And then, just quickly as a follow-up, Stewart, on the helium shortages—modest comp headwind here in Q2—just how should we think about that in terms of the back half, and what's assumed in the guide from that aspect?

Bobby Griffin: Good. That's helpful. I appreciate it. Then just quickly as a follow-up, Stuart, on the helium shortages, modest comp headwind here in Q2. Just how should we think about that in terms of the back half and what's assumed in the guide from that aspect?

Speaker #5: Yeah, I'll actually jump in on that. I'm very close to it. I will say that the team's done a great job on the merch side and on the store side.

Michael C. Creedon Jr.: Yeah, I will actually jump in on that. I am very close to it. I will say the team has done a great job on the merch side and on the store side navigating the helium shortage. As we mentioned in our prepared remarks, helium availability reduced sales by about $15 million or 30 basis points of comp during Q2. The impact was concentrated in our party business. Balloons are an important traffic driver for that business, and when customers come in for balloons, they often purchase other items for celebration and events. The impact definitely extends beyond the balloon sale itself. What I think is really important is we do not have a demand issue here. The challenge has been the availability of helium across the industry and these pockets where we have seen some challenges, and that has limited our ability to fully meet the demand.

Mike Creedon: Yeah, I will actually jump in on that. I am very close to it. I will say the team has done a great job on the merch side and on the store side navigating the helium shortage. As we mentioned in our prepared remarks, helium availability reduced sales by about $15 million or 30 basis points of comp during Q2. The impact was concentrated in our party business. Balloons are an important traffic driver for that business, and when customers come in for balloons, they often purchase other items for celebration and events. The impact definitely extends beyond the balloon sale itself. What I think is really important is we do not have a demand issue here. The challenge has been the availability of helium across the industry and these pockets where we have seen some challenges, and that has limited our ability to fully meet the demand.

Speaker #5: Navigating the helium shortage. As we mentioned in our prepared remarks, helium availability reduced sales by about $15 million, or 30 basis points of comp.

Speaker #5: During Q2, the impact was concentrated in our party business. Balloons are an important traffic driver for that business, and when customers come in for balloons, they often purchase other items for celebrations and events.

Speaker #5: So the impact definitely extends beyond the balloon sale itself. But what I think is really important is that we don't have a demand issue here.

Speaker #5: The challenge has been the availability of helium across the industry and these pockets where we've seen some challenges. That's limited our ability to fully meet the demand.

Speaker #5: So, we're working, and we've worked closely with our suppliers. We've taken steps to manage through the disruption. Supply remains constrained and has remained constrained throughout the quarter.

Michael C. Creedon Jr.: We are working and we have worked closely with our suppliers. We have taken steps to manage through the disruption. Supply remains constrained throughout the quarter. As we look to the back half of the year, it is still uncertain. Because of that, we are not assuming a recovery in the near term in our numbers. We work this constantly. I think it is important to note that when you take that impact and you step back, we are encouraged by the underlying performance of the business. You look at discretionary despite this helium headwind, broad-based strength across a number of departments, and really a strong discretionary on top of a very strong discretionary last year.

Mike Creedon: We are working and we have worked closely with our suppliers. We have taken steps to manage through the disruption. Supply remains constrained throughout the quarter. As we look to the back half of the year, it is still uncertain. Because of that, we are not assuming a recovery in the near term in our numbers. We work this constantly. I think it is important to note that when you take that impact and you step back, we are encouraged by the underlying performance of the business. You look at discretionary despite this helium headwind, broad-based strength across a number of departments, and really a strong discretionary on top of a very strong discretionary last year.

Speaker #5: And as we look to the back half of the year, it's still uncertain. And so, because of that, we're not assuming a recovery in the near term in our numbers.

Speaker #5: But we work on this constantly. And I think it's important to note that when you take that impact and you step back, we're encouraged by the underlying performance of the business.

Speaker #5: You look at discretionary, despite this helium headwind, broad bank strength across a number of departments, and really strong discretionary on top of very strong discretionary last year.

Speaker #4: Thank you. I appreciate the details on both aspects. Best of luck here in the back half.

Bobby Griffin: Thank you. I appreciate the details on both aspects. Best of luck here in the back half.

Speaker #5: Thanks, Bobby.

Michael C. Creedon Jr.: Thanks, Bobby.

Mike Creedon: Thanks, Bobby.

Speaker #2: Thank you. Next question today is coming from Michael Lasser from UBS. Your line is now live.

Operator 2: Thank you. Next question today is coming from Michael Lasser from UBS. Your line is now live.

Operator: Thank you. Next question today is coming from Michael Lasser from UBS. Your line is now live.

Speaker #6: Good morning. Thank you so much for taking my question. Obviously, there are a lot of moving pieces with all that's going on within the margins, especially.

Michael Lasser: Good morning. Thank you so much for taking my question. Obviously, there is a lot of moving pieces with all that is going on within the margins especially. My question is a two-parter. One is, you are pointing out that the gross margin should be down year-over-year in Q4. Most likely, the investment community is going to extrapolate that into next year as some of these persistent costs linger around. You have made the case that you can use your five levers to offset that. Is there anything different about this environment that we should at least not anticipate the gross margin will be down for a period of time because you do have a lot of competitors who are investing in price and that could constrain your ability to pass along further price increases?

Speaker #6: So, my question is two-parter. One is, you are pointing out that the gross margin should be down year over year. In the fourth quarter, most likely the investment community is going to extrapolate that into next year, as some of these persistent costs linger around.

Speaker #6: You have made the case that you can use your five-factor leverage to offset that. Now, is there anything different about this environment that we should at least not anticipate the gross margin will be down for a period of time? Because you do have a lot of competitors who are investing in price, and that could constrain your ability to pass along further price increases.

Speaker #5: Yeah. I mean, Michael, let me pick that up. First of all, I've seen a lot of earnings releases where people are talking about using tariff refunds to offset back-half inflation.

Michael C. Creedon Jr.: Yeah, Michael, let me pick that up. First of all, I have seen a lot of earnings releases where people are talking about using tariff refunds to offset back half inflation. I want to point out that is not what we have done here. All the inflation that we have discussed is sort of directly in the run rate. We wanted to do that because we want you to see what the underlying business looks like. Having said that, as you know, of course, we have very successfully managed volatility these past couple of years using those five levers, and we are confident that we can manage to the margin and work to the algorithm that we laid out at our Investor Day.

Mike Creedon: Yeah, Michael, let me pick that up. First of all, I have seen a lot of earnings releases where people are talking about using tariff refunds to offset back half inflation. I want to point out that is not what we have done here. All the inflation that we have discussed is sort of directly in the run rate. We wanted to do that because we want you to see what the underlying business looks like. Having said that, as you know, of course, we have very successfully managed volatility these past couple of years using those five levers, and we are confident that we can manage to the margin and work to the algorithm that we laid out at our Investor Day.

Speaker #5: And I want to point out that's not what we've done here. I mean, all the inflation that we've discussed is sort of directly in the run rate.

Speaker #5: And we wanted to do that because we want you to see what the underlying business looks like. Having said that, as you know, of course, we have very successfully managed volatility these past couple of years.

Speaker #5: Using those five levers, we’re confident that we can manage to the margin and work to the algorithm that we laid out at our Investor Day.

Speaker #5: So, the picture for the back half of the year is, of course, as painted. But we want to be mindful also that, because of the volatility, these things can move around a lot.

Michael C. Creedon Jr.: The picture for the back half of the year is, of course, as painted, but we want to be mindful also that because of the volatility, these things can move around a lot. Just imagine that we see changes in tariff or more importantly, we see a cessation of hostility in the Middle East and we see a dramatic reduction in fuel costs. These could change that inflation picture quite dramatically. It does not make sense for us, given the strategies that we employ and the value we want to drive for our customers, to take any sort of premature and reactive kinds of decisions. We are driving a great result for the year.

Mike Creedon: The picture for the back half of the year is, of course, as painted, but we want to be mindful also that because of the volatility, these things can move around a lot. Just imagine that we see changes in tariff or more importantly, we see a cessation of hostility in the Middle East and we see a dramatic reduction in fuel costs. These could change that inflation picture quite dramatically. It does not make sense for us, given the strategies that we employ and the value we want to drive for our customers, to take any sort of premature and reactive kinds of decisions. We are driving a great result for the year.

Speaker #5: And so, just imagine that we see changes in tariffs, or more importantly, we see a cessation of hostilities in the Middle East and a dramatic reduction in fuel costs.

Speaker #5: These could change that inflation picture quite dramatically. And it doesn't make sense for us, given the strategies that we employ and the value we want for customers, to take any sort of premature and reactive kinds of decisions.

Speaker #5: We're driving a great result for the year. We've absorbed these kinds of inflations in that great result, and we think it's better to stay the course until we can see very clearly what the results are going to look like.

Michael C. Creedon Jr.: We've absorbed these kinds of inflations in that great result, and we think it's better to stay the course until we can see very clearly what the results are going to look like and our merchants and our cost base will respond to what we need to drive the right results for next year.

Mike Creedon: We've absorbed these kinds of inflations in that great result, and we think it's better to stay the course until we can see very clearly what the results are going to look like and our merchants and our cost base will respond to what we need to drive the right results for next year.

Speaker #5: With our merchants and our cost base, we'll respond as needed to drive the right results for next year.

Speaker #6: Okay, and another way of basically asking the same question—so I apologize for that—is you've, at your Investor Day, laid out an algorithm that will generate substantial earnings growth moving forward.

Michael Lasser: Okay. Another way of basically asking the same question, so I apologize for that, is at your Investor Day, you laid out an algorithm that will generate substantial earnings growth moving forward. Given these inflationary pressures, coupled with the unique investments that you are making this year and the funding sources from those investments, will 2027 be a year, in light of all that, where you think you can generate the algorithm? Or should we, as the outside, be thinking next year is going to be a sub-algorithm year, given that you may have to digest some of what happened this year?

Speaker #6: Given these inflationary pressures, coupled with the unique investments that you are making this year, and the funding sources from those investments, will 2027 be a year, in light of all that, where you think you can generate the algorithm? Or should we, as the outside, be thinking next year is going to be a sub-algorithm year, given that you may have to digest some of what happened this year?

Speaker #5: Yeah, Michael. We feel confident in our algorithm. We think Q2 was an incredible proof point of that. With traffic turning earlier, I think it demonstrates the customer response.

Michael C. Creedon Jr.: Yeah, Michael, we feel confident in our algorithm. We think Q2 was an incredible proof point of that. With traffic turning earlier, I think it demonstrates the customer response. We're not giving 2027 guidance today, but we feel really good about the initiatives that we outlined at Investor Day, the work we've done. What you're starting to see is these initiatives build upon each other and work in conjunction with each other. I call it better, better. So it's a better assortment in better run stores and now with better marketing, and more to come on that. When I look out at the multi-year horizon, I'm excited about what we're doing, and the proof points are telling me we're doing the right things. We need to keep executing, and there's much strength ahead.

Mike Creedon: Yeah, Michael, we feel confident in our algorithm. We think Q2 was an incredible proof point of that. With traffic turning earlier, I think it demonstrates the customer response. We're not giving 2027 guidance today, but we feel really good about the initiatives that we outlined at Investor Day, the work we've done. What you're starting to see is these initiatives build upon each other and work in conjunction with each other. I call it better, better. So it's a better assortment in better run stores and now with better marketing, and more to come on that. When I look out at the multi-year horizon, I'm excited about what we're doing, and the proof points are telling me we're doing the right things. We need to keep executing, and there's much strength ahead.

Speaker #5: We're not giving 2027 guidance today. But we feel really good about the initiatives that we outlined at Investor Day. The work we've done—and what you're starting to see—is these initiatives building upon each other.

Speaker #5: And work in conjunction with each other. I call it better, better, better. So it's a better assortment and better-run stores, and now with better marketing.

Speaker #5: And more to come on that. So, when I look out at the multi-year horizon, I'm excited about what we're doing, and the proof points are telling me we're doing the right things.

Speaker #5: We need to keep executing. And there's much strength ahead. Yeah. The only thing I'd add to that, Michael, is that this sort of pressure you're seeing in the back half—I mean, inflation-driven—everybody's feeling that.

Stewart Glendinning: Yeah, the only thing I'd add to that, Michael, is that the sort of pressure you're seeing in the back half, that inflation driven, everybody's feeling that. So we're not going to be alone in that. I think what separates us, in my mind, and why I feel confident about the long-range algorithm is that we're taking the right choices. You're seeing those results in this quarter, and we're giving you the kind of transparency because we have that belief.

Speaker #5: So we're not going to be alone in that. I think what separates us in my mind, and why I feel confident about the long-range algorithm,

Speaker #5: It's that we're making the right choices. You're seeing those results this quarter, and we're giving you this level of transparency because we have that belief.

Speaker #6: Understood. Thank you so much, and good luck.

Michael Lasser: Understood. Thank you so much, and good luck.

Speaker #5: Thanks, Michael.

Michael C. Creedon Jr.: Thanks, Michael.

Mike Creedon: Thanks, Michael.

Speaker #2: Thank you. Next question is coming from Edward Kelly from Wells Fargo. Your line is now live.

Operator 2: Thank you. Next question is coming from Edward Kelly from Wells Fargo. Your line is now live.

Operator: Thank you. Next question is coming from Edward Kelly from Wells Fargo. Your line is now live.

Speaker #7: Yeah. Hi, good morning, guys. I was hoping that you could maybe unpack the second half a little bit from a comp perspective, and what you're thinking there.

Edward Kelly: Yeah. Hi, good morning, guys. I was hoping that you can maybe unpack the H2 a little bit from a comp perspective and what you're thinking there. Obviously, your traffic compare gets a lot easier. Ticket compare is a little bit harder there. Just sort of how you're thinking about sustaining sort of the 2-year on traffic, and then maybe also just additional color on the mix side and discretionary and what you think is causing that softness there.

Speaker #7: Obviously, your traffic compare gets a lot easier. Ticket compare is a little bit harder there. Just sort of how you’re thinking about sustaining, sort of, the two-year comp traffic.

Speaker #7: And then maybe also just additional color on the mix side and discretionary, and what you think is causing that softness there.

Speaker #5: Yeah, sure. Thanks, Ed. I'll take that. I think as you look at this sustaining, it really goes to the initiatives we've seen. Everything we laid out at Investor Day was designed to drive both traffic and ticket.

Michael C. Creedon Jr.: Yeah, sure. Thanks, Ed. I will take that. I think as you look at this sustaining, it really goes to the initiatives we have seen. Everything we laid out at Investor Day was designed to drive both traffic and ticket. While ticket carried the water in the H1 of the year, as you lap last year's tariff-related price actions, we know it is ticket. What gives me confidence in the H2 of the year is, yes, it is going to be skewed towards ticket, but seeing that, I am sorry, skewed towards traffic, excuse me. Seeing that traffic come earlier and seeing the positive Q2, and I mentioned we were pleased with the start to Q3, that gives me confidence in that traffic really helping to drive.

Mike Creedon: Yeah, sure. Thanks, Ed. I will take that. I think as you look at this sustaining, it really goes to the initiatives we have seen. Everything we laid out at Investor Day was designed to drive both traffic and ticket. While ticket carried the water in the H1 of the year, as you lap last year's tariff-related price actions, we know it is ticket. What gives me confidence in the H2 of the year is, yes, it is going to be skewed towards ticket, but seeing that, I am sorry, skewed towards traffic, excuse me. Seeing that traffic come earlier and seeing the positive Q2, and I mentioned we were pleased with the start to Q3, that gives me confidence in that traffic really helping to drive.

Speaker #5: And while ticket carried the water in the first half of the year as you lap last year's tariff-related price actions, we know it's ticket.

Speaker #5: And so what gives me confidence in the second half of the year is, yes, it's going to be skewed towards ticket. But seeing that—I'm sorry—skewed towards traffic, excuse me.

Speaker #5: Seeing that traffic come earlier and seeing the positive Q2—and I mentioned we were pleased with the start to Q3—that gives me confidence in that traffic really helping to drive. But as you start to smooth these things out and you look at the long-term algo, all the initiatives we're executing on are designed to drive both.

Michael C. Creedon Jr.: But as you start to smooth these things out and you look at the long-term algo, all the initiatives we are executing on are designed to drive both. I think we have got some really good proof points as you look at the H1 of the year, and that gives us the confidence that traffic will carry the day in the H2. As we normalize over time, we really get the strength of both ticket and traffic, because that is what we are designing it to do. In terms of the mix, Brockton will come out a little, and I will not apologize for a 1.6 comp in discretionary. When you look at it is on top of a 6.1 from last year. The consumables comp was incredible. I said it in the prepared remarks. This was not a question of consumable being the story and, oh, no, on discretionary.

Mike Creedon: But as you start to smooth these things out and you look at the long-term algo, all the initiatives we are executing on are designed to drive both. I think we have got some really good proof points as you look at the H1 of the year, and that gives us the confidence that traffic will carry the day in the H2. As we normalize over time, we really get the strength of both ticket and traffic, because that is what we are designing it to do. In terms of the mix, Brockton will come out a little, and I will not apologize for a 1.6 comp in discretionary. When you look at it is on top of a 6.1 from last year. The consumables comp was incredible. I said it in the prepared remarks. This was not a question of consumable being the story and, oh, no, on discretionary.

Speaker #5: And I think we've got some really good proof points as you look at the first half of the year, and that gives us the confidence that traffic will carry the day in the second half, and that as we normalize over time, we really get the strength of both ticket and traffic, because that's what we're designing it to do.

Speaker #5: In terms of the mix, my Brockton will come out a little, and I won't apologize for a 1.6 comp and discretionary. When you look at it, it's on top of a 6.1 from last year.

Speaker #5: So, and the consumables comp was incredible. I said it in the prepared remarks. This wasn't a question of consumables being the story and, oh no, on discretionary.

Speaker #5: This was a story about discretionary being strong and consumables being very strong. And add back in that helium—I mean, when you look at 30 bps, that takes discretionary to a 2% comp in the quarter.

Michael C. Creedon Jr.: This was a story about discretionary being strong and consumables being very strong. Add back in that helium. When you look at 30 bps, that takes discretionary to a two comp in the quarter. Remember, Q2, there is not a lot of Dollar Tree type events in Q2. So give me Halloween, give me Thanksgiving, let me get to Christmas, and I think that consumables discretionary mix really is strong for us and is constantly the magic of Dollar Tree.

Mike Creedon: This was a story about discretionary being strong and consumables being very strong. Add back in that helium. When you look at 30 bps, that takes discretionary to a two comp in the quarter. Remember, Q2, there is not a lot of Dollar Tree type events in Q2. So give me Halloween, give me Thanksgiving, let me get to Christmas, and I think that consumables discretionary mix really is strong for us and is constantly the magic of Dollar Tree.

Speaker #5: So, and remember, Q2 — there's not a lot of Dollar Tree-type events in Q2. So give me Halloween, give me Thanksgiving, let me get to Christmas.

Speaker #5: And I think that the consumables-discretionary mix really, really is strong for us and is constantly the magic of Dollar Tree.

Speaker #7: Great. And just a follow-up, Stewart, could you unpack freight for us, just the incremental headwind? What is sort of fuel surcharge? How should we be thinking about what's going on with the underlying contract rates?

Edward Kelly: Great. Just a follow-up, Stuart, could you unpack freight for us? Just the incremental headwind, what is sort of fuel surcharge, how we should be thinking about what is going on with the underlying contract rates. Just since we talk about driver shortages, I do not know what type of visibility you have on renewals. Just any help you could provide there?

Speaker #7: There's been some talk about driver shortages. I don't know what type of visibility you have on renewals. Is there any help you could provide there?

Speaker #5: Yeah. Look, I'll just go back. Nothing's really changed from the previous quarters in terms of the composition there. We did enjoy very low particularly ocean freight rates at the end of last year, which we highlighted in our call.

Stewart Glendinning: Yeah. Look, I will just go back. Nothing is really changed from the previous quarters in terms of the composition there. We did enjoy very low, particularly ocean freight rates at the end of last year, which we highlighted in our call. So there is a bit of lapping that. Ignoring that for a second, as we mentioned, we got through all of our, or most of our renewals, and the base rates were not substantially different from last year. What is different is really this fuel, the fuel surcharge that is coming through is very, very meaningful, and that is going to continue as long as the fuel prices are elevated. There is an impact from drivers. It is not nearly as much as fuel. Really kills the driver here. It is sort of good news, bad news. Nobody wants to see higher fuel prices.

Speaker #5: So there's a bit of lapping that. But ignoring that for a second, as we mentioned, we got through all of our or most of our renewals and the base rates were not substantially different from last year.

Speaker #5: What is different is really this fuel; the fuel surcharge that's coming through is very, very meaningful. And that's going to continue as long as fuel prices are elevated.

Speaker #5: There is an impact from drivers. It's not nearly as much as fuel. Really feels the driver here. I mean, it's sort of a good news, bad news.

Speaker #5: Nobody wants to see higher fuel prices. But to the extent that to the extent that we see things settle out in the Middle East, then those fuel prices can come back pretty quickly.

Stewart Glendinning: But to the extent that we see things settle out in the Middle East and those fuel prices can come back pretty quickly, and that will be felt in our freight rates pretty quickly because that is all set up as surcharge with readjustment time frames that are actually quite short.

Speaker #5: And that'll be felt in our freight rates pretty quickly because that's all set up as surcharge. With readjustment timeframes that are actually quite short.

Speaker #2: Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Operator 2: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over for any further closing comments.

Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over for any further closing comments.

Speaker #5: Thank you, everyone. We're excited about the quarter. We're excited about the future of dollar tree. And we appreciate your time this morning on the call.

Michael C. Creedon Jr.: Thank you, everyone. We are excited about the quarter. We are excited about the future of Dollar Tree, and we appreciate your time this morning on the call. Thank you.

Mike Creedon: Thank you, everyone. We are excited about the quarter. We are excited about the future of Dollar Tree, and we appreciate your time this morning on the call. Thank you.

Speaker #5: Thank you.

Speaker #2: Thank you. That does conclude today's teleconference and webcast. Let me disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator 2: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.