dltr-20230729

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended July 29, 2023


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

For the transition period from to

Commission File Number: 0-25464

DOLLAR TREE, INC.

(Exact name of registrant as specified in its charter)


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


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

(757) 321-5000

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes			☒			No			☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes			☒			No			☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes			☐			No			☒

As of August 22, 2023, there were 220,005,537 shares of the registrant’s common stock outstanding.

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		Page
	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Income Statements	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Signatures		29

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DOLLAR TREE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)


	13 Weeks Ended				26 Weeks Ended
(in millions, except per share data)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net sales	$	7,320.1	$	6,765.3	$	14,639.6	$	13,665.4
Other revenue	5.2		3.2		9.5		5.7
Total revenue	7,325.3		6,768.5		14,649.1		13,671.1
Cost of sales	5,185.4		4,640.9		10,274.5		9,200.5
Selling, general and administrative expenses	1,852.1		1,622.2		3,667.1		3,233.7
Operating income	287.8		505.4		707.5		1,236.9
Interest expense, net	24.2		30.6		50.1		64.6
Other (income) expense, net	(0.1)		0.1		—		0.1
Income before income taxes	263.7		474.7		657.4		1,172.2
Provision for income taxes	63.3		114.8		158.0		275.9
Net income	$	200.4	$	359.9	$	499.4	$	896.3
Basic net income per share	$	0.91	$	1.61	$	2.26	$	3.99
Diluted net income per share	$	0.91	$	1.60	$	2.26	$	3.97

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	13 Weeks Ended				26 Weeks Ended
(in millions)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net income	$	200.4	$	359.9	$	499.4	$	896.3

Foreign currency translation adjustments	3.9		(1.0)		1.1		(1.1)

Total comprehensive income	$	204.3	$	358.9	$	500.5	$	895.2

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in millions)	July 29, 2023		January 28, 2023		July 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	512.7	$	642.8	$	688.9
Merchandise inventories	5,329.4		5,449.3		5,422.2
Other current assets	315.3		275.0		266.2
Total current assets	6,157.4		6,367.1		6,377.3
Property, plant and equipment, net of accumulated depreciation of $6,361.6, $6,025.4 and $5,688.9, respectively	5,359.2		4,972.2		4,652.9
Restricted cash	70.1		68.5		53.5
Operating lease right-of-use assets	6,670.9		6,458.0		6,433.6
Goodwill	1,983.3		1,983.1		1,984.3
Trade name intangible asset	3,100.0		3,100.0		3,100.0
Deferred tax asset	13.1		15.0		17.7
Other assets	74.0		58.2		57.0
Total assets	$	23,428.0	$	23,022.1	$	22,676.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:

Current portion of operating lease liabilities	$	1,478.6	$	1,449.6	$	1,428.3
Accounts payable	1,776.4		1,899.8		2,011.3
Income taxes payable	10.0		58.1		27.4
Other current liabilities	885.3		817.7		913.5
Total current liabilities	4,150.3		4,225.2		4,380.5
Long-term debt, net	3,423.9		3,421.6		3,419.3
Operating lease liabilities, long-term	5,447.8		5,255.3		5,139.5
Deferred income taxes, net	1,107.6		1,105.7		1,063.6
Income taxes payable, long-term	18.1		17.4		20.7
Other liabilities	249.3		245.4		256.2
Total liabilities	14,397.0		14,270.6		14,279.8
Commitments and contingencies (Note 2)
Shareholders’ equity:
Common stock, par value $0.01; 600,000,000 shares authorized, 219,918,166, 221,222,984 and 223,932,187 shares issued and outstanding, respectively	2.2		2.2		2.2
Additional paid-in capital	446.5		667.5		1,026.7
Accumulated other comprehensive loss	(40.1)		(41.2)		(36.3)
Retained earnings	8,622.4		8,123.0		7,403.9
Total shareholders’ equity	9,031.0		8,751.5		8,396.5
Total liabilities and shareholders’ equity	$	23,428.0	$	23,022.1	$	22,676.3

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


	13 Weeks Ended July 29, 2023
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at April 29, 2023	220.6	$	2.2	$	519.5	$	(44.0)	$	8,422.0	$	8,899.7
Net income	—	—		—		—		200.4		200.4
Total other comprehensive income	—	—		—		3.9		—		3.9
Issuance of stock under Employee Stock Purchase Plan	—	—		2.5		—		—		2.5

Stock-based compensation, net	—	—		24.4		—		—		24.4
Repurchase of stock	(0.7)	—		(99.9)		—		—		(99.9)
Balance at July 29, 2023	219.9	$	2.2	$	446.5	$	(40.1)	$	8,622.4	$	9,031.0



	26 Weeks Ended July 29, 2023
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at January 28, 2023	221.2	$	2.2	$	667.5	$	(41.2)	$	8,123.0	$	8,751.5
Net income	—	—		—		—		499.4		499.4
Total other comprehensive income	—	—		—		1.1		—		1.1
Issuance of stock under Employee Stock Purchase Plan	—	—		5.4		—		—		5.4
Exercise of stock options	—	—		0.1		—		—		0.1
Stock-based compensation, net	0.4	—		25.5		—		—		25.5
Repurchase of stock	(1.7)	—		(252.0)		—		—		(252.0)
Balance at July 29, 2023	219.9	$	2.2	$	446.5	$	(40.1)	$	8,622.4	$	9,031.0

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (cont.)

(Unaudited)


	13 Weeks Ended July 30, 2022
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at April 30, 2022	225.5	$	2.2	$	1,230.6	$	(35.3)	$	7,044.0	$	8,241.5
Net income	—	—		—		—		359.9		359.9
Total other comprehensive loss	—	—		—		(1.0)		—		(1.0)
Issuance of stock under Employee Stock Purchase Plan	—	—		1.9		—		—		1.9

Stock-based compensation, net	0.1	—		30.0		—		—		30.0
Repurchase of stock	(1.7)	—		(235.8)		—		—		(235.8)
Balance at July 30, 2022	223.9	$	2.2	$	1,026.7	$	(36.3)	$	7,403.9	$	8,396.5



	26 Weeks Ended July 30, 2022
(in millions)	Common Stock Shares	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Shareholders' Equity
Balance at January 29, 2022	225.1	$	2.2	$	1,243.9	$	(35.2)	$	6,507.6	$	7,718.5
Net income	—	—		—		—		896.3		896.3
Total other comprehensive loss	—	—		—		(1.1)		—		(1.1)
Issuance of stock under Employee Stock Purchase Plan	—	—		4.8		—		—		4.8

Stock-based compensation, net	0.6	—		28.0		—		—		28.0
Repurchase of stock	(1.8)	—		(250.0)		—		—		(250.0)
Balance at July 30, 2022	223.9	$	2.2	$	1,026.7	$	(36.3)	$	7,403.9	$	8,396.5

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	26 Weeks Ended
(in millions)	July 29, 2023		July 30, 2022
Cash flows from operating activities:
Net income	$	499.4	$	896.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	399.0		382.4
Provision for deferred income taxes	3.8		78.8
Stock-based compensation expense	53.2		66.1
Amortization of debt discount and debt-issuance costs	2.3		2.3
Other non-cash adjustments to net income	37.6		18.8
Changes in operating assets and liabilities:
Merchandise inventories	120.5		(1,055.3)
Income taxes receivable	(22.0)		—
Other current assets	(18.5)		(10.0)
Other assets	(15.9)		(4.9)
Accounts payable	(123.8)		127.4
Income taxes payable	(48.0)		(55.2)
Other current liabilities	35.7		83.5
Other liabilities	4.8		(0.1)
Operating lease right-of-use assets and liabilities, net	(4.3)		(9.5)
Net cash provided by operating activities	923.8		520.6
Cash flows from investing activities:
Capital expenditures	(775.8)		(529.6)

Payments for fixed asset disposition	(5.2)		(3.8)
Net cash used in investing activities	(781.0)		(533.4)
Cash flows from financing activities:





Proceeds from stock issued pursuant to stock-based compensation plans	5.5		4.8
Cash paid for taxes on exercises/vesting of stock-based compensation	(27.7)		(38.1)
Payments for repurchase of stock	(250.0)		(250.0)
Net cash used in financing activities	(272.2)		(283.3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0.9		0.2
Net decrease in cash, cash equivalents and restricted cash	(128.5)		(295.9)
Cash, cash equivalents and restricted cash at beginning of period	711.3		1,038.3
Cash, cash equivalents and restricted cash at end of period	$	582.8	$	742.4
Supplemental disclosure of cash flow information:
Cash paid for:
Interest, net of amounts capitalized	$	64.5	$	64.3
Income taxes	$	223.6	$	253.2
Non-cash transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	959.7	$	726.1
Accrued capital expenditures	$	86.3	$	96.1

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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DOLLAR TREE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

Unless otherwise stated, references to “we,” “us,” and “our” in this quarterly report on Form 10-Q refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis. We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended January 28, 2023. The results of operations for the 13 and 26 weeks ended July 29, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year ending February 3, 2024.

In our opinion, the unaudited condensed consolidated financial statements included herein contain all adjustments (including those of a normal recurring nature) considered necessary for a fair presentation of our financial position as of July 29, 2023 and July 30, 2022 and the results of our operations and cash flows for the periods presented. The January 28, 2023 balance sheet information was derived from the audited consolidated financial statements as of that date.

Note 2 - Contingencies

We are defendants in legal proceedings including class, collective, representative and large cases as well as individual claims in arbitration. We will vigorously defend ourselves in these matters. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business, financial condition, or liquidity. We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the quarter or year in which they are reserved or resolved.

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

Active Matters

DC 202-related Matters

On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at Family Dollar’s West Memphis, Arkansas distribution center (“DC 202”) and the related sale and distribution of adulterated product, as well as other processes and procedures that required remediation. In connection therewith, we initiated a retail-level product recall of FDA and U.S. Department of Agriculture-regulated products stored and shipped from DC 202 from January 1, 2021 through February 18, 2022 (the “Recall”), temporarily closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, ceased the direct shipment of FDA-regulated products from DC 202, and initiated corrective actions. In June 2022, we stopped shipping to stores from DC 202 and have since disposed of all of the subject inventory that was in the facility.

Since February 22, 2022, Family Dollar has been named in 14 putative class action complaints primarily related to issues associated with DC 202 described above. The lawsuits are proceeding in federal court in Tennessee using the federal court’s multi-district litigation (“MDL”) process, seek class action status, and allege violations of the Mississippi, Arkansas, Louisiana, Tennessee, Alabama and Missouri consumer protection laws, breach of warranty, negligence, misrepresentation, deception and unjust enrichment related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions at DC 202. Plaintiffs sought damages, attorney fees and costs, punitive damages and replacement or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief. As a result of a mediation held in April 2023, the parties reached a claims made settlement whereby one class member per household will receive a $25 Family Dollar gift certificate. A hearing on the plaintiffs’ motion for preliminary approval of the settlement was held on July 21, 2023.

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On March 1, 2022, a federal grand jury subpoena was issued to us by the Eastern District of Arkansas requesting the production of information, documents and records pertaining to pests, sanitation and compliance with law regarding certain of our procedures and products. In connection with this matter, we have been investigating the condition of FDA-regulated product shipped from DC 202. We are cooperating fully with the U.S. Department of Justice investigation, including having produced documents and provided additional information. We are currently engaged in discussions with the government in an effort to reach a negotiated resolution. Due to the inherent uncertainties associated with this matter, no assurance can be given as to the timing or outcome of this matter, but we acknowledge that any negotiated resolution will include penalties and company undertakings.

On April 28, 2022, the State of Arkansas filed a complaint in state court alleging violations of the Arkansas Deceptive Trade Practices Act, gross negligence and negligence, strict liability in tort, unjust enrichment and civil conspiracy related to the sale of products that may have been contaminated by virtue of rodent infestation and other unsanitary conditions at DC 202. The State of Arkansas is seeking injunctive relief, restitution, disgorgement, damages, civil penalties, punitive damages and suspension or revocation of our authorization to do business in Arkansas. The parties have engaged in discussions regarding a potential resolution of this action.

Based on the developments discussed above, we have determined that there is a probable risk of liability for settlement amounts, costs, and potential penalties and accrued $30.0 million in the first quarter of fiscal 2023 for DC 202-related matters. We are currently unable to estimate the amount of additional incremental loss, if any, which may result when the matters are finally resolved. Based on the information available to date, we do not believe the resolution of the DOJ investigation, the State of Arkansas complaint, or settlement of any pending or potential civil litigation related to DC 202 will have a material adverse effect on our business, financial condition, or liquidity.

Talc Product Matters

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

Acetaminophen Matters

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

Note 3 - Debt

Commercial Paper Program

In July 2023, we established a commercial paper program to issue unsecured commercial paper notes with maturities up to 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1.5 billion. We expect to use the net proceeds of note issuances for general corporate purposes. Our Revolving Credit Facility will serve as a liquidity backstop for the repayment of notes outstanding under the program. The notes will rank pari passu with all of our other unsecured and unsubordinated indebtedness. As of July 29, 2023, no notes have been issued under the program.

Note 4 - Fair Value Measurements

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

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). We did not record any material impairment charges during the 13 or 26 weeks ended July 29, 2023 or July 30, 2022.

Fair Value of Financial Instruments

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

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


	July 29, 2023				January 28, 2023				July 30, 2022
(in millions)	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Level 1
Senior Notes	$	3,087.4	$	3,428.3	$	3,162.8	$	3,426.7	$	3,244.0	$	3,425.0

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

Note 5 - Net Income Per Share

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


	13 Weeks Ended				26 Weeks Ended
(in millions, except per share data)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Basic net income per share:
Net income	$	200.4	$	359.9	$	499.4	$	896.3
Weighted average number of shares outstanding	220.1		224.2		220.6		224.7
Basic net income per share	$	0.91	$	1.61	$	2.26	$	3.99
Diluted net income per share:
Net income	$	200.4	$	359.9	$

SEC Form 10-Q filed by Dollar Tree Inc.