Dollar Tree, Inc. (DLTR) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Dollar Tree's 2025 Investor Day. A quick housekeeping note, if you didn't see it on the way in. We've got a WiFi password up here -- the network and the password. So thank you all for joining us this afternoon, both here in New York and online. It's great to be together in such a beautiful fall day here. These are truly exciting times for Dollar Tree. Since we last met in June of 2023, the business has advanced in significant ways. Most notably, we have completed the sale of Family Dollar, marking a definitive moment in our journey. Today is about looking ahead to the future of the stand-alone Dollar Tree business and the tremendous opportunities that lie ahead for our brand, our customers and our shareholders. We have a refreshed management team. Today, you will hear from our CEO, Mike Creedon and key members of his executive team, who will talk to you about our products, customers, stores and people and the tremendous runway for profitable growth that we see ahead of us. For those here in New York, if you didn't get a chance to visit our merchandise space back here behind me, we'll have Dollar Tree team members there during the breaks, and they can show you some of the neat products that we are offering in our expanded assortment. And at every seat, you will have found a small gift from Dollar Tree as a thank you for your time this afternoon. And for our final housekeeping item, my favorite part of the presentation, I would like to remind everyone that various remarks that we will make about the company's plans and future prospects are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Act of 1995. These statements are subject to certain 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 review the slide included in our materials and see our public filings with the Securities and Exchange Commission. We caution against any reliance on any of these forward-looking statements made today, and we disclaim any obligation to update any of these forward-looking statements, except as required by law. One last housekeeping note also, we'll post a full presentation afterwards that were done at 4:30. And with that, it's my pleasure to announce our CEO, Mike Creedon.

Thank you, Bob. Good to see everybody today. It's an absolute pleasure to be here. When I stepped into this role of CEO just 10 months ago, I was already excited for this opportunity to tell you about the compelling future of a stand-alone Dollar Tree. That day has finally come, a new day for Dollar Tree, a new era for Dollar Tree, and I'm committed to realizing the potential that lies ahead. For me, accountability is nonnegotiable. One way I measure our business is by a simple standard, the say-do ratio. If we commit to something, we expect to deliver. Today is about transparency, recapping where we've delivered and more importantly, being clear about the vast opportunity still in front of us. I'm pleased to report that since we last met in June of 2023, Dollar Tree has made significant progress. We are within the comp growth and gross margin ranges we outlined, and we've opened more than 1,100 new stores, including our milestone 9,000th location in Plano, Texas. Our merchant team is delivering greater choice and relevance across our assortment through our multi-price expansion strategy. Their agility, deep supplier partnerships and strong negotiation discipline combined with our global sourcing scale and SKU selectivity enables us to react quickly to change in tariff regimes or others and deliver the lowest landed cost possible for these items. Across our supply chain, we're modernizing our distribution centers with enhanced technology and infrastructure investments. Beyond merchandising and supply chain, we're making tangible progress across operations by improving store level productivity and reducing turnover while promoting tens of thousands of associates. In IT, modernization efforts are replacing outdated green screen technology with integrated real-time tools that better support the business and deliver a return on investment, thanks to the data-driven flexibility and nimbleness they enable. Across finance, we're focusing on tighter capital discipline, stronger cost controls and enhancing returns. And we've returned $2.1 billion of capital to shareholders in just the past 2.5 years. We have made significant progress. And while we're proud of where we've come and how far we've come, we also know there's substantial opportunity ahead. The reality is that near-term results don't yet reflect the full earnings power of this business. And today, we'll talk about the many ways that's changing. As we look ahead, we believe several factors will set the stage for accelerated improvement: A consumer looking to recover from the highest inflation in decades, cost gaps that narrow as onetime pressures roll off, traction on our tariff mitigation efforts, actions underway to stabilize shrink and distribution capacity returning to full strength with Phoenix and our Marietta DC rebuild coming online. The progress we've made and the opportunities ahead give us every reason to be optimistic. But the real reason behind all of it is simple, our customer. Every action we take, every investment we make is designed to strengthen our promise to them. In these times, they need us more than ever. As we approach our 40th anniversary next year, that promise remains at the heart of who we are to deliver value, convenience and discovery every single day. This promise of offering value convenience and discovery is what makes shopping with us affordable and fun. This is what keeps our customers coming back. This is what sets us apart, and this is incredibly rare. I can count on 1 hand the number of retailers with a shopping experience that offers a true sense of discovery. Let's turn to the first pillar of our brand promise, value. For our shoppers, the comparison is clear. On the products that matter most to them, Dollar Tree provides more value for every dollar spent. Here's the headline, the average item in a Dollar Tree costs $1.40. Across the same categories in the marketplace, the average is more than $3. That's not a small gap. That's a structural advantage. In fact, 85% of the products for sale in the typical Dollar Tree costs $2 or less. That's why our customers trust us for the essentials they buy every week as well as the items they need to celebrate special occasions, holidays, honor the seasons. And scale matters, with more than 9,200 stores our size and SKU selectivity work together to create buying power that very few retailers can match. We don't try to be an endless aisle. We offer fewer smarter choices and that lets us go toe to toe with other retailers on price, while still delivering a sharper value proposition. And fewer SKUs means more volume per SKU, generating savings we can pass directly on to the customer. Now value is only part of the story. It's also about convenience. Our stores are efficient, easy to shop, it's a quick in and out. You can park right at the front door, complete a shop in about 10 minutes and walk out with what you need and at Dollar Tree, hopefully, a few things you didn't know you needed, and that makes us so special. It makes us one of the fastest trips in retail. With our multi-price strategy, which I'll speak about more in a moment, we are delivering a more complete shopping experience and building on the convenience our customers already value. They can now find complementary products and categories, including branded and licensed items as well as larger pack sizes. And to be clear, we have no aspirations to compete with club stores or big box retailers, where large means a 20-pound bulk bag of Halloween candy for $25. Our approach is rightsized for our Dollar Tree shoppers, offering a modest increase in quantity while maintaining the strong value they expect from us in the $2 to $5 range. And then there's the piece that makes us truly unique, the surprise and delight. Customers come in with their heads up, not buried in a list, every trip brings unexpected essentials at a great value plus those treasure hunt items that turn in every day errand into something fun. That's the power of Dollar Tree: value, convenience and discovery, a combination no big box or e-commerce player can match. Our ability to deliver the Dollar Tree brand promise requires the right leadership. I am delighted to introduce the leaders who are shaping this new era for Dollar Tree. These women and men bring the right mix of experience, resolve and vision. You will hear from several of them today, including Brent Beebe, Jose Konrad, Roxanne Weng and Stewart Glendinning. Together, as a full leadership team, we've been rolling up our sleeves to reimagine what this business can be, and we are aligned on a common goal to make Dollar Tree stronger, more productive and more profitable. This leadership team is just a part of a powerful engine fueled by more than 150,000 Dollar Tree associates. We always say our associates are our customers and our customers are our associates. And many of them are also our shareholders. More than that, they are the magic makers at the heart of this organization. And I've always centered myself and the company on 3 fundamentals that serve as our North Star. We make it easier to work here. It's a career, not a job, and we are building it to last. And when you look at the tech investments we've made and our race to gold that Jose will talk about later, that's all about making it easier to work here. When you look at the tens of thousands of associates we've promoted, that's a career, not a job. And if it comes to building it to last, we're building something that will last another 40 years and beyond. When we honor that commitment to our people, we honor our customers and we deliver for our shareholders. Going back to the say-do ratio, it's not just about metrics, it's about trust and it's about our people. Every promise we keep strengthens the foundation we've been building for decades. That foundation was laid by our founders, whose belief in delivering value continues to guide us. So as we look ahead, it's only fitting to pause and reflect on the Dollar Tree heritage. Dollar Tree has been a part of the retail landscape for nearly 40 years, going from a single toy store in Norfolk, Virginia, to a household name with more than 9,200 locations across North America. Our history teaches us that simple principles, executed with discipline can create extraordinary results. In looking at our significant milestones, I would be remiss not to formally address the recent monumental change in our business, the sale of Family Dollar. Selling Family Dollar enabled us to concentrate our management and financial resources on the highest return opportunity, enhancing the value of Dollar Tree. Through accelerated growth, margin expansion and capital discipline, we will take Dollar Tree to new heights. This wasn't just a financial transaction, it was a strategic milestone that enables us to play offense. It strengthens our balance sheet and removes a major distraction for our leadership team and our associates who supported both banners, ensuring that every ounce of our focus is now focused on the future of Dollar Tree. When you step back and look at our history from our earliest days to transformational decisions like selling Family Dollar, you see a story that has always been rooted in our founder's vision. In his One Buck At A Time, which we've given to all of you, our founder, Co-Founder, Makan Brock, captures the Dollar Tree retail philosophy that still guides us today and holds true: deliver simplicity in the store, value for the customer and consistency and execution. When we do this, we're able to surprise our customers with value on every trip, in clean, bright and inviting stores and delight them with a thrill of the hunt shopping experience where they can discover essentials and little treasures all at great prices. And while our DNA will never change, we're also acutely aware that the future is about more than nostalgia and heritage alone won't deliver long-term returns. It will be built on bold choices, disciplined execution and a relentless focus on delivering value for our customers and for our shareholders. The world has changed. Customers are more digitally connected, costs are higher, competition is shifting and tariffs have added more volatility. Later, I'll cover the playbook we've written to counteract those external pressures. But 1 thing is certain. To make the most of our opportunities, Dollar Tree must evolve. And we are from a single price point model to a multi-price assortment from an aging store base to a fleet of refreshed stores, from underinvestment in technology to an AI-enabled enterprise, from inconsistent execution to a culture of excellence and accountability. To advance our evolution, we're shifting our culture to one of testing and learning. We're evolving from informed intuition and judgment to a data-driven trial and error, test-and-learn approach. And that involves our people, the systems needed to support it and of course, the culture needed to thrive in this type of an environment. With the store fleet of our size, we operate a massive laboratory for innovation, allowing us to continuously test, learn and optimize to fully capture the opportunities in the market. The opportunities are there, and we will do what we need to in order to capitalize on them. Now it's time to share how we move forward with purpose, with clarity and with conviction. Today, I'm pleased to share the strategy that will take us there. Our strategy is simple, but it's powerful: Surprise and delight our customers with an expanded more relevant assortment; manage our costs with agility by controlling the cost of the goods we sell and managing our SG&A with discipline to drive operating leverage and profitability; create a strong connection with our customers with cost-effective, quick return and data-driven marketing efforts; open more new stores and improve the condition of our fleet; and finally, improve the in-store experience for our customers by raising the bar on our store standards. At the foundation of these strategic drivers, there are 3 critical forces that enable our success. Excellence in our supply chain enables flexibility, speed and efficiency. Disciplined financial management ensures high ROI investments and capital allocation, and most importantly, our human capital. At the foundation of this strategy, at the heart of our success is our people. More than 150,000 associates show up every day with purpose, serving customers supporting one another and strengthening the communities where we operate. They are the reason we do what we do and the driving force behind every decision we make. Our investments in people are not just about wages or training, they're about building pride, belonging and opportunities across our organization. When our associates thrive, our customers feel it, our communities benefit and our business delivers stronger results. Let's take a look at the first strategic driver. Surprise and delight our customers with an expanded, more relevant assortment. Why is this important? Because doing so offers added value, convenience and discovery for our customers, which drives higher traffic, ticket and discretionary penetration and then our existing store space becomes more productive. This expanded more relevant assortment not only enables us to capture greater share of our customer spend, it also helps us attract more shoppers to our stores. And the highest price point -- the higher price point items in our expanded assortment increase the gross profit we get from each item we handle and gives us greater operating leverage on our supply chain and in our stores. Before we go any further, I do want to address a point of growing investor confusion. Some observers have begun to conflate 2 distinctly different activities taking place in our stores. The first is our ongoing multiprice strategy, and the second item is the restickering which is directly tied to near-term cost mitigation. These are not the same thing. They serve entirely different purposes and time horizons. The multiprice strategy we are discussing involves expanding our assortment to include new relevant, attractively valued items we could not historically offer because of our price point constraint. To be clear, multiprice is a journey of becoming ever more relevant to our customer, whereas restickering is an operational stop gap we've deployed to manage external cost pressures. We fully acknowledge the retail execution behind restickering isn't ideal, and it doesn't make working in our stores easier, but I can assure you it short term and will primarily phase out by the end of our current fiscal year. While this activity has driven some discrete expenses and activities in our stores, I want to be clear that our prices and value remain compelling, and our continued strength in sales and market share trends demonstrate this. Let me underscore: Our multi-price strategy is one of the most important strategic shifts in Dollar Tree's modern history, and it's working. It's deliberate data-driven initiative that began in 2019 to make more relevant, more flexible and more profitable Dollar Tree. Those who know our history know that for decades, Dollar Tree was defined by a single price point. That discipline built enormous trust, but it also placed a ceiling on what we could offer. Expanding beyond $1.25 has allowed us to meet more of our customers' needs and in turn drive sales. With multiprice, we've been able to introduce complementary items that enable our customers to better complete their shopping trip with entirely new products, categories, larger pack sizes and trusted national brands, while still keeping our $1.25 offering as the foundation of our value proposition. This is not an identity shift. Multiprice strengthens what Dollar Tree stands for: value, convenience, discovery. Our customers understand that. They continue to fill their baskets with $1.25 essentials, and now they're adding items with expanded price points to their baskets, delivering a truly great value for the occasion or mission they're shopping for. This is not a departure from what made Dollar Tree, Dollar Tree. It's an expansion of that promise. It's how we remain relevant to customers today while creating sustainable growth and stronger returns for the future. We are not abandoning the customer who relies on our opening price point items. And as I shared before, the average price of an item in our stores still $1.40. And 85% of the products we sell still cost $2 or less. As we expand into higher price points, our promise to always deliver value remains unchanged. In fact, it's even stronger under our multiprice strategy. Our world-class merchandising team continues to set Dollar Tree apart through our unique model and global sourcing capabilities, including our China Plus One strategy. We design, specify and procure distinctive products at scale, delivering compelling merchandise that keeps customers coming back, including our leading discretionary and seasonal items where Dollar Tree can't be beaten. Our $20 billion in retail sales and focused assortment delivers a powerful advantage to our merchants. SKU selectivity gives us leverage with vendors and allows us to curate products that deliver the best value for the customer. The powerful combination of all these variables allows us to deliver exceptional merchandise and an unmatched value. And our multiprice results speak for themselves. It's driving strong sales growth, expanding margins and larger baskets. It's helping us attract new households, including more middle and higher income shoppers, while deepening loyalty among our core customer base. Multiprice drives significantly higher basket sizes and is highly accretive to our financial and operating performance overall. You could see the proof right here in this independent survey for Morning Consult. Our customers are consistently rating us high on key drivers, including number 2 in net favorability, number 3 in purchase consideration, number 3 in value and #2 in reputation. While customer feedback is strong, our sales performance really tells the story. Since breaking the dollar in 2022, we've driven an average comp of 5%, while growing our store count rate that added another 2% to our top line. In the first half of this year, we've grown comps at 6%, while guiding to 4% to 6% for the full year. These are strong results and favorably compared to other retailers. We'll continue to drive our multiprice strategy and look to deliver continued strong top line results. Top line growth in recent years has built a strong foundation, and we're now positioned to translate that growth into stronger profitability as multiprice scales, cost inflation moderates, transformation investments take hold and onetime costs unwind. Now let's talk more about how we've enhanced our ability to navigate the unusually dynamic cost environment. Our goal is to always stay ahead of cost headwinds and continue delivering strong performance no matter the challenges we face. We've identified 5 key levers that position us to offset these pressures: Renegotiating supplier terms, reengineering products for efficiency, shifting country of origin where we need to, discontinuing lower margin or underperforming items and executing targeted retail price changes when necessary. Each lever on its own provides meaningful help. But together, they are a very powerful mitigation tool that help us to preserve margins and provide more predictable returns. Our approach to agile cost management extends beyond protecting our cost of goods sold. We are also working to leverage our SG&A and drive profitability. We're managing SG&A with the same level of discipline and intentionality that we are applying to our cost of goods. We are focused on building a more efficient, agile organization that is aligned with our post Family Dollar needs and is built to scale profitably. Our major levers are clear: getting more from every hour. We're using smart tools, automation, better processes to help our teams work faster and smarter, turning effort into real results, spending less to do more. Our big corporate investment phase is behind us. And as operational investments and capital spending comes down, so will expense growth and depreciation and amortization, giving us more room to grow profitably. And rightsizing for our future. With the Family Dollar sale behind us, we're reshaping our organization to fit the needs of the new Dollar Tree. We'll reduce corporate SG&A from 3% to 2% by 2028, enabling us to be leaner, faster and built to win. Together, these actions drive operating leverage and allow more sales to flow to the bottom line. Now let's talk about how data-driven marketing efforts will enable us to build stronger connections with our customers cost effectively and with a quick return. And why is this important? Because improvements here build brand equity and drive customer affinity, traffic and loyalty. This accelerates all our other efforts. When we can connect directly with our customers, they have more reasons to shop, their baskets are fuller and they return more frequently. And our new presence on e-commerce platforms, like Uber Eats, introduces us to a whole new incremental base of customers. Dollar Tree's reach today is extraordinary. More than 100 million households shop with us annually, making us the fourth largest retailer by household penetration in the U.S. In fact, nearly 3 out of every 4 households in America visit a Dollar Tree in the past year. Importantly, this customer base is expanding, reaching over 2 million net new customers just in the last year and even more compelling since the launch of multiprice, we've added 10 million net new households demonstrating our customers' acceptance of our expanded assortment. What's more, nearly half of our new customers have already come back and shopped with us again, clear evidence that we are not only attracting shoppers, we're converting them into loyal customers. And who are our customers? I mean who aren't our customers? The Dollar Tree customer base is broad and diverse, it spans all ages. We serve young families stretching their budgets, retirees living on a fixed income, college kids outfanding a dorm and increasingly higher income households who appreciate the convenience and the thrill of the hunt shopping experience that only Dollar Tree can offer. Higher income households are our fastest-growing cohort, proving that our value resonates across all income brackets. When households, especially higher income households, shop our stores, they drive higher baskets because multiprice is especially relevant to them. As we look at frequency, we have a large base of occasional shoppers, more than 60 million households were even 1 more trip per year would translate into close to $1 billion in sales. We have the opportunity to earn that additional trip and expand our share of that customer's wallet. Together, this mix of loyal customers, new adopters and underpenetrated segments gives us both scale today and runway for tomorrow. So let's talk about how we're going to earn that trip. For most of our history, Dollar Tree didn't have to market itself. As a single price retailer, we operated with the mentality, build it and they will come. Today, we have an incremental opportunity to actively engage customers, tell our story in new ways and strengthen the unique value, convenience and discovery proposition that is always defined the Dollar Tree experience. We believe this will enable us to accelerate the expansion of our reach. As we strive to be more relevant to our customers, we are building marketing into a strategic capability, identifying low-cost, quick return, data-driven solutions that will accelerate our connection with consumers drive traffic and support our long-term success. After a decade of sharing resources to support Family Dollar, we are proudly building new muscle at Dollar Tree and the Dollar Tree of tomorrow. We are introducing ourselves to new customers and reintroducing ourselves to customers who may not be familiar with our newly expanded offering. We're advancing a brand that engages, excites and brings customers back more often. What does this mean? A stronger digital presence with personalized and geo-targeted campaigns, expanded social media and influencer marketing to connect with a broader audience, partnerships with e-commerce and delivery platforms like Instacart and Uber Eats that meet our customers wherever they are and wherever they want to shop. This is about one thing, though, cost-effective marketing solutions that build equity and drive sales. They strengthen the bond between our customers and our brand, they position Dollar Tree as a place to save and have fun and they become a relevant, ever-increasing relevant part of your life. We see this opportunity as an enormous tailwind. Delivering on our promise to customers starts with great stores, no doubt. This is why we're focused on expanding our footprint and elevating the condition and consistency of every store we operate. Earlier this year, we celebrated the opening of our 9,000 Dollar Tree store in Plano, Texas, a milestone that was both a point of pride and a reminder of the incredible opportunity still ahead of us. And more than 9,200 stores, that's a tremendous base of strength. But it also highlights the white space opportunity ahead. Look at the map. We are significantly underpenetrated in the Southwest, the West and in dense urban corridors across North America. This means that while we already operate from a position of national scale and brand recognition, we believe the runway for expansion is long. Our established footprint provides the stability and underpenetrated regions provide the growth, together, creating a powerful opportunity for sustained market share gains. With approximately 400 new stores opening each year, we have a powerful prospect to expand our footprint well into the future. Our growth plan isn't about adding stores everywhere, it's about strategically placing them where demographics and demand tells us the returns will be the strongest. Our new stores are delivering returns in excess of 25% even in today's environment of cost inflation, higher interest rates, low retail vacancy rates and limited development. Our growth runway does not stop there. Given our financial projections and the retail opportunities that continue to evolve, we see a long runway ahead for store growth. But growth has to be about more than new stores. It's about making our existing fleet stronger and more productive. Half of our stores haven't been touched in over a decade. So we are launching a refresh program. Paint, flooring, fixtures, these are small investments with big payoffs that quickly improve the shopping experience. I recently walked into 2 different Dollar Trees, same city, walked into one that had been refreshed, the other one hasn't been touched, the results were striking. Their performance was too. And we're optimizing space. Too much of our floor area has been tied up in underperforming categories. We are reallocating space to higher-margin categories and products within the $2 to $5 price band, which we believe is just the biggest value creation opportunity. Okay, let's talk about execution. For too long, our store standards have been inconsistent. How we approach our work matters. That's why with Joce's leadership, we launched the X factor framework and the race to gold to set clear benchmarks for what good looks like. We know what makes a store great. Like our founders said, it's about running clean, bright and inviting stores that deliver a consistently strong customer experience. And Joce and her team are committed to this journey. We strategically invested in labor extending hours of operation, fixing underperforming locations and giving associates better training and tools, and the early results are promising. We're also attacking shrink head-on through accountability tools, technology pilots and new leadership alignment. We see an opportunity to mitigate shrink as a persistent headwind. But this is about more than metrics. It's about culture. A store that meets gold standards isn't just better for customers, it's better for our associates. It's a place they're proud to work. It's a place they're proud to recruit others to and an opportunity that feels like a career and not just a job. That pride turns into lower turnover, stronger execution and a better financial performance. So what does gold actually look like? It means shelves are front-faced and fully stocked early in the day. It means clear aisles, bright lighting and signage that is clear for our customers. It means restrooms that are clean, checkouts that are staffed and associates who greet our customers with a sense of pride. That may sound basic, but across more than 9,200 stores consistency is what builds trust. None of this work can be completed without a modern supply chain infrastructure. Later today, you're going to hear from Roxane about many of the opportunities we have in our supply chain network. To date, our distribution network has been stretched by rapid store growth, the rollout of multiprice assortments and the loss of one of our DCs. We're addressing this with a multiyear plan to expand and modernize DCs in capacity and strengthen our transportation. This will unlock meaningful savings over the next several years. On the tech side, we're replacing legacy systems with modern AI-enabled platforms that means smarter assortment planning, better inventory visibility and improved workforce management. Technology is a big enabler. It gives us the ability to serve customers better, manage costs more effectively and scale profitably. To give you a sense, some of our legacy systems were decades old, a clear opportunity for modernization. Compare that to where we're going with cloud-based platforms, predictive analytics and mobile-enabled workflows, that's not just a tech upgrade, it's a cultural shift. These investments in our IT and supply chain infrastructure are highly transformative. They will allow us to flow product more reliably to stores, reduce out of stocks and improve our cost structure at scale. Our ability to invest in the business, expand our store base and create long-term value all starts with a very strong financial foundation. With a healthy balance sheet, solid free cash flow and the proceeds from the Family Dollar divestiture, we are well positioned to fund growth while also delivering consistent returns to our shareholders. Let's discuss a moment why these things matter. We are not going to spend our way into growth. We're strengthening the foundation for it. A healthy balance sheet and strong free cash flow gives us the flexibility to invest where it matters most. We'll deploy capital with discipline. Capital will be allocated with clear priorities, investing in high-return opportunities, maintaining prudent leverage and delivering sustainable long-term returns, all to provide predictability and confidence for investors. A disciplined financial strategy ensures that we can continue to grow without compromising returns. So what would I like you to take away from today? Dollar Tree has enormous opportunity for growth. We are well positioned to navigate today's unusually dynamic cost environment. We are now a focused stand-alone business. We have a refreshed leadership team that is aligned, accountable and committed to our strategy. Our strategy has very clear levers. We are already actioning them. They're led by multi-price expansion, improved store conditions and supply chain optimization. We are absolutely committed to driving expense discipline, reducing corporate costs to improve profitability. You've heard that our strategy is simple, yet powerful. It's a new era for Dollar Tree, fueled by value, convenience and discovery, and we are building it to last. With that, I'd like to turn things over to Brent Beebe, our incoming Chief Merchandising Officer, to share how our disciplined approach comes to life in the assortment and value we bring to customers every day. Brent?

Good afternoon. By way of quick introduction, I'm Brent Beebe, Dollar Tree's incoming Chief Merchant. I've had the pleasure of working with Dollar Tree and on our transformation since 2020. Our value proposition centers on opening price points, fixed and limited prices that signal quality and value. This approach, Mike kind of touched on it, it stretches the shoppers budget further, gets them between trips. And a key driver to our most recent growth has been the introduction of multiprice, expanding our ability while maintaining both that quality and value our customers has always loved from Dollar Tree. And in this role, I couldn't be more excited about the journey ahead. Today's story is about how Dollar Tree merchandising is transforming. We're going from constrained to optimized from a single price point to a high-performing multiprice model. It's about being more relevant. It's about building a stronger connection with our shoppers. As it currently stands, our store space has a lot of opportunity for sales and margin productivity. Some of our most productive categories have room to grow while others have an opportunity to be optimized. This creates an opportunity to enhance sales and unlock more value. And you know what, we're not starting from scratch, we've actually been doing this for 6 years. We're evolving and scaling multiprice. We've built a proven model that's informed by our customers. Now with advanced analytics, we can sharpen our understanding of assortment performance, unlocking that potential that we're talking about. Looking forward, we're optimizing our store space with precision and focusing especially on that $2 and $5 price point range. By aligning space with demand, we're expanding high-margin categories, and we're unlocking stronger productivity in sales per square foot. We're treating shelves like a real estate portfolio, every inch must deliver stronger sales and margin. Outcomes here aren't left to chance. We've been evolving this all along the way and multiprice is central to the strategy. It's not about more price points, it's about flexibility, it's about choice, it's about creating a deeper engagement with our shoppers. Now as all you know, in retail, innovation is key. Through a disciplined test-and-learn approach, we'll validate ideas before scaling, mitigating any execution risk and ensuring that there's measurable value in what we're doing. We understand the challenges. We see the growth potential, and we've got a plan to win more market share, so let's dive in. Let's begin with the performance of the core Dollar Tree business. Since 2023, we've added $2.6 billion in sales. It's a 7.5% compounded annual growth rate. At the same time, $1 billion in gross profit, that's an 8% CAGR, clear evidence of a strong, scalable and margin-accretive model. A key driver is the balanced mix that we have of discretionary and consumables. Discretionary drives margin, consumables drives trips, and together, they deliver an extremely attractive gross margin profile. Our unique blend of merchandise provides this unique advantage in the marketplace. You know what, our assortment is highly differentiated. Nearly 60% of all products are private label or control brand. These products are engineered specifically for the Dollar Tree shopper. The remaining 40% are trusted brands, names our shoppers recognize and absolutely love. Now taking that all in totality, 80% of our assortment is unique. Less than 20% is similar to the competition. Say it again, less than 20% is similar to the competition. That's what's fueling the treasure hunt experience that keeps shoppers coming back for more. Mike touched on it: Price is another advantage. Our average unit retail is less than half the broader retail market. That value gap is disruptive, one that unlocks new opportunities to layer in additional price points and broaden our assortment. Another point that's critical: As a variety retailer, we don't need to carry everything. We focus on categories and items where we can deliver true relevance and value at an attractive margin. If a product doesn't meet those standards, we'll simply either reengineer it or will drop it all together. Supporting all of this is our global sourcing strength. As one of the largest importers by container volume, our scale enables quality and value. Our well-developed China Plus One strategy helps us manage those macroeconomic pressures and maintains our competitive advantage. It allows us to deliver disruptive value at scale. In short, Dollar Tree stands on a foundation of growth, margin strength, unique assortment and sourcing excellence. With that in place, let's get to the meat of this and explore our multiprice journey. Multiprice has been a breakthrough for Dollar Tree. For decades, our identity has been defined as a single price point. Now that model gave us clarity for sure, but it also placed a ceiling on what we could offer. By expanding our price points, we've shattered that ceiling. Multiprice isn't a departure from our promise, it's an evolution that strengthens it. We believe it makes Dollar Tree more relevant, more competitive and more profitable. The benefits are clear. First, multi-price allows us to protect our core value promise, while expanding choice and relevance. Shoppers appreciate the affordability of the opening price point and the excitement of discovering something unexpected at 3 and 5. To enable a more complete shopping experience, we can now offer complementary $1.25 school supplies and a $5 Disney backpack; or for Halloween, we can now offer large variety bags of candy to round out that Halloween shopping experience. This expanded assortment is at reliably low price points that drives customer loyalty and incremental spend. Second, it gives us agility. When inflation hits, tariffs come or other cost pressures, we're no longer constrained by a single price point. We can adjust while still delivering our promise of value, convenience and discovery. Third, multiprice increases shelf productivity. As an example, a 4-foot section that once generated a fixed revenue at $1.25, now delivers multiples of that revenue, when we incorporate a $3 and $5 item, transforming the economics of the space across the entire fleet. Operationally, it gives us leverage. With lower unit throughput, each item that moves through our system generates more profit dollars while actually placing less strain on logistics and labor. Financially, multiprice delivers a step change in the economics. Margin dollars both per item and per basket are significantly higher than in a single price point model. It's a key driver of improved sales and margin productivity for us, exactly the outcome we want as we reallocate our space to higher-performing categories. By offering quality and value across multiple price bands, we become more relevant, more often. Now the strategy began in 2019. And since our last Investor Day, we've added multiple price points and scaled it by over $2 billion in sales. This is proof of customer acceptance and disciplined execution. You can see in the price bands, in 2023, 90% of our sales were at $1.25 or below; today, 60% is at $1.25 and below, 25% is in that $1.25 to $2 and 15% of our business is done above $2. That's merchandise relevance in action. It's measured, it's successful and it's anchored in value, convenience and discovery. We've seen household penetration grow, stronger basket conversion and expanded gross margin dollars. In short, the evidence suggests that multiprice delivers higher productivity, larger baskets, greater agility and most importantly, stronger customer engagement. It's an evolution that strengthens our core and positions us for long-term growth. All right. Multiprice is about creating differentiated value at Dollar Tree. For customers, it means stretching their dollar further without sacrificing on quality. For Dollar Tree, it means stronger gross profit dollars, a more compelling assortment and deeper customer loyalty. As we expand in the $2 and $5 price point range, we're not just competing on lowest nominal price, we're competing on value. That strategy positions us to capture more market share and accelerate our growth. Today, as I mentioned, items above $2 are about 15% of our mix. When you look at the totality of that assortment, our prices are 10% to 15% lower than the competition for similar products. Importantly, our goal with multiprice is to add relevant and differentiated and incremental items that expand what Dollar Tree means to our shoppers. Take toys, for example. We've engineered products into price bands that offer great value and drive incremental growth. One of my personal favorites, the snack option here. In snacks, we partnered with national brands to create multipacks tailored for our shoppers. In cleaning, we've introduced twin-pack disinfected wipes at $5. That's 15% lower than the competition. Now our vendors want to partner with us. It's because of our scale, because we have high traffic and their desire, they want to compel trial in their products. Other examples: You saw in the other room, include our automotive expansion. I don't know if you saw the Preston antifreeze down on the bottom shelf, it's $6. That's 20% less than the competition's private label, and the hand vacuum at $7, products that we simply could not offer at $1.25. These items broaden our relevance. We're meeting new shopper needs and reinforce our value promise. What we're doing in multiprice is different. It's unique to Dollar Tree and tailored specifically for our shoppers. That's why it's working. It's engineered values in categories where we have the right to win. One of the biggest differentiators in our business today compared to a few years ago is data. We now have new sources, new talent and AI-powered tools that give us visibility and precision we just never had before. We also built a new assortment planning suite, one that provides us guardrails, enables us to test and learn and offers modeling capabilities that didn't exist, didn't exist up until this year, really. And what that data tells us is clear. Our biggest opportunity is in optimizing the space we have, treating shelves like a real estate portfolio. Every inch is an investment, and we're engineering outcomes that deliberately drive sales and margin. To be clear, we're not shifting to a planogram approach, but rather we're leaning in to the treasure hunt experience. When products are grouped by mission and utilizing price point signage for clarity. Our goal simply is to maximize the financial performance of the store in its entirety. Within this framework, multiprice is a critical tool, but it's just one. Another real key value driver is engineering our mix based on shopper demand. Instead of relying on legacy space allocations, we're shifting from space-driven to shopper-driven merchandising. That allows us to further delight our shoppers, maximize sales, gross margin and returns across the fleet. This opportunity is huge. It is so significant. By optimizing store space, we're creating a pathway to accelerate multiprice or expanding shopper relevance and we're unlocking higher productivity across the entire fleet. I wanted to share kind of the magnitude of the space optimization that we have. If you look at this graph, it simply charts sales per foot per store across 50 different categories. Each data point represents how efficiently space is being monetized in our store. Our team has a clear map not only of the sales, but also the profit per foot for each category. This gives us a dual lens of volume and margin and how each foot is performing. Now we consider all factors of sales, profit and importance to customer traffic in deciding how we allocate our customer space. As you can see, there's a widespread here in performance. Some categories are delivering exceptional returns per foot, while others are under leveraged. The median line here is just the current benchmark, but it is by no means the ceiling. By optimizing space and refining our assortment mix, we have a clear path to shift that median up. This means reallocating space from low-performing categories to higher-performing ones and curating product shelves that drive both sales velocity and margin. So let's go a little deeper on this, just to give you a couple of examples. In our consumable business, optimizing the balance between shaving and skin care yields dramatic results. We freed up 4 feet of space for higher demand items, shifting from shave to skin care, and we saw a 26% improvement. The same applies to our discretionary categories. We reallocated 4 feet of space from apparel to household plastics, a category that we see strong customer demand for, and we're seeing a 47% lift on a combined basis. Mike referenced how often we're testing and learning. That's why changes like these are first assessed with thoughtful reference to related categories in the entire store as a whole. Space optimization has the potential to dramatically increase our sales productivity without any capital expenditures. For customers, it makes it feel more curated for them and aligned with their needs. For the business, it means higher returns on fixed assets. Optimization has a multiplier effect. Each proven change builds a more productive store. Multiply that across 1,000 locations and the impact is absolutely transformative. It's one of the clearest examples of how data can directly translate directly into value creation. As we look at the opportunity multiprice provides giving shoppers another reason to visit or one more reason to add to their basket. We see more than just a pricing strategy. We see a gateway for new categories that simply previously were out of reach. When we look at the consumable mission trips, multiprice has enabled us to expand assortment and broaden relevance in ways that weren't possible before. In frozen foods, we now offer large pack sizes of $3 or $5 items, making us more convenient for families. In beverages, multiprice allows us to sell multipacks that deliver value at scale. In household, we now carry higher quality storage solutions and cleaning categories. These offerings enable our shoppers to fulfill more of their needs at our store and it also elevates the entire shopping experience. These are examples of just how we're growing our share of wallet, becoming more relevant to our valued customer base. Looking at consumables through the lens of these shopper missions, 4 distinct trips emerge. First one here, grab and go, these are baskets with 3 or fewer items. These are quick transactional trips, typically for immediate consumption. Need it now. These are baskets between 3 and 10 items, driven by urgency. It's typically a household staple, health care or maybe it's a snacks for the week. A fill-in trip. That's 11 to 20 items in the basket. These are topping off a pantry load, typically household goods between larger stock-up trips. And my personal favorite, the stock-up trip. That bad boy has more than 20 items in the basket. That's where Dollar Tree is the primary destination. Our market share across the trip missions show 1% in grab and go, scaling to 5 and the fill-in and then closing it out with 4% in the stock-up trip. By aligning merchandising with these trips, we're ensuring Dollar Tree is relevant, relevant across multiple shopping occasions, driving frequency, bigger baskets and stronger quality. To illustrate how this plays out, I'll share a few real-world examples that bring these shopper missions to life. All right. First one, let's take a look at the grab-and-go trip. When we studied this trip, we quickly saw an opportunity to become more relevant by introducing brands. These are brands we couldn't afford at $1.25, but that resonate with our shoppers. But with multiprice with it's $0.25 increment price points enabled us to offer them. We can now satisfy additional impulse, convenience and value and enjoy the traffic and transaction benefits. This enriched assortment has energized our snack zones and impulse categories, areas where relevance and brand recognition matters enormously. The results have been some of the strongest sales we've seen in snacks and beverages in years. At the same time, we didn't walk away from our base. we carefully rationalized our $1.25 assortment. So we're ensuring that, that opening price is still available for our shoppers at the best value. It's not about replacing $1.25, it's about enhancing it with multiprice to create a more complete and compelling offering. The outcome is clear, we've increased sales productivity, open pathway for multi-price and through smart negotiations, delivered exceptional value for our shoppers. All right. Let's look at the next example, which, of course, is my favorite, the stock-up trip. When we dive into the stock-up trips, again, these are baskets with 20 or more items, they're often anchored by $1.25 essential. These everyday basics are what get customers into our stores. But today, we're offering an expanded assortment that includes items with a wider range of price points and additional items whose variable pack sizes enable us to offer an even better value. Now when shoppers come in for their bleach, they don't just leave with bleach. They can also find cleaning accessories that we could not offer at $1.25, plus a deeper value multipacks and quality items at $3 or $5. These aren't just add-ons. They're complementary essentials that deepen the value of the trip. So think about a customer who relies on Dollar Tree for our unbeatable value of bleach. Today, they can now round out their basket with multiprice items like gloves, sponges and bulk cleaning supplies, all in one stop. That's convenience, that's discovery and that's value working together. The expanded assortment is driving stock-up trips to Dollar Tree. It's not just about offering more, it's about offering better. The impact is clear. These larger baskets are no longer defined solely by opening price points, they're increasingly blended with multiple priced -- multiprice essentials that drive higher sales and stronger margins. Just as grab-and-go trips have been energized by brand introductions, stock-up trips are being redefined by our multi-price assortment. Okay. So what does this all mean for the consumables side of the business? I'll take a step back here and look at the total market. When we look at our share by price band in the marketplace, 2 things stand out. First, we have tremendous strength below $2, where Dollar Tree has been a long leader in. Second, and equally important, we see opportunities to win in adjacent price points. We can win there through incremental items where we can be relevant to our shoppers and deliver that quality and value. This is where the size of the prize comes in. We believe the opportunity in the $2 to $5 price band is immense. As I mentioned previously, we previewed a version of this in our last Investor Day and have delivered over $2 billion in incremental sales in just 2 to 3 years. Additionally, since our last Investor Day, we've been building capacity across multiple dimensions. In stores where space optimization creates room for expanded assortments with our shoppers by educating and engaging them on the value of multiprice in data using advanced analytics to guide smarter decisions and in talent with merchants who are sharper and more agile than they ever were before. At the same time, we've been accelerating growth in share of wallet and growth in household penetration. That progress alone gives us confidence that the next wave of growth is not just possible, but it's inevitable. Our discretionary business is a key differentiator for us and one that represents 50% of our total business. This mission trip, it's about a special occasion, a season, a celebration, inspiration and definitively about discovery. We'll look at a few examples that highlight the treasure hunt we're creating through our expanded assortments. When we look at the power of multiprice hardware is one of the clearest examples of how this strategy opens up new categories. Prior to multiprice, our assortment was simply constrained. There were entire categories we couldn't touch. You can't make a quality hammer for $1.25. At the same time, we had unproductive space take our phone accessories here at $1.25, which weren't delivering the sales or margin we expected. That gave us the chance to rationalize, free up the space and introduce a multiprice hardware set. The preliminary results have been absolutely compelling. Hardware is driven unit comps, average unit retails and basket penetration increases across all formats. In other words, shoppers are not just buying. They're building bigger baskets, mixing hardware into their trips in a way that they didn't before. Now let's look at the seasonal trip. Seasonal has always been one of the most distinctive parts of Dollar Tree and it's also one of the most mature multiprice businesses that we have. This is an area where we have both the right to win and the capability to deliver unmatched value. Multiprice enables us to broaden the scope of the items so that our shoppers can complete the purpose of the shop. It enables us to offer customers everything they need to celebrate holidays and special occasions in just one trip, again, at a value, no one else can match. Let's talk Halloween. We see 3 distinct shoppers. On my left, whatever it is for you, the casual shoppers who typically have up to 4 items in their basket. The celebrator has 5 to 10 and our enthusiasts who are all in their baskets are 12 or more items. When we analyze this mix, about 2/3 of trips fall into the casual and celebrator category. But importantly, 1/3 of our shoppers the enthusiast by 3x more the number of items, and they're adopting multi-price assortments in a major way with 8x the basket size by leveraging multi-price within the celebrator and enthusiast groups, we've significantly increased the basket size, margin dollars and overall impact. For these customers, multiprice isn't just an add-on, it transforms the trip by offering bigger, higher quality and more innovative items. To show how powerful this can be, let's take a look at how this played out in Christmas last season. Here are the facts that we've uncovered for the 2024 season. $1.25 baskets were flat to slightly down. Our multiprice only basket saw high single-digit increases. More importantly, the mixed baskets of opening price point and multiprice is up double digits. An opening price point only basket is about 5 items or less. But when customers combined opening price point and multiprice, the average basket size jumps to 10 items. That tells us that customers have embraced the expanded assortment. Think about those Christmas sets, you saw in the other room. We've got toys that parents can actually put under the tree. We've got large plush animals, and we've got Bluetooth electronics. These products simply weren't possible at $1.25. But at multiprice, they become attainable and compelling, and we didn't abandon our core. Most of our assortments remain under $2, preserving our value identity while layering in excitement and relevance. That combination, everyday affordability plus the expanded seasonal offerings is the engine behind our basket growth. Let's bring this to life with a seasonal candy. A great example of how multi-price helps meet customer needs in new and exciting ways. Seasonal candy is a key driver in building baskets, stronger margins and deeper engagement Think about the occasions throughout the year, large variety bags for tricker treaters for Halloween, stocking stuffers at Christmas, classroom exchanges for Valentine's Day in basket stuffers, for Easter. Each moment calls for something bigger, something different, more specialized than our $1.25 assortment alone can provide. By layering in multiprice, we've expanded beyond single-price small pack format while staying true to value and keeping everything complementary to the $1.25 set. We've built this strategy around brands our shoppers love. Candy is so emotional and recognizable credibility matters. Because of our tremendous purchasing volume, major vendors want to work with us to co-create special pack types designed specifically for Dollar Tree, products that deliver the right size, the right price and are seasonally relevant. On top of driving incremental sales, these partnerships further strengthen our position as a must-have retail partner for our vendors. So when you step back, it's about proving our model can scale that shoppers actually want more from us and that we have the tools to deliver. Now let's look around the corner on what's next. Looking ahead, one of the most powerful ways will drive growth and innovation is by doubling down on our test-and-learn approach. Disciplined and thoughtful analytics are at the cornerstone of this strategy. Before rolling out new multiprice categories, space reallocation or merchandising strategies, we will start with a controlled pilot. We'll measure customer response, analyze the sales impact and then refine the execution. Only when the data supports the concept will we expand it across the fleet. This approach reduces our risk, uncovers new opportunities and accelerates our success. Three areas we're exploring, zone pricing, strategically in a limited number of markets. Second, front-end reconfiguration, opportunities to increase our impulse purchases. Third, data and predictive analytics to help us forecast, personalize and make data-driven decisions. The beauty of this approach is our scale. With over 9,200 stores, 100 million households and a growing digital platform, we have the permission to test, fail-fast, but certainly implement quickly. This is how Dollar Tree will continue to evolve, not by standing still, but by constantly experimenting, refining and discovering new ways to serve our shoppers better and more profitable. All right. Now let's pull this all back together and connect these themes to the bigger picture. Our merchandising strategy is setting Dollar Tree up for long-term growth and leadership. We're optimizing store space, treating shelves like a real estate portfolio engineered to drive higher sales and margin. Multiprice is one of our most powerful tools. It enables us to capture greater share of wallet and increase our customers' -- relevance with our customers. We'll fuel innovation through test and learn, experimenting, reacting and using our scale to keep merchandising dynamic, resilient and relevant. Bottom line, Dollar Tree is moving with purpose. We're building a model that's more productive, more resilient and more customer-led than ever before. Thank you for your time. I'll now turn the stage over to Jocelyn Konrad, Chief of Stores and Enterprise Operations. Thank you.

Good afternoon. My name is Jocy Konrad. I'm the Chief of Dollar Tree stores and enterprise operations. I recently celebrated my second anniversary with the company, and it has been a privilege to be here today on behalf of our operations organization. With my more than 30 years of experience in running small box retail, I recognize that every business runs differently. When I transitioned to lead the Dollar Tree team last November, it was a peak holiday season and the busiest time at Dollar Tree. The best thing I did was listen, learn and ask questions. To protect the fourth quarter, I did not immediately jump in and make instinctive changes. I spent time with our team to learn the brand, our associates, our customers and our operations. And I observed 2 things that have stuck with me every day since. First, there is magic in the Dollar Tree brand; and second, there is a ton of opportunity ahead of us. The Dollar Tree brand is unique. And now we are accelerating our pace to raise the bar in stores and maximize the opportunities we have every day to impact associates, customers and deliver results to shareholders. As Mike shared earlier today, our store fleet is essential to our strategic plan. Our strong footprint provides the stability to raise the bar in store operations and that's what we will cover today. But before I dive in, I want to be clear on a few things. We are not satisfied with the inconsistency of our store conditions. We have made some progress, and I'll share more about that today. And we will continue to elevate our stores to reach higher standards. These are the headlines I want you to hear from me. We have a tremendous opportunity for improvement and acceleration. And as we begin, let's walk through our brand journey. With more than 9,200 stores across North America, our footprint is substantial. This means that when we make changes to our processes, standards or expectations, there are more than 9,200 store managers to reach, more than 500 district managers to connect with and more than 50 regional and zone leaders to influence. We recognize that as a large organization, there isn't a magic wand. We must make decisions and changes that are sustainable for our associates. And we must be intentional about how we choose to prioritize and drive improvements. As you've heard today, Dollar Tree has evolved from a single price point model to a multiprice assortment. Since we introduced the $1.25 price point in 2021, we have continued to fiercely protect our brand promise of delivering great value to our customers. And this brand evolution has come to life in our stores and through our associates. They are on the front lines of implementing new sets, fixtures and prices. We know what needs to be done to improve standards, and it's not a solo endeavor. Our associates have been on a journey with us each step of the way. And as we raise the bar, we're dedicating time to teach and coach and train with clear processes and expectations. Across departments, we collaborated this year to define the what and the how of our multiprice journey, while prioritizing value, convenience and discovery. Let me illustrate the importance of our recent operational evolution through an example. Our expanded multiprice assortment introduced a few schematics in our stores. One of those areas was in our frozen food department, a critical sales and transaction driver for Dollar Tree. From associate feedback during store visits, it was clear that we lack consistency in our stocking process. We saw an opportunity to make the process easier. And as a result, we began to simplify our freezer merchandising with a new 5-step process. Associates should now have a clear understanding of how to properly receive an order, replenish the freezer and then organize the backstock. It's not a complicated change. It's slightly different with more intentional steps. We focused our teams on these key behaviors that align to a high standard and the changes will result of listening to feedback from our associates. How we approach our work matters and many times, the best ideas come from our associates on the front lines. At our Field Leadership Summit last month, I shared with our district, regional and zone level field leaders that they and their teams are the magic makers in our stores. It's not just me or those presenting today, it's more than 144,000 field associates who are closest to the customer. They are responsible for the customer experience. But first, it's important to define our expectation standard. During our 2023 Investor Day, Mike introduced the G.O.L.D. standard that we aspire in all of our stores. We call that the grand opening look daily. The gold concept sets the bar for consistent store standards and associates are expected to run gold standard stores, not just meet those standards once. Initially, when we introduced the concept of gold, we coached our teams on what gold looked like. Our G.O.L.D. standard stores are our top shelf location the model stores in the fleet. These are the stores we are most proud of because their achievement of G.O.L.D. standards model value, convenience and discovery for associates and for customers. In a well-run G.O.L.D. store, we are fully staffed. Physicians are eased to hire by a well-trained store manager, associates are trained with consistent expectations, they work as a team, they are proud of their work. Leaders and associates follow standard operational processes. The store is safe, clean, bright. The shelves are full. The backroom is ready to receive the truck delivery. Customers are greeted, they feel welcome and their expectations are consistently exceeded. And shrink results and risks are mitigated. The G.O.L.D. standard supports our growth runway. It is our expectation in every store so we can continue delivering a consistent experience that earns the highest praises from our customers. But it's clear from the current range in our store standards, based on our new rating system this year that all stores are not achieving the G.O.L.D. expectations as committed. Listen, I am not pleased with the inconsistent G.O.L.D. score results. We know many of the root causes, and we've defined the work that needs to be done. And that is the work we are prioritizing. Now to guide our efforts before we step inside of a store, we use a report called the fish finder, which comprehensively rank stores across key metrics. We review the areas and where we are winning and where we have opportunities. With the fish finder, it's like a golf score, the lower, the better. We know many areas in the opportunity stores tend to be correlated to a few things: a store manager of vacancy and high turnover, inconsistent store process execution, opportunity with on-shelf availability, disengaged teams who call out from their shifts and are understaffed and potentially high shrink. And we know what it takes to move a store along the race of G.O.L.D. to higher standards and embodies brand strategies. At its core, retail is a people business. Our associates are at the heart of our organization, representing our brand for our customers and our communities. Our current focus is on building a foundation where our associates understand their role and have clear expectations for their work. They understand how to deliver and where to get help when they need it, and they collectively focus on running the business. As I shared earlier, we've made progress in our results. Year-to-date, we're seeing positive brand trends in both comp sales and improved associate scheduling, as we optimize our labor. We've seen improvements with store manager vacancies with a reduction in the number of stores that have a store manager opening. This is a key role in our store leadership, and we're prioritizing continued improvement in this area. And we're seeing a reduction of incidences of early closes or late openings. We are eager to build trust with customers so that they know that when we say our store will be open, it will be. We owe it to our customers to be a reliable shopping option. In the first half of the year, we also identified focus stores to monitor G.O.L.D. score improvements. I'd like to share an example. In 2 stores, the impact of filling store manager vacancies, reducing out of stocks and optimizing associate schedules led to results. In this case study, both stores, 1 in Texas, 1 in California, began as less than a 5 on the G.O.L.D. scoring scale. Both stores are now scoring in the great category on their way to a G.O.L.D. score. In the first quarter of the year, both of these stores had negative single-digit sales comps and after focus changes and running, now they are running positive double-digit comps year-to-date. When we focus on how we work, we will raise the bar. Now when it comes to how we work. I have seen that teams who care about the how also understand the why behind their work. As we are building high-performing teams who run high-performing stores, we needed to pause, slow down for a moment and define the purpose of our tasks. Our tasks, our task is to run clean, bright and inviting stores, as our founders clearly articulate it. What our purpose, that's to care to serve and to support our associates with a great place to work, our customers by surprising and delighting them and our communities by giving back. Our people are at the heart of everything we do, from the day we hire a new associate to the time dedicated to supporting them. As a team, we talk about the ways we win together. The first is that we will do it right the first time, prioritizing accuracy and efficiency. The second is that we will slow down to speed up. These are both cultural building blocks, and it is our responsibility to build and maintain an attractive culture. It's how we show that working at Dollar Tree is a career not just a job. Our team is raising the bar, emphasizing accountability at all levels. Earlier this year, we introduced a new accountability matrix to monitor our operational efforts. We aim to ensure expectations are understood as we live up to our community's commitments and our results. Our expectation is consistent store standards that deliver consistent customer experiences in every aisle, every store, every day. We know where the opportunity lies. We know that first impressions matter. We know that customers deserve our best. Doing all of this right is the best way to deliver value for our shareholders, and we're making measurable changes to deliver that grand opening look daily. So listen, as you get to know me, you'll find that I am passionate about being with people in our stores. Time spent with our associates always educational for both the associate and for my team. When we engage with our associates in their workplace and take time to ask questions, we find gaps and areas for opportunities to make it easier. My expectation for my team is to listen and learn while coaching and training in a tailored way for each person. It's the same expectation I hold for myself. And we are committed to relentlessly pursue ways to deliver the magic of Dollar Tree with urgency, as we evolve our culture to emphasize associate accountability. We have to start here with our people to build the culture that raises the bar. One of the ways that we're leading our teams differently is through a consistent framework called The X Factor, with 3 core components: the associate experience, customer experience and operational excellence. Surrounded by extraordinary leadership, we are positioned to drive exceptional results. You may notice that this visual looks a bit like a steering wheel. It does. We drive towards results through visual representation of our consistent focus areas. It starts with engaged associates, who delight our customers with memorable shopping experiences. That's how we will raise the bar. The G.O.L.D. framework is the foundation for our elevated standards. To evolve the initial G.O.L.D. framework that was originally rolled out, we have taken steps to just change our approach a bit. We have clearly defined what G.O.L.D. is and what it's not. Moving from the subjective to objective measurements. This is a key difference. Our associates are very familiar with what G.O.L.D. looks like, but the why and the how they weren't always clear through our expectations. This became evident when visiting stores. We're now driving results through a playbook called the Race to G.O.L.D., representing the next level of our G.O.L.D. evolution. It's an educational and coaching tool that brings to life the operational expectations for running G.O.L.D. stores that will deliver exceptional results. Our new approach has much more rigor and standardized scoring. We have a consistent expectation for associates that are measured the exact same way in every store. Along the race of G.O.L.D., associates use a visual road map to climb higher in the 10-point scoring scale for G.O.L.D. standard stores. Stores are scored along the race as they successfully master each step and stack their building blocks. The race to G.O.L.D. includes almost 50 operational activities, processes, events prioritize appropriately. Topics include safety, shrink, customer service, associate behaviors, price clarity and more. A few examples are highlighted on the illustration behind me. This visual hangs in each manager's office and our leaders coach to it during their store visits. There is a clear plan for every manager to assess their store and their progress and to understand how to maintain their current score, why those steps are so important and what steps are necessary to continue to improve. Using this tool, we measure all stores consistently for confirmed and continued improvements. We train our associates to deliver clean and bright associate and customer areas, front-face and fully stocked shelves, resources to mitigate shrink and opportunities to create merchandising magic. It's not linear. Our teams are working on all areas of the race of G.O.L.D. every day. By recalibrating the Dollar Tree G.O.L.D. standard, we have the foundation to raise the bar on our execution. With more than 9,200 store managers leaving 144,000 associates consistency is key. How we approach our work impacts the results that we will deliver along this journey. As Mike shared, Dollar Tree is on a journey, and our growth plan isn't about adding stores everywhere. It's about strategically placing new stores where demographic and demand tells us where the return is strongest. And while we're opening new stores and improving conditions, we're also committed to improving our store operation performance, and our associates are a core piece of this. When our associates bring our brand to life, our customers have a memorable thrill of the hunt experience in our stores. Part of our strategic approach is also about strengthening the existing fleet of stores to be stronger and more productive. One of the ways we will do that is through a store refresh program. Historically, Dollar Tree has not had a renovation or refresh program, and we're changing that. What we have known from the data that store refreshes quickly and reliably pay for themselves. And despite the fast returns, half of our fleet has been open for 10 years or more without a refresh or renovation. This new refresh program will result in the touch up of about 3,000 stores or 1/3 of the fleet and the renovation of more than 100 stores. However, because this is a new program for Dollar Tree, we will continuously measure the returns. When our customers step into our house we get 1 chance for a first impression. The impact of improvements like fresh paint, clean exteriors, new ceiling tiles, all says, welcome to Dollar Tree and meets our store standards. As we raise the bar, the physical store experience matters. I remember that X Factor framework I shared earlier with exceptional results in the center of the visual, the results are dependent on raising the bar for our standards. And we are providing our associates with tools, data and processes to support the elevation. A store that meets G.O.L.D. standards isn't just better for our customers. It's a better place for our associates, it's a place they want to work, and it's the way that we make the most of our opportunity, shifting store standards from the left is opportunity stores and good stores to the right as great and G.O.L.D. stores. Race to G.O.L.D. is our new playbook, but we are also focused on clarifying our ways of working and the work our associates are doing. We are relentlessly pursuing consistency in our store operations. As we do that, we are able to the work for our associates. As I mentioned, there are almost 50 stops along the race to G.O.L.D. And most of them are repeatable activities that require consistent execution. We've simplified 3 key activities so that they are integrated in a typical work week. First, it's about truck day. From the time we receive a truck, associates are expected to unload the freight, organize the backroom and stock the shelves. We urgently process freight within 48 hours. So our stores are fully stocked with new merchandise to deliver the thrill of the hunt for our customers. Second, work the plan, focusing on merchandising initiatives and seasonal displays. There are many, many items that the store manager has to do. And the manager manages their week through a plan. Part of this work is also preparing for the next truck to ensure an efficient backroom flow. And third, it's about daily recovery. At Dollar Tree, recovery means pulling products to the front of the shelf, filling in any gaps with new inventory and tidying up the aisles. If we do these 3 things consistently, that will help us elevate store standards. Consistent standards help get us to gold which brings our brand promise to life. And as we raise the bar, how we do our work matters. But we're not stopping there, aligned with many of the operational stops along the race of G.O.L.D., we are committed to continuous improvement. We're seeing early wins from test-and-learn initiatives this year. As a result of labor investment test in select store, performance was boosted with positive sales lifts. In the first half of the year, we extended hours of operation in select markets, which resulted in sales increases during those additional operating hours. Through a monitored focused stores test earlier this year, the sales increase resulted from targeted investments in store standards. And last, in select stores with upcoming scheduled inventories additional labor hours were allocated as a test to support the larger truck deliveries. A positive sales lift was observed. The test results were confirmed by a third party and are significantly significant, but we're not done yet. We're also pursuing a reimagined store experience that includes refresh signage, a new front-end configuration and facilities improvements. Each of these areas is intended to improve the customer experience in stores. Operational support of merchandise excellence in stores continues to evolve as the departments collaborate on shared initiatives. We've recently launched refreshed multiprice signage to support price clarity. Merchants source new easier shelf stocking formats that aid seasonal sell-through and minimize seasonal packaway. In late 2026, we plan to launch a powerful new workforce management system designed to transform how our stores schedule. This tool will give managers smarter, data-driven scheduling capabilities, helping them plan to business needs, optimize labor hours and ensure shifts are efficiently covered. Associates will have the convenience of self-serve options to change shifts, providing more flexibility and control with their work schedules. Ultimately, this is about precision and empowerment, having the right associate in the right place at the right time, so our stores run smoother, customers get better service and our teams feel more supported and empowered. The steps are clear for how to run a productive store. We're raising the bar with our teams to embrace our business model changes, and we're assessing the results each step of the way. The last piece of work I want to speak to is related to maximizing margins and reducing expenses through in-store controllables. One of these is shrink. We're recalibrating our focus to control what we can control, to protect the sales that we've achieved. Shrink represents a significant opportunity to improve our bottom line. Our reporting shows that about 20% of our stores are contributing to much of the shrink risk and impact. We're actively reviewing and activating with these stores differently to mitigate risk with a variety of tactics. Earlier this year, we also transitioned the asset protection team to work more directly with store operations hand-in-hand to focus on improvements in this important area. This fiscal year, we introduced new shrink mitigation tactics for long-term impacts. One of the tactics is the nonnegotiable audit. The first thing we needed to teach and coach, what does nonnegotiable mean, not up for debate and this audit is not optional. Our store leaders are required to conduct a rigorous nonnegotiable audit each time that they visit the store to ensure that we are controlling what we can in store operations. All associates are held accountable to the nonnegotiable processes and expectations that are critical to mitigate shrink risk. We are teaching, coaching and training our associates for consistent attention to critical shrink prevention tactics. Physical security initiatives like security camera reviews and internal and external theft prevention programs are all examples of ways our teams are combating shrink together. Shrink is a responsibility of the entire team of associates and field leadership, which is why many of the shrink-related activities are included in the race to G.O.L.D. you saw earlier. When we leverage these tactics to improve shrink, we are raising the bar in our stores. As we look at our current store landscape, there is immense opportunity. Our potential can be unlocked by raising standards across all stores to deliver the magic of Dollar Tree. This is a journey that we will sustain through routines, disciplines and clear expectations. By raising the bar and shifting a large portion of our stores from good to grade and onward to G.O.L.D., we will meet and exceed our associates, customers and shareholder expectations. We are also exploring ways to make labor more productive in our stores while we do this. When we talk about an attractive financial outcome, it's directly reflective of our consistent store standards that raise the bar across the entire fleet. We have the opportunity to shift the stores from the left to the right, measure and report on these improvements and deliver those financial results. Think about that profile of a G.O.L.D. store with an engaged manager and a team that's well prepared for the day; clean and inviting aisles; stocked shelves and low shrink. The best financial returns are from these stores. We have modeled out what it looks like when the opportunity and good stores shift from left to right and we're completing the work to continue to test, learn and validate those assumptions. In the next several years, we will continue to refine the model with consistent store standards and teams that test and learn all of those opportunities. We believe results are ahead of us. I started today by telling you, Dollar Tree has both magic and opportunity. As I pull the thread through from our time today, here are a few key takeaways: we are raising the bar in store operations, beginning with our associates and the culture that we build and maintain. We're doing that through consistent store standards and operational processes. And for a common language across the more than 9,200 stores, we've introduced The X Factor and the Race to G.O.L.D. playbook. And when we elevate our store standards using the new G.O.L.D. scale, we believe we can deliver strong financial results. We are committed to building high-performing teams that will continue to surprise and delight our customers. We are committed to retain and grow our associates and positively impact our communities. And we will absolutely be making changes that embody a consistent focus on store standards. The magic of Dollar Tree will only strengthen as we raise the bar together. Thank you for your time today. And now we invite you to take a 20-minute break right before our Chief Supply Chain Officer, Roxanne Weng will take the stage. [Break]

If everybody could please start moving back to your seats, we'll get set for supply chain and then finance. And then we'll get to Q&A. And hopefully, we'll have you all out here at 4:30 to get your trains and planes back home. Good morning, everyone. I hope everybody had a nice break. I'm Roxanne Weng, Chief Supply Chain Officer at Dollar Tree. I joined the company about 6 months ago, also with 30 years in small box retail, and I'm really excited to share with you today our supply chain strategy. Our supply chain is the backbone of our operations and the enabler of nearly every initiative we have underway. We don't just move boxes or pallets. We deliver those products that help families live their lives and create memorable moments. From household essentials to seasonal decor, the efficiency of our network directly determines how well we can serve our customers. Whether it's serving millions of customers each week, supporting the rollout of our multi-price strategy or ensuring consistent delivery to over 9,000 stores, our supply chain excellence is what allows us to compete and win. I'm going to take the next few moments to walk you through the evolution that we are under and what is shaping our path forward. We'll discuss our existing operations, significant opportunities we have to [indiscernible] and the actions that we are taking to evolve our supply chain into a long-term enabler of growth. This is about more than efficiency. It's about positioning Dollar Tree to capture growth and deliver value for many years to come. So let's start with looking at the network today. Our network has over 18 distribution centers. It's one of the largest in North American retail, 18 centers across the U.S. and Canada, and we have 2 more under construction. We recently announced a new facility near Phoenix, in the rebuild of our Marietta, Oklahoma DC, which is on track to open in 2027. Every day, we load over 1,400 trucks, put them on the road and deliver over 3,000 routes. And despite that scale, we are able to achieve a 97.5% on-day delivery rate, a remarkable level of reliability, given our scale and the complexity of external factors. Our network coverage is very extensive, but it also gives us the ability to service our stores with excellence. We are rapidly modernizing our systems to improve our capabilities, though as volume will continue to increase, our capacity is tightening. Within that pressure though, lies opportunity, opportunity to improve productivity, streamline our cost and enhance service to our stores. There are several dynamics that are driving our opportunities around capacity. First, sustained store growth. We have opened over 1,000 stores in the last few years, generating substantial increases in sales and volume across our network. This level of growth underscores why capacity and network planning is one of our key priorities. Second, the rollout of our multiprice assortment, is a big win for our customers and it has introduced some initial added complexity with a broader SKU mix and more dynamic replacement patterns. But note, that multiprice also allows us to leverage our supply chain costs with a portion of same-store sales growth delivered by AUR rather than units. And third, the loss of our Marietta, Oklahoma DC, following last year's tornado. It temporarily reduced capacity and created strain across the network. This event added transportation miles, temporary costs, but it also accelerate our ability to be flexible. Our focus is on ensuring that our network evolves and lock-step with our store growth, delivering reliability, scalability and efficiency for years to come. When we talk about evolving a supply chain of this scale, it's important that we measure our progress with the same discipline that we measure execution. This slide and the criteria on it are how we're going to measure success. Let's start with cost savings. Every initiative that we have in supply chain is designed to deliver measurable financial benefit, whether it's through transportation efficiencies, labor improvements or smarter inventory management. Each dollar saved strengthens our ability to reinvest. Next, throughput per facility. This measures how much additional volume each distribution center can handle without compromising safety or service. Improving throughput allows us to unlock more output without necessarily adding more distribution centers. This is a significant objective of our supply chain evolution, servicing more stores through each distribution center. Next, we are focused on cost to serve. It's a critical measure of how efficiently we move products from vendor to shelf. Lowering cost to serve, helps maintain margins, deliver consistent performance across a very complex network. Another key metric, service levels. Our ability to maintain a 97%-plus delivery rate, even as volume continues to increase, is proof that our team has operational discipline, we are leveraging technology and we are committed to reliability. And last, we've got to talk about multiprice readiness. That capability is now fully embedded across all of our distribution centers. It's a onetime investment that now gives us the flexibility to handle a broader multiprice assortment. So taken together, the criteria on this slide tell a very clear story. Our supply chain is becoming more efficient, more agile and more resilient. It's a network that we're building to sustain the growth, strengthen our margins and serve our customers with precision every day. To continue to evolve our supply chain, we are pursuing 4 clear priorities. First, we're going to strengthen labor management and drive performance. We are building a consistent operating framework, simplifying incentive programs and expanding safety and recognition initiatives. These efforts are creating a culture of accountability, engagement and continuous improvement across all of our facilities. Second, we're unlocking productivity through strategic investments. We're investing in technology and tools that allow each distribution center, the ability to handle greater volume more efficiently. These targeted investments expand capacity and improve service without adding unnecessary costs. If we can get an attractive return on capital, we will always look at it. Third, we are building an optimal network for sustainable growth. Our goal is to capture the right capacity in the right locations, aligning our distribution capabilities with store expansion. This minimizes miles and product touch points. And fourth, we're looking to improve transportation and inventory management. We are modernizing routing, fleet management, improving inventory visibility to enhance delivery precision, reduce transportation miles and better balance flow across all of our facilities. Together, these initiatives will strengthen our ability to serve stores, maintain costs and support sustained profitable growth. Because our associates are the backbone of what we do, I'm going to go a little bit deeper into labor. Without a stable engaged workforce, none of our initiatives can succeed. In 2023, our voluntary turnover was at 71%. In 2024, we were able to reduce that to 65%, and we are on track this year to hit 55%. That's meaningful progress, proof that deliberate actions are working. We've eliminated incentive plans that do not align to performance. We've enhanced safety programs so our associates feel protected and supported. Recognition and feedback are built into every facility that we run. And we have embedded a culture of continuous improvement into all of our facilities, empowering associates to give us feedback and propose solutions. But most importantly, we have introduced a pay for performance program that is grounded in engineered labor standards. This program allows associates to directly tie reward with effort. It creates fairness, transparency and accountability. We are building a sustainable engaged workforce that takes pride in results, drive stronger morale and will have lasting operational excellence. At the last investor conference, a couple of key investments are outlined that were designed to drive productivity. I am very happy to tell everyone here today that we have completed the temperature rollout to all of our distribution centers. This is allowing us to directly ship OTC products to stores, eliminating costly workarounds. As a stand-alone Dollar Tree, we are committed to building a store-friendly supply chain. One way is through the roto carts, which were introduced in 2023 when Family Dollar was still part of our business. Rotacarts are a tool that we will continue to utilize. We have plans to roll them to 2 additional facilities this year, and we will continue to study how we can use rotacarts to create an attractive return on capital. Another key objective is to smooth the flow into our distribution centers and into our stores. Doing so protects capacity. It also creates predictability for labor planning and for execution. Together, this approach has resulted in the most manageable peak period for years to come for our stores and our distribution centers. This is a store-friendly supply chain. A new warehouse management system is now being implemented. This is providing greater flexibility, greater storage utilization and faster throughput. We are introducing a new transportation management system right after the holidays that will improve trailer movement and reduce dwell time. But these are not isolated upgrades. Together, they represent a significant step forward in how product moves through our network. They will reduce transportation miles, improve driver efficiency and strengthen service levels to our stores. And with multi-price SKUs now set up completely in all of our distribution centers, a onetime investment that's complete, we can fully support the expanded multi-price assortment going forward. Let me talk about the network itself. Our growth plan manages capacity with efficiency, ensuring that as store count increases, our network can handle the added volume without sacrificing service levels or adding any unnecessary cost. As we've mentioned, we've approved facilities near Phoenix and in Marietta. I'm going to pause and talk about Marietta for just a second. As many of you know, Marietta, our Marietta, Oklahoma DC was destroyed by a tornado in 2024. Several weeks ago, I'm really excited to say we celebrated the groundbreaking of our new 1 million square foot facility, a rebuild that will serve over 700 stores and brought 400 jobs back to the area. We expect to be fully operational by 2027. And in addition, equally important, we've donated $50,000 in grants to local organizations in Marietta. This is about more than a logistics project for us. It's about resilience. It's about doing right by our associates and about ensuring that our supply chain is stronger than ever. Once Marietta is fully operational, it will also reduce the costs that we're currently absorbing from higher transportation miles across our distribution network. Over the next several years, we will also deliver new capacity and higher productivity within existing facilities through a series of targeted network projects that will optimize our current assets. We will achieve this by: one, better utilizing 2 Family Dollar -- former Family Dollar facilities. And two, we have targeted expansion plans for 3 other facilities. Together, these projects will help us increase our store to distribution center ratio with only limited capital investment. We are on track to increase our store to distribution center ratio from just under 600 today to 750 by 2029. That's a 20% increase in throughput. The result is a network positioned for sustainable growth at the right cost, one that supports store expansion, will protect service levels and strengthens our resilience for the long term. Transportation is another area where disciplined execution makes a measurable difference. We've locked in multiyear inbound and outbound contracts for freight. This will reduce exposure to the spot rate market and will achieve more predictability in service. Today, about 3/4 of our freight volume is covered by these longer-term agreements. This will provide stability even as market conditions fluctuate. We are also taking a very active approach to import management. By diversifying our points of origin and balancing our flow across multiple carriers and multiple ports, we're able to mitigate risk and respond faster to shifts in global conditions. These steps are already visible in our performance. As you can see from the chart, our inbound and outbound freight as a percent of sales has declined steadily. It has become more predictable, reflecting better contract coverage, improved routing and tighter alignment between inbound freight and store demand. So let me summarize by covering what I've talked about today. First, multi-price is now fully embedded across our network, unlocking a broader assortment, higher margins and greater customer reach. We're aligning our supply chain costs with sales growth, ensuring that our network can absorb store expansion without any unnecessary costs. We're maintaining stable transportation performance despite a challenging external environment. And we're normalizing inventory levels to free up capital and reduce strain across our facilities. We are seeing tangible results, higher throughput per facility, improved productivity and sustained service reliability, clear evidence that we are delivering measurable performance gains. Most importantly, we believe our supply chain is becoming a true competitive advantage, cost efficient, scalable and built for resilience. Looking ahead, our priorities are very, very clear: enhance the distribution network to support sustainable growth, unlock productivity in every facility and strengthen transportation and inventory management while mitigating external risk. Each of these priorities supports a single objective to build a supply chain that grows with the business, serves our customers with consistency and delivers long-term value. I want to thank you for your time, and I will now invite our CFO, Stewart Glendinning, up to the stage.

All right. Well, good afternoon, everyone. Mike and my colleagues have walked you through the elements of our strategic plan, and I'd like to show you how that translates into a powerful set of results for our business. As I begin my presentation, I'd like to point out the most important messages that you'll hear today. Number one, looking ahead, we have a clear algorithm for growth with consistent 5% to 7% annual top line growth driven by 3% to 4% same-store sales and the remaining incremental non-comp revenue contribution from new stores. Importantly, we believe we can drive operating margin leverage even at the lower end of our same-store sales comp range. This is driven by our operating and merchandising strategies combined with rigorous expense management. Now in addition to the underlying growth from top line sales and the operating cost leverage will benefit from the elimination of recent cost headwinds, and I'll talk to some of those in a minute, but we expect those in the coming years with most of that benefit coming in 2026. Number three, our balance sheet is strong and after making disciplined capital investments to support the growth of the business, we expect to produce meaningful free cash flow and return significant cash back to shareholders. Now before I go into our longer-term outlook for the business, let me take a moment to update you on 2025. We are reaffirming our full year 2025 outlook and still believe that our Q3 2025 EPS will be similar to Q3 last year. Now since we shared our Q3-to-date comp trends on our September earnings call, today, we'd like to update you on our most recent results. With just a few weeks left in the quarter, our Q3-to-date comp is 3.8%, which is similar to where it was about 6 weeks ago. While this is a slight deceleration from the first half, it's a strong result, and it's consistent with the modestly softer trends we've seen across broader retail. Also, it's worth pointing out that our traffic quarter-to-date is roughly flat, and our seasonal sell-through has started strongly with Halloween. Overall, we remain pleased with how we've addressed this period of enormous cost volatility while continuing to resonate with our customers. Of course, we'll be providing you with a lot more detail on our current results in early December when we report our Q3 results. Now let's talk about the future of Dollar Tree and our formula for earnings growth. The initiatives you've heard my colleagues present today ultimately ladder up into each of the elements in this formula. First, expanding our selling footprint by opening new stores. Second, improving our sales per store via our assortment enhancements, including multi-price to drive higher turns and bigger baskets and running our stores better so that they are clean and inviting and our shelves are full. Third, increasing the gross margin on each sales dollar by upgrading our assortment productivity to higher-margin products and by leveraging our fixed costs like rent with higher sales per square foot while lowering shrink and markdowns. Fourth and lastly, leveraging our in-store costs and corporate overhead to drive operating margin expansion. Let's take a closer look at each of these. so that you can understand the financial possibilities of what you've heard today. Now earlier, Mike laid out the runway for new stores. Opening approximately 400 new stores a year will add roughly 3.6 million net new square feet per year after considering normal course closures. And as you've also heard, we believe we can maintain this level of new stores -- of new store openings into the foreseeable future. New stores offer very strong returns and have a meaningful impact on our sales growth. As you can see from the table on the left, we expect our portfolio of new stores to drive 25-plus percent IRRs, including the impact of cannibalization and DC capacity, and they will contribute approximately $650 million of sales in their first year. Now this means that new stores are adding about 2.5% to our total annual sales growth after considering the impact of about 75 store closures per year. In their second year and thereafter, new stores grow more quickly than older stores. And as a result, each cohort of new stores that enters the comp base after their first 15 months of operation helps to accelerate our overall comp growth net of the cannibalization I spoke of. We believe new stores are good for customers, good for Dollar Tree and good for shareholders. Now as I move on to discuss how the merchant and operating activities Brent and Jocy spoke about and how they impact our P&L, I want to start by sharing a picture of our current portfolio. Our average store has a footprint of around 8,800 square feet of selling space. And you can see from the chart that most of our stores are in the 8,000 to 10,000 foot range. Looking back to 2019, our average sales per square foot has grown steadily, up approximately 19% through the second quarter of this year. As part of this increase, we've seen a much faster increase in basket and AUR than in units. And since we broke the dollar and introduced multi-price in 2021 and 2019, respectively. Driving higher sales per square foot and per store can unlock significant value for Dollar Tree, given that many of our expenses are semi-variable. Our largest semi-variable expense is store labor, which is driven more by unit volume than by dollar volume. In fact, if you look back at our labor hours per store since 2019, we're flat to slightly down. The primary driver of labor cost increase has been wage rates, which in a number of geographies has been dictated by state minimum wage mandates, not hours worked in our stores. I'll provide you with more detail on store costs in a few slides. The point to take away from this slide is that higher sales per square foot creates operating leverage. And the initiatives shared by Brent, enhancing the assortment with faster turning higher-margin products and multi-price will drive higher sales per square foot and leverage our costs. Here, you can see some examples of specific changes we have made to our businesses in categories like electronics, hardware and Easter. Now to make comparison easier, we've indexed these to 2020. In the top row of charts, you can see significant increases in both sales and merchandise dollars, these gross profit dollars. In the lower left chart, you can see that in all 3 categories, units grew substantially slower than sales. In fact, units were actually down in electronics and hardware. At the same time, gross profit dollars per unit increased markedly. With only about 15% multi-price penetration in our portfolio today, we believe we have a meaningful opportunity to repeat these kinds of success scenarios across other additional categories. And multi-price is driving a substantial change in our ability to leverage our costs. Historically, at the $1 price point to drive comp sales growth, we needed to sell exactly that same amount of units. This activity came with commensurate growth in variable cost activity, including supply chain and store labor. Now with the advent of multi-price driving our growth and by increasing AUR and the mix of pricing on products solely than units, we can grow our sales with less pressure from supply chain costs and store labor. It's not just changes in assortment that can drive increased sales and profits, but changes in the way that we run our stores. Earlier, Jocy shared with you some of the actions that she is taking to ensure consistent and exceptional service delivery to our customers. Her team uses a rigorous measurement approach across all 9,200 stores and approximately 580 district managers to monitor that performance. These tell us what is going on in the fleet and enable us to improve performance. As you all know, better operating performance and store conditions result in better financial outcomes. Since 2019, Dollar Tree has delivered strong top line growth and gross margin performance in addition, with net sales growth averaging over 7% a year and gross margins expanding by 110 basis points to around 36%, which is in line with our targets. However, during the same period, our increase in segment SG&A has averaged over 9% per year, leading to deleverage in the P&L. Our corporate costs have also risen disproportionately. You'll note here that I'm only showing 3 years of corporate SG&A because that's the period for which we've restated the results for stand-alone Dollar Tree to reflect the Family Dollar sale. Prior to the sale, corporate SG&A as a percentage of sales would have been much lower because the consolidated sales number reflected the operations of Dollar Tree and Family Dollar. This chart compares our total corporate cost to the revenue of Dollar Tree on a stand-alone basis, which results in a higher percentage. Regardless, our corporate SG&A costs have risen faster than sales, and our team is highly focused on reversing that trend. At the segment level, it is worth understanding the major line items that are driving our cost increases, which you can see on the left side of the slide. These 6 line items represent 3/4 of the cost increases we've seen over the past 5 years. At the per store level, the largest dollar increases have been store level labor and depreciation and amortization, which account for nearly half of our total SG&A increase. The former has been entirely wage rate driven and the latter has been driven by increased capital spending. Looking forward, we see a pathway to leveraging these costs, and we call out some of the expectations on the right side of the slide. After several years of elevated hourly pay rate inflation, we're expecting this to moderate beginning in 2026. On top of that, we expect to see greater labor efficiencies from the implementation of our new labor management software, which automates scheduling and other tasks that are currently done on an individual basis by more than 9,200 store managers. Additionally, as we expand the rollout of multi-price, we expect to create some additional labor efficiencies driven by the reduction of unit volumes, which I spoke about earlier. Also, while it's not reflected in these numbers, which only run through 2024, we expect to get a segment SG&A benefit of more of around $100 million to $115 million next year as the stickering costs and price implementation costs we're incurring in 2025 aren't expected to repeat in 2026. After we complete our multi-price conversion, that program by the end of 2026, we expect to see a benefit of approximately $40 million in 2027 as those temporary labor costs go away. We also expect our D&A growth rate to moderate as our per store pace of capital investments comes down. Both general liabilities and utilities will be market-driven, and there's some risk that they could rise faster than inflation. But at a total level, it's easier for us to react to these expenses in our gross margin or other expense reductions since they represent a relatively smaller percent of our overall sales. Finally, repair and maintenance cost, since COVID, they've been increasing faster than inflation because of resource availability and the cost of components, and we could see similar increases. Having said that, again, this is a relatively smaller line item in our P&L, easier for us to manage. With respect to corporate SG&A, we've set a target of 2% of sales by 2028, and that's about 2/3 of the current levels. Helping us get there, we expect a $95 million reduction in each of 2025 and 2026. And these reductions include the impact of the TSA income. After the TSAs run their course, any remaining costs related to providing those services, we will remove those from our business. For 2025, we're on track to deliver our $95 million target. And we believe our end goal of corporate overhead at 2% of revenues will come from a combination of additional SG&A cost reductions and from leverage of strong top line growth, and we expect, as I said, to achieve that by 2028. The strategy and the initiatives we presented today drive a powerful algorithm for Dollar Tree. Let me take you through some of the expectations for the medium term, and I want you to think about 3 years. You'll note that the table shows an underlying algorithm and an adjustment for discrete items affecting '26 and '27. And we totaled those on the right-hand side for a 3-year expectation. New gross store openings of approximately 400 per year, offset by roughly 75 closures and implementation of our merchant and operating strategies on a combined basis are expected to create annual sales growth of 5% to 7%. That's underpinned by annual comp sales growth of 3% to 4%. The leverage from this revenue growth, along with our shrink reduction objectives are expected to drive modest expansion in our annual gross margin. For 2026, we expect gross margin to be roughly flat as previously communicated, given the various puts and takes on tariffs and other related items. In 2027, when our Marietta DC comes back online, we expect a small benefit of around $10 million as a result of the shorter stem miles. Now this is less than the early impact of costs following the loss of the DC, and that's because of some of the steps that we have taken since then to optimize the delivery miles. Segment SG&A per store is expected to increase in line with inflation on an underlying basis. Within segment SG&A, we do not expect again to incur stickering and other price change-related costs, which results in approximately $100 million to $115 million of benefit in 2026. A small amount of stickering or other price-related costs may remain related to packaways or inventory carry through. In 2027, we expect approximately $40 million of benefit related to the completion of the multi-price conversion and the elimination of that temporary labor. The elimination of these discrete costs will reduce the reported growth rate of segment SG&A per store relative to the underlying growth rate. Now we expect savings of $95 million in 2026, as I said earlier, with a lesser impact in future years as we work towards our 2% goal. Note that the discrete items in the algorithm show a benefit range of up to $70 million with the balance of the $25 million, a balance of $25 million against that $95 million to be identified and delivered as part of the underlying growth algorithm. All in all, we expect this to drive a 12% to 15% EPS growth CAGR with an underlying growth of 10% to 15% and the balance will be driven by the discrete items, which are mostly front-loaded into 2026. That's an important item. Note that this expectation excludes the benefit of future share repurchases. And finally, we expect ongoing annual CapEx will average approximately 4% to 5% of sales. This outlook assumes that the current tariff levels remain in effect. Let me speak to that. As you all know, an additional 100% tariff may be imminently imposed on China. If this takes effect, we believe it will have only a small effect on this year as we've received almost 100% of the products required for our fourth quarter. Our newly created ability to shift our sources of supply to other countries and our treasure hunt model gives us the flexibility to substitute our merchandise with functional equivalents from new sources or different product alternatives. As a reminder, these are 2 of the 5 levers that we will use to deliver the lowest landed cost. This positions us to be as nimble or more so than our competitors. And as such, we'll be in a position to protect our market share. As we've done already this year, we'll be prepared for a range of scenarios and we'll implement the best solutions to ensure that we maintain the profitability of our business model. And finally, it's worth noting that we will not require further stickering efforts because these new product purchases are not prepriced. Now to help illustrate the expected earnings progression over the years ahead, we started with the midpoint of the range of our current full year outlook for 2025, and we added back the discrete items for each year and also applied the midpoint of the underlying growth algorithm. So we sort of run this for. You'll notice that because of the discrete items, the growth rate is higher for 2026, and this rate normalizes towards the underlying growth in future years, high teens, low double digit, high single digit. One question we're asked frequently is what level of comp is required to leverage our SG&A. We believe we can create operating leverage even at the lower end of the comp range I've just shared. And let me walk you through some of the logic for why that's true. First, our merchants buy to a target gross margin, which considers all of the cost of goods, including shrink and distribution costs. So if freight increases, the merchants will deploy the 5 levers to make sure that we get back to the target. It may not happen in weeks, but it will certainly happen in a period of quarters. Furthermore, we have teams focused on shrink and markdowns, both of which represent opportunities in the future to improve our gross margin. Store labor is a significant cost in the P&L and is driven by the hours work and the wage rates. On our side, we expect to see greater efficiency from multi-price and from the implementation of the new labor management software. And after several years of labor rates increasing faster than the rate of inflation, we expect wage rates going forward to be more closely correlated with overall inflation. Repairs and maintenance and depreciation and amortization can both be broadly managed to a target and growth rates for both are expected to moderate as our CapEx per store comes down. The remaining items, utilities, general liabilities are less impactful in total to the P&L. Unfortunately, as I shared earlier, historical indicators suggest these may run faster than inflation. But bringing this all together, we expect our per store operating cost to move in line with inflation, which we believe should be less than our current comp sales outlook. Right. Looking forward, we expect CapEx to moderate and when combined with our growth algorithm, we expect free cash generation -- free cash flow generation to be very strong. Keep in mind that for 2025, we are also benefiting from the proceeds of selling Family Dollar, which is outside of this free cash flow calculation. And on a go-forward basis, our free cash flow will benefit from approximately $400 million of cash tax benefits related to the Family Dollar sale. Now our balance sheet is strong. Our leverage is low, and our next bond redemption isn't until 2028. Our preference is to keep our leverage at 2.5x or below, which at our current leverage level offers headroom and provides ample liquidity for our business. Our capital allocation priorities are simple: maintain a strong balance sheet, invest in growing our business where we can find, of course, attractive returns and deliver and deliver excess cash back to shareholders, those 3 things. Looking ahead for the next 5 years, we expect to balance our investments across our existing stores, new stores and supply chain while continuing to support our IT modernization efforts. We have a disciplined process to vet capital spending and ensure we're delivering proper returns for our shareholders. We do this by setting return targets, upfront and then by reviewing capital returns after implementation to assess the achievement of the targets. And we've done a good job of returning cash back to shareholders via stock buybacks. This year, in particular, we leaned heavily into repurchases as we believe our stock price has been at an attractive price. As of the end of last week, we have repurchased $1.2 billion this year or 6% of our total sales -- our total shares, forgive me. 6% of our total shares for any confusion that I might have. Given our expectation of future free cash flow, we think it's increasingly likely that our Board will consider introducing a modest dividend in the next year as a complement to our share repurchase program. While our current stock price supports allocating excess cash to buybacks, we believe that over time, our free cash flow would support a dividend as well. This brings us back to the pathway to our earnings growth. Underpinning each of the elements of these earnings growth are specific actions and initiatives we believe can drive that growth. We expect to add more stores and add more to our footprint. Our enhanced product offering, including expanding multi-price and faster-turning goods, combined with exceptional store operations should drive higher sales and leverage our cost base. And we're aggressively managing our SG&A to disconnect future increases from top line growth. All of this is designed to drive growth and operating leverage, and I look forward to reporting our progress in the future quarters. Thank you for the time today. And now I'll invite my colleagues to join me on the stage for the Q&A. Thank you very much.

I got the mic back. Thank you. Bob just points out, it's always good to have a very good IR guy because he keeps you honest and honesty is, of course, very important. While I was explaining the algo to you, I wanted to be really clear that the 10% to 15% CAGR is combined, including the discrete items. The underlying growth rate is 8% to 10%. So just in case there's any mistake about that, everybody is now absolutely clear. Okay. I'm sorry, 12% to 15%. Thank you, Bob. I kept saying 10% to 15%, 12% to 15%. Thank you, Bob. Somehow that's in my head, but now it's out.

All right. You're going to tell us your name and who you work for the webcast and then you can ask your question. I will ask you to ask one question and you're only going to be allowed to ask one question because they're going to take the mic away from you. And then Mike will either answer or ask someone else to answer.

I like that. So -- my favorite answer, just so everybody knows, is Stewart.

And I'm going to point you and not call your name, so we don't say your name twice. So I will start right here.

Rupesh Parikh, Oppenheimer. So maybe since -- I'll start with Stewart with the first question. Just on your longer-term targets, one of the challenges with Dollar over the years is targets are set and then sometimes they don't materialize in line with expectations. So as you look at your planning forecast for the next couple of years, what level of conservatism do you believe you've embedded in the guide for maybe some of the unexpected developments?

Yes. I mean, Rupesh, I think we've done a good job of really looking at what the various outcomes are. I mean if you just take the opportunities that were presented by the team today, there are some really powerful ways to expand the P&L. We think we've appropriately assessed the probabilities of those, and we've rationalized the P&L to hit the right -- to get to the right spot. We put that out for 3 years because we think that's a horizon we can easily see. And I think we've got the kind of support that we feel confident that's a number that is absolutely achievable for our business.

It's Michael Lasser from UBS. It's a 2-part question. First, the model has become a little bit more complicated, not only for the consumer, but maybe the employee to deal with some of the ins and outs of managing the day-to-day. So how do you translate that to a better experience for the customer? And secondarily, is it realistic to expect a 3% to 4% comp over the longer run because you're doing a 3.8% right now with the benefit of maybe 10 to 15 points of inflation?

Yes. Why don't I start, and then I'll let Jocy jump in here and then certainly, we can kick that around. The first thing I'd say to you in terms of have you made it too complicated for your associate or for your customer. The first thing we do, and I said it was our associates are our customers and our customers are our associates. And we say that it's not just a tagline. Literally, our people tell us. We learn from them. They tell us what we're going to do. They're the first, they're the canary in the coal mine, if you will. They love multi-price. I mean they're the first to be surprised and delighted in terms of what we've put in the store. So they absolutely love that. They want it. They want more of it. They all wanted to get converted as soon as they could because it also brings more sales and it brings more sales with fewer units, so they get more productive hours. So they get the hours based on the sales and then they're more productive and they end up running better stores. That's separate from the red stickering. The red stickering, no one liked. It was awful in the stores. Stewart and I were in Columbus. And I mean, I think the team played a joke on us, they gave us floral to do, which was an absolute nightmare. But we did it just to get a feel for what it was. That's largely behind us. We say it will be done by the end of the fiscal year. But just so you know, it's pretty much behind us other than some packaway for Christmas and then you might have some packaway next year in any of the holidays, but just in Easter, but largely behind us. So separate that complication and how bad that was and really mostly in the rearview mirror, the vast majority of that work is done. It's been restickered. It's gone. That complication is behind us. The multi-price, they're loving and not finding complicated. Do you want to?

Yes. I would just say the changes that are happening in our store are different, not difficult, right? It's just building different muscles in our retail stores to just accommodate multi-price, schematics and our single price point. And we're doing that through multiple things, simplifying it, signs, shelf labels, et cetera, so that our teams can do the work without overcomplicating it.

And then finally, the sustainability of the comp. You heard a lot today. We don't have to hit every one of those out of the park to have sustained comps. we are developing an ever more relevant Dollar Tree. The assortment is very attractive now to not -- it's attractive to our core customer who loves the pack sizes. They love the trip consolidation. We've added some incrementality to what they could buy. You think about them coming in for Easter -- I mean, sorry, coming in for Halloween. They've always come in for decor and some of the things to do Jack Lanterns and all that. And now they're finding real candy that they can -- 30-piece candy you saw there. That's better than 1, and it's priced for $5. I mean it's a really good deal. So we believe for our core customer, they're loving our pack sizes and the incrementality. And then this higher-income customer is really finding us for the first time. And so when you start to look at what that can do for your comps, and you get more relevant to that higher income and you continue to surprise and delight your core customer, we see that as building on top of building, add to that new stores and then flat out running better stores, which we're committed to do. I look at the best retailers out there around the world. They run the best stores. There's a couple of retailers I could think of. I've never been in a bad store, and they don't know who I am and they didn't know I was coming, and they were never bad. So that's where we have to get to, too. You see that in the shift. So I looked at it and say, not all of those have to be home runs. We've built it. Every one of those has a list of actions below it that build up to that comp and above.

We go here.

[ Kevin Nichols ] from [ Greensboro ] Trust Advisors. My question is, so on the store growth and then on the same-store sales, you have to be taking market share from someone. And I'm just curious, any information you can say, who do you believe you're taking market share? It's not one person I know, but who's the market share coming from over the next 5, 6, 7 years?

Yes. We've seen great opportunity from convenience and drug. Those are the most pronounced. It's -- we've also been very opportunistic. If you looked at last year, the $0.99 only deal that we did. This year, Party City, Joann's. I mean, so bankruptcies have certainly helped support us as we've taken share. But we believe -- I always -- people say, who are your competitors? And everybody will compare us to Walmart or DG or any of those. And when we had Family Dollar, I think that made a lot of sense. We compete with everybody and we compete with nobody. I mean 80% of a Dollar Tree is unique to Dollar Tree. So when I look at who we take share from, we know who we're taking share today. I think that will continue for years here. We also believe we have the opportunity to be relevant no matter who the competition is. And one of the stats I always give is some of our fastest-growing stores are in mass merchant headquartered or mass merchant anchored Shopping centers. Shopping centers. Thank you. So we think we do well where there's already great traffic building.

Matt Boss, JPMorgan. So Mike, you cited your aspiration is not big box, not club stores. So could you talk to the total addressable market that you see for Dollar Tree, how that's changing with multi-price point? Maybe what inning you see multi-price point versus 15% of the mix today? Or what did you embed in the 3-year plan? And a quick one I'm going to sneak in for Stewart is 8.5% margins this year. I know that includes a number of transitory headwinds. What's the right operating margin for the business over time?

Yes. The headroom we see -- we've got others that do this around the world. Some are 85% multi-price. There's another one in Europe that's 2/3 multi-price. We sit here today at 15% is above $2. So you got kind of your opening price point of $1.25. We've made the decision on some $150 and $1.75, but still kind of opening price point. And then you have this multi-price that's relatively small. So we see a tremendous amount of headroom when it comes to attracting both new shoppers. So those higher income shoppers, I mentioned it's 50% of our growth of new customers in Q1, 2/3 in Q2. We believe we are more relevant to new shoppers. And then you take the trips, the customer journeys, if you will, I'm coming in for Easter. I'm coming in for craft. I'm coming in for any season or holiday or everyday shop and all of a sudden, I can add to that basket because the shop is more relevant. So more relevant to more customers, more relevant to every customer trip. We put those together, and I don't think we know what the ceiling is on that. We just think it's significant. We put the 3% to 4% comp in the model. I told you we didn't have to hit home runs to hit each of those, but we see this as an incredible opportunity because of that more relevant dynamic.

Yes, Matt, I think, look, this can be a double-digit business. We're going to take cost out of our SG&A. We know that's coming. If you think about the rest of it, just trying to drive that leverage through store, get to the higher end of the comp, maintain the cost, keep those semi-variable costs in line. And then I think you start to see that margin expansion. There are many other examples of retailers who have done this. And I think it's getting more revenue through the box, which is really a big lever.

Zhihan Ma from Bernstein. I wanted to follow up on the multi-price side. It seems like you're taking a pretty broad-based approach across categories. Is there a point in being more surgical in terms of where you can be more differentiated from an assortment perspective, maybe focus more on household discretionary and less so on food and be?

Yes. I'm going to let Brent take that. But I really want to make sure the distinction between the multi-price evolution we've been on since 2019, and I'm sorry, Matt, you asked what inning, it's early. It's an early inning. The multi-price evolution we've been on since 2019 and now red stickering to address some near-term costs. So we have been very strategic in terms of where we've taken multi-price. We still wanted to sell foil pants. They're $1.75 is the only way you can keep selling them, and we're still the best value in town on the foil pants. I don't count that as multi-price. That wasn't a decision to say, I'll tell you what, we're going into foil pants. It was all about making sure we could still sell it to our customer. Brent?

Yes. Yes, it's a great question. Really, we started with discretionary. That -- we started in 2019 with a discretionary point of view because we knew we could create incredible value that our stores could execute. We just started in consumables, and it's really through a test and learn. Some of the things that we've tested have been great value, but we weren't able to execute them. At the same time, we did frozen a couple of years ago, and that transacted really, really well. So the answer to your question, it's really through that test and learn where we'll engineer a value. We'll look at the market and say, where can I be relevant and can I engineer something at a high quality, high value. If yes and yes, then we'll go to work and put that into a select number of stores and see how that responds at shelf, how does the stores execute it, that kind of thing. And then that's what informs what goes forward. I think what you're going to see as you go forward with us, particularly on the consumable side, you're going to see some shifts there because of how much pressure the lower-end customer is under. We're seeing much more transact in our 125 business than some of these -- they're legitimately incredible values, but the customer that's looking for the consumable side sometimes can be a lower end. So a long-winded answer, but it's really through test and learn and based on where we think we can win.

We got 2 Johns here. We'll start with John on my left and then the other on the right.

Once I brought up frozen.

John Heinbockel, Guggenheim. So what is the brand awareness of multi-price point in and of itself? When you think about your marketing initiatives, how can that move the dial on brand awareness? And then back to zone pricing, you talked about the 80-20. How much of an opportunity is there to take the 80% where you can earn margin, reinvest in the 20% and drive a better value perception in the 20%?

Yes. So let me -- I'll take the first one. We have a customer that we've never really connected with or talked to digitally marketing. We had a if you build it, they will come approach. And as a result, you have a brand in Dollar Tree that has incredible unaided awareness. Everybody knows Dollar Tree. But what's inside, very little. I mean it floors me the folks that know Dollar Tree, but don't really know Dollar Tree in terms of what's inside. They come for a specific journey, customer journey. It's a birthday. I'm celebrating Halloween. I'm just getting cleaning supplies. They don't realize what else is there. We have an ability, and that's why we think we can do it low-cost, high-return marketing where we do geo-targeted. We connect with them with, don't think promo offer. That's not going to be us. Ours is going to be awareness. Hey, Christmas sets next July. And if you're part of the club or you're part of our app, you download, you get to know when Christmas sets, things like that. We think we could raise the awareness and then doing the -- you bought this, not would you like that, some of those things. This is all new ground for us. We're getting customer data that we've never gotten before within the last 8, 9 months. And we think we can use that to broadcast what's in the store and increase that awareness. Do you want to hit on pricing or...

Yes, I'll try. I'll do my best. I just want to go back on the other one, too, is John, as you know, that our customers still say, "Oh my gosh, I can't believe. Like the treasure hunt is still there, whether it's our Dollar Tree dupes, whether that's $1.25, $1.50 or multi-price. So it's a huge unlock for us, but we've really got to make sure that we can attribute it to a sale. Otherwise, you can get sideways quick.

So I will say one pricing falls into this test-and-learn culture that we're building. This is relatively new to us. We've got much better data now. The technology is incredible. The infrastructure that Bobby has built over the last couple of years, we actually get to use now. So before we were just building it. Now we actually get to use it. We think it gives us a muscle to really be able to look at things. So we have our launch in zone pricing in a couple of places. I think we'll learn from it and see what we get and go from there. And then is there an opportunity to say, okay, here, I can make more than invest others. We'll see. That's part of the testing and learning.

[ John Zolidis ], Quo Vadis Capital. So in the current quarter update you provided, it sounds like the average ticket is up nearly 4%. And as I understand it, 15% of the product assortment currently is above $2. And we still have the rollout of multi-price, which is going to be completed roughly at the end of next year. So when that rollout is completed, what percentage of the goods will be multi-price of your sales that you anticipate? And over the longer term, how much of a lift to average ticket do you expect to see given being more relevant to higher-income consumers, average price point in the store being higher, people putting more items in the basket? Because it feels like there is going to be quite a large lift from this product assortment transformation continuing to provide to comps over the next 1.5 years at least.

Yes. We believe that some of that answer -- first of all, we'll always start with the customer. So we're going to follow our customers' lead in terms of we're going to test and learn. And if they respond favorably and we take another category, so we too hardware. We took auto. The cleaning supplies are a great example. And we believe we can provide incremental value or even incremental convenience. You're already coming in for the bleach, you want the wipes, that's an incremental. It saves you a trip somewhere else. We'll continue to do that. I'm not going to say where that ends up, partly because I don't know right now. I think it's an opportunity to learn from test and learn. I actually don't know that we'll ever fully talk about that because we also believe there's a competitive advantage there. If you look at the place we play, the mid -- we're not where you come and do your entire grocery shop. You come to us in consumables for a mid fill-in or stock up or a grab and go. You come to us for the seasons. If we, like this Halloween, believe that we can save you a trip and present great value with a bag at 30-piece candy, well, that's going to increase. And then the final thing I'll say is it will change during the year. So you'll have times -- big Q1, Q4, you'll run higher in terms of multi-price. And then in the middle of the year where you don't have kind of I call it the reasons for Dollar Tree, which is the seasons, you'll go down a little bit. But we know what the -- what it could be someday. We know what others are doing. I mentioned our friends to the north, they're 85% above their opening price point. We're not friends in Europe yet, but those folks are doing about 2/3 of their business. So -- and we're at 15. So I think there's an incredible runway there, and I'm not exactly sure yet where it will go, but I know that our test and learning with our customer is what's going to guide us there.

Okay. I've been biased to the middle section, so I'm going to go over here to the left section right there. My left. You're right.

[ Sid from Edgepoint ]. Just thinking about the slide that you showed with the stores and the gold scoring, I thought that was a great slide. Can you talk about maybe the incentive structures for the associates at the stores and how you get these associates maybe to change those behaviors and bring the stores up to -- from the 2, 3, 4 up to the 6 and the 7

You want to jump right in on that?

So first, I want to clarify that when we launched the race to Gold, we elevated the standards immediately by putting different things under that 5 different tactics, different processes that actually took the score lower for our stores.

I appreciate that clarity. As the guy that launched gold, I really appreciate. Jocy has absolutely raised the bar on them. So a 4 for Creedon is now like a 2, I think, for Jocy. So...

So those things are just table stakes. So I don't want people to get nervous on that 1 to 4 rating. It's greeting customers. It's opening stores on time. It's nonnegotiable audit, simple things that we just have to be more consistent on because they're table stakes to running a retail shop. So as we teach our teams how important those things are ultimately to get to gold, they will understand and they will build upon that. We do have incentives for our store managers from a sales perspective. So each period, our store managers can bonus. So we're connecting sales to gold so that they can then benefit from that continued improvement in our stores.

The last thing I'll add to it, it ties -- the reason we talk so heavily about career, not a job is because if I had to go compete wage for wage, like right now, the guys that run all those amazing warehouses are hiring like crazy. The reason we keep our turnover low is people say, all right, I could go there for 90 days and make $0.25 more an hour, but then I'm thrown out right after the Christmas rush, whereas you work for us because we're opening 400 stores a year. Every 15 stores is a new district. That's a new leadership position. That's 400 store managers. You come work for us because you start with us, you might be a part-time holiday helper and you could be running your own blocks in 18 months. Nobody does that. Nobody can provide that career path. And so yes, there's incentive for our store manager. And when you run great stores, you make more money because your sales are better and you get bonus. You also are a part of something that then puts you in a position to grow a career versus just some job that's paying $10 an hour.

Paul Lejuez, Citi. Questions on traffic. Just at a very high level, the 3% to 4% comp that you put out there for the algorithm what do you build in, in terms of traffic that contributes to that 3% to 4%? I think when you gave the third quarter number, you said traffic was flat. So maybe just help connect from the dots as you roll out some of the multi-price point in theory, you're expanding your customer base. But what's happening underneath the surface? Are you also losing some customers? Or are they just shopping less frequently? Just maybe help connect the dots there and what the ultimate plan is in terms of traffic contributing to that comp.

Yes. We don't break it out by that. I'll tell you that we want both traffic and ticket. I talked about in the first half of the year, one of the things I loved was that balance between the 2. So one, we want more shoppers finding us, and then we want them loving what they find and filling their baskets. And then finally, and this is where I think will really come from the more relevant assortment is they'll increase their trip. So that's kind of -- we want it all. We don't break it down by each. We want them all. If you think about the -- sure, you can do the math, traffic, traffic flat, Stewart talked about it. Given the kind of time of year and where we're at, I think it fluctuates. We really -- the reason for Dollar Tree of the seasons, that's what drives people to our stores. Back-to-school was good for us. We had good sell-through, but that's not really a destination. We're not a destination. back-to-school comes out of the aisles and goes to the front. And when it's over, it goes back to the aisles as opposed to Halloween, Thanksgiving, Christmas, Valentine's, Easter, -- those are the real drivers where your destination is Dollar Tree first, and that's what really drives people to our store. And then as they get there, they're finding this thrill of the hunt that's filling in the basket. So we want it all, Paul.

All right. Let's go in the back on the first -- blue jacket.

Brad Thomas with KeyBanc. The question is about the overlap with competition. Mike, I believe you've been saying the number less than 20% of products overlapping. Could you just talk about how that's evolving with multi-price? I guess as a semantic, does that include pack sizes being different on a similar kind of product? And then how do you think about the competitive landscape changing just as you're at these different price points?

Yes. So first of all, 10% is pretty much like exact SKU match that we do. And then another 10% would be like products. So that's how you get to the 20% that we have to compete with, and then you get 80% that is unique to Dollar Tree. And certainly, Brent can jump in here. But one of the things that Brent talked about is our national brands, our supplier community, they want to work with us to make pack sizes that are for our customer. When I look at -- I don't -- I mentioned it earlier, and Matt said in his question, I don't want to compete with the big box. You're not coming to us for the $25 candy giant. I mean that's not who we want to be. We love the idea that you came to us for Halloween decor and the Jack O' Lantern, that you always came from, and now you're picking up wow, that 30 piece or $5 makes total sense. We believe that our value, relative value and our convenience can trump any competition because no one else offers that. When you add in thrill of the hunt and you end up leaving with something you had no idea you were going to get because you didn't even know you wanted it, that's really where we think no one can compete with us.

Yes. I just want to jump in on this particular one here. So to answer your question, it's a little bit of both, but we do look at unit of measure or equivalent. And then as we're looking at that, we're wanting to make sure that we're still a great value. However, we go in quarter increments. So it's not a penny for penny. We're looking at the total value proposition. So some of the reporting will come back and say, "Hey, you're getting beat by $0.08. And yes, that is true. However, but when we look at the value, convenience and discovery and then if we see the consumption happen, we're okay. And I say that nervously because we're really not okay, but we're always watching what is our value because we have a relentless pursuit for it. It's just within those quarter increments. If we're not a value and the customer isn't there, we'll drop the item.

And then what does that basket have to look like to get that relative value? I mean you quickly see -- we've seen reports comparing us to Walmart. Sure. If you want to go spend $348 at Walmart to get that $18 savings versus us, by all means that's your customer. Our basket is $12. That's not who we are. Those aren't our pack sizes.

Ed Kelly, Wells Fargo. I wanted to ask you about store standards and the opportunity there. You spent a lot of time talking about store standards not being good enough at a decent chunk of your stores. I think you had roughly half of your stores in that bottom quartile, maybe, right? As we think about that, is there a way to size the prize in terms of sales per store? How different is sales per store by cohort? So what's the real opportunity there? And then tying that into labor, I think some of the test and learn opportunities that were talked about were kind of tied to labor. Complexity of the store is rising with multi-price point. So maybe, Stewart, could you bridge that to leveraging on a 3% comp in terms of the labor side of the business out of complexity and the comp leverage.

And Ed, just pass it to you right for the next question.

I'll start with the store standards and then you guys can jump in. So first of all, Jocy did set a high bar. So that 48% or whatever it is of the stores that are 4 and below. I'd put it in this context. I think every retailer is chasing on a given year, 15% to 20% of their stores being not where they want them to be. We're chasing about 1/3 of our stores. So there's significant opportunity. That's to say that some of the ones that fall into that 48% with a little elbow grease and some focus from Jocy can be at that 5% very quickly. But 1/3 of our stores, we're chasing, and there's huge opportunity. And yes, we don't specifically say it, but if you look at the comps of a store that basically -- even a 7 and above comps compared to a store with a 4 or below that on the gold score, I mean, it's significant. And when we move them there, the comps are significant.

Yes. So Ed, your question is, how do we create that leverage? Is that what you're saying?

Yes, the complexity.

Yes. Look, I mean, yes, so let's take up a couple of things and then join the dots together here. I mean when you really look at the labor, and it's a huge chunk of our P&L. when a person takes one item and it puts on the shelf, there's not a lot of difference when it's $1.50 handle versus a $5 handle. And I think one of the points that I was making in my presentation this morning is that when we were back at $1, everything was $1 and a single kind of unit of labor. Now you're talking about a single unit of labor, but you've got 3x the sale. And for that reason, you create leverage. Look, if there's some marginal increase because I have to put in a certain spot or in a certain region or I need to get some pricing there. That's not a significant amount of labor, right? That isn't because the item goes on the shelf, we've got a bunch of items going there. It's repeated and repeated. And therefore, I don't really subscribe to the theory that there's a whole bunch of complexity. Matt asked the question about sort of where we might be from a leverage perspective and what does that look like in operating. I want to just be clear, Matt. I wasn't giving any guidance for the next 3 years, just so you know you asked us where could this business go. And so I just want to be really, really clear, right? I mean this is a -- we've got a model here that will start with leverage from our SG&A. And what is good about that is that is a much more controllable element. In the early years, you will see that leverage coming through because we have non-repeatable items. As we move forward, you will see that leverage coming because we are taking distinct actions against our corporate SG&A. And when you go to the stores on an ongoing basis, as multi-price ramps up, you will see unit benefit. To the extent that we then get much more sales going through the box, Well, that's a whole another level of leverage. But I think we've taken a pretty gentle approach here. If you want to really figure out what the leverage number is for the company, then I think starting with the guidance that we've given today, which is distinct in the answer I'm giving to Matt, is start with those elements we've given, that will put you on the right track for where we think the next 3 years will go.

You got the mic.

[ Pedro Gill ] with Morgan Stanley. You mentioned multi-price is driving a 10% increase in AUR, 8% increase in gross profit dollars per unit, which is impressive. I'm curious what you're seeing in terms of units per transaction and how you're managing any potential elasticity response to the higher AURs.

Yes. I mean we don't give units per transaction. We like what we're seeing from a customer response to the basket. You saw Brent's the bigger the basket, if it has multi-price in it, it's just a much bigger basket. We love the baskets that are both $1.25 and multi-price because those are our largest baskets. The unit game is a little tough because in our store, you still have the 8,800 selling fee. And so some of the expansion of multi-price comes at the expense of $1.25 where you'd sell more units, which is why we typically don't kind of play around the unit economics there. What we love is that selling a $5 hammer, you only have to sell one of them. It's the equivalent of selling $4 of something else helps us on labor utilization, also helps us in terms of dollars to the box. But...

What is most important to us is gross profit dollars per store, right? That is actually where we're focused. Can you get -- can you optimize the gross profit dollars per store, then the P&L itself will work. If we get there because we sell more multi-price and have lower labor, well, that's not -- because units are slightly less, that is not a bad thing. And so I wouldn't read less units as necessarily being....

One additional thing to the gross profit is household penetration. As long as we're continuing to increase our household penetration, then we can be okay with that.

Mike Montani at Evercore. I just wanted to ask if I could, to break down the comp a little bit further. So one question would be the store engineering part of the comp between new store growth, productivity benefit, refresh, remodel, less cannibalization. I was thinking 50 to 100 bps, but can you guys comment there? And then the other part was just space optimization, zone pricing, front-end reconfiguration. There's a lot of potentially meaningful drivers in the comp. So can you help us to kind of piece together what that could mean for comp as well?

I'm happy to start with the high level and then to the extent we want to include it. When you look at that 3% to 4%, we then deconstruct that here. And Jocy has a piece that are solely coming from moving her refresh program, which is a low CapEx but really nice return because we get a nice pop out of those stores. New stores net of cannibalization, especially as they mature year 2, 3 and 4. After that, they're kind of in the sauce, but you get an outsized benefit in year 2, 3 and 4 and net of cannibalization, that's what we call a comp builder, just improving the running of the stores as a comp builder. And then Brent, in his section has an entire set of comp builders and all that. So what -- the reason I say we don't have to hit the home run is every single one of these will ladder up to something more than the total. And that's because we want to build in some conservatism to make sure, okay, we want to fulfill our say-do ratio. If we say it, we want to do it. And as a result, we better go out there and move more stores towards the right. We should open 400 and work like hell to offset cannibalization by year 2, things like that. And then...

Yes. I mean there's nothing really to add to that. I mean we just -- we haven't broken down the comp for people. The truth is when you look at our -- when I look at my comp bridge for the year, it's got all the elements you've got on it, right? I mean it's a long list of items. And as we take each of the initiatives you've talked about today, we sort of assessed each of those and the probability model, put that together and the comp as it generally works out, one may end up being slightly higher than another. But this is not all sort of -- this is not all bets on one place. And I think that's probably the most important thing you should take away from it.

Kelly Bania from BMO. I guess a question, other parts of retail are talking about changing profile of the profit picture in grocery and food and consumables. And as you go deeper into these $3 and $5 products that are getting more margin from advertising, data monetization, how do you think about staying competitive in those price points longer term as other retailers are getting margin in other ways?

Yes. So we -- none of this has retail media in it. I mean we did learn from Family Dollar. They do a considerable amount of that. We're still a 50-50 consumable discretionary. We're still 80% Dollar Tree. That retail media piece really comes from national brands. So we'll always look at it. We believe that data can be a big unlock for us. The more data we have on our customer, the customer we're attracting, the basket they're building within our stores, the folks that fund retail media want to see that. But to us, the reason we believe we will be successful and we don't have to worry as much about being competitive on that item is we don't have to sell any of that. So when you're a grocery store, they better have that big tide. They better have milk and eggs. We've got that 30 load tide there that's pretty amazing for the value. That may not be there next year if we feel we can't do it. And that's the beauty of the thrill of the hunt. You don't have to have any of those things. But I guarantee you, there are some people surprised and delighted by that tide all in one, it's really exciting. So people tell me for $5, 31 loads for $5. So I don't think that's as big a problem for us because of our thrill of the hunt nature.

Back row, white shirt.

Bobby Griffin from Raymond James. Just curious, like moving the stores from the left to the right, when you look at that chart, very powerful chart. When we've seen that at other times in retail, it typically comes with a labor investment, either on an hours or a per hour basis. We haven't quite talked as much about that this time. So can you maybe bridge that and help us understand why your opportunity might not come with such a heavier labor investment and what some of those opportunities are?

I'm going to start it. I'm going to turn it to Jocy. So I brought gold to this company a couple of years ago when I got here, I've been here 3 years. If I ever went somewhere else, I'd bring Jocy's gold with me because it's much more specific. It's very objective and not subjective. And I will tell you, none of that ability to move up the gold curve required us to put hours in or do any of that. So that's kind of the first answer on it. A lot of this is -- I mean, I've been in small box a very long time, the 2 women to my left have as well. I mean onboarding for a lot of small box retailers, here's the keys. It's not been great in our business. Here, we've taken a much different approach. We've done a lot of training. We show people the career opportunities. We're being very specific in terms of the leadership that's coming to them. And then the last thing I'll say on it is the comps we're driving in the multi-price at lower units is providing a more productive hour to them. So it's as if you are adding to the stores hours even though you're not. Is there anything you want to add?

Yes. I think we're just looking to work smarter, not harder through disciplines and through teaching and training and coaching our teams how to do those specific things. And we see the opportunity there because many times, our associates aren't being very concise in what they're doing. We say do it right the first time. We may do things 3 times over, and that's just waste in the store. And then secondly, I would add, we're diving deep into taking waste out of the store. So as we look at all of our operational activities, if it's not adding value, we're pulling it out. Therefore, we don't need more labor. We're just using our labor more productively.

We'll stay in the back row.

Joe Feldman, Telsey Advisory Group. Can you guys talk about with the modernization of the systems that you're doing, how much AI or AI capability you're building in for the future to be able to optimize efficiencies.

Yes. I'll first -- I'll use AI in its big umbrella term, machine learning, automation, agentics. We are leveraging all 3 of those on our AI journey. Things like Bobby's got a call center that now we handle certain levels of the call center via agentics as opposed to a live operator. Steve Schumacher is rolling out. We hire -- I don't know if you know this, we hire thousands of people a week, just given the nature of our stores. We're looking at agentics to do the first 3 levels of screening. So you think about that. Right now, I have to have a -- sorry, Jocy, I love your job. Jocy has to have a DM make that call. A store manager has to meet with that person. And now we'll go through 3 levels with agentics and only the final interview gets done by the store manager, and that's just because they won't hire without it. We're working on that too because our system works that well. And then in Brent's world, the hands off the wheel of assortment, especially in consumables has grown rapidly and AI is supporting what goes where, when it gets ordered. We're leveraging it anywhere we can. We're still early in it, and we treat the same test-and-learn mindset to it. But I'm blown away by what it's done in just a year for us in a couple of key areas. And then hopefully, you all saw we had an announcement with Legion yesterday, I believe. So this is labor management planning. This is for our stores. Right now, I mean we have as antiquated a system as I've ever seen. I came from a world where demand planning set our schedule. All you had to do was load your attributes. This is Jenny, this is Paul. They work available these hours. And then the computer just created the schedule and all that. We do everything manually with Legion now starting next year, one, we'll be able to do that all automated. And two, AI is actually telling you when to staff those people. One of the favorite things I walk into a store and I say, "Hey, so when is your power hour? What are you most busy? -- it's 5. kind of end of the day. I'm like, you have a school across the street. I promise you it's 3:15. Let's stand here. Let's check it out. They don't know that -- but now the system will bring that person in starting at 3 because the system is using AI to see where the demand is. It's really -- I love it. I'm very excited about that.

Second row from the back.

Chris Bottiglieri, BNP Paribas. A couple of questions -- 2-part question on capital intensity. So your depreciation year-to-date is up 30%. Your gross PPE is up 8%. Trying to get a sense of what's happening there. You mentioned multiple times bending the curve on depreciation. So hoping you maybe explain why this year is elevated, why that gets better. And then relatedly, the part 2, as you start elevating the brand in the multi-price, why is 125 stores being renovated the right number? Why is it not higher? Like how do you think about managing that?

Maybe I'd pick up on those things. So a couple of key points here. First of all, why is the elevation of CapEx this year? And the answer is because we actually have 2 district DCs that are under construction, right? Keep in mind, we lost one of those in the tornado. We got that partially really funded by insurance. So if I adjust for insurance and a chunk of that money is going to come off. One of the things to take away from Roxanne's presentation today, which I think is really relevant is that she's talking about moving the number of stores per DC from 600 to 750 per DC. Now keep in mind, though the DC costs sort of $200 million, $250 million. So if we now have increased the productivity of DC by 20%, then you can expect that, that absolutely is going to have a meaningful impact on not having to add DCs as frequently as we were doing before. Every -- we were adding every 600 stores. Now we add every 750 stores. So for those 2 reasons, you're going to see that CapEx is going to be moderated. We also have pushed through some of the big systems -- some big systems investments that we've made in the last couple of years. Those platforms are now in place. That's a further help. Coming back to the stores. Look, we set out $100 million. We've talked extensively in this meeting today about how we use this sort of a test-and-learn approach, and we talked about how we're disciplined from a capital investment standpoint. If those stores work really great and those refreshes deliver amazing returns, then probably you can expect that we might ramp that up. If they don't work as well, then you can expect that we're not just going to spend the money because we said we're going to spend $100 million on it. We're going to use a very thoughtful and disciplined approach to make sure that as we deploy the cash is done in a sensible way. So hopefully, that covers the waterfront.

We'll have returns discipline. So if we see the refreshes go better or the rents go better, then we'll increase. But it will all be based on that returns-based discipline, something that this company hadn't had in my opinion, and I got whip marks on this one. We are absolutely disciplined about our capital and making sure it drives a great return.

We're at the end of our time. I got one more over there, and I'm going to call it after that.

Yes, we've got one right there.

Scott Ciccarelli with Truist. So you guys did give some examples of the increase in sales per square foot you experienced as you shifted merchandise from one category to another. The truth is every retailer is trying to optimize square footage productivity, right? So can you help us understand what's different about this particular initiative, maybe different than what you've done in the past? And then also like how much more of that initiative should we see as we go forward?

I'll start and then kick it to Brent. But I mean, that's great that others have been doing it for a long time. This is brand-new work for us. I mean, remember, we sold everything at a single price point. nothing went anywhere, everything went everywhere. I mean it was one of those where you could just come in and look and our folks kind of had a lot of say in what went everywhere. And there's some good things to that, but you end up with these large, large runs of maybe an underperforming category because that's what that store manager did, and that's the product they got. We want to be much more disciplined and purposeful about how we use our space. And we now have a technology that's telling us the productivity of that shelf. So that's something we didn't have until this year that says, this is how the shelf is doing, how it's working for us. But Brent?

Yes. No, I think you said it perfectly. I mean we're just now starting. That's the biggest difference. As simple as if you're a consumable store, we weren't really sending you more consumables. We were sending you the exact same assortment. So with the data now that we have, we're able to optimize that a lot better. And so it's really just beginning. And what we've seen in the rearview mirrors is really about the multi-price adaptation that's driving that square footage. You can see it almost line up pretty close to our multi-price. So in the rearview mirrors, it's been about AUR and that shopper adoption. As we go forward, it's going to be that plus just making the stores work harder for us as we optimize the assortment through our assortment planning team.

There's maybe one other thing I'd just add to that, and that is with the changes that are coming via multi-price, it's actually quite a -- that's a different architecture in the company than we've had. And therefore, Brent talked about doing that in a very thoughtful and disciplined way that optimizes the profit per store. And I'm not sure if you talk about broad retailers that actually they're seeing that kind of difference in terms of the evolution of their inventory or their product. So you'd have to make that comparison to for yourself.

And I think I got to everybody. I just want to make sure before we end that there isn't anybody. I think I got to everybody. If you've got 1 more, 2 more, maybe we can do a little extra time. But otherwise, going, going, gone. Great. All right. That's how we like it.

All right. Thank you all for spending the afternoon with us. We really appreciate your time commitment. This was, as I started, just something I've been looking forward to since this team came in. It's been 10 months for me. I want you to leave with a couple of things. We're not chasing growth for growth's sake. The discipline is real. Our say-do ratio will drive us. And then we're building Dollar Tree to last here. We want to be consistent. We want to make sure we're consistently customers. We're consistently there in how we show up for our associates. And then finally, we're consistent for our shareholders. We think that's the most important thing we can do. And we're at a key inflection point here, and we're building this thing for the next 40 years, and we're excited to have you go on the journey with us. So thank you all for the day. Safe travels home. I appreciate it. Thank you.