Thank you, Alan. Good morning, and welcome to our call to discuss results for Dollar Tree's First Fiscal Quarter 2022. With me on today's call are Executive Chairman, Rick Dreiling; President and CEO, Mike Witynski; and CFO, Kevin Wampler. Before we begin, I would like to remind everyone that various remarks that we will make about our expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, and our actual results may differ materially from those indicated in these forward-looking statements. For information on the risks and uncertainties that could affect our actual results, please refer to the Risk Factors, Business and Management's Discussion and Analysis of Financial Condition and Results of Operations sections in our annual report filed March 15, 2022, our Form 10-Q for the most recently ended fiscal quarter, our most recent press release and 8-K, and other filings we make from time to time with the Securities and Exchange Commission. We caution against reliance on the forward-looking statements made today, and we disclaim any obligation to update or revise these statements, except as required by law. Following our prepared remarks, Mike and Kevin will take your questions. And before I turn the call over to Rick, I want to make one quick clarification to our earnings release as I've received a few questions this morning. Our original fiscal 2022 EPS outlook of $7.60 to $8 per share did not include the $0.43 per share of cost outlined in today's earnings release. $0.13 of the $0.43 per share was incurred in Q1 and reduced our Q1 earnings. Our updated outlook for EPS of $7.80 to $8.20 per share does include the $0.43 per share of cost.

Thank you, Randy, and good morning, everyone. It's been an extremely busy 10 weeks since joining the Dollar Tree team. I've been actively meeting with the leaders throughout the organization to get to know them and their businesses and to discuss priorities and opportunities. We see a massive opportunity ahead of us to drive long-term sustainable value creation through the combined Dollar Tree and Family Dollar brands. It's abundantly clear to us that to deliver this long-term opportunity, we're going to need change. We are fully committed to transforming Dollar Tree from a good company today to a great company tomorrow. We have this unique opportunity to become a growth engine that delivers profitable growth with attractive returns on capital for many years to come. However, to get from here to there, we must build the foundation to fuel this engine. We need to invest in the areas that most positively impact the associate and shopper experience. These investments are intended to greatly improve the performance of the Family Dollar segment and our supply chain as well as support the continued momentum at Dollar Tree. We'll be focusing on our people, most importantly, our teams from store and distribution center associates to field leadership through competitive wages, improved store and DC conditions, and enhanced safety. The distribution center network and supply chain presents us with a golden opportunity to amplify efficiencies and deliver greater support to our stores and elevated service to our shoppers through improved in-stock positions. Pricing at Family Dollar and the value proposition at both banners must be right. We will work directly with our suppliers to drive greater store productivity. Dollar Tree has a long history of exceeding customer expectations by offering extreme value, and we will continue to place a great emphasis on the value proposition at Dollar Tree. Finally, technology: we are simply not where we need to be from a systems perspective to reach our potential. We have recently begun a comprehensive review of all of our systems and infrastructure to make the right decisions and investments to take Dollar Tree and Family Dollar to the next level. I felt great about the long-term opportunity for Dollar Tree and Family Dollar before I got here. Now that I've been inside the organization for 2 months, I feel better than ever. I have full confidence in the team and our Board of Directors as we embark on this much-needed transformational growth journey. The Dollar Tree banner is generating renewed momentum, and we will be taking the necessary steps to enable Family Dollar to seize the opportunity to deliver long-term operating performance improvements. We are in the midst of a very challenging time for consumers as many are living paycheck to paycheck. They are facing the highest inflation since the early 1980s, record high gas prices, the effects from the pandemic, geopolitical uncertainty, and much more. In tough times, value retail can be part of the solution to help families stretch their dollars to meet their evolving needs. Dollar Tree and Family Dollar provide convenience as our 16,000-plus stores are located close to millions of households where people live and work. Mike and I view our organization as a growth company. Now is the ideal time to shift gears for us to make change happen to unlock shareholder value and enable the next wave of profitable growth for Dollar Tree and Family Dollar.

Thank you, Rick. It's good to have you here with us, and good morning, everyone. Thank you for joining us today. The team delivered a solid start to the year with a 6.5% top line sales expansion, a 19.2% lift to gross profit, and a 48.1% increase to earnings per share. During the quarter, the Dollar Tree team successfully completed its conversion to the $1.25 price point, contributing to both sales and margin improvements. Shoppers are responding favorably as the new greater value products hit our shelves. Importantly, other key strategic initiatives, including the expansion of the $3 and $5 Plus assortment in our Dollar Tree stores, as well as our Combo Stores and H2 renovations at Family Dollar, are all working. Rick outlined the types of additional strategic investments we will be making over the next several years that are designed to position the company for improved operating performance and long-term sustainable growth. Before I discuss Q1 performance by segment, I want to share a few details regarding a very eventful quarter for the company. In mid-March, our Board was reconstituted. We now have a new Executive Chair, a new Vice Chair and Lead Director, and a total of 7 new directors. We also have 2 new Board committees, a Finance Committee and a Sustainability and Corporate Social Responsibility Committee. This week, we published our new 2022 CSR report. I am proud of the progress we are making as a company and the team's effort on sustainability. Please check out the new CSR report in the Corporate Governance portion of our website at DollarTreeinfo.com. Rick and I have been working very closely together. We share a common vision for a long-term growth opportunity for the Dollar Tree organization. That value will be created by a combination of Dollar Tree's unique and resilient business model that is demonstrating its earnings power and momentum with its recent initiatives, along with a material improvement over time in the operating performance of our Family Dollar banner. We are well underway with plans and priorities to address the performance at Family Dollar. I will share more detail later on this call. Also, 2 weeks ago, we announced the addition of 2 key executives to our leadership team. John Flanigan joined the company as Chief Supply Chain Officer. John brings decades of leadership experience in retail logistics, including grocery, drugstore, and the value sectors. John will be extremely focused on elevating our supply chain capabilities through improved distribution operations, hiring and retaining of teams, and efficiency improvements throughout the supply chain designed to drive greater store productivity through improved in-stock position. He plans to lead productivity improvements across the logistics function by the use of data analytics, process improvement, and automation. Additionally, Larry Gatta has joined the team as Chief Merchandising Officer for the Family Dollar segment. Larry brings more than 35 years of retail merchandising and marketing experience. He is well-known and respected throughout the vendor community and will be leading plans to drive our business and, in turn, the business of our supply partners. Larry will be focused on improving Family Dollar's operating performance and productivity through sales-driving initiatives that provide great value for our shoppers. In addition to the investments we are outlining today, components of our transformation were driven by a number of factors, including continuing to enhance our culture, elevated store standards, better use of private brands, improved category adjacencies, enhancing our product mix, optimizing our vendor partnerships, and many more. To some degree today, and especially in the quarters ahead, you can expect to receive more details, improved transparency, and greater management engagement in shareholder communications as we progress on our plans to improve the operating performance and reassess the long-term opportunities for the company. We are currently in the process of planning an Investor Day targeted for October timeframe. Now to Q1 performance. The Dollar Tree banner delivered its strongest quarter in company history. Among the highlights: an 11.2% comp, the best quarterly comp performance in more than 20 years, which included our largest sales day ever, which was the Saturday before Easter; a 40.6% gross profit margin, nearly 700 basis points above the prior year's quarter; and a company record 20.2% operating margin, more than 800 basis points over Q1 of last year. Margins in Q1 did receive an outsized temporary benefit from the initial transition to the new price point as well as selling through the current inventories. We are modeling a moderation of the margin level as we focus on providing our shoppers with new assortments at greater value for the $1.25 price point. The 11.2% comp sales increase was driven by a 15.4% increase in average ticket, partially offset by a traffic decline of 3.6%. For the quarter, the discretionary side of the business delivered a strong 14.1% comp increase, while consumables increased 8%. Importantly, we successfully completed the conversion to a primary price point of $1.25 across the chain. Credit to our teams. This project was announced in September of 2021 and was completed by the end of February with minimal disruption. By the end of Q1, our customers have already seen more than 960 of our projected 2,000 new greater value product SKUs on the shelves. Our shoppers are responding to the new items. We are seeing much improved results in the categories since rolling out the enhanced offering. Examples of the consumables category comp improvements where we've put in these new items: carbonated beverage went from a 3% decline to a 12% increase; in snacks and cookies, before the new SKUs, we had a decline of 8% and now a 12% increase in comp; and in our food category, from a 10% decline before to now experiencing a 2% increase. The majority of the changes at this early stage are now traffic-driving consumable side of the business. The discretionary changes will occur throughout the back half of the year. The $1.25 assortment changes are notable and easy to see when you visit Dollar Tree stores. In today's environment, where consumers are seeing higher prices everywhere, shoppers know they can rely on Dollar Tree as their destination for extreme value, evolving meaningful assortment, and a thrill of the hunt. The Family Dollar banner had a big hurdle to climb in Q1. In 2020, Family Dollar had a 15.5% quarterly comp increase at the onset of COVID. In last year's quarter, there was a record release of stimulus dollars that positively impacted both top-line sales and margin with the lift in discretionary sales. For Q1, Family Dollar's comps declined 2.8%, which represents a nearly 10% comp since 2019. The 2.8% comp sales decrease was comprised of a 3.7% decline in traffic, partially offset by a 1% increase in average ticket. For the quarter, the consumable side of the business delivered a 1.2% comp increase, while discretionary comps were down 14.7% as we cycled the massive release of stimulus dollars last year. February represented the best comp month for the quarter, and April was slightly better than the quarter's comp. Importantly, Family Dollar's comp sales for the quarter were negatively impacted by an estimated 200 basis points by the temporary closures of approximately 400 Family Dollar stores served by our Arkansas distribution center. All of these stores have now reopened. Last week, we announced that we will be closing the 30-year-old West Memphis, Arkansas distribution center that we have deemed is no longer part of our go-forward strategy. We are working closely with the impacted associates to support them with their transitions by providing severance plans to those eligible, helping associates with opportunities in our other distribution centers and in our stores as well as providing outplacement services and employee assistance programs. We are reallocating stores to other DCs to fulfill the store deliveries and have sufficient capacity to serve all stores in our remaining fleet of distribution centers. We appreciate the hard work and support of West Memphis associates committed during the transition process.

Thanks, Mike, and good morning. For the quarter, consolidated net sales increased 6.5% to $6.9 billion, comprised of $3.78 billion at Dollar Tree and $3.12 billion at Family Dollar. Enterprise same-store sales increased 4.4% despite cycling the large outflow of stimulus from the prior year's quarter. This represented a 190 basis point sequential improvement from Q4. Costs for the Dollar Tree segment increased 11.2%. Family Dollar same-store sales decreased 2.8%. And on a 3-year stack basis, Dollar Tree is at a 15% comp, and Family Dollar is at a 9.9% comp. Gross profit improved 19.2% to $2.34 billion for the quarter. Gross margin was 33.9% compared to 30.3% in the prior year's quarter. Gross profit margin for the Dollar Tree segment increased 690 basis points to 40.6% compared to 33.7% for the same period last year as a result of the net of the following. Merchandise costs, including freight, decreased 590 basis points, primarily due to increased initial mark-on and increased sales of higher-margin discretionary merchandise, partially offset by higher freight costs. Occupancy costs decreased 80 basis points from leverage on the comp sales increase. Distribution costs decreased 50 basis points from leverage and higher capitalized balances resulting from inventory increases in the current quarter, partially offset by higher hourly wages. And markdown costs increased 30 basis points primarily from markdowns for clearance items as we move to a higher value assortment at the $1.25 price point. Gross profit margin for the Family Dollar segment decreased 100 basis points to 25.8% compared to 26.8% for the same period last year. Markdown costs increased 75 basis points due to higher clearance activity related to the shipping delays for seasonal items and slow-moving merchandise. Occupancy costs increased 45 basis points from deleverage from the comparable store sales decrease and higher real estate taxes. Shrink increased 25 basis points for more favorable inventory results in relation to accruals in the prior year's quarter. These increases were partially offset by distribution costs that decreased 15 basis points, primarily from higher capitalized balances from inventory increases, partially offset by our higher hourly wages. And merchandise costs, including freight, decreased 35 basis points primarily due to higher initial mark-on, partially offset by higher freight costs and higher sales of lower-margin consumable merchandise. Consolidated selling, general and administrative expenses as a percentage of total revenue increased 100 basis points to 23.3% compared to 22.3% in Q1 last year. For the first quarter, the SG&A rate for the Dollar Tree segment improved 120 basis points to 20.4% when compared to the prior year's quarter. Payroll costs improved 100 basis points from leverage on the 11.2% comp, partially offset by hourly wages and investments in store payroll. Facility costs improved 25 basis points from leverage. Depreciation costs decreased approximately 10 basis points, partially offset by other SG&A, which increased approximately 15 basis points resulting from higher store supply costs. For the Family Dollar segment, the first quarter SG&A rate as a percentage of total revenue increased 280 basis points to 23% compared to 20.2% in the prior year's quarter. Payroll expenses increased 90 basis points primarily due to hourly wage and investment in store payroll as well as deleverage on the comp sales decline. Other SG&A expenses increased 85 basis points due to asset impairment for the West Memphis DC, along with higher store supply expenses for store projects and higher legal fees. Store facility costs increased 65 basis points primarily from costs associated with removal of product from stores in connection with the voluntary product recall as well as deleverage on the comp decline. And depreciation and amortization increased 40 basis points due to increased depreciation related to capital expenditures for store renovations and improvements. Corporate, support, and Other expenses as a percentage of total revenue were 1.8% compared to the prior year quarter of 1.4%. The higher costs related to increased legal fees, including the reconstitution of our Board and incentive compensation. Operating income improved 40.7% to $731.5 million or 10.6% of total revenue in the first quarter. Non-operating expenses totaled $34 million comprised of net interest expense, and the effective tax rate was 23.1% for both the current and prior year's quarter. Net income for the quarter improved 43.2% to $536.4 million or $2.30 per diluted share, which includes $0.13 per share for costs related to the West Memphis DC. This compared to net earnings of $374.5 million or $1.60 per diluted share in the prior year quarter. Looking at the balance sheet. Combined cash and cash equivalents at quarter end totaled $1.22 billion compared to $985 million at the end of fiscal 2021. Outstanding debt as of April 30 were $3.45 billion. The company repurchased approximately 90,000 shares in Q1 for approximately $14.2 million under the share repurchase authorization. Compared to last year, inventory levels at Dollar Tree are up 39% due to increased capitalized freight costs, plus Dollar Tree Plus inventory and a catch-up in past due inventories. Inventory levels at Family Dollar increased 27% compared to last year due to increased capitalized freight and an increase in the average unit cost. Both banners have less average inventory units in store than at the same period in 2019 pre-pandemic. Capital expenditures were $253.4 million in the first quarter, versus $224.9 million in Q1 of last year. And for fiscal 2022, we currently expect that consolidated capital expenditures will be approximately $XXX, slightly higher than our initial outlook for the year based on additional supply chain projects and construction cost pressures. Depreciation and amortization totaled $188.9 million for Q1 compared to $172.7 million in the first quarter of last year. And for fiscal 2022, we expect consolidated depreciation and amortization to be approximately $770 million. In March, our initial outlook for fiscal 2022, diluted EPS was a range of $7.60 to $8. We expect to incur costs totaling an estimated $0.43 per share, which were not included in our original outlook. These costs represent: in Q1, $0.13 per share for asset impairment and the product recall costs related to our West Memphis DC; for Q2, an estimated $0.22 per share for lost sales, freight, merchandise disposal, payroll, and legal costs associated with the West Memphis matter; and for the full year fiscal 2022, a total of $0.08 per share for stock compensation expense related to an option grant issued to our new Executive Chairman. Diluted earnings per share for the full year is now expected to range from $7.80 to $8.20, which includes the $0.43 of costs I've just outlined. Consolidated net sales for the year are now expected to range from $27.76 billion to $28.14 billion compared to our previous range of $27.22 billion to $27.85 billion. We expect to deliver a mid-single-digit comparable store sales increase for the year comprised of a high single-digit increase in the Dollar Tree segment and a more or less flat comparable store sales in the Family Dollar segment. Selling square footage is expected to grow by approximately 3.9%. For Q2, we estimate consolidated net sales to range from $6.65 billion to $6.78 billion based on a low to mid-single-digit increase in same-store sales for the enterprise. Diluted earnings per share for the quarter is expected to be in the range of $1.45 to $1.55 per share, and this estimate includes approximately $0.24 per share for costs for the West Memphis matter and stock compensation expense. Considerations for our updated 2022 outlook include the following. We anticipate that we will continue to experience uncertainty related to inflation, the global supply chain, and geopolitical factors. For example, we have seen diesel costs continue to rise, and natural gas price increases are affecting utility costs throughout the business. We are once again experiencing shortages in the availability of helium and have not been able to procure the volume needed, which will negatively affect balloon sales. Our outlook includes our best current estimates of pressures from these factors. We cycled the third round of stimulus checks that totaled an estimated $386 billion in March of 2021. In Q2, we will begin cycling the monthly advance Child Tax Credit payments that began in mid-July of 2021. We noted that our original outlook in March that we expected to invest $195 million in store and DC associate wages in 2022. As an update, given the competitive retail environment, we expect that we will likely exceed this amount as we invest in our associates. Import domestic freight will present cost pressures due to annualization of fiscal '21 rates in the first half of 2022. As noted in March, we plan for diesel fuel prices to be higher this year, and we have increased the forecasted amount for the remainder of the year based on the current market. Additional color for the year regarding our expectations include, for the enterprise, we are forecasting improved operating margin for the business driven by gross margin improvements, partially offset by higher SG&A costs as a percentage of total revenue. The Dollar Tree segment gross margin in Q1 included an outsized benefit from the transition to the new $1.25 price point. We expect to see a gross margin moderation from the Q1 level as new greater value assortments are incorporated into the business. The Dollar Tree segment is expected to deliver improved operating margin for the year with gross margin benefiting from its strategic initiatives as well as leverage on SG&A. The Family Dollar segment gross and operating margins are expected to be lower year-over-year, impacted by higher costs, including freight and needed investments in the business such as labor and improved store conditions; the impact to product mix as a result of stimulus dollars driving discretionary sales in the prior year; and the impact on sales and expenses related to the West Memphis DC matter. Net interest expense is expected to be approximately $XXX in Q2 and $123 million for the year. Our outlook assumes a tax rate of 24.2% for the second quarter and 24% for fiscal 2022. Weighted average diluted share count are assumed to be 226.4 million shares for Q2 and 226.5 million shares for the full year. Our outlook does not include any share repurchase. And as of April 30, we had $2.5 billion remaining in our existing share repurchase authorization.

As Rick mentioned in the opening, we are committed to transform Dollar Tree from a good company to a great company. Our initiatives are working and providing increased profits and cash flow. Rick and I both believe now is the ideal time to accelerate investments focused on driving growth through improved associate and shopper experience while propelling greater efficiencies. These strategic initiatives will be designed to position Dollar Tree for long-term sustainable growth. And we are going to invest and incur costs associated with making this journey. It's the right thing to do, and this is the ideal time to invest in our future. Again, to reiterate, we will be investing in our associates, our stores, the DC network and supply chain, Family Dollar pricing and the value proposition, and our technology. Both Rick and I are committed, aligned, and extremely focused. The ability to execute our key strategic initiatives is paying off and setting a solid foundation for improved operating performance and accelerated growth. We believe we delivered an EPS of $5.80 in fiscal 2021. The midpoint of our guidance range this year is $8, representing a 38% increase. I believe we are at an inflection point to exhibit our earnings power into the years ahead. We are committed to meeting our customers' needs while investing in initiatives that are delivering the best returns. These initiatives, combined with our robust balance sheet, will position us to deliver long-term growth for our stakeholders, associates, customers, suppliers, and shareholders. We all know it is incredibly challenging and uncertain time for the businesses today. We believe our company offers the following as we manage through these times: a stable and resilient business model that has worked at good times and in bad; a 16,000 store footprint that is convenient for shoppers buying their needs; a tremendous value assortment that helps shoppers stretch their budgets; a strong balance sheet that enables us to invest in our business while enhancing our ability to manage and maneuver through the current environment effectively; a roadmap to deliver shareholder value through improved performance at Family Dollar and improved supply chain and a continued momentum at Dollar Tree. We have a fantastic growth story of opening 590 new stores this year alone, driving top-line sales growth through key initiatives and, again, an expected 38% year-over-year earnings growth at the midpoint of our range.

Operator Instructions] We'll take our first question from Matthew Boss with JPMorgan.

Congrats on a nice quarter, and welcome back, Rick.

Thanks, Matt.

So perhaps at a high level, Rick, considering you’ve only been back for a few months, you referred to the Dollar Tree organization as one focused on growth. Is there any insight you can share regarding the potential timing of initiatives across the banners, your thoughts on the team you’re building, or even a high-level view of the opportunities you see to drive sustainable, profitable growth?

Yes, Matt. I'll throw a little color out here and then turn it over to Mike. We are really taking a good hard look at the entire organization. We're looking at both banners. The goal here is sustainable long-term growth. We've got a very good team here, a lot of solid people, and we're going to supplement them with incremental people that, quite frankly, I've been involved with in my career. But as I reflect on this, you have 2 great banners. Dollar Tree is incredibly exciting and fascinating to me. It's the true treasure hunt. The work that's been done on expanding multiple price points, I think, has been great. Now what we have to do is focus on the fundamentals of consumable retailing in Family Dollar. And Mike, what would you like to add to that?

Yes. Matt, regarding the timing of our initiatives, in the short to midterm, we will definitely be investing in our associates in our stores and will be working on that throughout the quarters. This is included in the guidance we provided as well as in our pricing. One of our key initiatives is to improve our pricing strategy and narrow the gap to our key competitors at Family Dollar. Larry is currently working on this, and we will implement that plan over the next several quarters. For our long-term growth, it's crucial to leverage and enhance efficiencies in our supply chain. John Flanigan is out in one of our distribution centers today, evaluating those aspects. Additionally, we are reviewing all of our systems, especially focusing on supply chain, merchandising, and storefront systems. These are significant capital items that will take time to assess. I believe you will start to see improvements in the business over the next 2 to 3 years.

That's great color. And then, Mike, just at the Dollar Tree banner, could you help break down upside in the quarter on the comp side maybe relative to plan that drove that first quarter performance at Dollar Tree? And just speak to customer reception that you're seeing regarding the new product assortment or the product changes as now you're bringing in the product that was bought for the higher price point, just as it's been introduced, what you're seeing from the customer front.

Yes. That's the exciting part of it. Our Dollar Tree has got such a great reputation for delivering extreme value, and customers have responded well. Throughout the quarter, units were better. Unit decline was better than what we had planned and expected. Unit decline is around the 10-ish mark. Our transactions are down a little bit more than 4%. Our average ticket is up 15%. So those all feel good for us. And going through the quarter, we're delivering almost half of the new items, and customers are responding very, very favorably. We did some more extensive research in the quarter. Customers are highly likely to continue shopping at Dollar Tree after the price change: 85% expressed strong likelihood to shop, 77% are recommending our stores. Our customers still appreciate that great find, the extreme value, and the meaningful assortment for them. So we feel good about where we're at right now.

We'll next go to Scot Ciccarelli with Truist Securities.

Welcome back, Rick. So retail transformations almost always take longer and cost more than we on the outside tend to anticipate. Can you guys provide any color regarding the magnitude of incremental investments that may be required to get Dollar Tree and Family Dollar kind of where you want them from an operational and technological standpoint?

Well, on the Dollar Tree side, as I've said, we've got a lot of momentum because we've been working on this for quite a while. In fact, in the last 2 years, what I'm excited about is during the 2.5 years of COVID and supply chain disruption, we've come out of this with 2 formats that we didn't have in 2019. We've got a great Combo Store, and we broke the $1 to $1.25, and we were enhancing that with $3 and $5 assortments. So we've got some momentum, and our strategies are working. Our cash flow is strong. We've got a great balance sheet. We've got a new reconstituted Board, and with Rick on board and including the new talent that we talked about. So we're in a place where we're coming out of, I believe, the era of COVID with great momentum in our strategies, a great balance sheet, a new Board. We're going to accelerate our growth. So we're not starting today. We're really going to accelerate this going forward.

All right. So there's no way to necessarily bracket or give a general view in terms of how much incremental investment or operating costs might be required?

No, not right now. We've got everything embedded in our outlook for this year. We're working really hard. Both Larry and John are looking at those items as we think about how the beyond years look, and we'll be sharing that in the future.

So first, just on Dollar Tree gross margins. I know you indicated that sequentially, you expect them to moderate versus what you saw in Q1. Is there a ballpark level you can help us frame that for maybe Q2 and the balance of the year? And then just any thinking longer-term in terms of where their gross margins are for the banner? At 35% to 36%? Or do you think you could do better than that?

Rupesh, this is Kevin. As we think through this, and obviously, to Mike's point, we're one quarter in, we're still learning a lot as we work through this. There'll be moving pieces as always. The marketplace continues to change regarding what investment into the product is going to be necessary to be a value in the marketplace. I would tell you this year, I think at a minimum, we would hope to be at the higher end of that historical range. If we can be above it, we'll be above it. I don't know where that will exactly land. Again, the environment is such that there's enough uncertainty that it's pretty hard to peg given the fact that the newness of the $1.25 price point and some of the things that are going on, on a macro level out there. But it will be a positive in a big way for the overall company.

Okay. Great. As a follow-up question regarding the Family Dollar banner, considering the initiatives you plan to implement and the capital investments in the coming years, do you believe you can close the gap with your closest competitor in terms of operating margin? Is it possible to achieve a high single-digit operating margin for the Family Dollar banner in the long term?

Absolutely.

I wanted to try this just from a slightly different angle. There's obviously been expectations in terms of what your new operating profit margin could look like with all the opportunities that you have at both banners. But as I look at today's press release, everything focuses on investing. I wanted to see if you could triangulate that a little bit. And I see you'll talk about this at the Analyst Day, but every single header in terms of strategies is investing as opposed to operating margin opportunity. Investors clearly have a very high number in terms of what the actual margin opportunity could look like. So any color on that would be helpful.

Yes, I'll throw it to Kevin for a little bit of color. The way I think about it, yes, we are investing. But also, we're delivering earnings EPS growth throughout the time and top line growth. So as Rick and I said, the things that we are investing, they will have a return for long-term sustainable growth. If you look at our EPS from the midpoint range up, it's a 40% just under a 40% increase in EPS, and we moved our top line up. We'll be investing in the future, but we're going to be investing with the thought of continuing to drive that top line and the bottom line at the same time.

I would like to add that, as Mike pointed out earlier, we have established a new Finance Committee that will focus on return on invested capital. We need to ensure our stores meet the standards we expect and that our customers deserve. These are necessary investments, particularly in our systems and supply chain, aimed at enhancing productivity and efficiency to support our store managers and their teams. Ultimately, our goal is to make their jobs easier, and we believe these investments will yield significant benefits in the long run.

So some skeptical arguments are that Dollar Tree is going to get a bunch of growth this year from raising its prices by 25% on the bulk of its assortment and seeing timing benefits from selling through some older cost inventory, and now it's talking about investments. Do you think in light of all that, that the core banner or the enterprise can grow both sales and margins next year while you're making these investments?

Yes, we do.

And my follow-up question is, as you focus your price investments, how do you ensure that you're not going to spark a race to the bottom in light of the very competitive environment that you operate in with some really large competitors?

Yes, and that's important. We've got to be meaningful to our customers first and foremost, and that's what we're going to focus on. On the other side, we've got Larry here who works closely with the vendor manufacturers, and we will balance it, right? We'll make good decisions to invest where we need to, to meet the customers' needs in the marketplace. We're just going to simply close the gap regarding our key value items, and then just make sure the entire shopping experience is of great value for our customer. It's a balance.

Rick, it's really nice to hear from you after all these years. My question is about the traffic decline at Dollar Tree. You mentioned it was down about 4%. I’m curious how that trend developed during the quarter, especially since you're incorporating more new products. Additionally, I believe you mentioned having 960 SKUs with plans to reach 2,000. Since the average Dollar Tree store has around 8, how many SKUs do you intend to change? How should we view the rollout of this over the rest of the year?

Well, the 2,000 were the amount that we needed to change. Remember, at the last earnings call, our merchants since last September went item by item and put our item on the table and went out and shopped the entire competitive market to ensure that it is still a great value at $1.25. Our merchants know that at a fixed price point, they don't have to carry every item; they can drop an item and go get a replacement item that meets the necessary margin. This extreme value and ever-changing meaningful assortment is part of our mission at Dollar Tree. Customers are used to it. They've always experienced it at $1. Now they're just doing it at $1.25, and it's working very well.

On your question about traffic, this quarter, in particular, is influenced by Easter. Easter was 2 weeks later. You would have seen the best traffic in the third period and probably the biggest decrease in traffic more than likely in the second period because of the later Easter as well as when the stimulus dollars were released. Those are probably the 2 factors; it's pretty lumpy because of them.

One of the things that we're really seeing excitement around is that our seasons are accelerating more than they used to at $1.25 with the meaningful assortment and then with our rollout of our $3 and $5 items that we're rolling out to another 1,500 stores this year. So the combination of the $1.25, $3 and $5 in our seasonal business has really given us a lift that we're excited about. If you think about quarter 1, Kevin talked about the great Easter and Valentine's, and we saw great customer response. Quarter 2 is summer, and you got Memorial Day and the Fourth of July. But the back half of the year is when back-to-school, Halloween, and then Thanksgiving and Christmas that we're really setting ourselves up to have a great back half.

Rick, great to hear your voice. First thing I wanted to ask is just about the $1.25 and the elasticity improving where you're adding value. Just more detail on the number of categories you've worked on adding value back and what's left to do. Additionally, how much bigger is the opportunity within discretionary in terms of adding value or bringing items back? It seems like that would be the area where there’s potentially a more powerful impact.

Thank you for the question. Our customers recognize the discretionary value we offer, and there hasn't been much rework needed in that area, which is reflected in our discretionary business growing at 14%. We are primarily focusing on 2,000 items in consumable categories, such as salty snacks, carbonated beverages, and food, where we have 47% of our SKUs. We plan to expand our offerings further in food, carbonated beverages, and salty snacks to enhance our consumable selection. While this will take time, we believe it will drive traffic. Customers experience and appreciate the value of these items, and over time, we expect this will help increase overall store traffic. Yes, it's a great question. We would go as fast as we can. We are going as fast as we can. Last year, we wanted to open up 500. The customers responded so well that we were selling through, and the supply chain was slowing things down. We slowed down our acceleration of rolling it out throughout the year, but still ended up at 600 stores. We're going to accelerate it to 1,500, and it's dependent on the supply chain because we’re buying these products 9 to 12 months out. Our expectations are to get this done as soon as we can this year.

I just wanted to ask first about freight costs. There was a comment about maybe annualizing the increases from last year, and I think that's consistent with last quarter. Just curious if you can help us understand just how you view the state of the global shipping backdrop from your seat, what you're expecting from contract versus spot this year and just the overall cost for that.

Yes, Kelly, this is Kevin. I'll start with some information on that. In Q1, our freight was up, but it was consistent with how we had forecasted. As we had talked about in March, we expected the first half of the year to be affected by annualization of the rates we saw in the last half of '21. That feels like a good place to start. Obviously, diesel fuel has increased, and we've increased our forecast for the current market rates. Just a $1 change in rate for the year would be about a $63 million headwind, so that's the annualized number. That gives you a feel for it. We have the current market rates as we see it in our forecast and embedded in our guidance. Regarding ocean freight, the backlog is significantly less than a year ago. It's not completely gone, but it's better. Contract carrier performance has been on plan at this point. We are still using chartered vessels, which has been successful. As Kevin said, we've smoothed our the purchasing to be more consistent and dependable for the carrier. We've gone into this year with a lot of experience from 2.5 years of disruption experience.

We have $1.25 fixed price point that we moved after 35 years, and we've got the $3 and $5 price points that are fixed price points that we are rolling out as fast as we can over the next couple of years. We feel really good that we can deliver an unbelievable assortment that is exciting, meaningful, and provides extreme value for our customers while delivering on that thrill of the hunt. We will always keep in mind the margins needed to deliver those two things.

Thank you, Alan, and thank you all for joining us for today's call. Our next earnings conference call to discuss Q2 results is tentatively scheduled for Thursday, August 25, 2022. Thank you, and have a good day.

That does conclude today's conference. We thank everyone again for their participation.