Greetings, and welcome to the Dollar Tree Q4 2024 Earnings Call. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Bob LaFleur, Senior Vice President, Investor Relations. Bob, please go ahead.

Good morning, and thank you for joining us today to discuss Dollar Tree's fourth quarter fiscal 2024 results. With me today are Dollar Tree CEO, Mike Creedon; CFO, Jeff Davis; and Chief Transformation Officer, Stewart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans and future prospects are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements. For information on the risks and uncertainties that could affect our actual results, please see the Risk Factors, Business and Management's Discussion and Analysis of Financial Condition and Results of Operations section in our annual report on Form 10-K to be filed on or about March 26, 2025, our most recent press release and Form 8-K and other filings with the SEC. We caution against reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements, except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a GAAP basis. Additionally, unless otherwise stated, all comparisons discussed today for the fourth quarter of fiscal 2024 are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike, Jeff and Stewart will take your questions. I'd like to now turn the call over to Mike.

Thanks, Bob. Good morning, everyone, and thank you for joining our call today. Today is a very exciting day for our company. As I'm sure most of you saw this morning, we announced that Brigade-Macellum will acquire our Family Dollar business for a total price of just over $1 billion. After a thorough review of our strategic alternatives, the company determined that a sale of Family Dollar is the best way to achieve our value creation goals. Dollar Tree and Family Dollar are two different businesses with limited synergies, and each is at a very different stage of its journey. Separating them will enable each banner to be led and managed by a dedicated team that can focus exclusively on that banner's distinct needs and on realizing each banner's full potential. Separating will also enable investors to own a business they value more without also having to own a business they value less or that may not fit in their investment profile. It should also make it easier for the market to properly value each business. Under the terms of the deal, subject to certain closing adjustments, Dollar Tree will receive just over $800 million in cash proceeds. The deal should close in about 90 days, and Family Dollar will remain headquartered here in Chesapeake. In the fourth quarter, our team was focused on achieving three distinct objectives: successfully closing out the year; bringing the strategic review to a favorable conclusion; and setting Dollar Tree on a path to realize its full potential and create long-term value for our associates, customers and shareholders. With a strong finish to 2024 and the sale of Family Dollar set to close later this year, my leadership team and I will fully dedicate ourselves to Dollar Tree's long-term growth, profitability and returns on capital. Our focus and energy will be devoted to growing sales and profits at this iconic and powerful retail brand. Dollar Tree offers customers incredible value, convenience and discovery. Our world-class merchants consistently provide our shoppers with an unparalleled and ever-changing assortment of discretionary and consumable products. No other retailer or e-commerce platform can reproduce the immediacy and thrill of that signature Dollar Tree treasure hunt. This is our heritage, and this is our future. One of our founders, Macon Brock, always spoke of running clean, bright and inviting stores that exceed our customers' expectations. With Dollar Tree as our sole focus, we can remain true to that vision and return to our roots, while still competing and innovating in the marketplace in new and better ways than we could before. With value, convenience and discovery, Dollar Tree offers just what the customer needs in today's value-seeking environment. By delivering on the fundamentals, we can drive the sales productivity and profitability necessary to create long-term value for our associates, customers and shareholders. With that, let's now turn to our results. 2024 ended strong as Dollar Tree's multi-price journey continued to build momentum and improvements in store standards and operational efficiency are creating the foundation for sustainable growth and value creation. Fourth quarter results reflect the positive impact of our expanded assortment with our newest multi-price offerings, especially in holiday categories, driving strong year-end sell-through. In the current economic landscape, we continue to see value-seeking behavior across all customer groups. In recent weeks, many retailers reported that customers, particularly middle-income customers, are shifting towards alternatives that present value. Dollar Tree is also seeing middle-income shoppers who make up about half of our customer base, focusing more on value. At the same time, we are seeing stronger demand from higher-income customers who increasingly see Dollar Tree as a cost-effective source for an expanding range of products. This trade-in has helped to offset other headwinds. We believe our ability to continue gaining market share amid such challenging market conditions shows that consumers appreciate the discovery aspect of our unique assortment and our compelling value proposition. Dollar Tree's Q4 comp was 2%. The quarter got off to a slow start with the late Thanksgiving, but our merchandising teams delivered across the broader holiday season as customers responded positively to our expanded multi-price holiday assortment. We are particularly gratified that our comp growth was balanced with traffic up 0.7% and ticket up 1.3%. Not only were both positive measures, but ticket actually grew faster than traffic for the first time since Q4 of 2022, during the tail end of the anniversary impact from breaking the dollar. We are encouraged by the deceleration in consumables mix shift this quarter, which was supported by the strong performance of our expanded holiday assortment. Q4 consumables mix increased 60 basis points to 45.2%, which is an improvement over the average per quarter mix shift of roughly 200 basis points we've seen recently. Consumables comp was 4.2%, which was on top of a 10.8% comp last year. Discretionary comp was 0.4%, its first positive reading since Q4 of last year. Multi-price clearly provided a boost to our Q4 performance. And while we are still in the early stages of this journey, I'm pleased with the progress so far and excited about the opportunity still ahead. With that, let me share some highlights of how our expanded assortment boosted our Q4 results. First, as a reminder, our 3.0 stores are new or converted stores that offer our expanded multi-price assortment throughout the store. Other formats include 2.0, which have a smaller multi-price assortment that is concentrated in a single aisle we call the valley and our 1.0 stores, which are over 95% of the items are still at $1.25. So in Q4, our in-line 3.0 stores saw a 220 basis point comp lift compared to other formats, including a 40 basis point consumables lift and a 290 basis point discretionary lift. Compared to other formats, 3.0 stores also saw a 20 basis point traffic lift and, more importantly, a 200 basis point ticket lift. Our merchandising team worked tirelessly to improve and refine execution around our expanded assortment, especially in holiday categories. Across seasonal merchandise broadly, our 3.0 stores saw a 10 percentage point comp lift over other formats, including 30 points in Thanksgiving and 15 points in Christmas. In everyday categories like textiles, electronics, apparel and toys, we saw comp lifts in the low to mid-teens. Toys, in particular, was a big winner this season. And even in underperforming categories like books, beauty and food, that was more by design as we cut space allocations for these items to make way for more productive categories. We finished the year with approximately 2,900 3.0 format stores, including roughly 2,600 conversions and 300 new stores. While the number of 3.0 conversions this year fell a bit short of target, we continue to believe it is better to not rush and get them done right with the least amount of disruption for our customers and associates. To that end, we are targeting approximately 5,200 3.0 stores by the end of 2025, including 2,000 new conversions and 300 new stores. In summary, we're pleased with the first year performance of our expanded assortment in our 3.0 stores. The traffic, ticket and sales lift that we saw is validating the investments we're making in our expanded assortment. Before I wrap up the Q4 results, I should note that with the decision to sell Family Dollar, from an accounting perspective, our Dollar Tree and Corporate segments are now reported as continuing operations and Family Dollar results are reported as discontinued operations. Net sales from continuing operations increased 0.7% to $5 billion, reflecting the solid comp performance and strong revenue contribution from noncomp stores, including the former 99 Cents Only portfolio, offset by lapping the 53rd week of last year. Net sales from discontinued operations decreased 11.2% to $3.3 billion, reflecting Family Dollar's 1.3% comp, the impact of store closings and the lapping of last year's 53rd week. Therefore, on a consolidated basis, net sales were $8.3 billion, which was at the high end of our $8.1 billion to $8.3 billion outlook range. I'd like to take a few minutes to talk about tariffs and give you a quick supply chain update. As a large retailer and significant importer, we have years of experience dealing with global trade variability. As discussed last quarter, we have multiple contingencies in place to address a variety of tariff scenarios and mitigate the earnings impact of higher tariffs. These include negotiating supplier cost concessions, changing product specs, dropping noneconomical items, moving country of origin and, lastly, exercising the flexibility multi-price gives us. While we are focused on limiting the financial impact of any new tariffs, we are equally committed to continuously delivering value and market leadership on the items we offer our customers and differentiating ourselves from our competitors across the retail landscape. Our strategies to diversify country of origin sourcing have been in place for some time now. We intend to remain flexible and nimble, focusing our efforts on sourcing products via channels that deliver the lowest landed cost to us in order to maintain value continuity for our customers. This includes the optionality to shift sourcing to and from different countries within a relatively short time frame. For example, given our anticipated 2025 imports, the expected net impact of the 10% China tariff that was announced on February 4 prior to any mitigation efforts would have been about $15 million to $20 million per month. Based on our mitigation efforts to date, we have offset more than 90% of this incremental cost, which is reflected in our current 2025 outlook. With respect to the additional tariffs proposed in March, which included an additional 10% on goods from China and 25% on goods from Canada and Mexico, we believe our potential pre-mitigation exposure is approximately $20 million per month. As we speak, our merchants are working to mitigate the impact of this latest round of tariffs. On top of that, we are evaluating the potential impact of any additional tariffs that could materialize and impact our sourcing efforts. We have not reflected the impact of this second round of tariffs in our 2025 outlook as the net impact will depend on the eventual policy and the degree, scope and timing of our mitigation efforts. The imposition of this year's tariffs has introduced uncertainty and volatility. But over the long term, we believe that our mitigation efforts can help us prevent sustained margin erosion. Finally, concerning our supply chain operations, we will be replacing the DC capacity we lost in Marietta, Oklahoma, and we'll communicate our plans to you once they are finalized. In the interim, we will continue incurring additional stem mile and other related costs until a replacement is up and running. As an immediate step to help ease some of our current network pressure and support our growing store base, prior to the closing of the sale, we plan to convert the Family Dollar distribution center in Odessa, Texas to a Dollar Tree distribution center. In sum, we finished 2024 on a high note with strong execution at Dollar Tree. Our results reflected sales momentum powered by growing consumer acceptance of our expanded assortment. With the pending sale of Family Dollar, I am excited at the opportunity to return to Dollar Tree's roots and begin to unlock the full potential of this iconic retail brand. Before I turn the call over to Jeff to go through the details of our Q4 results, I'd like to welcome Stewart Glendinning to our team. We recently announced that Stewart will take over as CFO at the end of March. Stewart joined the company earlier this year as our Chief Transformation Officer, where he has been heavily immersed in the Family Dollar sale process and charting the future course for Dollar Tree as a standalone organization. After Jeff's Q4 recap, I've asked Stewart to share our 2025 outlook. Finally, I want to thank Jeff Davis for his partnership these past 2.5 years and for helping to ensure a smooth transition as Stewart assumes his new role. And with that, I'll turn the call over to Jeff.

Thank you, Mike, and good morning. I also want to extend my congratulations to Stewart. Having had the opportunity to work with Stewart over the past few months, I want to echo Mike's comments regarding what has been a smooth transition. Let me start with an overview of the changes in our financial reporting this quarter. Last June, we initiated a formal review of strategic alternatives for Family Dollar, which ultimately resulted in the transaction we announced today. That process officially ended in the fourth quarter with the company's decision to pursue a sale. And accordingly, Family Dollar was classified as discontinued operations. As such, our fourth quarter and full year 2024 results are reported on a continuing operations basis, which includes the results of the Dollar Tree segment and Corporate, support and Other. Family Dollar's results are reported as discontinued operations. In our earnings release this morning, we provided schedules of our 2024 quarterly and annual GAAP and non-GAAP results on a continuing, discontinued and consolidated basis. Unless otherwise stated, my comments today reference our adjusted results from continuing operations. Also for comparability purposes, please keep in mind that Q4 and FY 2023 included a 53rd week, which positively impacted revenue by approximately $560 million and adjusted EPS by approximately $0.35. Fourth quarter adjusted EPS was $2.11 from continuing operations and $0.18 from discontinued operations for a total adjusted enterprise EPS of $2.29, which compares to our outlook range of $2.10 to $2.30. Enterprise results include a $19 million or $0.07 per share benefit from a Mastercard settlement in discontinued ops and a $25 million or $0.09 per share charge for an antidumping duty recorded in continuing operations. Neither of these items were contemplated in our fourth quarter outlook. After netting both items, enterprise adjusted EPS would have been $0.01 above the high end of our outlook range. Turning to results from continuing operations. Adjusted operating income was $628 million, a 15% decrease from last year. Adjusted operating margin declined 230 basis points as gross margin declined 130 basis points and adjusted SG&A rate increased 100 basis points. Our adjusted effective tax rate was 24.8% compared to 23.8%, reflecting higher nondeductible expenses for executive compensation and lower work opportunity tax credits in the current year. Adjusted net income was $455 million compared to $544 million. Adjusted EPS from continuing operations was $2.11, which includes the $0.09 impact from the antidumping duty. Now let me move to our fourth quarter results for the Dollar Tree segment. Adjusted operating income declined 12.1% to $768 million. Adjusted operating margin declined by approximately 220 basis points, reflecting a 130 basis point decline in gross margin and a 90 basis point increase in adjusted SG&A rate. Gross margin declined primarily from the loss of sales leverage, lower mark-on and higher shrink, distribution and markdown costs, partially offset by lower freight. Also note that Q4 cost of sales included the $25 million antidumping duty. Adjusted SG&A rate rose principally from higher depreciation and utilities expense and the loss of sales leverage, which was partially offset by lower general liability claims adjustments. Moving on to the balance sheet and free cash flow. On a continuing operations basis, total inventory increased $176 million to $2.7 billion on higher mark-on and inventory receipts as we expanded our multi-price assortment. We ended the year with $1.3 billion in cash and cash equivalents. On the cash flow statement for continuing operations, on a full year basis, we generated $2.2 billion in cash from operating activities, had capital expenditures of $1.3 billion and delivered $893 million of free cash flow. We ended the year with no borrowings under our revolver, no commercial paper outstanding and bank-defined leverage below 2.5x. Last week, we extended the maturity of our $1.5 billion long-term revolving credit facility to 2030 from 2026. Additionally, we closed on a new $1 billion 364-day revolver ahead of the May maturity of our $1 billion 4% senior notes. We believe we have ample funding capacity between cash on hand and availability under these credit facilities to meet our near-term debt obligations and provide for the ongoing capital needs of the business. We did not repurchase any shares in the fourth quarter. For the full year, we repurchased approximately 3.3 million shares of common stock for approximately $404 million, including excise tax. At the end of the year, we had approximately $952 million remaining under our existing share repurchase program. And now let me turn the call over to Stewart.

Thank you, Jeff. Now let me provide our current perspective on fiscal 2025. With the pending sale of Family Dollar, 2025 will be a transitional year for Dollar Tree as a standalone business. We will be working to separate Family Dollar while simultaneously focusing on driving growth and operating improvements in Dollar Tree. Prior to the closing of the sale, continuing operations, or what we are calling RemainCo, will be burdened with the full cost of corporate shared services. After the sale closes, which we expect will be in June 2025, a transition services agreement, or TSA, will go into effect. This agreement will help offset the shared cost burden until such time as these costs are fully transitioned to the new owners, a process which should unfold throughout 2025 and into 2026. Looking forward to fiscal year 2025, we expect strong top line growth from the Dollar Tree banner, with sales being positively impacted by multi-price expansion, operating improvements in our stores, new store growth and the continuing ramp-up of our recently opened stores, especially the former 99 Cents Only portfolio. Taking all this into consideration, we expect fiscal year 2025 sales will be in the range of $18.5 billion to $19.1 billion based on comparable store sales growth of 3% to 5%. We expect a modest improvement in gross margin based on the mitigation actions we've taken to date on implemented tariffs. That said, the tariff situation remains volatile, and any additional tariffs or unforeseen waterfall effects from the already announced tariffs could affect this assumption. Keep in mind Mike's comments about our ability to mitigate those tariffs over time. Outside of tariffs, we're forecasting favorability in mark-on, markdown and freight, with a partial offset from higher distribution costs related to incremental D&A from our supply chain investments and additional stem mile and other costs from losing the Marietta DC. Our freight cost outlook is positive across ocean and both inbound and outbound ground. For SG&A, I'll talk about Dollar Tree segment separately from Corporate, support and Other. Dollar Tree's adjusted SG&A rate in 2024 was 23.8%. In 2025, we expect deleverage of approximately 50 to 80 basis points. This is coming from higher store payroll related to our investments in additional hours and state-mandated minimum wage increases, management incentive compensation, D&A related to our elevated 2024 and 2025 CapEx investments as well as repair and maintenance, as we continue to improve store standards. Our corporate adjusted SG&A in 2024 was approximately $550 million. We expect this to grow by approximately 20% in 2025. The largest contributor to the year-over-year increase is IT spending, as we move systems off legacy platforms and onto the cloud, followed by payroll from merit increases and incentive comp and D&A. Under the TSA that I mentioned earlier, we expect to receive approximately $95 million in the last six months of 2025 for services provided to Family Dollar over the second half of the year and a similar amount next year. While we will receive TSA income in connection with the cost of supporting Family Dollar for the second half of the year, we will incur these costs over the entire year. This negatively impacts our adjusted EPS by approximately $0.30 to $0.35, given the expected timing of the deal closing. On a normalized basis, had we received TSA payments for the full year, our net corporate costs at RemainCo would be lower, and our adjusted EPS would be $0.30 to $0.35 higher than the outlook we are providing. Over the next several years, we expect absolute Corporate SG&A dollars will go down, as overhead costs permanently shift to Family Dollar's new owners. Our Corporate infrastructure adjusts to the level needed to properly support a single banner, stranded costs go away and the TSA runs its course. We are targeting a reduction in our adjusted Corporate SG&A rate of approximately 100 basis points over the medium term. Finishing out the P&L, we expect net interest and other income of approximately $115 million, an effective tax rate of approximately 25.2% and 216 million shares outstanding, which does not reflect any share repurchases. Adjusted EPS from continuing operations is expected to be in the range of $5 to $5.50, which compares to last year's $5.10. Capital expenditures are expected to be in the range of $1.2 billion to $1.3 billion, including approximately 400 new Dollar Tree store openings. With respect to cash, we started the year with $1.3 billion on the balance sheet and expect to receive approximately $800 million of net proceeds from the Family Dollar sale. On top of this, we expect tax benefits from losses on the sale to be approximately $350 million accretive on a cash flow basis. Our capital allocation priorities remain investing and growing the business, then returning excess cash to shareholders with our preferred vehicle to date having been share repurchase. It is reasonable to assume that we will be back in the market repurchasing shares this year. Our balance sheet is strong. For this reason, we expect to come to market with a new debt offering following our May debt maturity and the closing of the Family Dollar sale. In the near term, we expect first quarter net sales to be in the range of $4.5 billion to $4.6 billion based on comparable net sales growth in the 3% to 5% range and adjusted diluted earnings per share in the range of $1.10 to $1.25. In summary, 2025 is going to be a transitional year. With the sale of Family Dollar, we can fully focus on unlocking value at Dollar Tree. We had a solid 2024, and we feel good about many parts of our business heading into 2025. We're optimistic about the top line, and we're addressing cost pressures on several fronts, with tariffs being at the top of that list. We feel great about our cash position and our ability to generate meaningful levels of cash going forward. With a solid balance sheet and prudent CapEx commitments, we should have the ability to return a substantial amount of capital to shareholders this year and into the future. With that, I'll turn the call back over to Mike.

Thanks, Stewart. This is a pivotal time at Dollar Tree. We are shifting our long-term operational focus away from an integrated 2-banner model. With the sale of Family Dollar, our leadership team can focus all our energy and resources on growing Dollar Tree. I strongly believe selling Family Dollar and returning to our roots with an expanded assortment at Dollar Tree has created material value. Dollar Tree remains one of the best growth stories in retail, and the separation of the two businesses will allow us to move forward with a single-minded focus of driving growth and profitability. As Stewart indicated, 2025 is going to be a transition year as we pivot to operating Dollar Tree as a standalone entity. After 2025, on a go-forward basis, we will drive top line results by growing comp and opening new stores. We expect increased sales productivity will allow us to expand gross margin, begin leveraging SG&A and grow EPS. Most importantly, by returning a meaningful level of cash to our shareholders, we can leverage that EPS growth even more. I'd like to close with a shout-out to the entirety of the Dollar Tree and Family Dollar teams. They have worked masterfully and tirelessly on behalf of our shareholders and our customers. I could not be more honored to count myself among them. And with that, we're ready to take your questions.

Our first question is coming from Edward Kelly from Wells Fargo. Your line is now open.

Hi. Good morning, everyone. I wanted to start with just the tariff side and mitigation. So it sounds like $20 million a month or about $0.85 a share is not in guidance. Can you talk about the potential mitigation of that, what are efforts that you currently have on deck in order to mitigate that? Your confidence level around your ability to offset it? And then as part of this, Mike, it does seem like you have new price points on deck, just from what we can see $1.50, $1.75, I don't know if that's a test or not. But how important could that be to offsetting this as well? Just curious as to how you put all this together and you view your opportunity to mitigate what potentially could be ahead?

Thanks, Ed, and good morning. If you look at the tariffs, the first round, our team has been working our tariff strategy for a while now. We went through the round one of tariffs several years ago. And really, we put actions in place as soon as November to start mitigating the first round of tariffs. And as we said, we were able to offset 90% of those first round. With the second round, we continue to leverage the tools that we have, those big five that I talk about in terms of if we have to change the spec or negotiate really well with our suppliers and eliminate the product if we have to. And of course, what multi-price has opened up for us and given us the ability to mitigate. If you look at the second round, the additional 10% on top of 10 and the 25% for Mexico and the 25% for Canada, there's still a great deal of uncertainty as to what completely hits and how those change. April 2 is a big day in terms of what happens with reciprocal tariffs. And so our teams are actively looking to mitigate, but given the level of uncertainty, we want to go with what we knew and then we continue to run our plays and our mitigation strategies to offset any other tariffs that come. I think we've demonstrated that when we've got the time, we can mitigate these tariffs, and that's what the team will continue to do. In terms of the different price points, we look at value, convenience and discovery and we say where can we offer that and maybe move on some pricing as part of not just tariffs, but an inflationary cost environment that we've got to mitigate. And so that's where you're seeing that work where it makes sense. And I think we're positioned better than we ever have before to manage what is a very uncertain and volatile arena that we're in.

Thank you. Your next question is coming from Michael Lasser from UBS. Your line is now live.

Good morning. Thank you so much for taking my question. So Mike, I think the fact that Dollar Tree quantified the 90% mitigation of the first 10% from China and the fact that the second 10% from China is currently being collected is being assumed by the market that that's a cost that should be embedded in the P&L for this year. So a, is that wrong? And b, can you give us a sense of what your overall sourcing portfolio looks like right now such that when the reciprocal tariffs do come out if they do, we can get a sense for the exposures for the core Dollar Tree and that would help us understand the potential financial impact? And then on top of that, to what extent is Dollar Tree willing to use its balance sheet and all the cash that it has on its balance sheet, especially as the Family Dollar sale is consummated to offset the potential margin implications of these tariffs and support the EPS outlook from here? Thank you very much.

Yes. Thanks, Michael. The first answer is, no. We have included the first round of tariffs and our mitigation strategy in our forecast. So the uncovered portion of that first round that remains is reflected in our 2025 forecast. It was premature given the uncertainty in the April 2 reciprocal tariffs and some of the back and forth that we've seen for us to include the March 4 tariffs in our outlook. And so we will continue to look to mitigate those. We've got to see what materializes there. We did dimensionalize it, though, to talk about how it would impact us per month on an unmitigated basis, and that's the $20 million per month if unmitigated. I think we've demonstrated as a company that we've been doing this a long time with our China Plus One strategy coming out of 2017 and 2018. We're in a good position to manage that over time, and we'll continue to do that. As far as the balance sheet, Stewart, why don't you take the balance sheet to offset any margin impact?

Yes. Great. Michael, can you just help us in what ways you're thinking about us using our balance sheet to offset margin?

Have a lot of financial flexibility to return excess cash to shareholders.

Okay. Good. Yes. No, certainly. Let me address both of those. So first of all, there is actually one hidden benefit in our balance sheet. We are carrying a level of inventory that potentially is not tariffed yet, and of course, we'll be able to use that. So there's a baked-in benefit in our P&L. I just want to reinforce what Mike said. We have baked in all the first round tariffs. We gave you a sense of the run rate so you could decide what that looks like as we see the tariffs unfold. But that $20 million we're still working on mitigating. With respect to using our balance sheet to return cash to shareholders, in my prepared remarks, I mentioned that you should expect to see us back in the market repurchasing shares. Outside of the tariffs, we are in a place where our balance sheet is very healthy. We have an attractive stock price. And the reality is we are sitting on a lot of cash that we will need to do something with.

Thank you. Next question is coming from Simeon Gutman from Morgan Stanley. Your line is now live.

Hi. Good morning, everyone. Congratulations on the Family Dollar sale. Mike, I wanted to ask you the philosophy of how you're going to run the business over the next few years. You have a fresh start now with one asset. And if you look back, inflation has been pretty challenging for Dollar stores and now you still have to navigate tariffs. So I wanted to ask how you think about margins for the business. Do you invest during the next several years, keeping margin down to reinvest back in the company? You have your competitors. Your biggest one is reinvesting in itself; not sure what Family Dollar's plans will be. But curious, do you let margins run up, or do you have to keep a lot of ammunition and firepower, given the pretty uncertain backdrop that the Dollar stores have been navigating for the last several years?

Yes. I'm excited about the opportunities of Dollar Tree on its own as a standalone business. If you look at the ability to open stores every year, you look at the great work that our merchants have done, you look at the clarity of message that we can deliver from a Dollar Tree-only scenario. We believe that there is a very attractive algorithm over time that has strong margins. We've been in investment mode for the last several years, as you can see from our CapEx, and we've accepted some near-term pressures through wage increases and hours investments. While 2025 is a year where we have a partial TSA and we need to close the Family Dollar deal and complete that work, I look out multi-year and say this is a very strong business that we can manage through an inflationary environment. In large part, because of the investments we've made over the past couple of years in our stores and in our distribution centers, and what we've done in terms of the ability to provide an expanded assortment as a result of multi-price. So when I look at the multi-year algorithm, I think it's a very compelling business that we feel we can manage well for a long time.

Thank you. Our next question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Great. Thanks. So Mike, could you elaborate on trends you're seeing from higher income versus middle and lower. I thought that was interesting in your prepared remarks. And maybe just drivers of 3% to 5% comps in the first quarter, relative to the 2% comp that you did in the fourth quarter, have you seen acceleration so far quarter-to-date? And is it traffic or ticket?

Yes. Let me hit the comp builders first. As I look out over 2025, there are a couple of things going on. One, you have a large pool of new store openings that will become part of our comp, including the former 99 Cents Only portfolio. Opening or converting 99 Cents Only stores is equivalent to opening multiple Dollar Tree stores in terms of volume contribution. Last year, we had a significant headwind from self-inflicted cannibalization of our new store openings without the maturation tailwind. We start to get that tailwind this year, which is encouraging. Multi-price continues to mature. I was very encouraged in Q4. You saw the true strength of multi-price in Q4 with discretionary growth. It's the new conversions this year and the maturing of ones we did in the past. When I look by cohort, the Q1, Q2 and Q3 conversions all strengthened in Q4 versus Q3. The longer you're on multi-price, you get the real benefit of the expanded assortment. Last year, we also had a difficult holiday calendar with fewer days at key holidays, which is now behind us and provides a boost. Finally, store standards, blocking and tackling, and investments in hours and wages will help position us. Regarding consumer behavior, lower-income shoppers need us for pack size and fill-ins; middle-income shoppers, about 50% of our customer base, use us to live and celebrate their lives. What's interesting is that in this inflationary environment, higher-income shoppers are increasingly finding Dollar Tree part of their solution as well. So we see strength across income cohorts and growth in ticket and traffic, which supports our outlook.

Thank you. Next question today is coming from John Heinbockel from Guggenheim Securities. Your line is now live.

Hi, Mike, two related things. What are your product priorities when I think about discretionary particularly around seasonal because you did a lot of new stuff with holiday last year. So priority is there, priorities with regard to multi-price point cooler expansion? And then when you think about comp getting better by maybe 200 basis points, do you think it's equal between discretionary and consumable, each go up by an equal amount? Or is there a difference?

So we're trying to exceed our customers' expectations at every turn. You saw in Q4 the real power of our assortment in Christmas and Harvest (Thanksgiving). The holidays are a key driver for Dollar Tree. We will be balanced. We know we have to be there for what the customer needs, which has shifted the mix a bit to consumables over the last couple of years. But our DNA is discretionary, and we will continue to bring compelling seasonal and holiday assortment. Last year, to get product in quickly we focused on items that were more available domestically and consumables. Over time, you saw in Q4 what we could do when we bring in discretionary with time to buy. We plan to fuel the discretionary business with an expanded assortment and better advance planning for seasons.

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

Good morning and thanks for taking my question. So, just going back to 3.0 format stores, any pause or negative surprise you're seeing with that format? And then as you look forward, what are the bigger opportunities to further optimize the performance?

The 3.0 stores continue to perform. The longer you're on the program, the better you perform. Our customers need to discover multi-price when they come into the store, and it's encouraging to see strong performance across conversion cohorts. We are learning and iterating; Rick McNeely's team constantly learns what worked and what didn't and circles back to change assortments and space allocation. One key lesson from 2024 is you can't rush conversions; stores must be ready to receive the new format — you need strong leadership in the store, proper freight management in the back room and no Store Manager vacancy. When we set up stores right, results are incredible. When we don't, we're disappointed. Our focus for 2025 is improving execution in operations and readiness for conversions.

Thank you. Next question is coming from Chuck Grom from Gordon Haskett. Your line is now live.

Hi. Thanks very much. Good morning, everybody. On the multi-price, I think you guys said 220 basis points of an uptick; I believe in the second and third quarter, the numbers were higher. Just wondering if you could speak to that directional change for us. And then on the 2025 outlook, on the 3% to 5% comp you're expecting 50 to 80 basis points of deleverage. Can you just speak to the factors that are going against you when you think you get a little bit more leverage on such a great comp? Thank you.

First, on multi-price performance, the cadence of conversions changed through the year. Early conversions were largely 1.0 to 3.0, which was a bigger step change. Later in the year, more conversions were from the Valley to 3.0, which is a more incremental change. For 2025, we'll pursue a more balanced conversion approach, targeting about 2,000 conversions. Also, as we evolve the program, we focus on lift versus absolute comp, so turning a very negative comping store into a less negative store still delivers value and improves results over time.

Thank you.

Let me touch on the second part about why you see deleverage. First, at the segment level you will see some immediate pickup in margin when Family Dollar is no longer on the consolidated P&L because Family Dollar historically carried a lower operating margin. However, in 2025 RemainCo will carry the full corporate shared costs for the year even though we only expect TSA receipts in the second half, which creates near-term deleverage. In addition, corporate SG&A will increase in 2025 due to investments in IT and costs that were previously allocated to Family Dollar. Those components drive the year-over-year increase in corporate SG&A. From a timing perspective, you should expect EPS to be backloaded this year because TSA payments and the favorable holiday calendar impact the second half more meaningfully.

Thank you. Our next question is coming from Kate McShane from Goldman Sachs. Your line is now live.

Good morning. Thanks for taking our question. Can you remind us how many combo stores you have with Family Dollar and Dollar Tree and how that unwind might look? And just as a follow-up to all the tariff questions: you mentioned that you can mitigate 90% of the first round of tariffs. Does that mean that the remaining 10% is going to be mitigated with higher prices?

This is a clean deal. There are roughly 1,000 combo stores that will go to the new owner. There are just under 60 full combos that will stay with Dollar Tree and will be rebranded Dollar Tree only. Regarding the 90% mitigation, the remaining 10% is reflected in our forecast. We will continue to use our full toolkit — country of origin shifts, negotiating with suppliers, changing specs, eliminating items where necessary — and in select circumstances we will consider targeted pricing. We will be surgical and strategic about pricing decisions.

Thank you. Our next question is coming from Paul Lejuez from Citigroup. Your line is now live.

Okay. Thanks guys. I think you already started to take some prices—I'm curious if that was driven by the tariffs or was that driving that decision? And then just going back to Matt Boss' question, what do you assume in that 3% to 5% comp from a traffic versus ticket perspective? I'm not sure if I heard the answer there. And just how much are recent price moves a driver of AUR and ticket? And then just last, when is there a clean break from the TSA? And are there any guarantees of the leases on the Family Dollar stores by Dollar Tree? Thanks.

We've been operating in an inflationary environment for some time. Some targeted pricing actions were taken on products for which we are the primary destination and which are important to our customers, for example certain candles that are core to our assortment. Tariffs are a part of the decision set, but wage increases, investments and other cost pressures have also been factors. On the 3% to 5% comp, we aim to deliver both traffic and ticket growth; Q4 showed strong ticket growth driven by multi-price and holiday assortment. The TSA becomes effective at closing and we expect a transition process through 2025 into 2026. This is a clean deal; the majority of stores convey with the transaction and there are no ongoing guarantees of Family Dollar leases by Dollar Tree beyond standard provisions that convey in transactions like this.

Thank you. Our next question today is coming from Karen Short from Melius Research. Your line is now live.

Hi. Thanks very much. Congratulations on something that has been long awaited by many in the investment community. I have two questions. One is what is the right run rate to think about for Dollar Tree banner operating margin once we get past transition in 2025? And the second question I had was, anything to call out with respect to a breakup fee in this transaction, if there's anything to point out?

In terms of a run rate, given time we expect Dollar Tree to be a strong margin business. We have opportunities to improve topline productivity, expand gross margin and leverage SG&A over time. 2025 is a transitional year with some near-term noise from corporate cost allocation and the TSA timing, but over the medium term we expect meaningful improvement. Regarding deal specifics, this is a negotiated transaction with customary terms; we will disclose material deal terms in required filings as appropriate.

Structurally, when you remove Family Dollar from the consolidated results, you'll see an immediate pickup in operating margin because Family Dollar historically carried lower margins. However, because RemainCo will carry the full corporate costs in the short run, you'll also see some near-term pressure despite that pickup. We shared in the supplemental slides how we plan to work down corporate costs and we are targeting a reduction in corporate SG&A rate of roughly 100 basis points over the medium term, which will flow into operating margin. We will provide more detail in upcoming communications, potentially including an Investor Day later this year.

Thank you. Our final question today is coming from Seth Sigman from Barclays. Your line is now live.

Great. Thanks for taking the question. Good morning, everyone. I wanted to focus on the gross margin. The guidance is for a marked improvement in 2025. Now obviously, you said that you mitigated the first 10% tariffs here. I just want to clarify that means that there's no impact on the gross margin? I think that's how the commentary implied. But just wanted to clarify that. And then there should be some tailwinds. So I'm just curious, what are some of the other offsets to gross margin this year? Or if you could give us the puts and takes, that would be helpful. Thanks.

Yes. We have considered the first round of tariffs in our gross margin Outlook and our mitigation actions have offset roughly 90% of that first round. The second round of tariffs is not included in our outlook, which is why we provided the $20 million a month unmitigated run rate for context. From a gross margin perspective, we expect modest improvement driven by mitigation actions, mark-on and markdown improvements and freight benefits. Offsetting items include higher distribution costs related to increased D&A from supply chain investments and stem-mile impacts from the Marietta DC loss. On SG&A, you will see some offsetting items like higher depreciation from CapEx and the reversal of certain one-time items from last year. On net, I wouldn't assume a large one-time SG&A tailwind this year; the shape of the year includes higher backloading of benefits in the second half due to TSA receipts and the holiday calendar impact.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you all for joining us this morning, and have a great day. Thank you.

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