10-K 1 dltr-20220129.htm 10-K dltr-20220129
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-25464
dltr-20220129_g1.gif
DOLLAR TREE, INC.
(Exact name of registrant as specified in its charter)
Virginia26-2018846
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
500 Volvo Parkway
Chesapeake,Virginia23320
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (757) 321-5000

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareDLTRNASDAQ Global Select Market
Securities registered pursuant to section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YesNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YesNo


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value of common stock held by non-affiliates of the registrant on July 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was $22,404,353,447, based upon the closing sale price for the registrant’s common stock on such date. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the registrant.
On March 7, 2022, there were 225,110,329 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for in Items 10, 11, 12, 13 and 14 of Part III, to the extent not set forth herein, is incorporated by reference to the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended January 29, 2022.
2


DOLLAR TREE, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 29, 2022
TABLE OF CONTENTS
  Page
 PART I 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 PART II 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
 PART III 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 PART IV 
Item 15.
Item 16.
3

Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,” “should,” “predict,” “possible,” “potential,” “continue,” “strategy,” and similar expressions. For example, our forward-looking statements include, without limitation, statements regarding:
The potential effect of general business or economic conditions on our business, including the direct and indirect effects of the COVID-19 pandemic, inflation, labor shortages, consumer spending levels, and unemployment in our markets;
The uncertainty of the impact of the COVID-19 pandemic and public health measures on our business and results of operations, including uncertainties surrounding shipping delays and other disruptions in our supply chain or sources of supply, the physical and financial health of our customers, and the effectiveness and duration of government assistance programs to individuals, households and businesses to support consumer spending;
Our expectations regarding higher oceanic shipping and domestic freight and fuel costs, and our plans to manage these cost increases;
Our expectations regarding increased expenses for higher wages and bonuses paid to associates, including increases in the minimum wage by States and localities, potential federal legislation increasing the minimum wage, and a potential increase in the minimum salary for exempt store managers;
Our expectations regarding continued disruptions and delays in shipping from China and other parts of Asia, and the impact of such disruptions and delays on our product availability, product mix, sales, and merchandise margin.
Our growth plans, including our plans to add, renovate, re-banner, expand, remodel, relocate or close stores and any related costs or charges, our leasing strategy for future expansion, and our ability to renew leases at existing store locations;
Our anticipated sales, comparable store net sales, net sales growth, gross profit margin, costs of goods sold (including product mix), shrink rates, earnings and earnings growth, inventory levels, selling, general and administrative and other fixed costs, and our ability to leverage those costs;
The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations, including (a) the proceeding by the U.S. Food and Drug Administration (“FDA”) arising out of or relating to: (i) products manufactured by certain Chinese factories, (ii) the inspection by the FDA and the U.S. Department of Agriculture (“USDA”) and pending FDA compliance process with respect to our West Memphis, Arkansas Family Dollar distribution center (“Arkansas FDA Matter”), (iii) a voluntary retail level product recall we initiated in February 2022 in connection with the Arkansas FDA Matter, (b) several proposed class action complaints filed against Family Dollar pertaining to circumstances underlying the Arkansas FDA Matter, (c) the federal grand jury subpoena relating to issues associated with our West Memphis, Arkansas Family Dollar distribution center, and/or (d) the facts relating to the matters described in (a), (b) or (c) above;
Our plans to renovate existing Family Dollar stores and build new stores in the H2 store format, including an increase in the number of stores with freezers and coolers and the roll-out of adult beverages, and the performance of that format on our results of operations;
Our plans and expectations relating to the introduction of additional price points above $1 in our Dollar Tree stores;
Our plans relating to new store openings and new store concepts such as Dollar Tree Plus and our Combination Store format;
The impact of trade relations and the ongoing trade dispute between the United States and China, including the actual and potential effect of Section 301 tariffs on Chinese goods imposed by the United States Trade Representative, uncertainties surrounding the policies of the current presidential administration, and other potential impediments to imports;
Our expectations regarding an increase in imports and the resulting payment of a higher amount of Section 301 tariffs in 2022;
The reliability of, and cost associated with, our sources of supply, particularly imported goods such as those sourced from China and domestic goods which are in higher demand as a result of the COVID-19 pandemic;
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The effect of changes in labor laws, and the effect of the Fair Labor Standards Act as it relates to the qualification of our managers for exempt status, minimum wage and health care law;
Our seasonal sales patterns and customer demand including those relating to the important holiday selling seasons and party merchandise;
The average size and productivity of our stores, including those to be added in 2022 and beyond;
Our cash needs, including our ability to fund our future capital expenditures, working capital requirements and repurchases of common stock under our repurchase program, and our ability to service our debt obligations, including our expected annual interest expense;
Our expectations regarding the construction of new distribution centers and the capabilities of our distribution center network;
Our expectations regarding higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores, and construction, permitting and inspection delays related to new store openings;
Our expectations regarding competition and our potential for long-term growth;
Our assessment of the impact on us of certain actions by activist shareholders and our potential responses to these actions;
Our assessment of the materiality and impact on our business of recent accounting pronouncements adopted by the Financial Accounting Standards Board;
Management’s estimates and expectations as they relate to income tax liabilities, deferred income taxes, uncertain tax positions, and recognition of stock-based compensation; and
Management’s estimates associated with our critical accounting estimates, including inventory valuation, self-insurance liabilities and valuations for our goodwill and indefinite-lived intangible assets impairment analyses.
A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Our forward-looking statements are all based on currently available operating, financial and business information. The outcome of the events described in these forward-looking statements is subject to a variety of factors, including, but not limited to, the risks and uncertainties discussed under “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-K.
We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements.
We do not undertake to publicly update or revise any forward-looking statements after the date of this Form 10-K, whether as a result of new information, future events, or otherwise.
Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that we agree with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, we have a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
Introductory Note
Unless otherwise stated, references to “we,” “our” and “us” generally refer to Dollar Tree, Inc. and its direct and indirect subsidiaries on a consolidated basis. Unless specifically indicated otherwise, any references to “2022” or “fiscal 2022,” “2021” or “fiscal 2021,” “2020” or “fiscal 2020,” and “2019” or “fiscal 2019,” relate to as of or for the years ended January 28, 2023, January 29, 2022, January 30, 2021 and February 1, 2020, respectively.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our website
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at www.dollartree.com as soon as reasonably practicable after electronic filing of such reports with the Securities and Exchange Commission (“SEC”).
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PART I
Item 1. Business
Overview
We are a leading operator of discount variety stores with a solid history of growth and performance. Our stores operate under the brand names of Dollar Tree, Family Dollar and Dollar Tree Canada. At January 29, 2022, we operated 16,077 discount variety retail stores across 48 states and five Canadian provinces and over the long-term, we believe that the market can support more than 10,000 Dollar Tree stores and 15,000 Family Dollar stores across the United States, and approximately 1,000 Dollar Tree stores in Canada. We believe the convenience and value we offer are key factors in serving and growing our base of loyal customers.
We operate in two reporting business segments: Dollar Tree and Family Dollar. For discussion of the operating results of our reporting business segments, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Segment Information” and Note 11 to our consolidated financial statements.
We execute a dual-banner strategy that aims to offer the best of our brands in various store formats to serve customers in all types of geographic markets. Dollar Tree is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $1.25. Dollar Tree stores serve a broad range of income customers in suburban locations, striving continuously to “Wow” the customer with a compelling, fun and fresh merchandise assortment comprising a variety of the things the customer wants and needs, all at incredible values in bright, clean and friendly stores. Family Dollar operates general merchandise retail discount stores providing customers with a selection of competitively-priced merchandise in convenient neighborhood stores. Family Dollar primarily serves a lower than average income customer in urban and rural locations, offering great values on everyday items.
We are committed to growing our combined business through new store openings and through our store relocation, expansion and remodel program. We plan to open new stores in underserved markets and to strategically increase our presence in our existing markets. We are executing our strategic initiatives including Dollar Tree Plus and the Family Dollar H2 and Combination Store (or Combo Store) format initiatives. We are focused on revitalizing our assortment in every store by leveraging the complementary merchandise expertise of each segment, including Dollar Tree’s sourcing and product development expertise and Family Dollar’s consumer package goods and national brands sourcing expertise. These initiatives are discussed further in the overview of each segment below.
Corporate Culture
We believe that honesty and integrity, and treating people fairly and with respect are core values within our corporate culture. We believe that running a business, and certainly a public company, carries with it a responsibility to be above reproach when making operational and financial decisions. Our executive management team visits and shops at our stores like every customer, and ideas and individual creativity on the part of our associates are encouraged, particularly from our store managers who know their stores and their customers. We have standards for store displays, merchandise presentation, and store operations. We maintain an open door policy for all associates. Our distribution centers are operated based on objective measures of performance and virtually everyone in our store support center is available to assist associates in our stores and distribution centers. For more information, see Human Capital Resources below.
Our disclosure committee meets at least quarterly and monitors our internal controls over financial reporting to ensure that our public filings contain discussions about the potential risks our business faces. We believe that we have appropriate controls in place to be able to certify our financial statements. Additionally, we have complied with the listing requirements for the Nasdaq Global Select Market.
Dollar Tree
The Dollar Tree segment includes 8,061 stores operating under the Dollar Tree and Dollar Tree Canada brands, 15 distribution centers in the United States and two in Canada. Our stores predominantly range from 8,000 - 10,000 selling square feet. During the third quarter of 2021, we announced our new pricing initiative to increase the price point on a majority of our $1.00 merchandise to a new $1.25 price point across our Dollar Tree stores in the United States. We believe that the new pricing strategy will enable us to introduce new products and expand our merchandise assortment in Dollar Tree stores while maintaining great value for our customers. At January 29, 2022, the new price point was rolled out to more than 5,800 of our stores and we completed the rollout to the remaining stores in the first quarter of 2022. We continue to implement our Dollar Tree Plus initiative which provides our customers with extraordinary value in discretionary categories priced at the $3 and $5 price points. During 2021, we entered into a partnership with Instacart and as of January 29, 2022, our customers can shop online and receive same-day delivery from nearly 7,000 Dollar Tree stores without having to visit a store.
In our Dollar Tree Canada stores, we sell items principally for $1.25(CAD) or less. Our revenue and assets in Canada are not material. We are the owners of several trademarks including “Dollar Tree” and the “Dollar Tree” logo.
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We strive to exceed our customers’ expectations of the variety and quality of products they can purchase by offering items we believe typically sell for higher prices elsewhere. We buy approximately 57% to 59% of our merchandise domestically and import the remaining 41% to 43%. Our domestic purchases include basic, home, closeouts and promotional merchandise. We believe our mix of imported and domestic merchandise affords our buyers flexibility that allows them to consistently exceed our customers’ expectations. In addition, direct relationships with manufacturers permit us to select from a broad range of products and customize packaging, product sizes and package quantities that meet our customers’ needs.
We carry approximately 7,000 items in our Dollar Tree stores and as of the end of fiscal 2021 approximately 30% of our items are automatically replenished. The remaining items are pushed to the stores and a portion can be reordered by our store managers on a weekly basis. Through automatic replenishment and our store managers’ ability to order product, each store manager is able to satisfy the demands of their particular customer base.
We maintain a balanced selection of products within traditional variety store categories. We offer a wide selection of everyday basic products and we supplement these basic, everyday items with seasonal, closeout and promotional merchandise. We attempt to keep certain basic consumable merchandise in our stores continuously to establish our stores as a destination and increase traffic in our stores. Closeout and promotional merchandise is purchased opportunistically and represents less than 10% of our purchases.
The merchandise mix in our Dollar Tree stores consists of:
consumable merchandise, which includes everyday consumables such as household paper and chemicals, food, candy, health and personal care products, and in many stores, frozen and refrigerated food;
variety merchandise, which includes toys, durable housewares, gifts, stationery, party goods, greeting cards, softlines, arts and crafts supplies and other items; and
seasonal goods, which include, among others, Christmas, Easter, Halloween and Valentine’s Day merchandise.
For information regarding the amounts and percentages of our net sales contributed by the above merchandise categories for the last three fiscal years, please refer to Note 11 to our consolidated financial statements.
Family Dollar
In our 8,016 Family Dollar stores, we sell merchandise at prices that generally range from $1.00 to $10.00. Our stores predominantly range from 6,000 - 8,000 selling square feet. The Family Dollar segment consists of our store operations under the Family Dollar brand and 11 distribution centers. We have two primary initiatives for our Family Dollar stores, the H2 format and our Combo Store format, both of which incorporate elements of our Dollar Tree stores into Family Dollar stores. The H2 model stores include approximately 20 Dollar Tree $1.25 merchandise sections and establish a minimum number of freezer and cooler doors, throughout the store. As of January 29, 2022, we operated approximately 3,815 H2 stores. The Combo Store format, which was designed specifically for small towns and rural communities with populations of 3,000 to 4,000 residents, blends Family Dollar’s great value and assortment with select Dollar Tree merchandise categories under one roof. As of January 29, 2022, we operated more than 240 Combo Stores. Our new and renovated H2 and Combo Stores have higher sales and operating income margins compared with legacy Family Dollar stores. During 2021, we entered into a partnership with Instacart and as of January 29, 2022, our customers can shop online and receive same-day delivery from more than 6,000 Family Dollar stores without having to visit a store. We are the owners of the trademarks “Family Dollar,” “Family Dollar Stores” and other names and designs of certain merchandise sold in Family Dollar stores.
Our Family Dollar stores provide customers with a quality, high-value assortment of basic necessities and seasonal merchandise. We offer competitively-priced national brands from leading manufacturers alongside name brand equivalent-value, lower-priced private labels. We purchase merchandise from a wide variety of suppliers and generally have not experienced difficulty in obtaining adequate quantities of merchandise. In fiscal 2021, we purchased approximately 14% of our merchandise through our relationship with McLane Company, Inc., which distributes consumable merchandise from multiple manufacturers. In addition, approximately 16% of our merchandise is imported directly.
While the number of items in a given store can vary based on the store’s size, geographic location, merchandising initiatives and other factors, our typical Family Dollar store generally carries approximately 7,600 basic items alongside items that are ever-changing and seasonally-relevant throughout the year.
The merchandise mix in our Family Dollar stores consists of:
consumable merchandise, which includes food and beverages, tobacco, health and personal care products, household chemicals, paper products, hardware and automotive supplies, diapers, batteries, and pet food and supplies;
home products, which include housewares, home décor, giftware, and domestics, including comforters, sheets and towels;
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apparel and accessories merchandise, which includes clothing, fashion accessories and shoes; and
seasonal and electronics merchandise, which includes Christmas, Easter, Halloween and Valentine’s Day merchandise, personal electronics, including pre-paid cellular phones and services, stationery and school supplies, and toys.
For information regarding the amounts and percentages of our net sales contributed by the above merchandise categories for the last three fiscal years, please refer to Note 11 to our consolidated financial statements.
Purchasing
We believe our substantial buying power and our flexibility in making sourcing decisions contributes to our successful purchasing strategy, which includes targeted merchandise margin goals by category. We leverage our merchandising team to source products that can be sold in both Dollar Tree and Family Dollar stores. We also believe our ability to negotiate with our vendor partners allows us to minimize the margin impact of economic pressures such as tariffs. We buy products on an order-by-order basis and have no material long-term purchase contracts or other assurances of continued product supply or guaranteed product cost. Historically, no vendor has accounted for more than 10% of total merchandise purchased by us.
Our merchandise systems provide us with valuable sales information to assist our buyers and improve product allocation to our stores. We use this information to target our inventory levels in our distribution centers and stores in order to plan for capacity and labor needs.
Distribution
A strong and efficient distribution network is critical to our ability to grow and to maintain a low-cost operating structure. We currently operate 26 distribution centers in the United States, 15 of which are primarily dedicated to serving our Dollar Tree stores and 11 distribution centers primarily serve our Family Dollar stores. Our St. George, Utah distribution center, which is a legacy Family Dollar facility, services both Dollar Tree and Family Dollar stores and we expect future distribution centers to be built with the capability to service both Dollar Tree and Family Dollar stores. New distribution sites are strategically located to reduce stem miles, maintain flexibility and improve efficiency in our store service areas. We expect to complete a significant expansion of our Ocala, Florida distribution center in 2024 which will include more modern automation.
Our Dollar Tree stores receive approximately 91% of their inventory from our distribution centers via contract carriers and our Family Dollar stores receive approximately 71% of their inventory from our distribution centers. The remaining store inventory, primarily perishable consumable items and other vendor-maintained display items, are delivered directly to our stores from vendors. Our Family Dollar stores receive approximately 14% of their merchandise from McLane Company, Inc. For more information on our distribution center network, see “Item 2. Properties.”
Seasonality
Competition
Our segment of the retail industry is fragmented and highly competitive and we expect competition to increase in the future. We operate in the discount retail sector, which is currently and is expected to continue to be highly competitive with respect to price, store location, merchandise quality, assortment and presentation, and customer service, including merchandise delivery and checkout options. Our competitors include single-price dollar stores, multi-price dollar stores, mass merchandisers, on-line retailers, discount retailers, drug stores, convenience stores, independently-operated discount stores, grocery stores and a wide variety of other retailers. In addition, several competitors have sections within their stores devoted to “one dollar” price point merchandise, which further increases competition. We believe we differentiate ourselves from other retailers by providing high-value, high-quality, low-cost merchandise in attractively-designed stores that are conveniently located. Our sales and profits could be reduced by increases in competition. There are no significant economic barriers for others to enter our retail sector.
Government Regulation
We are subject to a wide variety of local, state and federal laws and regulations within the United States and Canada. Compliance with these laws and regulations often requires the dedication of our associates’ time and attention, as well as financial resources. In fiscal 2021, compliance with these laws and regulations did not have a material effect on our capital expenditures, earnings or competitive position.

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Human Capital Resources
Our business success is built upon our dedicated, passionate and diverse associates who work and live in the communities we serve. Our goal is to provide a working environment that is welcoming and inclusive, offers competitive pay and benefits, supports the growth and development of our associates, and affirms our corporate values and mission. We recruit and hire in the communities we serve using local job fairs, social media as well as local community service partners to provide part-time and full-time jobs that can become lasting careers. Our Human Resources team, with oversight from our Board of Directors and its committees, develops and executes programs for compensation and benefits, onboarding and training, professional development, performance management, retention and succession planning.
We greatly value our people and invest in their personal well-being and professional growth through various human capital programs and initiatives, including the following:
Compensation and benefits. We are committed to providing market-competitive pay for all positions and we are a pay-for-performance organization, offering performance-based compensation opportunities at nearly all levels of the organization, including hourly-paid positions. We strive to ensure gender and racial pay equity for employees performing equal or substantially similar work. Full-time associates can participate in our Retirement Savings Plan, which provides a dollar for dollar match on the first 5% of employee contributions and all associates can participate in our Employee Stock Purchase Plan. All full-time and part-time associates are eligible for competitive health and welfare benefits, including medical, dental, vision, disability, life insurance and other benefits. We also offer a voluntary benefit called “pay any-day,” which allows associates to advance their payday earnings for flexibility in meeting their bills and expenses.
Health, wellness and family resources. In addition to making health and welfare benefits available to our associates, we also support our associates and members of their household through our Employee Assistance Program, which includes financial and legal services, as well as expert counsel in areas such as parenting, family issues and resilience skills. We offer primary caregiver and parental leave to support our associates while they are starting or growing their families and we have a program that provides financial support to associates recovering from natural disasters and personal hardships. To support our associates with high school-aged children, we launched a scholarship program in 2021 to provide access to financial support in their pursuit of higher education.
Talent development and retention. We believe in the growth and development of our associates and are committed to building a culture of learning in which associates are given the opportunity to enhance their skills at every stage of their career. To support this objective, we provide a multitude of professional and leadership development experiences, including online and instructor-led trainings that enable associates to consume relevant learning content for their current role and future career growth. To remove barriers to education, we launched an education assistance program in 2021 that provides tuition reimbursement, as well as discounted tuition at over 200 colleges and universities for our associates and their families. Our associates also receive personalized coaching and advisement on degree programs that meet their needs. Retention of our associates is a focus for all leaders and we continue to strive to improve our turnover rate. We monitor associate turnover as we know our success depends on retaining and engaging talent in all areas of the business. To identify high-potential talent, leadership assesses talent at the store manager level and above on a regular basis through structured talent reviews and succession planning paired with customized development plans. This focus on talent resulted in more than 48,500 promotions in fiscal 2021.
Diversity, equity and inclusion. We believe our associates should mirror our diverse customer base and the communities we serve. Our goal is to create and support a culture of inclusion among a diverse and inclusive workforce where the individual differences of our associates are understood, respected and appreciated. To further this goal, we launched a Diversity, Equity and Inclusion (DEI) Executive Council in 2020 comprised of senior leaders from every department within the company. The DEI Executive Council is charged with creating and implementing DEI-focused strategies consistent with our business goals, catalyzing cultural change throughout the organization and driving accountability at the senior management level for progress on key DEI objectives. In addition, we have provided associate training on DEI topics and committed to forming a number of employee resource groups that are intended to serve as platforms for discussion and support among communities of associates within targeted demographics. Our plan is for each employee resource group to have an executive sponsor who is a member of the DEI Executive Council.
Workplace safety. We strive to maintain a safe working environment for our associates with a safety program designed to promote accident prevention. Among other things, our environmental health and safety department establishes standard safety protocols and operating procedures across the company, and our field managers are responsible for overseeing associate safety training and conducting store safety audits. In response to the COVID-19 pandemic, we implemented several changes to protect our associates and our customers and to ensure adherence to Centers for Disease Control and Prevention (CDC) recommendations. During 2020, we provided personal protective equipment including masks, gloves and sanitizers for our store and distribution center associates, installed plexiglass sneeze guards at all store registers and
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enabled the majority of our store support center teams to work remotely. We provided wage premiums for store and distribution center hourly associates, provided minimum guaranteed sales bonuses for store managers and pay continuation for associates who tested positive for COVID-19.
Communication and Engagement. We believe that our associates are critical to our business and the right culture is essential to creating an environment of high engagement and inclusivity in which Associates thrive. It is important to listen to Associate feedback and perspectives on various matters affecting their relationship with the company. As a result, we have launched a culture assessment that enables us to define the culture we aspire to be, measure the culture we are today and close the gaps so we realize our goals, execute on our business strategies and create a compelling associate experience within the organization.
As of January 29, 2022, we employed more than 210,500 associates, as follows:
Store and Distribution Center Associates
Dollar TreeFamily DollarStore Support Center AssociatesTotal
Full-time Associates28,759 30,521 2,606 61,886 
Part-time Associates101,795 46,878 148,679 
Total130,554 77,399 2,612 210,565 
Part-time associates work an average of less than 30 hours per week and the number of part-time associates fluctuates depending on seasonal needs.
We consider our relationship with our associates to be good, and have not experienced significant interruptions of operations due to labor disagreements.
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. Any failure to meet market expectations, including our comparable store sales growth rate, earnings and earnings per share or new store openings, could cause the market price of our stock to decline. You should carefully consider the specific risk factors listed below together with all other information included or incorporated in this report and other filings that we make from time to time with the SEC, including our consolidated financial statements and accompanying notes. However, the risks and uncertainties that we face are not limited to those described below and those set forth in our SEC filings. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also arise. In such event, our business, financial condition, results of operations or prospects could be materially adversely affected.
Profitability and Operational Risks
Our profitability is vulnerable to increases in oceanic shipping costs, domestic freight and fuel costs, wage and benefit costs and other operating costs.
Future increases in costs such as wage and benefit costs, ocean shipping rates, domestic freight costs, fuel and energy costs, the cost of merchandise (including the substitution of higher cost domestic goods), duties and tariffs, merchandise loss (due to theft, damage, or errors) and store occupancy costs would reduce our profitability. We expect material increases in wage rates and labor costs as well as in shipping rates, freight and fuel costs in 2022. We have incurred additional costs as a result of recent minimum wage increases by certain states and localities and we expect additional minimum wage increases by states and localities in 2022. In addition, the federal minimum wage may increase depending on the outcome of legislation proposed in Congress, and the current administration may consider raising the minimum salary for store managers who have exempt status under the Fair Labor Standards Act. Separately, government or industry actions addressing the impact of climate change may result in increases in merchandise or operating costs.
In our Dollar Tree segment, we raised our primary price point on merchandise to $1.25 in fiscal 2021. In addition, we continue to implement our Dollar Tree Plus initiative which provides our customers with discretionary categories priced at the $3 and $5 price points. Although we have increased our price points at Dollar Tree stores, we remain dependent on our ability to adjust our product assortment, to operate more efficiently or to increase our comparable store net sales in order to offset cost increases. Supply chain constraints and higher commodity costs could make it more difficult for us to obtain sufficient quantities of certain products and could negatively affect our product assortment and merchandise costs. We can give no assurance that we will be able to adjust our product assortment, operate more efficiently or increase our comparable store net sales in the future. Although Family Dollar, unlike Dollar Tree, can raise the price of merchandise, customers may buy fewer products if prices were to increase. Please see “Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effect of economic factors on our operations.
We are experiencing higher costs and disruptions in our distribution network, which have had and could have an adverse impact on our sales, margins and profitability.
Our success is dependent on our ability to import or transport merchandise to our distribution centers and then truck merchandise to our stores in a timely and cost-effective manner. We rely heavily on third parties including ocean carriers and truckers in that process. We may not anticipate, respond to or control all of the challenges of operating our distribution network. Additionally, when a shipping or trucking line fails to deliver on its commitments or our distribution centers fail to operate effectively, we could experience increased freight costs or merchandise shortages that could lead to lost sales. We are experiencing ocean shipping disruptions, trucking shortages, increased ocean shipping rates and increased trucking and fuel costs. In the last several years, we have incurred higher distribution costs due to a variety of factors. Some of the factors that have had and could have an adverse effect on our distribution network or costs in 2022 are:
Shipping costs. We are experiencing unprecedented increases in shipping rates from the Trans-Pacific ocean carriers due to various factors, including higher demand, a continued increase in spot market rates and the limited availability of shipping capacity. In fiscal 2021, we found it necessary to rely on an increasingly expensive spot market and other alternative sources to make up the shortfall in our shipping needs when contracted carriers were unable or unwilling to execute on all of our annual contracts. Import and domestic freight costs will present cost pressure in the first half of fiscal 2022 due to the annualization of fiscal 2021 rates. In addition, diesel fuel prices are expected to be significantly higher in fiscal 2022 and may increase further because of international tensions. There is a risk that our estimated annual freight costs for fiscal 2022 could be higher than we expect if our carrier contract rates for 2022 exceed our expectations, our carriers do not fulfill their contractual commitments to us and we find it necessary to increase our use of the spot market, and/or the spot market rates during 2022 are higher than anticipated. A significant increase in our freight costs could have a material adverse impact on our business and results of operations. Changes in import duties, import quotas and other trade sanctions could also increase our costs.
Shipping disruptions. There is currently a shortage of shipping capacity from China and other parts of Asia, and as a result we are experiencing significant delays in importing our goods. We have also experienced issues with port congestion and pandemic-related port closings and ship diversions. Our receipt of imported merchandise has been and may be further disrupted or delayed as a result of these or other factors. Delays could potentially have a material adverse impact on future product availability, product mix, sales and merchandise margin, especially at Dollar Tree, if the delays do not improve. These and other disruptions adversely impacted Trans-Pacific shipping in 2021 and are expected to continue to affect shipping from China, where we buy a significant portion of our merchandise, and we cannot predict when the disruptions will end. In addition, our supply chain may be disrupted as a result of other international events such as armed conflict, war, economic sanctions or acts of terrorism.
Efficient operations and management. Distribution centers and other aspects of our distribution network are difficult to operate efficiently, and we have experienced and could continue to experience a reduction in operating efficiency resulting in delayed shipments of merchandise to our stores as a result of high associate turnover and challenges in attracting and retaining an adequate and reliable workforce. Although we have offered sign-on bonuses, enhanced wages and other inducements in certain markets to address the shortage of labor at our distribution centers, such measures have increased our costs and are expected to continue to increase our costs, which could have an adverse effect on our margins and profitability. There can be no assurances that such measures will be adequate to attract and retain the workforce necessary for the efficient operation of our distribution centers.
Trucking costs. We have experienced significant increases in trucking costs due to the truck driver shortage and other factors. The truck driver shortage has also required us to increase our use of more expensive surge carriers to transport our merchandise. We expect our trucking costs to continue to increase in the future.
Diesel fuel costs. We have experienced volatility in diesel fuel costs and are expecting increases to continue in fiscal 2022 and may worsen, for example, because of the impact of international events such as trade restrictions on Russia on oil prices.
Vulnerability to natural or man-made disasters, including climate change. A fire, explosion or natural disaster at a port or any of our distribution facilities could result in a loss of merchandise and impair our ability to adequately stock our stores. Some facilities are vulnerable to earthquakes, hurricanes, tornadoes or floods, and an increase in the severity and frequency of extreme weather events and patterns may increase our operating costs, disrupt our supply chain, change customer buying patterns, result in store closures and impede physical access to our stores.
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Labor disagreement. Labor disagreements, disruptions or strikes, including at ports, may result in lost sales due to delays in the delivery of merchandise to our distribution centers or stores and increase our costs. For example, the union collective bargaining agreement that governs the wages and benefits of a large number of longshoremen at ports in California, Oregon, and Washington is scheduled to expire on July 1, 2022, unless extended or a new contract is negotiated. If the parties are unable to agree on a new or extended collective bargaining agreement, there could be additional shipping delays and disruptions which could adversely affect the availability of imported merchandise and increase our costs.
Direct-to-store deliveries. We rely on a limited number of suppliers for certain consumable merchandise, including frozen and refrigerated products. In fiscal 2021, we purchased and delivered approximately 14% of our merchandise for our Family Dollar segment through our relationship with McLane Company, Inc., which distributes consumable merchandise from multiple manufacturers. We also rely on third parties to deliver frozen and refrigerated product, as well as chocolate in the summer, to our Dollar Tree stores. To the extent that supply chain disruptions and higher costs affect our suppliers, we may be subject to delays or reductions in deliveries and higher costs for merchandise. A substantial disruption in our relationship with or in service levels from these suppliers could have a material adverse impact on our business and results of operations.
We may stop selling or recall certain products for safety-related or other issues.
We may stop selling or recall certain products produced by certain manufacturers for safety-related or other issues, including product contamination, product content such as lead, spoilage or other adulteration, improper manufacturing processes, improper testing, product mislabeling or product tampering. We may also stop selling or recall products if the products, the operations of our suppliers, or our operations violate applicable laws or regulations, including food, drug and cosmetic safety laws, or raise potential health and safety-related issues, including improper storage, product mishandling, contamination or other adulteration, or when our suppliers’ products cause injury, illness or death. On February 18, 2022, following a prior FDA and USDA inspection of Family Dollar Distribution Center 202 in Arkansas (“DC 202”), and subsequent issuance by the FDA of Form 483 observations primarily regarding rodent infestation at DC 202, as well as other items that require remediation, we initiated a voluntary retail-level product recall of FDA and USDA-regulated products stored and shipped to approximately 400 stores from DC 202 from January 1, 2021 through such date (the “Recall”). Any recall may require significant management attention, and could result in significant and unexpected costs, lost sales, compliance or enforcement actions by governmental authorities, and/or product liability claims or lawsuits. In addition, our sale of adulterated products could subject us to claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment against us, a related regulatory enforcement action or a product recall could materially and adversely affect our reputation, financial condition and/or results of operations. Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against the products we sell could materially and adversely affect our business, reputation and/or profitability. Additionally, the pending Recall has led, and any future product recall may lead, to increased scrutiny of our operations by regulatory agencies, requiring further management attention and potential legal fees and other expenses. Also see “Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations” on page 18 for, among other things, a description of legal proceedings relating to issues associated with DC 202.
Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of consumer concerns about the quality and safety of our products.
We could experience a decline in consumer confidence and spending in connection with product recalls if our customers become concerned about the quality and safety of the products we sell. To date, other than with respect to the stores temporarily closed to permit the removal and destruction of relevant inventory, we have not experienced significant lost sales in connection with the Recall, but there can be no assurances that consumer confidence in the quality and safety of our products resulting from the Recall will not decline in the future. If there is a decline in consumer confidence in our products, our reputation may be adversely affected and we may experience additional lost sales which could have a material adverse impact on our business and results of operations.
Inflation or other adverse change or downturn in economic conditions could impact our sales or profitability.
A deterioration in economic conditions, whether related to the COVID-19 pandemic or otherwise, could reduce consumer spending or cause customers to shift their spending to products we either do not sell or do not sell as profitably. Adverse economic conditions such as a recession could disrupt consumer spending and significantly reduce our sales, decrease our inventory turnover, cause greater markdowns or reduce our profitability due to lower margins. Other factors that could result in or exacerbate adverse economic conditions include inflation, higher unemployment, consumer debt levels, trade disputes, as well as adverse climate or weather conditions, epidemics, terrorism or international tensions, including armed conflict and economic sanctions.
Furthermore, factors that could adversely affect consumer disposable income could decrease our customers’ spending on products we sell. Factors that could reduce our customers’ disposable income and over which we exercise no influence include but are not limited to, the COVID-19 pandemic and other adverse economic conditions described below as well as increases in fuel or other
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energy costs and interest rates, lack of available credit, higher tax rates and other changes in tax laws, increasing healthcare costs, and changes in, decreases in, or elimination of, government subsidies such as unemployment and food assistance programs.
Although governmental authorities adopted substantial measures, including fiscal and monetary stimulus, to provide economic assistance to individual households and businesses and support economic stability during the COVID-19 pandemic and the related recession, certain of the government assistance payments to households were temporary and were permitted to expire. There can be no assurance that current or future governmental efforts to support the economy during the pandemic or a recession will be sufficient to support future consumer spending at levels experienced in fiscal 2021 or mitigate the negative effect of the pandemic on the economy. If consumer spending on the goods we sell declines as a result, there could be a material adverse impact on our business and results of operations.
Many of the factors identified above that affect disposable income, as well as commodity rates, transportation costs (including the costs of diesel fuel), costs of labor, insurance and healthcare, foreign exchange rate fluctuations, lease costs, barriers or increased costs associated with international trade and other economic factors also affect our ability to implement our corporate strategy effectively, our cost of goods sold and our selling, general and administrative expenses, and may have other adverse consequences which we are unable to fully anticipate or control, all of which may adversely affect our sales or profitability. We have limited or no ability to control many of these factors.
If the COVID-19 pandemic and associated disruptions worsen or continue longer than expected, there could be a material adverse impact on our business and results of operations.
The continuing COVID-19 pandemic arising from a novel strain of coronavirus and its variants has caused on-going direct and indirect economic disruptions that have adversely affected, and are expected to continue to adversely affect, elements of our business. The COVID-19 pandemic, related public health measures and associated economic and social impacts have already contributed to, among other things, significant increases in the cost of operating our stores and distribution centers, decreased foot traffic in our stores, disruptions in the patterns of consumer demand and traffic, and an increase in demand for online sales (which is an insignificant part of our business), home deliveries (which we began providing in 2021 through our partnership with Instacart) or curbside deliveries (which we do not offer), and changes in the labor markets.
There continues to be uncertainty and unpredictability about the impact of COVID-19-related issues on our financial and operating results in future periods. If the pandemic worsens or continues longer than expected, governments may reinstate or extend business or personal restrictions, and we could be forced to curtail or restrict operations or incur additional costs. We might also experience new disruptions in our supply chain and sources of supply, suffer facility closures or encounter additional difficulties in hiring or retaining the workforce required for our business. These circumstances, if applicable for an extended duration or across significant parts of our operating footprint, or if they fall during particularly meaningful holiday seasons, could have a material adverse effect on our business and results of operations.
We are unable to predict the full extent to which COVID-19-related issues will affect the economy and our customers, associates, suppliers, vendors, other business partners or our business, results of operations and financial condition. If the economic consequences of the pandemic are prolonged and/or worsen, it could amplify many of the other risks described in this Form 10-K.
Risks associated with our domestic and foreign suppliers could adversely affect our financial performance.
We are dependent on our vendors to supply merchandise in a timely and efficient manner. If a vendor fails to deliver on its commitments due to financial or other difficulties, we could experience merchandise shortages which could lead to lost sales or increased merchandise costs if alternative sources must be used.
We rely on the timely availability of imported goods at favorable wholesale prices. Merchandise imported directly accounts for approximately 41% to 43% of our Dollar Tree segment’s total retail value purchases and 15% to 17% of our Family Dollar segment’s total retail value purchases. In addition, we believe that a significant portion of our goods purchased from domestic vendors is imported. Imported goods are generally less expensive than domestic goods and result in higher profit margins. A disruption in the flow of our imported merchandise or an increase in the cost of those goods may significantly decrease our profits. Risks associated with our reliance on imported goods may include disruptions in the flow of or increases in the cost of imported goods because of factors such as:
duties, tariffs or other restrictions on trade, including Section 301 tariffs that have already been imposed on imported Chinese goods, and it is uncertain whether the current presidential administration will reduce these tariffs in the future. We are currently expecting the amount of Section 301 tariffs we pay in 2022 to increase above 2021 levels because the amount of our imports is expected to increase;
raw material shortages, work stoppages, government travel restrictions, strikes and political unrest, including any impact on vendors or shipping arising from epidemics and related travel restrictions, such as the COVID-19 pandemic;
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economic crises in the United States or abroad and international disputes or conflicts, including war and economic sanctions;
changes in currency exchange rates or policies and local economic conditions, including inflation (including energy prices and raw material costs) in the country of origin;
potential changes to, or withdrawal of the United States from, international trade agreements or the failure of the United States to maintain normal trade relations with China and other countries;
changes in leadership and the political climate in countries from which we import products and their relations with the United States; and
failure of manufacturers outside the United States to meet food, drug and cosmetic safety and labeling requirements or environmental standards set by government regulators or consumer expectations.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effect of foreign suppliers on our operations.
Our supply chain may be disrupted by changes in United States trade policy with China.
We rely on domestic and foreign suppliers to provide us with merchandise in a timely manner and at favorable prices. Among our foreign suppliers, China is the source of a substantial majority of our imports. A disruption in the flow of our imported merchandise from China or an increase in the cost of those goods may significantly decrease our profits.
The United States has scaled back punitive Section 301 tariffs on certain Chinese imports based on an agreement reached with China in 2020. However, there is uncertainty as to the actions that may be taken under the current presidential administration with respect to U.S. trade policy with China, including whether the administration will support reductions in tariffs. The imposition of any new U.S. tariffs on Chinese imports or the taking of other actions against China in the future, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a material adverse impact on our business and results of operations.
Our growth is dependent on our ability to increase sales in existing stores and to expand our square footage profitably.
Existing store sales growth is critical to good operating results and is dependent on a variety of factors including merchandise quality, relevance and availability, store operations and customer satisfaction. In addition, increased competition could adversely affect our sales. Failure to meet our sales targets, including in our renovated stores, could result in our needing to record material non-cash impairment charges related to our intangible assets. We believe increasing sales at Family Dollar depends in significant part on the success of the H2 renovations and Combo Store concepts.
Our highest sales periods are during the Christmas and Easter seasons, and we generally realize a disproportionate amount of our net sales and our operating and net income during the fourth quarter. In anticipation, we stock extra inventory and hire many temporary employees to prepare our stores. A reduction in sales during these periods could adversely affect our operating results, particularly operating and net income, to a greater extent than if a reduction occurred at other times of the year. Untimely merchandise delays due to receiving or distribution problems could have a similar effect.
When Easter is observed earlier in the year, the selling season is shorter and, as a result, our sales could be adversely affected. Easter was observed on April 4, 2021 and will be observed on April 17, 2022.
Expanding our square footage profitably depends on a number of uncertainties, including our ability to locate, lease, build out and open or expand stores in suitable locations on a timely basis under favorable economic terms. We also open or expand stores within our established geographic markets, where new or expanded stores may draw sales away from our existing stores. Obtaining an increasing number of profitable stores is an ever-increasing challenge.
In addition, our expansion is dependent upon third-party developers’ abilities to acquire land, obtain financing, and secure necessary permits and approvals. We have experienced higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores. We have also experienced delays in new store openings due to inspection, permitting and contractor delays. We anticipate these increased costs and delays may continue for the foreseeable future, which could adversely affect our profitability. Further, we may not manage our expansion effectively, and our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of operations.
Our profitability is affected by the mix of products we sell.
Our gross profit margin decreases when we increase the proportion of higher cost goods we sell. For example, some of our consumable products carry higher costs than other goods, so our gross profit margin will be negatively impacted as the percentage of
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our sales from higher cost consumable products increases. Imported merchandise is generally lower cost than domestic goods. Our product mix is affected by the supply of goods, including imported goods, and could be negatively impacted by various factors, including the COVID-19 pandemic and oceanic shipping and port disruptions.
In our Family Dollar segment, our success also depends on our ability to select and obtain sufficient quantities of relevant merchandise at prices that allow us to sell such merchandise at profitable and appropriate prices. A sales price that is too high causes products to be less attractive to our customers and our sales at Family Dollar could suffer. We are continuing to refine our pricing strategy at Family Dollar to drive customer loyalty and have a strategic pricing team to improve our value and to increase profitability. Inability to successfully implement our pricing strategies at Family Dollar could have a negative effect on our business.
In addition, our Family Dollar segment has a substantial number of private brand items and the number of items has been increasing. We believe our success in maintaining broad market acceptance of our private brands depends on many factors, including our pricing, costs, quality and customer perception. We may not achieve or maintain our expected sales for our private brands and, as a result, our business and results of operations could be adversely impacted. Additionally, the increased number of private brands could negatively impact our existing relationships with our non-private brand suppliers.
Pressure from competitors may reduce our sales and profits.
The retail industry is highly competitive. The marketplace is highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and merchandising strategies, including mobile and online shopping. We expect competition to increase in the future. There are no significant economic barriers for others to enter our retail sector. Some of our current or potential competitors have greater financial resources than we do. We cannot guarantee that we will continue to be able to compete successfully against existing or future competitors or that doing so will not require substantial capital expenditures. Please see “Item 1. Business” for further discussion of the effect of competition on our operations.
Our business could be adversely affected if we fail to attract and retain qualified associates and key personnel.
Our growth and performance is dependent on the skills, experience and contributions of our associates, executives and key personnel for both Dollar Tree and Family Dollar. Various factors, including the ongoing pandemic, constraints on overall labor availability, wage rates, regulatory or legislative impacts, and benefit costs could impact our ability to attract and retain qualified associates at our stores, distribution centers and corporate offices.
We are experiencing a shortage of associates and applicants to fill staffing requirements at our distribution centers, stores and corporate offices due to the current labor shortage affecting businesses. This has adversely affected the operating efficiency of our distribution centers and stores and our ability to transport merchandise from our distribution centers to our stores. If we are unable to attract and retain qualified associates for our distribution centers and stores in the future, our business and results of operations may be adversely affected.
Risks Relating to Strategic Initiatives
We may not be successful in implementing or in anticipating the impact of important strategic initiatives, and our plans for implementing such initiatives may be altered or delayed due to various factors, which may have an adverse impact on our business and financial results.
We have adopted important strategic initiatives that are designed to create growth, improve our results of operations and drive long-term shareholder value, including:
the conversion of our basic product price from $1.00 to $1.25 for the vast majority of merchandise in all Dollar Tree stores;
the expansion of a multi-price initiative in Dollar Tree stores referred to as Dollar Tree Plus;
the introduction of selected Dollar Tree merchandise into Family Dollar stores;
the roll-out of the Combo Store format that combines a Dollar Tree store and Family Dollar store in a single location;
the renovation of Family Dollar stores to the H2 format;
our partnership with Instacart to provide home delivery of merchandise purchased online;
our plans relating to new store openings for Dollar Tree and Family Dollar generally; and
the continued integration of the operations of Family Dollar with Dollar Tree.
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The implementation and timing of these strategic initiatives are subject to various risks and uncertainties, including the acceptance of the amount of price increases by customers and others as justified or reasonable; customer acceptance of new store concepts and merchandise offerings; construction and permitting delays relating to new and renovated stores; the availability of desirable real estate locations for lease at reasonable rates; the impact of the COVID-19 pandemic and associated issues; the success of our integration strategies; and other factors beyond our control. In addition, several of these initiatives depend on the timeliness, cost and availability of adequate levels of the appropriate domestic and imported merchandise, our ability to execute on our plans and expectations with respect to those initiatives and the continued success of our integration of Family Dollar merchandising, supply chain and operations with those of Dollar Tree. To the extent that shipping delays, supply chain disruptions and other distribution logistics adversely affect the availability of merchandise necessary to implement our strategic initiatives, we may delay or reduce our planned rate of implementation of one or more of those initiatives.
The rollout of our initiative to add price points above $1 in Dollar Tree stores is subject to additional risks and uncertainties relating to, among other things, provisions in our leases and/or third-party waivers tied to single or $1 price points, and compliance with the terms of our leases and state and local consumer laws, which may restrict price increases deemed unjustified in certain circumstances.
There can be no assurance that we will be able to implement important strategic initiatives in accordance with our expectations or that they will generate expected returns, which may result in an adverse impact on our business and financial results.
We could incur losses due to impairment of long-lived assets, goodwill and intangible assets.
Under U.S. generally accepted accounting principles, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Identifiable intangible assets with an indefinite useful life, including goodwill, are not amortized but are evaluated annually for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred.
In fiscal 2019, we recorded a $313.0 million non-cash pre-tax and after-tax goodwill impairment charge related to our Family Dollar reporting unit. The impairment was a result of business challenges including slower sales growth, higher freight, shrink and store labor costs. Should we experience similar business challenges or significant negative industry or general economic trends, we could recognize additional impairments to our goodwill, intangible assets and other long-lived assets. We monitor key assumptions and other factors utilized in our goodwill impairment analysis, and if business or other market conditions develop that are materially different than we currently anticipate, we will conduct an additional impairment evaluation. Any reduction in or impairment of the value of goodwill or intangible assets will result in a charge against earnings, which could have a material adverse impact on our reported results of operations and financial condition. For additional information on goodwill impairments please refer to Note 1 to our consolidated financial statements under the caption “Goodwill and Nonamortizing Intangible Assets.”
Cybersecurity and Technology Risks
We rely on computer and technology systems in our operations, and any material failure, inadequacy, interruption or security failure of those systems including because of a cyber-attack could harm our ability to effectively operate and grow our business and could adversely affect our financial results.
We rely extensively on our computer and technology systems and, in certain cases, those of third-party service providers to manage inventory, process credit card and customer transactions and summarize results. Our ability to effectively manage our business and coordinate the distribution and sale of our merchandise depends significantly on the confidentiality, integrity and availability of these systems and on our ability to successfully integrate the Dollar Tree and Family Dollar systems. We also rely on third-party providers and platforms for some of these computer and technology systems and support.
Although we have operational safeguards in place, they may not be effective in preventing the failure of these systems or platforms to operate effectively and be available to us. This may be as the result of deliberate breach in the security of these systems or platforms by bad actors, including through malicious software, ransomware and other cyber-attacks, which may originate from state actors and may increase during times of international tensions. Failures may also be caused by various other factors, including power outages, catastrophic events, physical theft, computer and network failures, inadequate or ineffective redundancy, problems with transitioning to upgraded or replacement systems or platforms, flaws in third-party software or services, errors or improper use by our employees or third party service providers.
If these systems are damaged or fail to function properly, we may incur substantial costs to repair or replace them, may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions and may receive negative publicity, which could adversely affect our results of operations and business. In addition, remediation of any problems with our systems could take an extensive amount of time and could result in significant, unplanned expenses.

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The potential unauthorized access to customer information may violate privacy laws and could damage our business reputation, subject us to negative publicity, litigation and costs, and adversely affect our results of operations or business.
Many of our information technology systems, such as those we use for our point-of-sale, web and mobile platforms, including online and mobile payment systems, and for administrative functions, including human resources, payroll, accounting, and internal and external communications, contain personal, financial or other confidential information that is entrusted to us by our customers and associates as well as proprietary and other confidential information related to our business and suppliers.
We have procedures and technology in place to safeguard our customers’ personal information (including debit and credit card information), our associates’ private data, suppliers’ data, and our business records and intellectual property and other sensitive information. Despite these measures, we have experienced attempted and ongoing cyber-attacks, which are rapidly evolving. Perpetrators, who may include well-funded state actors, are becoming increasingly sophisticated and difficult to detect. We and/or our third party suppliers may be vulnerable to, and unable to anticipate, detect and appropriately respond to such cyber-security attacks, including data security breaches and data loss.
We are subject to laws and regulations in various jurisdictions in which we operate regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. For example, the California Consumer Privacy Act, which became effective on January 1, 2020, and the California Privacy Rights Act of 2020, which will become effective on January 1, 2023, impose responsibilities on us for the handling, disclosure and deletion of personal information for consumers who reside in California. These laws permit California to assess potentially significant fines for data privacy violations and create a right for individuals to bring class action suits seeking damages for violations. Our efforts to comply with California’s consumer privacy laws and other similar privacy and data protection laws may impose significant costs and challenges that are likely to increase over time, and we could incur substantial penalties or be subject to litigation related to violation of existing or future data privacy laws and regulations.
Likewise, we are subject to the Payment Card Industry Data Security Standards (“PCI-DSS”) which is mandated by the card brands and administered through the Payment Card Industry Security Standards Council. As a Level 1 Merchant, we are subject to assessment and attestation for PCI-DSS compliance on an annual basis. A failure to meet and maintain compliance with PCI-DSS requirements could result in our inability to continue to accept credit cards as a form of payment, which would materially impact our ability to sell our products. In addition, our credibility and reputation within the business community and with our customers may be affected, which could result in our customers discontinuing the use of debit or credit cards in our stores or not shopping in our stores altogether. Non-compliance with PCI-DSS requirements also may subject us to recurring and accumulating fines until compliance is achieved. Considerable investments to strengthen our information security could also be required should we ever be deemed to be non-compliant.
Moreover, significant capital investments and other expenditures could also be required to remedy cyber-security problems and prevent future security breaches, including costs associated with additional security technologies, personnel, experts and services (e.g., credit-monitoring services) for those whose data has been breached. These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.
The unavailability of our information technology systems or the failure of those systems or software to perform as anticipated for any reason and any inability to respond to, or recover from, such an event, could disrupt our business, decrease performance and increase overhead costs. If we are unable to secure our customers’ credit card and confidential information, or other private data relating to our associates, suppliers or our business, we could be subject to negative publicity, costly government enforcement actions or private litigation and increased costs. Any of these factors could have a material adverse effect on our results of operations or business.
Legal and Regulatory Risks
Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations.
Our business is subject to the risk of litigation and arbitration involving employees, consumers, suppliers, competitors, shareholders, government agencies, or others through private actions, class actions, derivative actions, governmental investigations, administrative proceedings, regulatory actions, mass arbitration or other similar actions.
In addition, due to the types of products that we store and sell, our operations are subject to regulatory oversight by the FDA, the USDA, the Occupational Health and Safety Administration, and other federal, state, local and applicable foreign governmental authorities. If such authorities believe that we have failed to comply with applicable regulations and/or procedures, they may require prompt corrective action, and/or proceed directly to other forms of enforcement action, including the imposition of operating restrictions, including a ceasing of operations in one or more facilities, enjoining and restraining certain violations of applicable law
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pertaining to products, seizure of products, and assessing civil or criminal sanctions or penalties. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively selling our products and could have a material adverse effect on our business, financial condition and/or results of operations. From January 11, 2022 through February 11, 2022, DC 202 was inspected by the FDA and USDA. On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at DC 202, as well as other items that require remediation. In connection therewith, we initiated the Recall, temporarily closed DC 202 for extensive cleaning, temporarily closed the affected stores to permit the removal and destruction of inventory subject to the Recall, ceased sales of relevant inventory subject to the Recall, committed to the FDA to continue to cease the shipment of FDA-regulated products from DC 202 until FDA approval is received, and initiated corrective actions at DC 202 intended to ensure that these issues will not recur when shipment of FDA-regulated products recommences. If the FDA and/or other governmental authorities are not satisfied with these corrective actions or observe issues in our other distribution centers or stores, they may initiate other enforcement or administrative actions, which may have a material adverse effect on our business, financial condition and/or results of operations. Also see “We may stop selling or recall certain products for safety-related issues” on page 13.

We have received the following class action complaints related to issues associated with DC 202 (and anticipate additional lawsuits of a similar nature):
On February 22, 2022, a proposed class action complaint was filed in the Circuit Court of Pope County, Arkansas, alleging various causes of action on behalf of the citizens of Arkansas who purchased “contaminated products” covered by the Recall from January 1, 2021 through the date of such Recall. Plaintiffs seek restitution, disgorgement, damages, attorney fees, costs and expenses, punitive damages and such further relief (in each case in unspecified amounts), as the Court deems just and proper.
On February 23, 2022, a proposed class action complaint was filed in the U.S. District Court for the Southern District of Mississippi, Northern Division, alleging various causes of action related to the sale of products that may be contaminated by virtue of a rodent infestation and other unsanitary conditions in stores throughout Mississippi, Arkansas, Louisiana, Alabama, Missouri and Tennessee. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On February 25, 2022, a proposed class action complaint was filed in the U.S. District Court for the Eastern District of Virginia, on behalf of all persons who purchased products subject to the Recall (with a subclass for all persons residing in the State of Tennessee who purchased products subject to the Recall), alleging breach of the implied warranty of merchantability and unjust enrichment. Plaintiffs seek restitution, damages, interest, punitive damages, attorney fees, costs and expenses, and such further relief (in each case in unspecified amounts), as the Court deems just and equitable.
On March 2, 2022, a proposed class action complaint was filed in the U.S. District Court for the Western District of Louisiana, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Louisiana, Mississippi, Arkansas, Alabama, Missouri and Tennessee. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On March 4, 2022, a proposed class action complaint was filed in the U.S. District Court for the Western District of Tennessee, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Tennessee, Louisiana, Mississippi, Arkansas, Alabama, and Missouri. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On March 7, 2022, a proposed class action complaint was filed in the U.S. District Court for the Southern District of Alabama, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Alabama, Louisiana, Mississippi, Arkansas, Tennessee, and Missouri. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On March 8, 2022, a proposed class action complaint was filed in the U.S. District Court for the Western District of Missouri, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Missouri, Arkansas, Louisiana, Mississippi, Alabama and Tennessee. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On March 10, 2022, a proposed class action complaint was filed in the U.S. District Court for the Eastern District of Arkansas, Delta Division, alleging various causes of action related to the sale of products that may be contaminated by virtue of rodent infestation and other unsanitary conditions in stores throughout Arkansas, Louisiana, Mississippi, Alabama, Tennessee and Missouri. Plaintiffs seek damages, attorney fees and costs, punitive damages and the replacement of, or refund of money paid to purchase the
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relevant products, and any other legal relief available for their claims (in each case in unspecified amounts), including equitable and injunctive relief.
On March 10, 2022, a proposed class action complaint was filed in the U.S. District Court for the Western District of Tennessee, Memphis Division, on behalf of all persons who purchased products subject to the Recall (with a subclass for all persons residing in the State of Tennessee who purchased products subject to the Recall), alleging breach of the implied warranty of merchantability, violation of the Tennessee Consumer Protection Act, and unjust enrichment. Plaintiffs seek refunds of unjust benefits, damages, interest, punitive damages, attorney fees, costs and expenses, and such further relief (in each case in unspecified amounts), as the Court deems just and equitable.
We intend to vigorously defend ourselves in the foregoing (and any similar) litigations. Although we have recently received the complaints, we do not believe that any of them will, individually or in the aggregate, have a material adverse effect on our business or financial condition. However, we cannot assure that these litigations, individually or in the aggregate, will not have a material adverse effect on our results of operations for the period or year in which they are reserved or resolved.
On March 1, 2022, a federal grand jury subpoena was issued to us by the Eastern District of Arkansas requesting the production of information, documents and records pertaining to pests, sanitation and compliance with law regarding certain of our procedures and products. We intend to cooperate fully with the subpoena and any related investigation, however, no assurance can be given as to the timing or outcome of this matter.
Three personal injury lawsuits are pending against us and our vendors alleging that certain talc products that were sold by the company in the past caused cancer. We intend to vigorously defend against these claims. Although we have been able to resolve previous talc lawsuits against us without material loss to the company, given the inherent uncertainties and high potential losses of talc litigation there can be no assurances regarding the outcome of pending or future cases. Future costs to litigate these cases are not known but may be significant, and it is uncertain whether our costs will be covered by insurance. In addition, although we have indemnification rights against our vendors in several of these cases, it is uncertain whether the vendors will have the financial ability to carry out their obligations. We do not believe that any of these lawsuits will, individually or in the aggregate, have a material adverse effect on our business or financial condition. However, we cannot assure that these lawsuits, individually or in the aggregate, will not have a material adverse effect on our results of operations for the period or year in which they are reserved or resolved.
Our products (or our storage and handling of such products) could also cause illness or injury, harm our reputation, and subject us to litigation. We are dependent on our vendors to ensure that the products we buy comply with all applicable safety standards. However, product liability, personal injury or other claims may be asserted against us relating to product contamination, product tampering, mislabeling, recall and other safety issues with respect to the products that we sell, or with respect to our handling or storage of such products, including as a result of the issues raised by the pending Arkansas FDA Matter (which has led to increased scrutiny of our operations by regulatory agencies, requiring further management attention and potential legal fees and other expenses). A significant product liability or other legal judgment against us, a related regulatory compliance or enforcement action or a product recall could materially and adversely affect our reputation, financial condition and/or results of operations. Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against the products we sell could materially and adversely affect our reputation. We seek but may not be successful in obtaining contractual indemnification from our vendors, where appropriate, or insurance coverage, and if we do not have adequate contractual indemnification or insurance available, such product liability or safety claims could adversely affect our business, financial condition and/or results of operations. Our ability to obtain the benefit of contractual indemnification from foreign vendors may be hindered by our ability to enforce contractual indemnification obligations against such vendors. Our litigation-related expenses could increase as well, which also could have a materially negative impact on our financial condition and/or results of operations even if a product liability claim is unsuccessful or is not fully pursued.
The outcome of such matters is difficult to assess or quantify. Plaintiffs in these types of lawsuits or proceedings may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss may remain unknown for substantial periods of time. In addition, certain of these matters, if decided adversely to us or settled by us, may result in an expense that may be material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend current and future litigation or proceedings, including arbitrations, may be significant. There also may be adverse publicity associated with litigation, including litigation related to product or food safety, customer information and environmental or safety requirements, which could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable.
For a discussion of current legal matters, please see “Item 3. Legal Proceedings” and Note 4 to our consolidated financial statements under the caption “Contingencies.” Resolution of these matters, if decided against us, could have a material adverse effect on our results of operations, accrued liabilities or cash flows.

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Changes in laws and government regulations, or our failure to adequately estimate the impact of such changes, could increase our expenses, expose us to legal risks or otherwise adversely affect us.
Our business is subject to a wide array of laws and regulations, and changes to those laws and regulations could have an adverse effect on our business. In addition, the adoption of new environmental laws and regulations in connection with climate change and the transition to a low carbon economy, including any federal or state laws enacted to regulate greenhouse gas emissions, could significantly increase our operating or merchandise costs or reduce the demand for our products. These laws and regulations may include, but are not limited to, requirements relating to hazardous waste materials, recycling, single-use plastics, extended producer responsibility, use of refrigerants, carbon pricing or carbon taxes, product energy efficiency standards and product labeling. If carbon pricing or carbon taxes are adopted, there is a significant risk that the cost of merchandise from our suppliers will increase and adversely affect our business and results of operations.
In addition, significant changes in laws or regulations that impact our relationship with our workforce, such as minimum wage increases, health care, labor laws or workplace safety, could increase our expenses and adversely affect our operations. An increase in federal corporate tax rates also could adversely affect our profitability. Changes in other regulatory areas, such as consumer credit, privacy and information security, product and food safety, energy or environmental protection, and tariff and other trade restrictions, among others, could cause our expenses to increase or result in product recalls. Further, if we fail to comply with applicable laws and regulations, including wage and hour laws, we could be subject to legal risk, including government enforcement action and class action civil litigation, which could adversely affect our results of operations.
Risks Relating to Indebtedness
Our substantial indebtedness could adversely affect our financial condition, limit our ability to obtain additional financing, restrict our operations and make us more vulnerable to economic downturns and competitive pressures.
Our substantial level of indebtedness could adversely affect our ability to fulfill our obligations and have a negative impact on our financing options and liquidity position. As of January 29, 2022, our total indebtedness is $3.45 billion. We may in the future incur substantial additional indebtedness. In addition, we have $1.5 billion of additional borrowing availability under our revolving credit facility, less amounts outstanding for letters of credit totaling $46.0 million.
In addition, our credit ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings reflect the opinions of the ratings agencies of our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
The terms of the agreements governing our indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to pursue our business strategies, and could adversely affect our capital resources, financial condition and liquidity.
The agreements that govern our indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including, among other things, restrictions on our ability to incur liens; make changes in lines of business, subject to certain exceptions; and consolidate or merge with or into, or sell all or substantially all of our assets to, another person.
In addition, certain of these agreements require us to comply with certain financial maintenance covenants. Our ability to satisfy these financial maintenance covenants can be affected by events beyond our control, and we cannot assure you that we will meet them.
A breach of the covenants under these agreements could result in an event of default under the applicable indebtedness, which, if not cured or waived, could result in us having to repay our borrowings before their due dates. Such default may allow the debt holders to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. If we are forced to refinance these borrowings on less favorable terms or if we were to experience difficulty in refinancing the debt prior to maturity, our results of operations or financial condition could be materially affected. In addition, an event of default under our credit facilities may permit the lenders to terminate all commitments to extend further credit. In the event our lenders or holders of notes accelerate the repayment of such borrowings, we cannot assure you that we will have sufficient assets to repay such indebtedness.
As a result of these restrictions, we may be limited in how we conduct our business; unable to raise additional debt financing to operate during general economic or business downturns; or unable to compete effectively, take advantage of new business opportunities or grow in accordance with our plans.

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Our variable-rate indebtedness subjects us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
Our revolving credit facility is subject to variable rates that expose us to interest rate risk. We may also incur additional indebtedness subject to variable rates in the future. Interest rates, while historically low, may increase. When interest rates increase, our debt service obligations on the variable rate indebtedness increase even though the amount borrowed remains the same, and our net income decreases. Although we may enter into interest rate swaps involving the exchange of floating-for fixed-rate interest payments, to reduce interest rate volatility, we cannot assure you we will choose to or be able to do so.
Borrowings under our revolving credit facility bear interest at a rate derived from the Secured Overnight Financing Rate (“SOFR”). SOFR is a relatively new reference rate and has a very limited history. The future performance of SOFR cannot be predicted based on its limited historical performance. Since the initial publication of SOFR in April 2018, changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates, such as United States dollar LIBOR. Additionally, any successor rate to SOFR under our revolving credit facility may not have the same characteristics as SOFR or LIBOR. As a result, the amount of interest we may pay on our revolving credit facility is difficult to predict.
Risks Relating to Our Common Stock
Our business or the value of our common stock could be negatively affected as a result of actions by shareholders.
We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. The Board of Directors and management team are committed to acting in the best interests of all of our shareholders. There is no assurance that the actions taken by the Board of Directors and management in seeking to maintain constructive engagement with our shareholders will be successful. Shareholders who disagree with our strategy or the way we are managed may seek to effect change in the future, through various strategies that could include private engagement, publicity campaigns, proxy contests, and litigation. Responding to these actions may be costly and time-consuming, disrupt our operations, divert the attention of our Board of Directors, management and employees, and impact our relationship with investors, vendors, and other third parties. A change in the composition of our Board of Directors in response to shareholder engagement may result in changes to our business plans, operations, strategies, initiatives, governance, management and risk factors, which could be materially different from those described in this report. The perceived uncertainty as to our future direction resulting from these strategies could also affect the market price and volatility of our common stock.
The price of our common stock is subject to market and other conditions and may be volatile.
The market price of our common stock may fluctuate significantly in response to a number of factors. These factors, some of which may be beyond our control, include the perceived prospects and actual results of operations of our business; changes in estimates of our results of operations by analysts, investors or us; trading activity by our large shareholders; trading activity by sophisticated algorithms (high-frequency trading); our actual results of operations relative to estimates or expectations; actions or announcements by us or our competitors; litigation and judicial decisions; legislative or regulatory actions or changes; and changes in general economic or market conditions. In addition, the stock market in general has from time to time experienced extreme price and volume fluctuations. These market fluctuations could reduce the market price of our common stock for reasons unrelated to our operating performance.
Certain provisions in our Articles of Incorporation and By-Laws could delay or discourage a change of control transaction that may be in a shareholder’s best interest.
Our Articles of Incorporation and By-Laws contain provisions that may delay or discourage a takeover attempt that a shareholder might consider in his/her best interest. These provisions, among other things:
provide that only the Board of Directors, the chairman of the Board or the chief executive officer may call special meetings of the shareholders;
establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings; and
permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
However, we believe that these provisions allow our Board of Directors to negotiate a higher price in the event of a takeover attempt which would be in the best interest of our shareholders.
Item 1B. Unresolved Staff Comments
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None.
Item 2. Properties
As of January 29, 2022, we operated 15,840 stores across the contiguous United States and the District of Columbia and operated 237 stores within five Canadian provinces.
The Dollar Tree segment includes 8,061 stores operating under the Dollar Tree and Dollar Tree Canada brands with stores predominantly ranging from 8,000 - 10,000 selling square feet. The Family Dollar segment includes 8,016 stores operating under the Family Dollar brand with stores predominantly ranging from 6,000 - 8,000 selling square feet. For additional information on store counts and square footage by segment for the years ended January 29, 2022 and January 30, 2021, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Overview.”
We lease the vast majority of our stores and expect to lease the majority of our new stores as we expand. Our leases typically provide for a short initial lease term, generally between five and ten years, with options to extend; in some cases we have initial lease terms of up to fifteen years. We believe this leasing strategy enhances our flexibility to pursue various expansion opportunities resulting from changing market conditions. As current leases expire, we believe that we will be able to obtain lease renewals, if desired, for present store locations, or to obtain leases for equivalent or better locations in the same general area.
Our network of distribution centers is strategically located throughout the United States to support our stores. As of January 29, 2022, we operated 26 distribution centers occupying a total of 24.0 million square feet, 15 of which are primarily dedicated to serving our Dollar Tree stores and 11 distribution centers primarily serve our Family Dollar stores. Our St. George, Utah distribution center services both Family Dollar and Dollar Tree stores and we expect future distribution centers to be built with the capability to service both Dollar Tree and Family Dollar stores. Our distribution network supports multiple store formats including H2, Combo Stores and Dollar Tree Plus. We ship to our H2 format stores from our Family Dollar distribution centers and we ship to our Dollar Tree Plus format stores from our Dollar Tree distribution centers. Our Combo Stores receive shipments from both Dollar Tree and Family Dollar distribution centers. We believe our distribution center network is currently capable of supporting approximately $35.3 billion in annual sales in the United States. Except for 0.4 million square feet of our distribution center in San Bernardino, California, all of our distribution center capacity is owned.
Each of our distribution centers contains advanced materials handling technologies, including radio-frequency inventory tracking equipment and specialized information systems. With the exception of four of our facilities, each of our distribution centers in the United States also contains automated conveyor and sorting systems.
Distribution services in Canada are provided by a third party from facilities in British Columbia and Ontario.
Our store support center in Chesapeake, Virginia is located in an approximately 0.5 million square foot office tower that we own in the Summit Pointe development. We are also developing additional parcels on our Summit Pointe property for mixed-use purposes and began leasing some portions during fiscal 2020.
For more information on financing of our new, expanded and renovated stores, distribution centers and the Summit Pointe development activities, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Funding Requirements.”
Item 3. Legal Proceedings
From time to time, we are defendants in ordinary, routine litigation or proceedings incidental to our business, including allegations regarding:
employment-related matters;
infringement of intellectual property rights;
personal injury/wrongful death claims;
real estate matters;
environmental and safety issues; and
product safety matters, which may include regulatory matters.
In addition, we are currently defendants in national and state proceedings and responding to the regulatory matters described in Note 4 to our consolidated financial statements under the caption “Contingencies.” These include several proposed class action complaints that have been filed against, as well as a federal grand jury subpoena that has been issued to, Family Dollar related to
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issues associated with our West Memphis, Arkansas distribution center as well as Talc litigation. For a further description of these matters and their impact, see “Item 1A. Risk Factors”: “We may stop selling or recall certain products for safety-related issues” on page 13 and “Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations” on page 18. Such description is incorporated by reference herein.
We will vigorously defend ourselves in these matters. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance, however, that one or more of these matters will not have a material effect on our results of operations for the period or year in which they are reserved or resolved. Based on the information available, including the amount of time remaining before trial, the results of discovery and the judgment of internal and external counsel, we may be unable to express an opinion as to the outcome of those matters which are not close to being resolved and may be unable to estimate a loss or potential range of loss.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on The Nasdaq Global Select Market® under the symbol “DLTR.” As of March 7, 2022, we had 2,191 shareholders of record.
Issuer Purchases of Equity Securities
During fiscal 2021, 2020 and 2019, we repurchased 9,156,898, 3,982,478 and 1,967,355 shares of common stock, respectively, on the open market at a total cost of $950.0 million, $400.0 million and $200.0 million, respectively. The fiscal 2021 share repurchases occurred prior to the fourth quarter. As of January 29, 2022, we had $2.5 billion remaining under Board repurchase authorization. The repurchase authorization does not have an expiration date.
Stockholder Matters
We anticipate that substantially all of our cash flow from operations in the foreseeable future will be retained for the development and expansion of our business, the repayment of indebtedness and, as authorized by our Board of Directors, the repurchase of stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future.

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Stock Performance Graph
The following graph sets forth the yearly percentage change in the cumulative total shareholder return on our common stock during the five fiscal years ended January 29, 2022, compared with the cumulative total returns of the S&P 500 Index and the S&P Retailing Index. The comparison assumes that $100 was invested in our common stock on January 28, 2017, and, in each of the foregoing indices on January 28, 2017, and that dividends were reinvested. The stock price performance shown in the graph is not necessarily indicative of future price performance.
dltr-20220129_g2.jpg
Year Ended
January 28, 2017February 3, 2018February 2, 2019February 1, 2020January 30, 2021January 29, 2022
Dollar Tree, Inc.$100.00 $146.97 $130.57 $117.58 $137.29 $173.52 
S&P 500 Index100.00 126.41 123.48 150.26 176.18 217.21 
S&P Retailing Index100.00 148.34 159.89 190.43 278.09 296.49 
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section of Form 10-K generally discusses 2021 and 2020 events and results and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be
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found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021.
In Management’s Discussion and Analysis, we explain the general financial condition and the results of operations for our company, including, factors that affect our business, analysis of annual changes in certain line items in the consolidated financial statements, performance of each of our operating segments, expenditures incurred for capital projects and sources of funding for future expenditures. As you read Management’s Discussion and Analysis, please refer to our consolidated financial statements and related notes, included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Initiatives and Recent Developments
Our initiatives, as well as other recent developments that have had or are expected to have a significant effect on our operations are listed below:
Dollar Tree
In September 2021, we announced our new $1.25 price point initiative and as of January 29, 2022, we increased the price point on a majority of our $1 merchandise to $1.25 in more than 5,800 legacy Dollar Tree stores. We completed the rollout of this initiative to all Dollar Tree stores during the first quarter of fiscal 2022. To date, the increase in the price point has more than offset the decline in the number of units sold. We expect to see a greater lift in gross margin in the first half of the year as we sell through our current inventory. We plan to invest in new products and modify existing products to provide greater value for our customers and increase customer traffic and store productivity.
After a successful launch of the Instacart platform in the Family Dollar segment, we began testing the online service delivery at Dollar Tree stores in the third quarter of fiscal 2021. As of January 29, 2022, the Instacart platform covers nearly 7,000 Dollar Tree stores. This enables our customers to shop online and receive same-day delivery without having to visit a store.
In fiscal 2021, we continued to implement our Dollar Tree Plus initiative which introduces products priced at the $3 and $5 price points and provides our customers with extraordinary value in discretionary categories. As of January 29, 2022, we have approximately 660 Dollar Tree Plus stores. We plan to accelerate the implementation of the Dollar Tree Plus initiative in fiscal 2022 by adding the concept to an additional 1,500 stores.
The roll-out of our Crafter’s Square initiative to all of our Dollar Tree stores was completed during fiscal 2020. The Crafter’s Square assortment carries mark-ups which are higher than our average mark-up.
Family Dollar
In March 2019, we announced plans for a store optimization program for Family Dollar. For fiscal 2019, this program included rolling out a new model for both new and renovated Family Dollar stores, internally known as H2, re-bannering selected stores to the Dollar Tree brand, closing under-performing stores, and installing adult beverages and expanding freezers and coolers in selected stores. Our H2 stores have significantly improved merchandise offerings throughout the store, including the addition of approximately 20 Dollar Tree $1.00 merchandise sections (which transitioned to $1.25 in the first quarter of 2022) and establishing a minimum number of freezer and cooler doors. These stores have higher customer traffic and provide a higher average comparable store net sales lift, when compared to non-renovated stores, in the first year following renovation. H2 stores perform well in a variety of locations and especially in locations where our Family Dollar stores have been most challenged in the past. As of January 29, 2022, we have approximately 3,815 H2 stores and we plan to complete 800 H2 store renovations in fiscal 2022. In addition, we added adult beverage to 275 stores in fiscal 2021. We believe the addition of adult beverage to our assortment will drive traffic to our stores.
Building on the success of the H2 format, in March 2021, we announced the development of a new combination store format. Combo Stores leverage the strengths of the Dollar Tree and Family Dollar brands under one roof to serve small towns across the country. We are taking Family Dollar’s great value and assortment and blending in select Dollar Tree merchandise categories, creating a new store format targeted for small towns and rural communities with populations of 3,000 to 4,000 residents. As of January 29, 2022, we had more than 240 Combo Stores in operation. Due to the success of this initiative, we plan to accelerate expansion of the program in fiscal 2022 by adding 400 new, renovated, or relocated Combo Stores.
After a successful pilot program in 2020, in February 2021, we entered into a partnership with Instacart, which covers more than 6,000 Family Dollar stores across the United States as of January 29, 2022.
In fiscal 2019, the results of our annual goodwill impairment test showed that the fair value of the Family Dollar reporting unit was lower than its carrying value resulting in a $313.0 million non-cash pre-tax and after-tax goodwill impairment charge.
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In fiscal 2019, we substantially completed the consolidation of the store support center in Matthews, North Carolina to our Summit Pointe development in Chesapeake, Virginia.
On February 11, 2022, the FDA issued Form 483 observations primarily regarding rodent infestation at DC 202, as well as other items that require remediation. We initiated a voluntary retail-level product recall of FDA and USDA-regulated products stored and shipped to approximately 400 stores from DC 202 from January 1, 2021 through February 18, 2022, temporarily closed DC 202 for extensive cleaning, temporarily closed approximately 400 affected stores to permit the removal and destruction of inventory subject to the recall, ceased sales of relevant inventory subject to the recall, committed to the FDA to continue to cease the shipment of FDA-regulated products from DC 202 until FDA approval is received, and initiated corrective actions at DC 202 intended to ensure that these issues will not recur when shipment of FDA-regulated products recommences. The recall may have material adverse consequences. See “Item 3. Legal Proceedings” and Note 4 to our consolidated financial statements under the caption “Contingencies” for information concerning the proposed class action complaints filed against Family Dollar related to these matters. We anticipate additional lawsuits of a similar nature related to the recall. See also “Item 1A. Risk Factors”: “Litigation, arbitration and government proceedings may adversely affect our business, financial condition and/or results of operations” and “We may stop selling or recall certain products for safety-related issues.”
Supply Chain
In the third quarter of 2019, we opened a new 1.2 million square foot distribution center in Morrow County, Ohio.
In the third quarter of 2020, we opened a new 1.2 million square foot distribution center in Rosenberg, Texas and opened the first phase of our new Ocala, Florida distribution center.
The following factors have impacted our operations in fiscal 2021 and we expect these challenges to continue in fiscal 2022:
Shipping Delays: We rely heavily on Trans-Pacific shipping to acquire merchandise for our stores, and we are experiencing significant shipping delays as a result of the shipping capacity shortage which have negatively impacted our sales and the availability of product in the stores. We are also experiencing issues with port congestion and pandemic-related port closings and ship diversions. If the shipping delays do not improve they would continue to have a material adverse impact on product availability and product mix, and on our sales and merchandise margin. Sales could be negatively impacted if imported goods do not arrive in time to stock our stores, including the timely delivery of adequate levels of seasonal merchandise for the important Christmas holidays. If higher cost domestic goods are substituted for delayed imports, our merchandise margin could be adversely impacted. To address delays in shipments, we are prioritizing product categories for shipment in an effort to obtain seasonal assortments in advance of holiday seasons, adding and evaluating the use of long-term and short-term chartered vessels, and adding alternative sources of supply from North American factories.
Freight Costs: We are experiencing significantly higher international and domestic freight costs as a result of disruptions in the global supply chain. This trend is likely to continue. The combination of increased demand and limited availability of Trans-Pacific shipping capacity has caused spot market prices to increase substantially. We are a large importer of merchandise from Asia and particularly sensitive to freight costs. Import and domestic freight costs will present cost pressure in the first half of fiscal 2022 due to the annualization of fiscal 2021 rates. In addition, diesel fuel prices are expected to be significantly higher in fiscal 2022 and may increase further because of international tensions. We are working to reduce our freight costs by using chartered vessels, evaluating and securing long-term contracts with our carriers for vessels dedicated in large part to our needs, and adding alternative sources of supply that do not rely on Trans-Pacific shipping.
Labor Shortage: We are experiencing a shortage of associates and applicants to fill staffing requirements at our distribution centers due to the current labor shortage affecting businesses. This has adversely affected the operating efficiency of our distribution centers and our ability to transport merchandise from our distribution centers to our stores. The steps we have taken to address the labor shortage at our distribution centers include hosting national hiring events, paying sign-on bonuses, offering enhanced wages in select competitive markets, which is expected to increase our costs by more than $30.0 million in fiscal 2022, and paying tuition reimbursement.
Minimum Wage Increases, Wage Investments and Store Labor Shortages
In 2022, the minimum wage has increased in certain States and localities. In addition, the federal minimum wage may increase depending on the outcome of legislation proposed in Congress. Minimum wage increases in States and localities and wage investments in certain markets are expected to increase our costs by more than $165.0 million in
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2022. We are also experiencing a shortage of associates and applicants to fill staffing requirements at our stores due to the current labor shortage affecting businesses.
Build-out and Construction Costs and Delays
We have experienced higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores. In addition, we have experienced delays in new store openings due to inspection, permitting and contractor delays. We anticipate these increased costs and delays may continue for the foreseeable future.
Impact of COVID-19
As an essential business, our stores and distribution centers have remained open during the pandemic; however, our business trends and financial results in 2020 were materially different than in prior years. Our results of operations in fiscal 2020 include approximately $279.0 million of COVID-19-related expenses and these expenses totaled $33.5 million in fiscal 2021 and we expect them to be minimal in fiscal 2022.
The future impact of COVID-19 on our customers and our business is difficult to predict. The course of the pandemic, the effectiveness of health measures such as vaccines, and the impact of ongoing economic stabilization efforts is uncertain and government assistance payments may not provide enough funding to support future consumer spending at levels experienced during fiscal 2020 and 2021. For example, although the American Rescue Plan Act of 2021 (“Rescue Act”), which was enacted on March 11, 2021, provided U.S. government funding to address the continuing impact of COVID-19 on the economy, public health, individuals and businesses, some of the enacted benefits, including $1,400 direct payments to individuals and supplemental unemployment benefits, were temporary and have been discontinued. Given the level of volatility and uncertainty surrounding the future impact of COVID-19 on our customers, suppliers and the broader economies in the locations that we operate as well as uncertainty around the future impact on our supply chain and the global supply chain, it is challenging to predict our future operations and financial results.
Long-term Debt
During the fourth quarter of 2019, we prepaid $500.0 million of the $750.0 million Senior Floating Rate Notes due 2020 and accelerated the expensing of $0.3 million of deferred financing costs.
During the first quarter of 2020, we repaid the remaining $250.0 million outstanding under the Senior Floating Rate Notes.
During the first quarter of 2020, we preemptively drew $750.0 million on our revolving credit facility to reduce our exposure to potential short-term liquidity risk in the banking system as a result of the COVID-19 pandemic, all of which was repaid by the end of the third quarter of 2020.
During the fourth quarter of 2020, we repaid the $300.0 million 5.00% Senior Notes that we assumed upon the acquisition of Family Dollar.
During the fourth quarter of 2021, we refinanced our long-term debt obligations as follows:
We completed the registered offering of $800.0 million of 2.65% Senior Notes due 2031 and $400.0 million of 3.375% Senior Notes due 2051 and used the proceeds of the offering to redeem the $1.0 billion 2023 Notes, which resulted in our incurring a $43.8 million prepayment penalty and we accelerated the expensing of $2.7 million of deferred financing and original issue discount costs associated with the 2023 Notes;
We entered into a credit agreement for a $1.5 billion revolving credit facility, which replaced our then-existing $1.25 billion revolving credit facility.
For additional information regarding the risks related to our business and operations, including risks relating to the implementation of our Dollar Tree and Family Dollar initiatives, see “Item 1A. Risk Factors.”
Overview
We are a leading operator of more than 16,000 retail discount stores and we conduct our operations in two reporting segments. Our Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price of $1.25. Our Family Dollar segment operates general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores.
Our net sales are derived from the sale of merchandise. Two major factors tend to affect our net sales trends. First is our success at opening new stores. Second is the performance of stores once they are open. Sales vary at our existing stores from one year to the next. We refer to this as a change in comparable store net sales, because we include only those stores that are open throughout both of the periods being compared, beginning after the first fifteen months of operation. We include sales from stores expanded or remodeled
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during the year in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. The term ‘expanded’ also includes stores that are relocated. Stores that have been re-bannered are considered to be new stores and are not included in the calculation of the comparable store net sales change until after the first fifteen months of operation under the new brand.
At January 29, 2022, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces. A breakdown of store counts and square footage by segment for the years ended January 29, 2022 and January 30, 2021 is as follows:
Year Ended
January 29, 2022January 30, 2021
Dollar TreeFamily DollarTotalDollar TreeFamily DollarTotal
Store Count:
Beginning7,805 7,880 15,685 7,505 7,783 15,288 
New stores311 225 536 341 156 497 
Re-bannered stores(1)— (4)
Closings(56)(88)(144)(37)(64)(101)
Ending8,061 8,016 16,077 7,805 7,880 15,685 
Relocations56 68 124 49 39 88 
Selling Square Feet (in millions):
Beginning67.4 57.7 125.1 64.6 56.7 121.3 
New stores2.7 2.0 4.7 3.1 1.3 4.4 
Re-bannered stores— — — (0.1)0.1 — 
Closings(0.5)(0.6)(1.1)(0.3)(0.5)(0.8)
Relocations0.1 0.1 0.2 0.1 0.1 0.2 
Ending69.7 59.2 128.9 67.4 57.7 125.1 
Stores are included as re-banners when they close or open, respectively. Comparable store net sales for Dollar Tree may be negatively affected when a Family Dollar store is re-bannered near an existing Dollar Tree store.
The average size of stores opened in 2021 was approximately 8,760 selling square feet (or about 11,050 gross square feet) for the Dollar Tree segment and 8,880 selling square feet (or about 10,990 gross square feet) for the Family Dollar segment. For 2022, we continue to plan to open stores that are 8,000 - 10,000 selling square feet (or about 10,000 - 12,000 gross square feet) for both the Dollar Tree segment and the Family Dollar segment. We believe that these size stores are in the ranges of our optimal sizes operationally and give our customers a shopping environment which invites them to shop longer, buy more and make return visits.
Fiscal 2021, fiscal 2020 and fiscal 2019 each included 52 weeks.
The percentage change in comparable store net sales on a constant currency basis for the fiscal year ended January 29, 2022, as compared with the preceding year, is as follows:
Year Ended January 29, 2022
Sales GrowthChange in Customer TrafficChange in Average Ticket
Consolidated1.0 %(3.3)%4.5 %
Dollar Tree Segment2.1 %(1.8)%3.9 %
Family Dollar Segment(0.1)%(5.6)%5.7 %
Constant currency basis refers to the calculation excluding the impact of currency exchange rate fluctuations. We calculated the constant currency basis change by translating the current year’s comparable store net sales in Canada using the prior year’s currency exchange rates. We believe that the constant currency basis provides a more accurate measure of comparable store net sales performance. Comparable store net sales are positively affected by our expanded and relocated stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores.
Results of Operations
Our results of operations and year-over-year changes are discussed in the following section. Note that gross profit margin is calculated as gross profit (i.e., net sales less cost of sales) divided by net sales. The selling, general and administrative expense rate and operating income margin are calculated by dividing the applicable amount by total revenue.
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Net Sales
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Net sales$26,309.8 $25,508.4 $23,610.8 3.1 %
Comparable store net sales change,
    on a constant currency basis
1.0 %6.1 %1.8 %
The increase in net sales from 2020 to 2021 was a result of sales of $703.4 million at new stores and a comparable store net sales increase in the Dollar Tree segment, partially offset by a net decrease in sales in the current year from stores closed in fiscal 2021 and fiscal 2020.
Enterprise comparable store net sales increased 1.0% on a constant currency basis in 2021, as a result of a 4.5% increase in average ticket and a 3.3% decrease in customer traffic. Comparable store net sales increased 1.1% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 2.1% in the Dollar Tree segment and decreased 0.1% in the Family Dollar segment.
In 2020, the Dollar Tree segment had a comparable store net sales increase of 2.2% and the Family Dollar segment had a comparable store net sales increase of 10.5%. The Family Dollar segment increase was due to higher demand for essential products in the early stages of the COVID-19 pandemic and higher demand for discretionary items later in 2020.
Gross Profit
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Gross profit$7,725.9 $7,787.4 $7,040.7 (0.8)%
Gross profit margin29.4 %30.5 %29.8 %(1.1)%
The decrease in gross profit margin from 2020 to 2021 was a result of the net of the following:
Merchandise cost, including freight, increased 140 basis points in 2021 compared to 2020 resulting primarily from higher freight costs in both segments, partially offset by increased initial mark-on in both segments and higher sales of lower cost discretionary merchandise in the Dollar Tree segment, primarily due to higher Easter seasonal sell-through.
Markdown costs increased 10 basis points resulting from a reserve for a product recall and higher clearance markdowns on the Family Dollar segment, partially offset by lower seasonal markdowns on the Dollar Tree segment and $10.4 million of uninsured markdown costs for stores affected by civil unrest in 2020.
Occupancy costs increased 5 basis points primarily due to the loss of leverage from the comparable store net sales decrease on the Family Dollar segment.
Distribution costs decreased 5 basis points resulting from COVID-19-related expenses in 2020 of $36.3 million, including COVID-19 premium pay for all hourly associates for all hours worked from March 8, 2020 through January 2, 2021, partially offset by hourly wage increases at the distribution centers in 2021 and higher depreciation costs on the Dollar Tree segment resulting from the two new distribution centers. COVID-19-related expenses at the distribution centers in 2021 were $8.8 million.
Shrink costs decreased 40 basis points resulting from favorable inventory results in relation to accruals and decreases in the accrual rates on both the Family Dollar and Dollar Tree segments in the current year.

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Selling, General and Administrative Expenses
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Selling, general and administrative
   expenses
$5,925.9 $5,900.4 $5,778.5 0.4 %
Selling, general and administrative
   expense rate
22.5 %23.1 %24.5 %(0.6)%
The decrease in the selling, general and administrative expense rate from 2020 to 2021 was the result of the net of the following:
Payroll expenses decreased 70 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive and stock compensation expenses, partially offset by minimum wage increases in the current year and higher health care costs. Fiscal 2021 and 2020 included $17.6 million and $212.6 million, respectively of COVID-19-related payroll costs. The COVID-19 expenses in 2021 were primarily for quarantine and sick pay as well as the related payroll taxes. The prior year expenses were for store payroll costs for a wage premium paid to all store hourly associates for all hours worked from March 8, 2020 through September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes.
Other selling, general and administrative expenses increased 10 basis points primarily due to higher debit and credit fees as a result of increased debit and credit card penetration and higher advertising costs.
We recorded a non-cash goodwill impairment charge of $313.0 million in fiscal 2019, as discussed further in Note 1 to our consolidated financial statements under the caption “Goodwill and Nonamortizing Intangible Assets.” Excluding the goodwill impairment charge in 2019, the selling, general and administrative expense rate was 23.2% in 2019.
Operating Income
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Operating income$1,811.4 $1,887.9 $1,262.2 (4.1)%
Operating income margin6.9 %7.4 %5.3 %(0.5)%
Operating income margin decreased to 6.9% in fiscal 2021 compared to 7.4% in fiscal 2020. In the current year, the decrease in gross profit margin was partially offset by the decrease in the selling, general and administrative expense rate, as described above. Operating income in fiscal 2021 included $33.5 million of COVID-19-related expenses. Operating income in fiscal 2020 included $279.0 million of COVID-19-related expenses and $18.2 million of uninsured expenses related to civil unrest.
Excluding the non-cash goodwill impairment charge in 2019, operating income margin was 6.7% in 2019.
Interest Expense, Net
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Interest expense, net$178.9 $147.3 $162.1 21.5 %
Interest expense, net increased $31.6 million in fiscal 2021 compared to the prior year, resulting from the refinancing of our debt in the fourth quarter of 2021, which resulted in prepayment penalties of $43.8 million and the acceleration of the expensing of $2.7 million of amortizable non-cash deferred financing costs. These increases were partially offset by lower average debt outstanding in the current year.

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Provision for Income taxes
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Provision for income taxes$304.3 $397.9 $271.7 (23.5)%
Effective tax rate18.6 %22.9 %24.7 %(4.3)%
The effective tax rate for 2021 was 18.6% compared to 22.9% for 2020. The 2021 effective rate decreased compared to the prior year rate primarily resulting from a deferred tax benefit related to state entity restructuring in the current year and additional tax deductions in the current year related to restricted stock vesting. In the prior year, the restricted stock vesting resulted in an increase in tax expense.
Segment Information
We operate a chain of more than 16,000 retail discount stores in 48 states and five Canadian provinces. Our operations are conducted in two reporting business segments: Dollar Tree and Family Dollar. We define our segments as those operations whose results our chief operating decision maker (“CODM”) regularly reviews to analyze performance and allocate resources.
We measure the results of our segments using, among other measures, each segment’s net sales, gross profit and operating income. The CODM reviews these metrics for each of our reporting segments. We may revise the measurement of each segment’s operating income, as determined by the information regularly reviewed by the CODM. If the measurement of a segment changes, prior period amounts and balances are reclassified to be comparable to the current period’s presentation. Corporate, support and Other consists primarily of store support center costs that are considered shared services and therefore these selling, general and administrative costs are excluded from our two reporting business segments. These costs include operating expenses for our store support center and the results of operations for our Summit Pointe property in Chesapeake, Virginia. The Family Dollar segment “Operating income” includes advertising revenue, which is a component of “Other revenue” in the accompanying consolidated income statements. Prior year amounts have been reclassified to conform to the current year presentation.
Dollar Tree
The following table summarizes the operating results of the Dollar Tree segment:
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Net sales$13,922.1 $13,265.0 $12,507.9 5.0 %
Gross profit4,603.6 4,543.8 4,342.9 1.3 %
Gross profit margin33.1 %34.3 %34.7 %(1.2)%
Operating income$1,607.0 $1,598.0 $1,670.2 0.6 %
Operating income margin11.5 %12.0 %13.4 %(0.5)%
Net sales for the Dollar Tree segment increased 5.0%, or $657.1 million, in 2021 compared to 2020 due to sales from new stores of $446.2 million and a 2.1% increase in comparable store net sales. Average ticket increased 3.9% and customer traffic declined 1.8% in 2021.
Gross profit margin for the Dollar Tree segment decreased to 33.1% in 2021 from 34.3% in 2020. The decrease is due to the net of the following:
Merchandise cost, including freight, increased 170 basis points due primarily to higher freight costs, partially offset by increased initial mark-on and higher sales of higher margin discretionary merchandise, including higher seasonal sell-through.
Markdown costs decreased 5 basis points resulting from lower seasonal markdowns in the current year due to improved seasonal sell-through, partially offset by increased dated product markdowns.
Distribution costs decreased 5 basis points resulting primarily from lower COVID-19-related expenses in the current year, partially offset by higher depreciation costs related to two new distribution centers and higher hourly wages in the current year. Total distribution center COVID-19-related expenses were approximately $5.9 million and $21.3 million for fiscal
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2021 and 2020, respectively. COVID-19-related expenses in 2020 included a wage premium paid to all distribution center hourly associates for all hours worked from March 8, 2020 through January 2, 2021.
Occupancy costs decreased 5 basis points resulting from the leverage from the comparable store net sales increase in the current year.
Shrink costs decreased 40 basis points resulting from favorable inventory results in relation to accruals in the current year and a decrease in the shrink accrual rate.
Operating income margin for the Dollar Tree segment decreased to 11.5% in 2021 compared to 12.0% in 2020. The decrease in operating income margin in 2021 was the result of lower gross profit margin as noted above, partially offset by a lower selling, general and administrative expense rate. The selling, general and administrative expense rate decreased to 21.5% in 2021 compared to 22.3% in 2020 primarily resulting from a decrease in payroll expenses of 65 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases and higher health insurance costs. Fiscal 2021 and fiscal 2020 included $9.5 million and $124.2 million, respectively, of COVID-19-related payroll expenses. COVID-19 expenses in the current year were primarily for quarantine and sick pay as well as the related payroll taxes. In the prior year, COVID-19-related payroll expenses included store payroll costs for a wage premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, quarantine pay and sick pay as well as the related payroll taxes.
Operating income in fiscal 2021 included $19.2 million of COVID-19-related expenses. Operating income in fiscal 2020 included $161.1 million of COVID-19-related expenses and $5.4 million of uninsured costs related to civil unrest.
Family Dollar
The following table summarizes the operating results of the Family Dollar segment:
Year EndedPercentage Change
January 29,January 30,February 1,
Fiscal 2021 vs. Fiscal 2020
(dollars in millions)202220212020
Net sales$12,387.7 $12,243.4 $11,102.9 1.2 %
Gross profit3,122.3 3,243.6 2,697.8 (3.7)%
Gross profit margin25.2 %26.5 %24.3 %(1.3)%
Operating income (loss)$543.1 $655.6 $(74.9)(17.2)%
Operating income margin4.4 %5.4 %(0.7)%(1.0)%
Net sales for the Family Dollar segment increased $144.3 million, or 1.2%, in 2021 compared to 2020 due to $257.2 million of new store sales, partially offset by a comparable store net sales decrease of 0.1%. Average ticket increased 5.7% and customer traffic declined 5.6% in 2021.
Gross profit margin for the Family Dollar segment decreased to 25.2% in 2021 compared to 26.5% in 2020. The decrease is due to the net of the following:
Merchandise cost, including freight, increased 130 basis points primarily due to higher freight costs, partially offset by higher initial mark-on.
Markdown costs increased 20 basis points resulting from an increased reserve for a product recall and higher clearance markdowns, partially offset by $7.5 million of uninsured markdowns for stores affected by civil unrest in the prior year.
Occupancy costs increased 15 basis points as a result of the loss of leverage from the comparable store net sales decrease and higher real estate tax expenses.
Shrink expense decreased 35 basis points resulting from favorable physical inventory results in relation to accruals and a decrease in the shrink accrual rate.
Distribution costs decreased 5 basis points primarily due to lower COVID-19-related costs, partially offset by higher hourly wages. Total distribution center COVID-19-related expenses were $2.9 million and $15.0 million for 2021 and 2020, respectively. COVID-19-related expenses in the prior year included a wage premium for all distribution center hourly associates for all hours worked beginning March 8, 2020 through January 2, 2021.
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Operating income margin decreased to 4.4% in 2021 compared to 5.4% in 2020, resulting from the gross margin decrease noted above, partially offset by a decrease in the selling, general and administrative expense rate. The selling, general and administrative expense rate was 20.9% in 2021 compared to 21.1% in 2020. The decrease was due to the net of the following:
Payroll expenses decreased 50 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases and the loss of leverage from the comparable store net sales decrease. COVID-19-related payroll expenses for 2021 and 2020 were $8.1 million and $88.4 million, respectively. COVID-19 expenses in the current year were primarily for quarantine and sick pay as well as the related payroll taxes. The prior year included a wage premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes.
Store facility costs decreased 5 basis points primarily due to lower telecommunication expenses and lower repairs and maintenance expenses. Fiscal 2020 included $2.8 million of incremental repairs and maintenance expenses for stores damaged by civil unrest.
Other selling, general and administrative expenses increased 25 basis points primarily due to an increase in advertising expenses, increases in tax reserves and the loss of leverage from the comparable store net sales decrease. Promotional advertising was lower in the prior year due to the COVID-19 pandemic.
Depreciation and amortization expense increased 10 basis points primarily due to the loss of leverage from the comparable store net sales decrease and expenditures associated with the store renovation program.
Operating income in fiscal 2021 included $13.9 million of COVID-19-related expenses. Fiscal 2020 included $115.5 million for COVID-19-related expenses and $12.8 million of uninsured costs related to civil unrest. Excluding the $313.0 million non-cash goodwill impairment charge in 2019, operating income margin for the Family Dollar segment was 2.1% in 2019.
Liquidity and Capital Resources
Our business requires capital to build and open new stores, expand and renovate existing stores, expand our distribution network and operate our existing stores. Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October. Historically, we have satisfied our seasonal working capital requirements for existing stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities.
The following table compares cash flow-related information for the years ended January 29, 2022, January 30, 2021 and February 1, 2020:
 Year Ended
 January 29,January 30,February 1,
(in millions)202220212020
Net cash provided by (used in):
Operating activities$1,431.5 $2,716.3 $1,869.8 
Investing activities(1,019.9)(889.7)(1,020.2)
Financing activities(836.5)(949.9)(709.8)
Operating Activities
Net cash provided by operating activities decreased $1,284.8 million in 2021 compared to 2020 primarily as a result of higher inventory levels and lower current liabilities, partially offset by higher accounts payable.
Investing Activities
Net cash used in investing activities increased $130.2 million in 2021 compared with 2020 primarily due to higher capital expenditures in the current year.
Financing Activities
Net cash used in financing activities decreased $113.4 million in 2021 compared to 2020 primarily due to the following:
On December 1, 2021, we completed the registered offering of $800.0 million aggregate principal amount of Senior Notes due 2031 and $400.0 million aggregate principal amount of Senior Notes due 2051 and used the proceeds of the offering to
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redeem the $1.0 billion 2023 Notes, which resulted in our incurring a $43.8 million prepayment penalty. In addition, in connection with the registering of these senior notes and the refinancing of our revolving line of credit, we paid $15.5 million in deferred financing costs.
In 2021, we paid $950.0 million in cash for stock repurchases compared to $400.0 million in the prior year.
In 2020, we also repaid the remaining $250.0 million of our $750.0 million Floating Rate Notes and the $300.0 million 5% Senior Notes.
At January 29, 2022, our long-term borrowings were $3.45 billion and we had $1.5 billion available under our revolving credit facility, less amounts outstanding for standby letters of credit totaling $46.0 million. For additional detail on our long-term borrowings and other commitments, refer to the discussion of Funding Requirements below, as well as Note 4 and Note 5 to our consolidated financial statements.
Share Repurchases
We repurchased 9,156,898, 3,982,478 and 1,967,355 shares of common stock on the open market in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, for $950.0 million, $400.0 million and $200.0 million, respectively. At January 29, 2022, we had $2.5 billion remaining under Board repurchase authorization.
Funding Requirements
Overview
We expect our cash needs for opening new stores and expanding and renovating existing stores in fiscal 2022 to total approximately $748.0 million, which includes capital expenditures, initial inventory and pre-opening costs.
Our estimated capital expenditures for fiscal 2022 are approximately $1.3 billion, including planned expenditures for our new and expanded stores, store renovations, distribution center expansions and the development of additional parcels on our Summit Pointe property, located in Chesapeake, Virginia, for mixed-use purposes. We believe that we can adequately fund our working capital requirements and planned capital expenditures for the foreseeable future from net cash provided by operations and potential borrowings under our revolving credit facility.
Our material contractual obligations consist of long-term debt and related interest payments and operating lease obligations. Additionally, we have commitments related to ocean shipping contracts, software license and support agreements, telecommunication services and store technology assets and maintenance for our stores. Other commitments include letters of credit for imported merchandise, standby letters of credit that serve as collateral for our large-deductible insurance programs and surety bonds that serve as collateral for utility payments at our stores and self-insured insurance programs. For additional information regarding these obligations, including amounts outstanding at January 29, 2022, refer to Note 4, Note 5 and Note 6 to our consolidated financial statements.
Critical Accounting Estimates
The preparation of financial statements requires the use of estimates. Certain of our estimates require a high level of judgment and have the potential to have a material effect on the financial statements if actual results vary significantly from those estimates. Following is a discussion of the estimates that we consider critical.
Inventory Valuation
As discussed in Note 1 to our consolidated financial statements under the caption “Merchandise Inventories,” inventories at the distribution centers are stated at the lower of cost or net realizable value with cost determined on a weighted-average basis. Cost is assigned to store inventories using the retail inventory method on a weighted-average basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that is widely used in the retail industry and results in valuing inventories at lower of cost or market when markdowns are taken as a reduction of the retail value of inventories on a timely basis.
Inventory valuation methods require certain management estimates and judgments, including estimates of future merchandise markdowns and shrink, which significantly affect the ending inventory valuation at cost as well as the resulting gross margins. The averaging required in applying the retail inventory method and the estimates of shrink and markdowns could, under certain circumstances, result in costs not being recorded in the proper period.
We estimate our markdown reserve based on the consideration of a variety of factors, including, but not limited to, quantities of slow moving or seasonal carryover merchandise on hand, historical markdown statistics and future merchandising plans. The accuracy
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of our estimates can be affected by many factors, some of which are outside of our control, including changes in economic conditions and consumer buying trends. Historically, we have not experienced significant differences in our estimated reserve for markdowns compared with actual results.
Our accrual for shrink is based on the actual, historical shrink results of our most recent physical inventories adjusted, if necessary, for current economic conditions and business trends. These estimates are compared to actual results as physical inventory counts are taken and reconciled to the general ledger. Our physical inventory counts are generally taken between January and October of each year; therefore, the shrink accrual recorded at January 29, 2022 is based on estimated shrink for most of 2021, including the fourth quarter. The amounts recorded in the current year reflect the Dollar Tree and Family Dollar segments’ historical results. We periodically adjust our shrink estimates to reflect our best estimates based on the factors described and, historically, these adjustments have not been material.
Our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis.
Self-Insurance Liabilities
The liabilities related to our self-insurance programs for workers’ compensation and general liability are estimates that require judgment and the use of assumptions. Semiannually, we obtain third-party actuarial valuations to aid in valuing the liabilities and in determining the amount to accrue during the year. These actuarial valuations are estimates based on our historical loss development factors and the related accruals are adjusted as management’s estimates change.
Management’s estimate for self-insurance liabilities could vary from the ultimate loss sustained given the difficulty in predicting future events; however, historically, the net total of these differences has not had a material effect on our financial condition or results of operations.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are initially recorded at their fair values. These assets are not amortized but are evaluated annually for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock.
For purposes of our goodwill impairment evaluation, the reporting units are Family Dollar, Dollar Tree and Dollar Tree Canada. Goodwill has been assigned to the reporting units based on prior business combinations related to the brands. In the event a qualitative assessment of the fair value of a reporting unit indicates it is more likely than not that the fair value is less than the carrying amount, we then estimate the fair value using a combination of a market multiple method and a discounted cash flow method. Under the market multiple approach, we estimate a fair value based on comparable companies’ market multiples of revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted for a control premium. Under the discounted cash flow approach, we project future cash flows which are discounted using a weighted-average cost of capital analysis that reflects current market conditions, adjusted for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.
The Family Dollar goodwill and trade name comprise a substantial portion of our goodwill and indefinite-lived intangible assets and management’s judgment utilized in the Family Dollar goodwill and trade name impairment evaluations is critical. The computations require management to make estimates and assumptions and actual results may differ significantly, particularly if there are significant adverse changes in the operating environment. Critical assumptions that are used as part of a quantitative Family Dollar goodwill evaluation include:
The potential future revenue, EBITDA and cash flows of the reporting unit. The projections use management’s assumptions about economic and market conditions over the projected period as well as our estimates of future performance and reporting unit revenue, gross margin, expenses and other factors. The resulting revenue, EBITDA and cash flow estimates are based on our most recent business operating plans, and various growth rates are assumed for years beyond the current business plan period. We did not perform a quantitative evaluation in fiscal 2021; however, we believe that the assumptions, estimates and rates used in our fiscal 2020 impairment evaluations are reasonable. Variations in the assumptions, estimates and rates could result in significantly different estimates of fair value.
Selection of an appropriate discount rate. Calculating the present value of future cash flows requires the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants. Given current economic conditions, it is possible that the discount rate will fluctuate in the near term. During
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fiscal 2020, we engaged third party experts to assist in the determination of the weighted-average cost of capital used to discount the cash flows for our Family Dollar reporting unit. We did not perform a quantitative analysis in fiscal 2021; however, the weighted-average cost of capital used to discount the cash flows for our evaluation was 8.25% for our fiscal 2020 analysis.
Indefinite-lived intangible assets, such as the Family Dollar trade name, are not subject to amortization but are reviewed at least annually for impairment. The indefinite-lived intangible asset impairment evaluations are performed by comparing the fair value of the indefinite-lived intangible assets to their carrying values. We estimate the fair value of our trade name intangible asset based on an income approach using the relief-from-royalty method. This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables. We base our fair value estimates on assumptions we believe to be reasonable, but which are inherently uncertain. The discount rate includes a premium compared to the discount used for the Family Dollar goodwill impairment evaluation due to the inherently higher risk profile of intangible assets compared to the overall reporting unit.
Our evaluation of goodwill did not result in impairment charges being recorded in fiscal 2021 or 2020. A non-cash impairment charge of $313.0 million was recorded in fiscal 2019 related to the Family Dollar reporting unit. Our evaluation of the Family Dollar trade name did not result in impairment charges during fiscal 2021, 2020 or 2019. Based on the results of the 2020 quantitative evaluation, the fair value of the Family Dollar reporting unit exceeded its carrying value by a significant margin and the fair value of the Family Dollar trade name exceeded its carrying value by approximately 7.5%.
For additional information related to goodwill and indefinite-lived intangible assets, including the related impairment evaluations, refer to Note 1 to our consolidated financial statements under the caption “Goodwill and Nonamortizing Intangible Assets.” For additional information related to uncertainties associated with the key assumptions and any potential events and/or circumstances that could have a negative effect on the key assumptions, please refer to “Item 1A. Risk Factors” and elsewhere within this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If our assumptions and related estimates change in the future, we may be required to record impairment charges against earnings in future periods. Any impairment charges that we may take in the future could be material to our results of operations and financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate changes and diesel fuel cost changes. We may enter into interest rate or diesel fuel swaps to manage exposure to interest rate and diesel fuel price changes. We do not enter into derivative instruments for any purpose other than cash flow hedging and we do not hold derivative instruments for trading purposes.
Interest Rate Risk
Our exposure to interest rate risk relates to our revolving credit facility, as borrowings under the revolving credit facility bear interest at SOFR, reset periodically, plus 0.10%, plus 0.875% to 1.50% as determined by our credit ratings and leverage ratio. At January 29, 2022, there were no borrowings outstanding under the revolving credit facility.
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Item 8. Financial Statements and Supplementary Data


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Dollar Tree, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Dollar Tree, Inc. and subsidiaries (the Company) as of January 29, 2022 and January 30, 2021, the related consolidated income statements, and statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended January 29, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 29, 2022 and January 30, 2021, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 29, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 29, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 15, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Estimated self‑insurance liability
As discussed in Note 1 to the consolidated financial statements, the Company considers actuarial assumptions to estimate its self‑insurance liability. As of January 29, 2022, the Company recorded an estimated liability of $317 million.
We identified the evaluation of the estimated self‑insurance liability as a critical audit matter. The estimation process involves auditor judgment and actuarial expertise to evaluate the actuarial methods and assumptions that are used to estimate future claim payments. Specifically, the evaluation includes the assumptions related to the loss development factors and expected loss rates which are primarily driven by historical claims paid and incurred data.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self‑insurance liability estimation process. This included controls related to (1) the selection of the actuarial methods, and the development of the loss development factors and expected loss rates used to calculate the liability, and (2) the completeness and accuracy of historical claims paid and incurred data. We assessed the Company’s estimate of the liability by testing a selection of certain data, including claims data, utilized by the Company’s actuary by comparing it to relevant documentation. We involved actuarial professionals with specialized skills and knowledge, who assisted in:
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assessing the Company’s actuarial methods by comparing them to generally accepted actuarial methodologies; and
evaluating the Company’s actuarial estimates and assumptions related to the loss development factors and expected loss rates, by comparing them to generally accepted actuarial methodologies and the Company’s historical data and trends.

/s/ KPMG LLP
We have served as the Company’s auditor since 1987.

Norfolk, Virginia
March 15, 2022

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DOLLAR TREE, INC.
CONSOLIDATED INCOME STATEMENTS

 Year Ended
 January 29,January 30,February 1,
(in millions, except per share data)202220212020
Net sales$26,309.8 $25,508.4 $23,610.8 
Other revenue11.4 0.9  
Total revenue26,321.2 25,509.3 23,610.8 
Cost of sales18,583.9 17,721.0 16,570.1 
Selling, general and administrative expenses, excluding Goodwill
    impairment
5,925.9 5,900.4 5,465.5 
Goodwill impairment  313.0 
Selling, general and administrative expenses5,925.9 5,900.4 5,778.5 
Operating income1,811.4 1,887.9 1,262.2 
Interest expense, net178.9 147.3 162.1 
Other expense, net0.3 0.8 1.4 
Income before income taxes1,632.2 1,739.8 1,098.7 
Provision for income taxes304.3 397.9 271.7 
Net income$1,327.9 $1,341.9 $827.0 
Basic net income per share$5.83 $5.68 $3.49 
Diluted net income per share$5.80 $5.65 $3.47 

See accompanying Notes to Consolidated Financial Statements
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DOLLAR TREE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended
January 29,January 30,February 1,
(in millions)202220212020
Net income$1,327.9 $1,341.9 $827.0 
Foreign currency translation adjustments 4.6 (1.5)
Total comprehensive income$1,327.9 $1,346.5 $825.5 

See accompanying Notes to Consolidated Financial Statements
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DOLLAR TREE, INC.
CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)January 29, 2022January 30, 2021
ASSETS  
Current assets:  
Cash and cash equivalents$984.9 $1,416.7 
Merchandise inventories4,367.3 3,427.0 
Other current assets257.0 207.1 
Total current assets5,609.2 5,050.8 
Property, plant and equipment, net of accumulated depreciation of $5,363.8 and $4,765.0,
    respectively
4,477.3 4,116.3 
Restricted cash53.4 46.9 
Operating lease right-of-use assets6,425.3 6,324.1 
Goodwill1,984.4 1,984.4 
Trade name intangible asset3,100.0 3,100.0 
Deferred tax asset20.3 23.2 
Other assets51.9 50.3 
Total assets$21,721.8 $20,696.0 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current liabilities:  
Current portion of operating lease liabilities$1,407.8 $1,348.2 
Accounts payable1,884.2 1,480.5 
Income taxes payable82.6 86.3 
Other current liabilities802.0 815.3 
Total current liabilities4,176.6 3,730.3 
Long-term debt, net3,417.0 3,226.2 
Operating lease liabilities, long-term5,145.5 5,065.5 
Deferred income taxes, net987.2 1,013.5 
Income taxes payable, long-term20.9 22.6 
Other liabilities256.1 352.6 
Total liabilities14,003.3 13,410.7 
Commitments and contingencies (Note 4)
Shareholders’ equity:  
Common stock, par value $0.01; 600,000,000 shares authorized, 225,100,198 and
  233,383,199 shares issued and outstanding at January 29, 2022 and January 30, 2021,
    respectively
2.2 2.3 
Additional paid-in capital1,243.9 2,138.5 
Accumulated other comprehensive loss(35.2)(35.2)
Retained earnings6,507.6 5,179.7 
Total shareholders’ equity7,718.5 7,285.3 
Total liabilities and shareholders’ equity$21,721.8 $20,696.0 

See accompanying Notes to Consolidated Financial Statements
44

DOLLAR TREE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
YEARS ENDED JANUARY 29, 2022, JANUARY 30, 2021, AND FEBRUARY 1, 2020

(in millions)Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Shareholders’
Equity
Balance at February 2, 2019238.1 $2.4 $2,602.7 $(38.3)$3,076.1 $5,642.9 
Cumulative effect of adopted accounting
    standards, net
— — — — (65.3)(65.3)
Net income— — — — 827.0 827.0 
Total other comprehensive loss— — — (1.5)— (1.5)
Issuance of stock under Employee Stock
    Purchase Plan
0.1 — 9.4 — — 9.4 
Exercise of stock options — 5.8 — — 5.8 
Stock-based compensation, net0.4 — 36.5 — — 36.5 
Repurchase of stock(1.9)— (200.0)— — (200.0)
Balance at February 1, 2020236.7 2.4 2,454.4 (39.8)3,837.8 6,254.8 
Net income— — — — 1,341.9 1,341.9 
Total other comprehensive income— — — 4.6 — 4.6 
Issuance of stock under Employee Stock
    Purchase Plan
0.2 — 10.0 — — 10.0 
Exercise of stock options0.1 — 7.0 — — 7.0 
Stock-based compensation, net0.4 — 67.0 — — 67.0 
Repurchase of stock(4.0)(0.1)(399.9)— — (400.0)
Balance at January 30, 2021233.4 2.3 2,138.5 (35.2)5,179.7 7,285.3 
Net income— — — — 1,327.9 1,327.9 
Issuance of stock under Employee Stock
    Purchase Plan
0.1 — 10.4 — — 10.4 
Exercise of stock options0.1 — 7.4 — — 7.4 
Stock-based compensation, net0.7 — 37.5 — — 37.5 
Repurchase of stock(9.2)(0.1)(949.9)— — (950.0)
Balance at January 29, 2022225.1 $2.2 $1,243.9 $(35.2)$6,507.6 $7,718.5 

See accompanying Notes to Consolidated Financial Statements
45



DOLLAR TREE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended
 January 29,January 30,February 1,
(in millions)202220212020
Cash flows from operating activities:   
Net income$1,327.9 $1,341.9 $827.0 
Adjustments to reconcile net income to net cash provided by operating activities:   
Goodwill impairment  313.0 
Depreciation and amortization716.0 686.6 645.4 
Provision for deferred income taxes(23.2)30.7 9.1 
Stock-based compensation expense79.9 83.9 61.4 
Amortization of debt discount and debt-issuance costs8.9 4.0 6.9 
Other non-cash adjustments to net income11.2 19.0 24.5 
Loss on debt extinguishment43.8   
Changes in operating assets and liabilities:   
Merchandise inventories(940.4)97.1 13.6 
Other current assets(49.9)1.7 (8.4)
Other assets(2.6)(7.0)8.2 
Accounts payable403.8 142.6 (79.8)
Income taxes payable(3.7)23.6 2.7 
Other current liabilities(36.5)203.4 24.3 
Other liabilities(98.2)88.2 (14.6)
Operating lease right-of-use assets and liabilities, net(5.5)0.6 36.5 
Net cash provided by operating activities1,431.5 2,716.3