AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Substantial stores and distribution infrastructure support operations, but insignificant entry barriers and competitors with greater resources undermine a structural advantage. No relative unit-cost advantage is demonstrated.
durability · 1/4 · The existing footprint has operating value, but low entry barriers and broad substitutable retail formats make competitive protection fragile. Expected investment benefits do not establish durable excess returns.
customer dependency · 1/4 · Customers have many alternative retail formats, and management identifies value and convenience as loyalty drivers rather than demonstrated switching friction. The evidence supports weak dependency, without proving actual customer attrition.
erosion resilience · 2/4 · Executed pricing initiatives and lower shrink and freight supported improvement before refunds, showing some adaptation. Pricing-model constraints and the large refund contribution prevent treating recent margin gains as durable protection from erosion.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · 2/4 · Fiscal 2025 pricing initiatives demonstrably improved fiscal 2026 merchandise mark-on. This supports realized pricing ability, but its separate magnitude and volume effects are undisclosed, while cost pass-through remains constrained.
retention · — · Sales increased, but the passages do not distinguish repeat demand from new stores, basket mix or price changes. Management's loyalty assertion and aggregate operating results cannot establish retention following repricing.
margin resilience · 2/4 · First-quarter gross-margin improvement before refund receipt demonstrates partial resilience through pricing, freight and shrink improvements. Higher tariffs and markdowns offset benefits, and refunds supplied 375 basis points of the subsequent 480-basis-point first-half improvement.
contractual freedom · 2/4 · Executed pricing initiatives demonstrate practical discretion to change merchandise prices. The value-oriented pricing model constrains that discretion economically; the passages do not establish complete contractual freedom or disclose customer pricing commitments.
Predictability81
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 22.21
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.82
Financial strength72
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 81.41
- netDebtEbitGrade
- 79.26
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 25.39
- Debt / FCF (x)
- 2.30
- Net debt / operating income (x)
- 1.04
- Current ratio (x)
- 1.07
- cashInterestPaid
- 125.40
- cashInterestCoverage
- 17.47
Capital allocation64
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 14.06
- 3-year average dilution (%)
- -2.66
- 3-year average SBC / revenue (%)
- 0.41
- cashConversionGrade
- 0.00
Management50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 1/4 · Realized Family Dollar impairments and disposal losses establish a poor historical capital outcome. Its sale generated cash, and infrastructure investment continued, but substantial repurchases alongside a new term loan do not demonstrate superior allocation. Cash-flow improvement also benefited from refunds, tax effects and working-capital movements. Historical failures are not attributed solely to current leadership.
incentive alignment · 2/4 · Actual fiscal 2025 awards combined three-year performance equity, relative shareholder-return modification and service-vesting equity; existing clawback and trading restrictions add alignment. Discretionary performance adjustments and a 162.4% incentive payout weaken confidence in strict pay-for-performance discipline. Actual management ownership is missing.
execution · 2/4 · The Phoenix opening, realized pricing benefits and higher sales demonstrate progress. This assessment uses indirect operating evidence rather than customer retention measures. Refunds and temporary transition-services income explain substantial earnings improvement, while historical Family Dollar losses temper the broader execution record.
governance · 3/4 · Disclosed existing practices include independent board leadership and standing committees, majority director elections, a shareholder-approved 15% special-meeting threshold and a mandatory executive clawback. These establish strong governance mechanisms, without proving exceptional oversight effectiveness or implying adoption of pending shareholder proposals.
Evidence
There are no significant economic barriers for others to enter our retail sector.
Risk factors: economic barriers to retail-sector entry · Filed 16/03/2026
We compete with discount stores and many other retailers, including mass merchandise, warehouse club, grocery, drug, convenience, variety, online retailers, and certain specialty stores.
Risk factors: competing retail formats · Filed 16/03/2026
Some of our current or potential competitors have greater financial, distribution, marketing and other resources than we do.
Risk factors: competitors' resources · Filed 16/03/2026
The Company operates 9,150 stores across 48 states and the District of Columbia and approximately 285 stores across seven Canadian provinces as of August 1, 2026.
Note 8: operating store footprint at August 1, 2026 · Filed 27/08/2026
We also operate 17 distribution centers in the United States.
Note 8: United States distribution-center count · Filed 27/08/2026
In May 2026, we celebrated the grand opening of this 1.0 million square foot facility with outbound deliveries to approximately 700 stores across Arizona, Colorado, Nevada, New Mexico, and Utah.
MD&A: Phoenix distribution-center opening and deliveries · Filed 27/08/2026
Our stores receive approximately 90% of their inventory from our distribution centers.
Business: proportion of inventory received through distribution centers · Filed 26/03/2025
Our ability to pass along labor and other related costs to our customers is constrained by our pricing model, and we may not be able to offset such increased costs elsewhere in our business.
Risk factors: pricing-model constraints on cost pass-through · Filed 16/03/2026
improved mark-on from pricing initiatives executed during the second and third quarters of fiscal year 2025, lower import freight costs, and lower shrink from favorable inventory count results, partially offset by higher tariff costs and higher markdowns.
MD&A: first-quarter fiscal 2026 pricing, freight, shrink, tariff and markdown effects · Filed 28/05/2026
Gross profit margin increased during the 13 weeks ended May 2, 2026 due to a 120 basis point decrease in cost of sales.
MD&A: first-quarter fiscal 2026 gross-margin improvement · Filed 28/05/2026
The cost of sales rate decreased to 60.2% during the 26 weeks ended August 1, 2026 from 65.0% during the same period last year primarily due to a 375 basis point benefit from the receipt of $368.7 million in tariff refunds, pricing initiatives executed during the second and third quarters of fiscal 2025, lower shrink from favorable inventory count results, and lower import freight costs, partially offset by higher tariff costs, higher markdowns including approximately $22.0 million related to our tariff reinvestment initiative, and a $13.0 million charge recorded for antidumping and countervailing duties related to the imports of paper plates and aluminum pans.
MD&A: first-half fiscal 2026 gross-margin drivers and tariff refunds · Filed 27/08/2026
These investments are expected to support long-term growth and improve network resilience, though they may modestly impact gross margin in the near-to-mid term as capacity ramps up.
MD&A: expected distribution investment benefits and ramp-up costs · Filed 27/08/2026
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) 13 Weeks Ended 26 Weeks Ended (in millions, except per share data) August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025 Net sales $ 4,886.5 $ 4,566.8 $ 9,857.0 $ 9,203.3 Other revenue 4.7 3.6 10.0 6.8 Total revenue 4,891.2 4,570.4 9,867.0 9,210.1 Cost of sales 2,792.2 2,996.7 5,933.2 5,983.7 Selling, general and administrative expenses 1,426.6 1,350.7 2,809.2 2,619.3 Transition services agreement income, net 17.7 8.0 38.8 8.0 Operating income 690.1 231.0 1,163.4 615.1 Interest expense, net 17.8 22.8 34.1 45.5 Other income, net (14.1) (0.4) (19.5) (62.1) Income from continuing operations before income taxes 686.4 208.6 1,148.8 631.7 Provision for income taxes 171.9 53.1 287.0 162.7 Income from continuing operations 514.5 155.5 861.8 469.0 Income from discontinued operations, net of tax — 32.9 — 62.8 Net income $ 514.5 $ 188.4 $ 861.8 $ 531.8 Basic earnings per share of common stock: Continuing operations $ 2.70 $ 0.75 $ 4.45 $ 2.23 Discontinued operations — 0.16 — 0.30 Total basic earnings per share of common stock $ 2.70 $ 0.91 $ 4.45 $ 2.53 Diluted earnings per share of common stock: Continuing operations $ 2.70 $ 0.75 $ 4.44 $ 2.22 Discontinued operations — 0.16 — 0.30 Total diluted earnings per share of common stock $ 2.70 $ 0.91 $ 4.44 $ 2.52 Weighted average common shares outstanding: Basic 190.6 207.3 193.7 210.4 Diluted 190.9 207.8 194.1 210.8 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Unaudited condensed consolidated income statements: sales and operating results · Filed 27/08/2026
We believe the convenience and value we offer, as well as the “thrill-of-the-hunt” shopping experience where customers discover new celebratory and seasonal items every week, are key factors in serving and growing our base of loyal customers.
Business: management belief concerning convenience, value and customer loyalty · Filed 16/03/2026
Further, to remain competitive, we may be required to change our product offerings or lower our prices, but our ability to do so may be limited or delayed with the result that we could see lower traffic or sales or reduced profitability.
Risk factors: possible competitive price reductions and offering changes · Filed 16/03/2026
66 Table of Contents The following table summarizes the results of operations of the Family Dollar business that are being reported as discontinued operations: Year Ended (in millions) January 31, 2026 February 1, 2025 February 3, 2024 Net sales $ 5,625.5 $ 13,252.1 $ 13,811.3 Other revenue 4.5 15.0 11.4 Total revenue 5,630.0 13,267.1 13,822.7 Cost of sales 3,931.6 9,894.5 10,510.6 Selling, general and administrative expenses, excluding Goodwill impairment 1,218.4 4,706.9 4,899.4 Goodwill impairment — 490.5 1,069.0 Selling, general and administrative expenses 1,218.4 5,197.4 5,968.4 Operating income (loss) 480.0 (1,824.8) (2,656.3) Interest income 2.7 5.5 5.7 Loss on held for sale and disposal of discontinued operations 407.7 3,438.8 — Income (loss) from discontinued operations before income taxes 75.0 (5,258.1) (2,650.6) Provision for income taxes 17.8 (1,185.5) (386.4) Income (loss) from discontinued operations, net of tax $ 57.2 $ (4,072.6) $ (2,264.2) Depreciation expense related to discontinued operations was $430.6 million and $418.5 million for the years ended February 1, 2025 and February 3, 2024, respectively.
Discontinued operations: Family Dollar operating losses, impairments and disposal losses · Filed 16/03/2026
Total cash generated from the sale approximated $793 million, consisting of approximately $680 million of net proceeds, including from settlement of net working capital and net indebtedness, and approximately $113 million monetized primarily through a reduction of net working capital prior to the date of sale.
MD&A: realized cash generated from Family Dollar sale · Filed 27/08/2026
We repurchased 11,136,764 shares of common stock on the open market and in a block trade transaction at a cost of $1.2 billion, including applicable excise tax, during the 26 weeks ended August 1, 2026.
Liquidity and capital resources: first-half fiscal 2026 share repurchases · Filed 27/08/2026
27 Table of Contents At August 1, 2026, our long-term borrowings were $3.0 billion, including our new $500.0 million Term Loan which we entered into on March 19, 2026 as discussed further in Note 4 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Liquidity and capital resources: long-term borrowings and new term loan · Filed 27/08/2026
Net cash provided by operating activities increased $926.3 million primarily due to higher income from continuing operations, net of non-cash items, including the receipt of $383 million of tariff refunds, increases in accounts payable in the current year compared to decreases in the prior year, lower income tax payments in the current year, and reductions in merchandise inventories compared to a prior year increase.
Liquidity and capital resources: operating cash-flow improvement and its drivers · Filed 27/08/2026
2025 Executive Compensation Program Element Vehicle Description & Strategic Role Base Salary • Helps attract and retain executives through market-competitive base pay • Based on individual performance, experience and scope of responsibility Management Incentive Compensation Plan • Encourages achievement of short-term financial performance metrics that create shareholder value • Cash bonus incentives in 2025 were based 70% on adjusted operating income and 30% on adjusted total revenue goals which are designed to promote profitable growth Long-Term Equity Incentive Awards • Long-term incentive compensation composed of equity awards: 50% in PSUs and 50% in RSUs • PSUs incentivize executives to drive financial performance toward long-term objectives and strengthen alignment with shareholders • PSUs awarded in 2025 were based on a three-year cumulative goal for adjusted earnings per share, with a three-year relative TSR modifier (+/- 25%) • RSU awards create a retention incentive through multi-year vesting and robust stock ownership guidelines In addition, we provide certain perquisites to our executives, principally to allow them to devote more time to our business and to promote their health and safety.
Compensation discussion: adopted fiscal 2025 incentive metrics and equity award structure · Filed 01/05/2026
The Committee determined that it was appropriate to make symmetrical adjustments to operating income and total revenue that increased operating income by $148.8 million related to tariffs and decreased total revenue by $259.4 million.
Compensation discussion: discretionary tariff-related adjustments to performance measures · Filed 01/05/2026
During its March 2026 meeting, the Compensation Committee determined the following Company performance for fiscal 2025: Metric 2025 Target ($ millions) 2025 Achievement ($ millions) % of Target Achieved % of Payout per Metric Weighting (%) Total Weighted Payout (%) Adjusted Operating Income(1) 1,696.5 1,880.1 110.8% 186.6% 70% 130.6% Adjusted Total Revenue(2) 19,095.8 19,152.4 100.3% 106.0% 30% 31.8% Total 100% 162.4% (1) The definition of adjusted operating income provided above allows for adjustments of certain items within the discretion of the Compensation Committee.
Compensation discussion: March 2026 determination of fiscal 2025 performance and incentive payout · Filed 01/05/2026
• Independent Board Leadership—Our Board is led by an Independent Chairman, and each of our standing committees is composed entirely of independent directors.
Governance: independent chairman and independent standing committees · Filed 01/05/2026
At the Company’s 2022 annual meeting of shareholders, holders of over 86% of the Company’s outstanding shares and over 99% of votes, upon recommendation of the Board of Directors, approved an amendment to our Articles of Incorporation (“Articles”) providing that a special meeting will be called upon the written request of shareholders owning 15% or more of the Company’s outstanding stock.
Governance: previously approved shareholder special-meeting right · Filed 01/05/2026
The Company has a robust clawback policy that requires mandatory reimbursement of excess incentive compensation from any current or former executive officer if the Company’s financial statements are restated due to material noncompliance with financial reporting requirements under the securities laws.
Compensation governance: existing executive clawback policy · Filed 01/05/2026
• Majority Election Standard—In uncontested elections, director nominees must receive the affirmative vote of a majority of the votes cast to be elected, and any incumbent director who fails to receive majority support is subject to our resignation policy.
Governance: majority election standard and resignation policy · Filed 01/05/2026
Operating income margin increased to 11.8% for the 26 weeks ended August 1, 2026 compared to 6.7% for the same period last year, resulting from the increase in gross profit margin as described above, and net income from the transition services agreement with Family Dollar, partially offset by the marginal increase in the selling, general and administrative expense rate.
MD&A: first-half operating-margin improvement and transition-services contribution · Filed 27/08/2026
Policy restrictions on hedging and pledging of Dollar Tree stock and holding Dollar Tree stock in margin accounts Our Insider Trading Policy contains certain restrictions on executive officers and Board members from entering into hedging transactions, holding our stock in margin accounts and pledging Company stock as collateral for any loan.
Compensation governance: existing hedging, pledging and margin-account restrictions · Filed 01/05/2026
