Dollar Tree, Inc.

Welcome to Dollar Tree Inc.'

's third quarter earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Randy Geiler, Vice President, Investor Relations. Please go ahead, sir. Thank you, Aaron. Good morning, and welcome to our conference call to discuss Dollar Tree's performance for the third fiscal quarter of 2019. Participating on today's call will be our President and CEO, Gary Bilvin, and our CFO, Kevin Wadler. Before we begin, I would like to remind everyone that various remarks that we will make about future expectations, plans, and prospects for the company constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors included in the most recent press release most recent 8K, 10Q, and annual reports, which are on file with the SEC. We have no obligation to update our forward-looking statements, and you should not expect us to do so. At the end of our prepared remarks, we will open the call to your questions. Please limit your questions to one and one related follow-up, if necessary. Now, I will turn the call over to Gary Dilton, Dollar Tree's President and Chief Executive Officer.

Thanks, Randy. Good morning, everyone. The third quarter represented another period of solid sales performance for both brands, Dollar Tree and Family Dollar. Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree rebanners, and more than 1,000 Dollar Tree snack zones, and launched our Dollar Tree Plus test already this year. These efforts have driven top line sales and transaction counts at both banners. Fiscal 2019 has been a unique year as the result of several factors. We planned and accomplished the material acceleration of our family dollar store optimization initiatives and the consolidation of our two support centers to Chesapeake, Virginia. Additionally, the global helium shortage, which has an outsized impact on our party business, and the continued uncertainty regarding trade and the related tariffs have impacted our business. I'm proud of our team's efforts and the sales execution through this environment. We worked hard to maintain focus on our customers and our values in store. Our results for the third quarter included sales increase of 3.7% to 5.75 billion, Consolidated same-store sales increase of 2.5%. And our EPS of $1.08 was within our guidance range. Other highlights for the quarter included completing 247 Family Dollar H2 renovations, completing 512 Dollar Tree snack zones, bringing our total to 2,087 across the chain, and repurchasing 11.6 million shares as part of our share buyback program. And in mid-October, we hosted our fourth annual nationwide hiring event focused on hiring more than 25,000 associates in communities all across the country. This event provides individuals with the opportunity to join the Dollar Tree or Family Dollars teams. These new associates can earn the opportunity to be promoted through the field organization. As a growth company, we're always looking for talent and strength that can develop into future leaders in our stores. Our application flow was strong for this successful hiring event. Regarding Dollar Tree segment sales highlights for the third quarter, we delivered a 2.8% comp, representing the 12th consecutive quarter of comps exceeding 2%. Dollar Tree had increases in both traffic and ticket, with traffic slightly outpacing the ticket increase. Geographically, all zones topped positively and were at or better than 2%. Strongest performing zones were in the Northeast, the Upper Midwest, and Southwest. Our cadence of comps through the quarter all three months were better than 2%, with August being the strongest month. Dollar Tree continues to deliver solid positive comps in the consumables category. And our seasonal business continues to perform very well. In fact, Halloween was on par with a very good seasonal sell through we've been experiencing over the past couple of years. Our variety business, which includes party at Dollar Tree, comp positive each month during the quarter, but was again impacted by the helium shortage. We estimate that our comp was negatively impacted from lost balloon sales by about 20 basis points. We expect this helium shortage headwind to continue, but to a lesser degree, for the remainder of 2019. The Dollar Tree merchant team continues to do a terrific job of delivering ever-changing and new product ideas that drive customer excitement and repeat visits. Dollar Tree WOW is the excitement that our customers have come to expect. That zone that started in 27, we have rolled out to great success, and we continue to extend this initiative into more Dollar Tree stores. Last year, we added Hallmark cards to all stores across the chain. This has proven to be a great partnership, and customers certainly love the Hallmark brand, the offering, and the value. And this year, we've been rolling out a new program called Crafter Square. Crafter Square is now in more than $600 stores and is a new and expanded selection of arts and crafts supplies, all priced at $1. Feedback from stores and customers has been fantastic. We'll continue to expand this traffic driving initiative to more stores going forward. The sharing of projects within the crafting community on Pinterest, Instagram and other platforms has made this one of the quickest launches to our customers on a small base of only 600 stores. Let me give you an update on Dollar Tree Plus. As we've discussed previously, we're conducting a test of multi price points at select Dollar Tree stores. The multi price points Multi-price assortment is in increments of $2, $3, $4, and $5. It's being tested in 115 stores. We just reached the six-month mark in the initial stores, as the majority of the test stores were added in June. And we're closely monitoring performance, including impact to traffic, sales, margin, and, of course, customer feedback. As always with tests, we follow an interim process where we test, learn, modify, and and improve along the way. Our focus regarding multi-price point tests as we finish this year moving to 2020 will be on delivering great values to our shoppers within targeted categories, shifting more towards discretionary and unique products that we believe delivers the wow factor to consumers and is additive to the basket and margin profile. utilizing our broad vendor base that sources great value products, and ensuring, as always, that we protect the Dollar Tree brand. Our brand is more than the items we sell for a dollar. The Dollar Tree brand represents a pricing value, and that the customers get tremendous value for what they spend at Dollar Tree. Our efforts to drive this test should include extending our reach by adding great value, exciting merchandise, and opportunities to expand margins. We are still early in this test and look forward to updating you as the test evolves. The Family Dollar team delivered another quarter of positive comps with a 2.3% increase. Importantly, comparable transaction count for the quarter was positive, continuing the trend that began to emerge in midsummer. The team's performance demonstrates that efforts to improve the consistency of execution across the chain and efforts to drive H2 performance are working and are gaining traction. The Family Dollars segment highlights for the third quarter, our consumables business performed very well, delivering its 12th consecutive quarter of positive same-store sales. Our cadence of comps through the quarter, all three months were better than 1.5%, with August being the strongest month. From a zone perspective, comps for six of our seven zones were positive, with the strongest performance in the west, southwest, and southeast zones. Our FamilyGuard customer service scores for Q3 showed improvement from the prior year. Categories of store cleanliness, product assortment, speed of checkout were among the notable improvements. We continue to believe we are taking the right steps to transform our customer experience to increase the frequency of the visits. These steps include improving customer satisfaction, developing brand and price reputation, focusing on opening price points, incorporating better organized and focused dollar impact sections, and sorting more of what our customers need, including frozen foods. And as we expected, the average scores for H2 stores, where we have invested in our fleet, are higher across the board. We continue to be very pleased with the performance of our H2 store format of Family Dollar, All new and remodeled stores are in this format, which is driving greater loyalty, repeat visits, and value perception in these locations. These renovated stores continue, on average, to deliver a comp greater than 10% in their first year post-renovation. We are committed to this format and plan to renovate at least 1,000 Family Dollar stores to the H2 format in fiscal 2020. We began rolling out the H2 format in Q3 last year. We continue to like the sales that we are seeing in the H2 stores now cycling into their second year. Our efforts to drive performance across the store base continue to focus on initiatives around our private brands with Compare and Save, our smart coupons that offer our loyal customers the latest and best values. Walmart cards will be coming to all Family Dollar stores in 2020. And of course, our store manager training and retention efforts, as always, to drive performance and consistency store by store. In our store support center, we are seeing the benefits of having our team's Dollar Tree and Family Dollar together in one location. We anticipate being together will greatly enhance our culture, our ability to recruit great talent, and improve the collaboration within our organization as we train and develop and provide even more and better support for our stores. Looking at real estate for both segments in the third quarter, we opened a total of 165 new stores, 114 Dollar Trees, two in Canada, and 51 Family Dollars. We relocated or expanded 12 Dollar Tree and three Family Dollar stores. We renovated 247 Family Dollars as a part of our H2 renovation initiative. And we re-bent our $39 family dollars to Dollar Tree stores for a total of 463 projects during the quarter. We also added freezers and cores into $138 tree stores, bringing our total to stores with freezers and cores to just over 6,000. During the quarter, we closed 42 stores, $12 trees and $30 family dollars. And we ended the quarter with 15,262 stores. $7,447 trees, $7,815 family dollars. Before I turn the call over to Carolyn, I'd like to provide a brief update on tariffs. Just prior to our last earnings announcement in August, the USTR announced that tariffs on List 1, 2, and 3 products would increase from 25% to 30% on October 1st. Tariffs on List 4A products would increase from 10% to 15% on September 1st. And tariffs on 4B products would increase also from 10% to 15% on December 15th. As noted in our August earnings announcement, our outlook provided at that time did not include any impacts related to these changes. Our updated outlook includes approximately $19 million of cost of goods sold for the expected impact from USTR tariffs. for List 1, 2, and 3, as well as List 4A and 4B tariffs if fully implemented in Q4. Nearly all the expected impact is related to the introduction of List 4A tariffs. Now I'll turn the call over to Kevin. Thanks, Jerry, and good morning.