Dollar Tree, Inc.

Good day and welcome to the Dollar Tree, Inc. First 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, VP, Investor Relations. Please go ahead.

Thank you, Stephanie. Good morning and welcome to our call to discuss Dollar Tree's first fiscal quarter 2021. With me on today's call will be our President and CEO, Mike Witinski, and our CFO, Kevin Wampler. Before we begin, I would like to remind everyone that various remarks that we will make about 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. Results may differ materially from those indicated by these forward-looking statements as a result of various important factors included in our most recent press release, most recent 8K, 10Q, and annual reports, which are on file with the SEC. We have no obligation to update forward-looking statements, and you should not expect us to do so. Following our prepared remarks, we will open the call to your questions. Please limit your questions to one and one related follow-up. I will now turn the call over to Mike Witemski, Dollar Tree's President and Chief Executive Officer.

Thank you, Randy. Good morning, everyone. Our record first quarter performance reflects the progress we continue to make on numerous initiatives to provide even greater value and convenience to our shoppers. Dollar Tree delivered its strongest quarterly same-store sales since 2017, while improving its operating margin by 290 basis points. Family Dollar effectively cycled a 15.5% comp sales increase from the prior year by driving its best post-merger quarterly operating profit. Combined, the enterprise produced positive same-store sales against a tough 2020 comparison and a 220 basis point improvement in operating margin, driven by higher gross margins and better expense leverage. Overall, a very solid start to the year. During the initial post-merger years, much of the company's energy and focus was dedicated to integration-related projects such as stabilizing and restructuring the organization, improving store maintenance, harmonizing our technology, designing and testing store formats, optimizing our real estate portfolio, elevating the operational execution in our stores, offering improved assortments and value, and ultimately consolidating our store support centers. These priorities were critical as we prepared the combined business for long-term profitable growth. Now, over the last 18 months, we have transitioned to an aggressive approach under one aligned leadership team, dedicating our major efforts to customer focus initiatives with clarity, focus, and speed. Examples of the innovation efforts are our brick-and-mortar initiatives include Refining and growing our Dollar Tree Plus multi-price initiative. Continuing to evolve and improve the H2 store format with expanded home, seasonal, and other discretionary categories. Introducing the new combo stores for rural markets. Testing fresh produce and frozen meat products in select stores. Initiating self-checkout in a smaller number of stores. And on our digital and omni-channel initiatives, they include launching FamilyDollar.com as a selling site, partnering with Instacart for same-store delivery, which expands our customer reach, and creating our new retail media network, the Chesapeake Media Group. I'm enthusiastic about the long-term impact of these actions designed to drive shopper satisfaction and loyalty, giving us the ability to meet the evolving needs of our shoppers better than any other company can, especially inside the Beltway and in rural America. I will share more details, more detailed update on these exciting initiatives later on in the call. But for now, for the quarter, our Dollar Tree segment delivered its best quarterly same-store sale since Q3 of 2017. The 4.7% comp increase was comprised of a 9.5% increase in tickets. partially offset by a 4.4% decline in traffic. Notably, we saw a double-digit increase in traffic in April, which represented our best monthly comp traffic increase in years. From a cadence perspective, March was the strongest comp month, with stronger pre-Easter sales compared to the prior year, followed by April. February was slightly negative as we lost more than 2,500 store days in due to closures related to storms through Texas and central U.S. Gross margin improved 180 basis points from the prior year, as we saw record sell-through on seasonal merchandise, including Valentine's Day, Easter, and Easter candy. Compared to the prior year's quarter, the discretionary mix as a percentage of net sales increased 710 basis points to 52.3%. Categories performing well included crafts, party, our Easter seasonal, toys, and floral. Our inventory turn improved 22 basis points for the quarter. Our merchant team continues to source great products that provide wonderful value at the margins we need. With a product already purchased for the back half of the year, I am thrilled with the discretionary back-to-school crafts, holiday, and seasonal assortments that will be hitting store shelves within the next few months. As COVID restrictions ease and customers continue to gather with friends and family for celebrations, we plan to fulfill that need with our compelling mix with even more exciting discretionary items at the dollar price point that our shoppers love. Family Dollar highlights for the quarter include its best post-merger quarterly operating profit at $211.4 million. Let me repeat that. Family Dollar achieved its best post-merger quarterly operating profit at $211.4 million, cycling a very strong 15.5% comp from the prior year. Same-store sales came in at a decline of 2.8%, equating to a positive 12.7% on a two-year stack. Average ticket was up over 11%, and traffic, cycling the initial pandemic-related demand for the consumables from a year ago, was down nearly 13% for the quarter. The family dollar merchants continue to do a terrific job refining the assortment to deliver meaningful value that is resonating with our shoppers. The discretionary side of the business saw a 14.7% comp increase. Consumable comp, again, Cycling unprecedented demand from last year was down 7.7%. Regarding Family Dollar's comp cadence through the quarter, February was the strongest comp, followed by April. March was cycling a 20-plus comp from the prior year. From a category perspective, the strong performers were primarily on the discretionary side of the business, including party, apparel, home decor, beauty care, and floral. We continue to see encouraging results for stores that added fresh produce and frozen meats to their assortment in late 2020. We are seeing materially higher average tickets when a basket contains produce or meats. I am excited to share that we will continue to expand on this initiative in 2021 and beyond as we are focused on meeting the needs of shoppers in all markets. On the previous earnings call, I spoke to the fact that Family Dollar customer satisfaction survey scores had improved three consecutive quarters across each of the four key categories, store cleanliness, product assortment, customer service, and speed of checkout. Credit to our field leadership and our merchant and operations teams, each of those scores improved again for the first quarter, making it four quarters in a row. Increasing store productivity at Family Dollar has been a critical component of the turnaround. In addition to all the sales and traffic driving initiatives that have been increasing average sales per store, we believe Family Dollar is squarely positioned to continue serving more customers and gaining market share with its compelling discretionary mix, especially as Family Dollar shoppers are benefiting from stimulus dollars, increased SNAP participation, child tax credits, and earning higher wages. Now, regarding Dollar Tree Canada, the team had a strong quarter one. From an operating income standpoint, the Canada team exceeded their budget despite challenges to sales in April related to increased COVID restrictions. From a real estate perspective, we completed 575 projects, including 106 new stores, 36 relocations, 414 family dollar H-2 renovations, 19 store closures. We ended the quarter with 15,772 stores. Before I hand it over to Kevin, I wanted to let you know that in April, we released our updated Corporate Sustainability Report. The report is available on the homepage at our website, dollartree.com. I am very proud of the team's progress related to our ESG program in fiscal 2020. Accomplishments included that we conducted a detailed assessment of our impact on the environment and measured our carbon footprint to establish an initial baseline. We developed our first generation of climate goals aimed to reducing emissions and increase the use of renewable energy. We participated in the chemical footprint project for the second consecutive year. We partnered with ADT Commercial for Comprehensive and Innovative Security Solutions, and we formed our Diversity Equity Inclusion Executive Council. And lastly, we launched our inaugural Choose to Give Workplace Giving Campaign. We will remain steadfastly committed to improvement, especially as related to our ESG goals and initiatives designed to minimize corporate sustainability risks while reducing cost and driving efficiencies. I will go into more detail on several of our initiatives after Kevin speaks to the Q1 performance and our outlook. Kevin.