DLTRDollar Tree

Among our foreign suppliers, China is the source of the majority of our direct imports. In early 2025, the United States imposed or threatened to impose significant additional tariffs, including reciprocal tariffs, on China, Mexico, Canada and other countries from which we import goods. In addition, the Trump administration has announced plans to impose significant fees on Chinese shipping companies and any Chinese-built vessels that enter U.S. ports. The imposition of these or other additional tariffs on imported merchandise or other actions against China or other countries from which we import goods, and any retaliatory actions or other responses by such countries, could negatively impact product availability or impair our ability to meet customer demand and could result in lost sales, an increase in our cost of merchandise or other adverse impacts on our operations, unless we are able to successfully offset or mitigate these impacts. Our We have actively implemented mitigation efforts could include negotiating lower product costs, rebates or invoice deductions; shifting supply sources to alternate countries; changing our product assortment or discontinuing certain items; or increasing our prices. Even if we are able to mitigate the impact of tariffs in the short-term through one or more of the foregoing actions, a change in product assortment, reduced product offering or increase in pricing could reduce the competitiveness of our products, particularly if our competitors do not keep pace with any such changes or are able strategies to offset the impact of tariffs through and other actions. cost pressures by re-negotiating supplier terms, re-engineering products for efficiency, shifting country of origin where it adds advantage, discontinuing lower-margin or underperforming items and executing targeted retail price changes. We experienced increased costs during fiscal 2025 related to the implementation of these mitigation strategies, including significant labor and other discrete costs related to price changes, and our results could continue to be negatively impacted by tariffs

Gross profit margin remained unchanged increased in fiscal 2024 as the 2025 due to a 60 basis point decrease in cost of sales. The cost of sales rate is decreased to 63.6% in fiscal 2025 from 64.2% in both fiscal 2024 primarily due to improved mark-on from pricing initiatives, lower domestic and 2023. Changes in the cost of sales rates consist of lower import freight costs, offset by favorable sales mix resulting from increased sales of higher cost consumable merchandise, increased margin discretionary merchandise as a percentage of net sales, and lower occupancy costs resulting from the loss of due to leverage from the low single-digit comparable store net sales increase and the 53rd week of sales in 2023, increase, partially offset by higher distribution tariff costs, increased shrink costs resulting from unfavorable inventory results, higher markdowns, higher shrink, and increased markdown distribution costs for slow moving items. expense. The higher markdowns in fiscal 2025 include a $56.0 million write-off of various slow-turning SKUs. This reflects actions taken related to our ongoing strategic initiative to increase shelf space productivity, as discussed within “Strategic Initiatives and Recent Developments” above. Included in freight costs for fiscal 2024 is $25.0 million of duties related to an anti-dumping case for paper plates imported in fiscal 2024.