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Tariffs and Other Trade Measures. Beginning in the first quarter of 2025, new tariffs were announced on imports to the U.S. (“U.S. Tariffs”), including additional tariffs on imports from China, Mexico, Canada and other countries from which we import goods. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other retaliatory measures. Various modifications and delays to the U.S. Tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures.
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Among our foreign suppliers, China is the source of the majority of our direct imports. In early 2025, the United States imposed a new tariff and trade policy, announcing significant additional tariffs on a wide variety of products originating from countries worldwide, including China, and other countries from which we import goods. Subsequently, there have been various updates and revisions to these tariffs and the United States’ tariff policy, with some tariffs delayed or temporarily paused as country-specific agreements have been negotiated with certain countries. On February 20, 2026, the Supreme Court ruled that certain of the tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. Following the Supreme Court’s decision, the United States imposed new, temporary tariffs on imports from all countries under Section 122 of the Trade Act of 1974 and could take action to invoke other laws to collect tariffs. While the company has taken action to preserve its rights, there remains substantial uncertainty regarding the impacts of this decision on the availability, timing, and amount of potential refunds, if any, for the invalidated tariffs, the scope and duration of newly announced tariffs, and the possibility of further additional or modified tariffs or retaliatory actions.
Read in the filing ↗ Also in 10-K of Mar 26, 2025
The U.S. has continued to announce new tariffs on various imported products during 2026, and there remains substantial uncertainty regarding the outcome of legal challenges to tariffs, the scope and duration of any newly announced tariffs, and the possibility of further additional or modified tariffs or other measures. As a result, our margins and operating results could vary significantly.
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On February 20, 2026, the U.S. Supreme Court ruled that certain of the tariffs imposed last year under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. In April 2026, the U.S. Customs and Border Protection launched a platform for submitting IEEPA tariff refund claims. We are taking action to preserve our rights to refunds for these IEEPA tariffs and have submitted refund claims. Subsequent to May 2, 2026, we began receiving refunds for IEEPA tariffs previously paid, totaling approximately $ 110 million through May 26, 2026, including $ 6 million of interest. Following the Supreme Court’s decision, the United States imposed new, temporary tariffs on imports from all countries under section 122 of the Trade Act of 1974 and could take action to invoke other laws to collect additional tariffs. In May 2026, the U.S. Court of International Trade invalidated these section 122 tariffs. There remains substantial uncertainty regarding the impacts of these events on existing tariffs, the scope and duration of any newly announced tariffs, and the possibility of further additional or modified tariffs or retaliatory actions. As a result, our margins and operating results could vary significantly.
Read in the filing ↗ Also in 10-K of Mar 16, 2026
On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Court decision, the United States announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain carveouts, effective February 24, 2026 for a period of 150 days. There remains substantial uncertainty as of the filing date regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.
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Furthermore, in response to the recent tariffs announced by the United States, China and other countries have imposed or proposed additional tariffs on certain exports from the United States. These and any other retaliatory countermeasures imposed by countries subject to such tariffs, such as China, could increase our, or our vendors’, import expenses. Additionally, even if the products we import are not directly impacted by additional tariffs, the imposition of such additional tariffs on goods imported into the United States could cause increased prices for consumer goods in general, which could have a negative impact on consumer spending for discretionary items reducing demand for our products. These direct and indirect impacts of increased tariffs or trade restrictions implemented by the United States, both individually and cumulatively, could have a material adverse effect on our business, financial condition and results of future operations.
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• Gross profit increased 33.4% to $2,094.3 million primarily due to the receipt of $368.7 million of tariff refunds, the 3.7% comparable store net sales increase, our net store growth, lower tariff costs and improvements in shrink.
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In addition, the tariff environment remains fluid. On February 20, 2026, the U.S. Supreme Court ruled that certain of the tariffs imposed in fiscal 2025 under the International Emergency Economic Powers Act (“IEEPA”) were unlawful and remanded the case to the U.S. Court of International Trade (“CIT”) to provide a remedy for importers who had paid the tariffs. On March 4, 2026, the CIT ordered U.S. Customs and Border Protection (“CBP”) to begin refunding all tariffs imposed under IEEPA. On April 20, 2026, CBP launched a process for importers to submit IEEPA refund claims. The Company submitted claims for refunds totaling $379 million in April 2026. In the second quarter of fiscal 2026, the Company began receiving refunds for IEEPA tariffs previously paid, totaling approximately $369 million, plus $14 million of interest. Approximately $369 million is reflected within “Cost of sales,” and the interest is reflected within “Other income, net” in the accompanying unaudited Condensed Consolidated Income Statements. We do not expect the amounts of the remaining refunds of IEEPA tariffs to be material.
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During fiscal 2025, we have experienced increased costs associated with the tariff environment and implementation of our mitigation strategies, including discrete price-change costs. We expect our results to continue to be impacted by near-term challenges, including higher costs due to the volatility in the tariff environment, in the fourth quarter of fiscal 2025. Additionally, implementation costs associated with our mitigation strategies may continue to be experienced before the benefits from those efforts are expected to materialize. The ultimate impact of cost inflation, including tariffs and other related measures, remains uncertain and will depend on several factors, including whether additional or incremental tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, the overall magnitude and duration of these measures, and the costs and effectiveness of, and consumer response to, our mitigation efforts.
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and related measures in the future. We expect tariff volatility to persist in the near-term, and implementation costs associated with our mitigation strategies may continue to be experienced before the benefits from those efforts are expected to materialize. Further, there is no guarantee that we will be able to successfully mitigate the impact of tariffs through one or more of the foregoing strategies or that our customers will respond favorably to the implementation of these strategies. The competitiveness of our products could be reduced if our competitors are able to react quickly to changes in the tariff environment to increase the relative value of their products or are otherwise able to offset the impact of tariffs.
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Additionally, our outlook assumes that the level of tariffs in place today, June 4, 2025, remains in effect for the balance of the fiscal year. It further assumes that we will be able mitigate most of the incremental margin pressure from higher tariffs and other input costs.
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Additionally, our outlook assumes that the level of tariffs in place today, September 3, 2025, remains in effect for the balance of the fiscal year. It further assumes that we will be able mitigate most of the incremental margin pressure from higher tariffs and other input costs.
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Gross profit margin increased 850 basis points to 42.9% and included 680 basis points related to the net impact of tariff refunds . The remaining improvement in gross margin rate was primarily driven by lower tariff rates, favorable shrink, and occupancy leverage, partially offset by sales mix.
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Additionally, our outlook assumes that the level of tariffs in place today, December 3, 2025, remains in effect for the balance of the fiscal year. It further assumes that we will be able to mitigate most of the incremental margin pressure from higher tariffs and other input costs.
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• Our tariff mitigation strategies could subject us to increased costs and other risks.
Read in the filing ↗ Also in 10-Q of Dec 3, 2025
During fiscal 2025, the volatile tariff environment and the implementation of these mitigation strategies resulted in increased costs, including significant labor and other discrete costs related to price adjustments, which also impacted our net sales. The tariff environment remains fluid, and we expect our results to continue to be impacted by near-term challenges, potentially including higher costs due to increases or variability in tariffs. Further, we may experience implementation costs associated with our mitigation strategies that impact us before the benefits from those efforts are expected to materialize.
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On February 20, 2026, the U.S. Supreme Court ruled that certain of the tariffs imposed in fiscal 2025 under the International Emergency Economic Powers Act (“IEEPA”) were unlawful and remanded the case to the U.S. Court of International Trade (“CIT”) to provide a remedy for importers who had paid the tariffs. On March 4, 2026, the CIT ordered U.S. Customs and Border Protection (“CBP”) to begin refunding all tariffs imposed under IEEPA. On April 20, 2026, CBP launched a process for importers to submit IEEPA refund claims. The Company submitted claims for refunds totaling $379 million in April 2026. In the second quarter of fiscal 2026, the Company began receiving refunds for IEEPA tariffs previously paid, totaling approximately $369 million, plus $14 million of interest. Approximately $369 million is reflected within “Cost of sales,” and the interest is reflected within “Other income, net” in the accompanying unaudited Condensed Consolidated Income Statements. We do not expect the amounts of the remaining refunds of IEEPA tariffs to be material.
Read in the filing ↗ Also in 10-Q of May 28, 2026
• Our plans to mitigate the impact of current and potential tariffs and related implementation costs;
Read in the filing ↗ Also in 10-Q of Dec 3, 2025, 10-K of Mar 16, 2026, 10-Q of May 28, 2026, 10-Q of Aug 27, 2026
• The direct and indirect impacts of and challenges associated with the current and potential tariff environment;
Read in the filing ↗ Also in 10-K of Mar 16, 2026, 10-Q of May 28, 2026, 10-Q of Aug 27, 2026
The tariff environment remains fluid, and we expect our results to continue to be impacted by near-term challenges, potentially including higher costs due to increases or variability in tariffs. Further, we may continue to experience implementation costs associated with our mitigation strategies that impact us before the benefits from those efforts are expected to materialize.
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Diluted EPS of $2.70, including a $1.31 benefit related to the net impact of tariff refunds
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Gross profit increased 21.9% to $3.9 billion and gross profit margin expanded 480 basis points to 39.8%, which includes a 340 basis point benefit from the net impact of tariff refunds. The remaining year-over-year improvement reflected higher mark-up from pricing initiatives, lower shrink and lower import freight costs, partially offset by higher tariff costs.
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Operating income was $690 million and operating income margin was 14.1%. Operating income margin expanded 900 basis points versus the prior year period and included a 650 basis point benefit 2 related to the net impact of tariff refunds. Adjusted operating income margin expanded 890 basis points including a 650 basis point benefit related to the net impact of tariff refunds.
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Our full-year fiscal 2026 outlook is presented on a continuing operations ba sis and excludes the impact of tariff refunds.
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Operating income margin expanded 900 basis points including a 650 basis point benefit related to the net impact of tariff refunds
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• Adjusted Diluted EPS from Continuing Operations of $0.77, Including $0.20 of Positive Impact, Relative to Expectations, Related to Tariff Timing
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Adjusted operating income margin expanded 890 basis points including a 650 basis point benefit related to the net impact of tariff refunds
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• The direct and indirect impacts of current and potential tariffs and other trade-related measures, restrictions and policies and any retaliatory counter measures;
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• Adjusted diluted EPS of $7.70 to $8.05 including an approximate $0.60 benefit related to the net impact of tariff refunds
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We expect additional expenses to be incurred in the third and fourth quarters of fiscal 2026 related to our tariff refund reinvestment initiatives.
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We are actively implementing mitigation strategies to offset the impact of cost inflation including tariffs as noted above, by negotiating lower product costs, rebates or invoice deductions with our suppliers, shifting supply sources to alternate countries, changing our product assortment or discontinuing certain items, or increasing our prices. We believe our mitigation strategies will allow us to protect our margins and maintain our competitiveness over the long term and, most importantly, keep providing our customers with the value, convenience, and discovery they expect for the products they need to help live and celebrate their lives. However, we expect our results to be impacted by near-term challenges, including higher costs due to the volatility in effective tariffs in the second half of fiscal 2025. Additionally, implementation costs associated with our mitigation strategies may be experienced before the benefits from those efforts are expected to materialize. The ultimate impact of cost inflation including tariffs and other related measures remains uncertain and will depend on several factors, including whether additional or incremental U.S. Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, the overall magnitude and duration of these measures, and the costs and effectiveness of, and consumer response to, our mitigation efforts.
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• Risks associated with merchandise supply, including tariffs and other trade-related measures, restrictions and policies and any retaliatory counter measures, could adversely affect our financial performance.
Read in the filing ↗ Also in 10-Q of Dec 3, 2025
• Managing costs with agility, including our strategies to mitigate tariffs and inflationary pressures, manage operating expenses, and reduce corporate SG&A as a percentage of sales;
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Gross profit margin increased during the 13 weeks ended August 1, 2026 due to an 850 basis point decrease in cost of sales. The cost of sales rate decreased to 57.1% during the 13 weeks ended August 1, 2026 from 65.6% during the same period last year primarily due to a 755 basis point benefit from the receipt of $368.7 million in tariff refunds, lower tariff costs, lower shrink from favorable inventory count results, and occupancy cost leverage, partially offset by higher markdowns including approximately $22.0 million related to our tariff reinvestment initiative, a $13.0 million charge recorded for antidumping and countervailing duties related to the imports of paper plates and aluminum pans, and unfavorable sales mix resulting from lower sales of high margin discretionary merchandise.
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Income from continuing operations was $515 million and diluted earnings per share was $2.70, including a $1.31 benefit related to the net impact of tariff refunds.
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Gross profit margin increased during the 26 weeks ended August 1, 2026 due to a 480 basis point decrease in cost of sales. 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.
Read in the filing ↗ Also in 10-Q of Sep 3, 2025, 10-Q of Sep 3, 2025
• duties, tariffs or other measures that create barriers or restrictions on trade, including anti-dumping or countervailing duty orders or other trade-related sanctions and any retaliatory counter measures;
Read in the filing ↗ Also in 10-K of Mar 16, 2026
Increasing fiscal 2026 adjusted EPS outlook to a range of $7.70 to $8.05 including an approximate $0.60 benefit related to the net impact of tariff refunds
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• Third quarter diluted EPS is currently expected to be in the range of $0.80 to $0.95 including an approximate $0.50 impact related to tariff refund reinvestments
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We expect additional costs to be incurred in the third and fourth quarters of fiscal 2026 related to our tariff refund reinvestment initiatives including additional markdowns, as well as higher freight expenses.
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Adjusted selling, general and administrative expenses inclusive of transition services agreement income, net decreased 50 basis points as a percent of total revenue and included 30 basis points of tariff refund related reinvestment.
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• We may not be successful in executing or achieving the anticipated benefits of our reinvestment of tariff refunds or other important strategic initiatives, which may have an adverse impact on our business and financial results.
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The imposition of 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. We have actively implemented mitigation strategies to offset the impact of tariffs and other 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
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• The direct and indirect impacts of current and potential tariffs, duties, anti-dumping or countervailing duty orders and other trade-related measures, restrictions and policies and any retaliatory counter measures, and our plans to mitigate those impacts;
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Gross profit margin increased 120 basis points. The improvement in gross margin was primarily driven by higher mark-on, lower freight costs, and lower shrink. These benefits were partially offset by higher tariff costs and higher markdowns.
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• The direct and indirect impacts of tariffs and other related measures, our mitigation strategies, and our customers’ response and consumer behavior generally, could subject us to increased costs and other risks and adversely affect our financial performance.
Read in the filing ↗ Also in 10-Q of Aug 27, 2026
Other income, net increased $13.7 million in the 13 weeks ended August 1, 2026 compared to the same period last year, primarily due to interest of $14 million received in the current year for tariff refunds.
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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.
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• Our plans and expectations regarding our current and future strategic initiatives, including our operational strategy for Dollar Tree as a standalone business following the sale of Family Dollar, and the reinvestment of certain tariff refunds in our business;
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• Q3 quarter-to-date share repurchases totaled $5.3 million 1 Net impact of tariff refunds includes the impact of IEEPA tariff refunds totaling $383 million, including $369 million in cost of sales and $14 million of interest in other income, net, reinvestment expenses totaling $22 million in cost of sales and $15 million in selling, general and administrative expenses, and $13 million of certain duties on aluminum pans and paper plates recorded in cost of sales, all net of tax 1 • Ended the quarter with 9,436 sto res across the Dollar Tree U.S. and Dollar Tree Canada banners
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Gross profit margin increased 60 basis points compared to the prior year, primarily driven by improved mark-on from pricing initiatives, and lower domestic and import freight costs. These benefits were partially offset primarily by higher tariff costs, and higher markdowns.
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Operating income increased 89.1% to $1.16 billion and operating income margin expanded approximately 510 basis points to 11.8%. Adjusted operating income margin expanded 500 basis points including a 320 basis point benefit related to the net impact of tariff refunds.
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Selling, general and administrative expenses decreased 40 basis points to 29.2% of total revenue. SG&A included 30 basis points of tariff refund related reinvestment. The remaining year-over-year decrease primarily reflected lower payroll expenses partially offset by higher marketing and depreciation.
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The Company’s effective tax rate was 25.0%, compared with 25.8% in the prior- year period. 3 Income from continuing operations was $862 million and diluted earnings per share from continuing operations was $4.44, including a $1.29 net benefit of tariff refunds.
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The selling, general and administrative expense rate decreased 40 basis points during the 13 weeks ended August 1, 2026 primarily due to lower payroll expenses and lower consulting fees, partially offset by increased investments in marketing including costs related to our tariff reinvestment initiative, and higher depreciation expense from store investments. Payroll expenses decreased primarily due to lower store payroll as the labor needed to support our pricing initiatives in fiscal 2025 did not re-occur, lower temporary labor used to support our multi-price rollout and lower corporate payroll, partially offset by additional labor incurred for our tariff reinvestment initiatives. Selling, general and administrative expenses include costs to support the transition services agreement with Family Dollar.
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These direct and indirect impacts and the collective interaction of tariffs and other related measures, our mitigation strategies and those of our competitors, our customers’ response and consumer behavior generally, and other factors, could have a material adverse effect on our business, financial condition and results of operations.
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Gross profit increased 13.3% and gross profit margin increased 150 basis points to 39.1%. The improvement in gross margin was primarily driven by improved mark- on from pricing initiatives and lower domestic and import freight costs. These benefits were partially offset primarily by higher tariff costs.
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The selling, general and administrative expense rate increased 10 basis points during the 26 weeks ended August 1, 2026 primarily due to increased investments in marketing including costs related to our tariff reinvestment initiative, higher general liability claims costs, and higher depreciation expense from store investments, partially offset by lower payroll expenses and consulting fees. Payroll expenses decreased primarily due to lower store payroll as the labor needed to support our pricing initiatives in fiscal 2025 did not re-occur, lower temporary labor used to support our multi-price rollout and lower corporate payroll, partially offset by wage increases and additional labor incurred for our tariff reinvestment initiatives. Selling, general and administrative expenses include costs to support the transition services agreement with Family Dollar.
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primarily due to improved mark-on from pricing initiatives, lower domestic and import freight costs, and favorable sales mix resulting from increased sales of higher margin discretionary merchandise as a percentage of net sales, partially offset by higher tariff costs, higher markdowns, and higher shrink costs resulting from unfavorable inventory results.
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Gross profit increased 10.8% to $1.7 billion and gross margin increased 40 basis points to 35.8%. The expansion in gross margin was primarily driven by improved mark-on from pricing initiatives, lower domestic and import freight costs, favorable sales mix, partially offset by higher tariff costs, markdowns, and shrink.
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Q3 fiscal 2026 outlook of 3% to 4% comparable net sales growth and adjusted EPS of $0.80 to $0.95 including a $0.50 impact related to tariff refund reinvestments CHESAPEAKE, Va. – August 27, 2026 – Dollar Tree, Inc. (NASDAQ: DLTR) today reported financial results for its second quarter ended August 1, 2026.
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Gross profit increased 12.9% to $1.6 billion and gross margin expanded 20 basis points to 34.4%. The expansion in gross margin was driven primarily by improved mark-on from pricing initiatives, lower domestic freight costs, lower occupancy costs due to sales leverage, and favorable mix, partially offset by higher tariff costs, markdowns, distribution costs, and shrink.
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During the second quarter, we began to reinvest certain of these proceeds in a number of initiatives designed to strengthen our business. We expect to reinvest a significant portion of the total tariff refunds in these initiatives over the remainder of 2026. For instance, we plan to direct approximately $40 million of these proceeds to a philanthropic fund that supports our associates and the communities served by our business. Consistent with our strategic initiatives noted below, we also are using a portion of these proceeds to strengthen customer value and reinforce our core brand promise - value, convenience, and discovery - including targeted pricing strategies, customer messaging and marketing, and incremental improvements in store conditions and operations. While we believe the reinvestment of tariff refunds is important to our business, there is no certainty that we will achieve the anticipated benefits, impacts or timing of these reinvestments or our strategic initiatives generally.
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Future increases in costs such as the cost of merchandise, wage and benefit costs, ocean shipping rates, domestic freight costs, fuel and energy costs, tariffs and other trade-related measures, and store occupancy costs, whether due to inflation and economic conditions, government action, geopolitical tensions, or otherwise, would reduce our profitability. For example, we recently have experienced, and could continue to experience, increased merchandise costs associated with the tariff environment and related mitigation efforts. In addition, we have experienced increases in wage rates and labor costs, distribution costs, and unfavorable development in self-insured general liability claims in prior years, and we expect further increases in certain cost categories in fiscal 2026. In addition to pressures from a tight labor market, we recently have experienced increased labor costs in connection with our multi-price rollout. We also 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 fiscal 2026.
Read in the filing ↗ Also in 10-K of Mar 26, 2025
The Company’s effective and adjusted tax rate was 25.5% compared to 23.5%. 2 Income from continuing operations was $155.5 million and diluted earnings per share from continuing operations was $0.75. On an adjusted basis, which does not include strategic review costs, income from continuing operations was $159.2 million and diluted EPS was $0.77. This included approximately $0.20 of positive impact from the timing of inventory mark-on and tariffs.
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Over the balance of fiscal 2025, the Company expects to mitigate the earnings impact of the cost pressures it faces, including higher tariffs. In the near- term, it does expect to see some earnings volatility based on the timing of the various inputs and outputs to the Company’s financial results. As such, we expect second quarter adjusted EPS from continuing operations could be down as much as 45 to 50 percent year-over-year before re-accelerating in the third and fourth quarters to meet our full-year earnings outlook.
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In addition, significant changes in laws or regulations that impact our relationship with our workforce, such as minimum wage increases, health care, labor relations 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, international labor protections, and tariff and other trade restrictions, among others, could cause our expenses to increase or result in product recalls.
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We are actively implementing mitigation strategies to offset the impact of cost pressures and inflation, including tariffs, 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 believe our mitigation strategies will allow us to protect our margins and maintain our competitiveness over the long term and, most importantly, keep providing our customers with the value, convenience, and discovery they expect for the products they need to help live and celebrate their lives.
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In addition, significant changes in laws or regulations that impact our relationship with our workforce, in areas such as wage and hour, health care, scheduling and leave, labor relations 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, international labor protections, and tariff and other trade restrictions, among others, could cause our expenses to increase or result in product recalls.
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Other income, net decreased $42.6 million in the 26 weeks ended August 1, 2026 compared to the same period last year, primarily due to a higher insurance gain recognized in the prior year for the excess of the insurance proceeds received over the losses incurred for damaged property and equipment and damaged inventory associated with the tornado that destroyed our Marietta, Oklahoma Dollar Tree distribution center, partially offset by interest of $14 million received in the current year for tariff refunds. The insurance gain recognized in the first quarter of fiscal 2026 totaled $5.2 million compared to $62.0 million in fiscal 2025.
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Gross profit margin increased during the 39 weeks ended November 1, 2025 due to a 30 basis point decrease in cost of sales. The cost of sales rate decreased to 64.7% during the 39 weeks ended November 1, 2025 from 65.0% during the same period last year primarily due to improved mark-on from pricing initiatives, lower domestic and import freight costs, favorable sales mix resulting from increased sales of higher margin discretionary merchandise as a percentage of net sales, and lower occupancy costs due to leverage from the comparable store net sales increase, partially offset by higher tariff costs, higher markdowns, higher shrink costs resulting from unfavorable inventory results, and increased distribution costs expense.
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• Shipping costs. While we experienced lower domestic and import freight costs in fiscal 2025, we expect those costs to increase in the future. We could experience increased freight costs due to shifts in country of origin to mitigate tariff impacts and increased spot market usage. Ocean shipping and other freight costs could increase because of the macroeconomic environment, armed conflicts and other geopolitical tensions, or other shocks or disruptions in the global supply chain. As freight contracts terminate or renew, our costs or benefits may lag changes in market rates based on the timing of freight contract terms. A significant increase in our freight costs could have a material adverse impact on our business and results of operations.
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Cost Management. We are actively implementing mitigation strategies to offset the impact of cost pressures and inflation, including tariffs, 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 believe our mitigation strategies will allow us to protect our margins and maintain our competitiveness over the long term and, most importantly, keep providing our customers with the value, convenience, and discovery they expect for the products they need to help live and celebrate their lives. In addition, our long-term strategy includes a disciplined approach to managing our selling, general and administrative expenses to drive operating leverage and profitability.
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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. The change in accounts payable and merchandise inventories was primarily due to the timing of certain payments and receipts as well as our ongoing strategic initiative to improve shelf space productivity. The reduction in income tax payments in the current year is a result of tax benefits realized from losses on the sale of Family Dollar in fiscal 2025.
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We are subject to a wide variety of local, state and federal laws and regulations within the United States and Canada. These laws and regulations relate to, among other things, the operation of our facilities and the sale of products, including without limitation product and food safety, marketing and labeling; labor and employment, including wage and hour, benefits, healthcare and workplace safety; pricing; antitrust and fair competition; privacy and information security; tariff and trade; energy and environmental protection; financial reporting and disclosure; licensing; intellectual property; and taxes. We routinely incur significant compliance-related costs, both direct and indirect, with respect to these laws and regulations which may have a material effect on our capital expenditures, earnings or competitive position. For more information, see “Item 1A. Risk Factors.”
Read in the filing ↗ Also in 10-K of Mar 16, 2026
Gross profit margin increased in fiscal 2025 due to a 60 basis point decrease in cost of sales. The cost of sales rate decreased to 63.6% in fiscal 2025 from 64.2% in fiscal 2024 primarily due to improved mark-on from pricing initiatives, lower domestic and import freight costs, favorable sales mix resulting from increased sales of higher margin discretionary merchandise as a percentage of net sales, and lower occupancy costs due to leverage from the comparable store net sales increase, partially offset by higher tariff costs, higher markdowns, higher shrink, and increased distribution costs 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.
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… are expected to impact our quarterly and annual results of operations for fiscal 2026; the direct and indirect impacts of current and potential tariffs and other trade-related measures and our plans to mitigate those impacts; tariff refunds and our reinvestment plans; our plans and expectations regarding our business, including the impact of various initiatives, investments, and strategies on the …
Read in the filing ↗ Also in 8-K of Mar 16, 2026, 8-K of Dec 3, 2025, 8-K of May 28, 2026, 8-K of Sep 3, 2025, 8-K of Jun 4, 2025