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SEC filingDollar Tree delivered a strong quarter driven by 3.5% comparable sales growth and margin expansion from pricing and lower freight costs, with net income up 10.8% to $347M.
Dollar Tree reported net sales of $4,970.5 million for the 13 weeks ended May 2, 2026, a 7.2% increase from $4,636.5 million in the prior year quarter. The growth was driven by a 3.5% comparable store net sales increase and $259.0 million from non-comparable stores. Comparable sales improved despite a 1.0% decline in customer traffic, as the average ticket rose 4.5% due to targeted retail price changes executed in fiscal 2025 and higher mix of multi-price products.
Gross profit increased 10.9% to $1,829.5 million, with gross margin expanding 120 basis points to 36.8%. The margin improvement stemmed from improved mark-on from pricing initiatives, lower import freight costs, and favorable shrink results, partially offset by higher tariff costs and markdowns.
Operating income grew 23.2% to $473.3 million, representing an operating margin of 9.5% versus 8.3% a year ago. The 120 bps expansion reflected the gross margin improvement and $21.1 million of transition services agreement income from the Family Dollar sale, partially offset by a 50 bps increase in the SG&A expense rate to 27.8% due to higher marketing, general liability claims, and depreciation costs.
Net income from continuing operations was $347.3 million ($1.76 per diluted share), up from $313.5 million ($1.47 per share) in the prior year. The effective tax rate declined to 24.9% from 25.9%, benefiting from increased vesting of share-based compensation awards.
At May 2, 2026, Dollar Tree held $1,007.3 million in cash and cash equivalents, up from $717.8 million at January 31, 2026 and roughly flat with $1,007.4 million at May 3, 2025. Total assets of continuing operations were $13,823.8 million, compared to $18,291.2 million a year earlier, primarily reflecting the deconsolidation of Family Dollar assets. Total debt (net) stood at $2,932.6 million, including the new $500 million Term Loan entered on March 19, 2026. The company had no borrowings under its $1.5 billion revolving credit facility or commercial paper program at quarter end. Shareholders' equity decreased to $3,507.0 million from $3,754.9 million at year-end and $3,904.8 million a year ago, driven by $594.8 million of share repurchases.
Operating cash flow from continuing operations was $644.0 million, significantly higher than $378.5 million in the prior year quarter, driven by higher income and favorable working capital changes (accounts payable increased $33.4 million compared to a $135.9 million decrease last year, and inventories decreased $24.1 million versus an increase of $27.6 million). Capital expenditures totaled $252.5 million, roughly flat with the prior year. Free cash flow (operating cash flow minus capex) was $391.5 million. The company used $585.8 million for share repurchases and received $500 million from the new Term Loan, resulting in net financing cash outflow of $100.9 million.
Management highlighted strategic progress in multi-price assortment expansion, new store growth (113 new stores opened), and supply chain investments including the new Phoenix distribution center. The tariff environment remains highly uncertain, with the company pursuing mitigation strategies such as renegotiating supplier terms, re-engineering products, and shifting sourcing. The sale of Family Dollar was completed in July 2025, and the transition services agreement is providing net income of $21.1 million in the quarter. No explicit numerical guidance was provided for future periods. Risks mentioned include potential antidumping duties (up to $56M for aluminum pans, $53M for paper plates), ongoing litigation, and variability in tariffs.
The company reorganized its segment reporting to a single reportable segment in fiscal 2026. Disaggregated revenue by merchandise category: Consumable $2,494.7 million (50.2% of net sales), Variety $2,307.5 million (46.4%), and Seasonal $168.3 million (3.4%). Share repurchases during the quarter totaled 5,552,410 shares at a cost of $600.4 million (including excise tax), with $1.3 billion remaining under the board authorization. Post-quarter end, an additional 1,031,569 shares were repurchased for $98.0 million as of May 26, 2026. The company recorded a $5.2 million insurance gain in other income from the Marietta tornado, down from $62.0 million in the prior year. Tariff refunds of $110 million (including $6 million interest) were received after quarter end from the IEEPA ruling.