DOLLAR TREE, INC. (DLTR) FY 2025 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In Management’s Discussion and Analysis, we explain the general financial condition and the results of operations for our company, including, factors that affect our business, analysis of annual changes in certain line items in the consolidated financial statements, expenditures incurred for capital projects and sources of funding for future expenditures. As you read Management’s Discussion and Analysis, please refer to our consolidated financial statements and related notes, included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.

During fiscal 2024, the Family Dollar business met the held for sale and discontinued operations accounting criteria. Accordingly, the results of operations of the Family Dollar business are reported as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented and the related assets and liabilities are classified as assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets. Unless otherwise noted, all amounts, percentages and discussions below reflect only the results of operations and financial condition of our continuing operations.

Overview

We are a leading operator of more than 8,800 retail discount stores, as of February 1, 2025, offering merchandise predominantly at the opening price point of $1.25, with additional offerings at higher price points.

Our net sales are derived from the sale of merchandise. Two major factors tend to affect our net sales trends. First is our success at opening new stores. Second is the performance of stores once they are open which can be impacted by a number of factors including operational performance, competition, inflation, consumer buying preferences and changes in the product assortment, pricing, or quality. Sales vary at our existing stores from one year to the next. We refer to this as a change in comparable store net sales, because we include only those stores that are open throughout both of the periods being compared, beginning after the first fifteen months of operation. We include sales from stores expanded, relocated or remodeled during the year in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. Stores that were converted from Family Dollar stores to Dollar Tree stores are considered to be new stores and are not included in the calculation of the comparable store net sales change until after the first fifteen months of operation under the Dollar Tree brand. Additionally, sales that are excluded from the calculation of comparable store net sales are referred to as non-comparable store sales and consist of sales from new stores open fifteen months or less and stores that are closed permanently or expected to be closed for more than 90 days.

2024 Financial Highlights

Financial highlights for the fiscal year ended February 1, 2025, as compared to the fiscal year ended February 3, 2024, include:

•Net sales increased 4.7% to $17,565.8 million, due to a 1.8% comparable store net sales increase and net sales of $1.1 billion at non-comparable stores. The 53rd week in fiscal 2023 accounted for $307.0 million of the total net sales.

•Gross profit increased 4.5% to $6,281.7 million as a result of our net store growth. Gross profit, as a percentage of net sales, remained unchanged in fiscal 2024 as the cost of sales rate is 64.2% in both fiscal 2024 and 2023.

•Selling, general and administrative expenses, as a percentage of total revenues, increased 220 basis points to 27.5%.

•Operating income, as a percentage of total revenues, decreased 230 basis points to 8.3%.

•The effective tax rate increased to 24.7% compared to 23.8% in the prior year.

•Income from continuing operations was $1,042.5 million, or $4.83 per diluted share, compared to $1,265.8 million, or $5.76 per diluted share.

27

Table of Contents

Store Activity & Selected Sales Data

At February 1, 2025, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces. The average size of stores opened in fiscal 2024 was approximately 10,990 selling square feet. A breakdown of the changes in store count and square footage is as follows:

The store counts above do not include new stores until they are opened for sales. Similarly, stores converted from a Family Dollar store to a Dollar Tree store, or vice versa, are reflected in the table above when they opened or closed, respectively.

Fiscal 2024 and fiscal 2022 which ended on February 1, 2025 and January 28, 2023, respectively, each included 52 weeks. Fiscal 2023 ended on February 3, 2024 and included 53 weeks, commensurate with the retail calendar. The 53rd week in fiscal 2023 added approximately $307.0 million in sales.

The percentage change in comparable store net sales, as compared with the preceding year, is as follows:

Comparable store net sales are positively affected by our expanded, relocated and remodeled stores, which we include in the calculation, and are negatively affected when we open new stores or expand stores near existing stores. The comparable store net sales change for the years ended February 1, 2025 and January 28, 2023 is based on a 52-week comparison for both periods included in the calculation. The comparable store net sales change for the year ended February 3, 2024 is based on a 53-week comparison for both periods included in the calculation.

Net sales per selling square foot is calculated based on total net sales for the preceding 12 months as of the end of the reporting period divided by the average selling square footage during the period. Selling square footage excludes the storage, receiving and office space that generally occupies approximately 20% of the total square footage of our stores. We believe that net sales per selling square foot more accurately depicts the productivity and operating performance of our stores as it reflects the portion of our footprint that is dedicated to selling merchandise.

28

Table of Contents

Net sales per selling square foot for the last three fiscal years is as follows:

The 53rd week in fiscal 2023 contributed $4 to the total net sales per selling square foot. See our “Strategic Initiatives and Recent Developments” below for more information on the initiatives that are driving our comparable store net sales growth and net sales per selling square foot growth.

Strategic Initiatives and Recent Developments

We continue to execute on a number of strategic initiatives to drive productive sales growth, improve operating efficiency, invest in technology, and expand our culture of service to our associates. These initiatives include, among others, and in no particular order, the following:

Dollar Tree Merchandising. We continue to expand our brand assortment at the $1.25 price point to provide greater value to our customers and increase customer traffic and store productivity. We are continuing to expand our multi-price product assortment, which began with the introduction of $3 and $5 products in select discretionary categories, expanded into $3, $4 and $5 frozen and refrigerated product, and now comprises a wide assortment of other consumable and discretionary product at varying price points. As of February 1, 2025, we had approximately 2,900 multi-price format stores, including approximately 2,600 conversions and 300 new stores.

99 Cents Only Stores Acquisition. During the second quarter of fiscal 2024, we acquired designation rights for up to 170 leases of 99 Cents Only Stores across Arizona, California, Nevada and Texas. The designation rights were acquired following the bankruptcy of 99 Cents Only Stores, which provided us an attractive opportunity to secure leases in priority markets. We secured the leases for 164 of these stores and substantially all have opened as Dollar Tree stores.

Our Workforce & Our Workplace. We are investing in our talent, including initiatives to provide competitive pay and benefits, enhanced training, and attractive career opportunities to deliver an enhanced associate experience, reduce turnover, and improve our store standards and efficiencies and ultimately the customer experience. Additional initiatives include projects to optimize and modernize our stores, with a focus on improving the in-store experience through renovations and customer service enhancements.

Supply Chain Optimization. Our supply chain initiatives include expanding and enhancing our distribution and transportation network, including investments in our truck fleet, transportation management systems, a new distribution center with enhanced automation to improve efficiency, and a new RotaCart delivery process to streamline the truck unloading and store delivery process. Significant investments are also underway to improve climate control conditions in our distribution centers. These investments are expected to negatively impact gross margin in the near-to-mid term.

Technology Investment. We continue our multi-year plan for significant investment in our technology across our business, including our mobile apps, human capital management system and supply chain system. We believe these improvements can promote operational efficiencies and deliver an elevated customer experience.

Marietta, Oklahoma Distribution Center. In the first quarter of fiscal 2024, a tornado destroyed our distribution center in Marietta, Oklahoma. Based on the significant damage sustained by the facility, the inventory contained in the facility and the facility itself are not salvageable. We have pivoted our supply chain network to deliver products to the approximately 600 Marietta-serviced stores, and we believe these efforts have limited and will continue to limit disruption to the Dollar Tree shopping experience. We are incurring additional costs within our supply chain as a result of servicing these impacted stores, including additional stem miles for delivered product and outside storage, and expect such costs to continue negatively impacting gross margin in the near-to-mid term.

General Liability Claims Development. Our self-insured general liability claims related to customer accidents and other incidents at our stores continue to develop unfavorably due to the rising costs to reimburse, settle, or litigate the claims. As a result, our actuarially determined liabilities were increased during the second quarter of fiscal 2024, contributing to a $45.3 million increase in our general liability claim expenses compared to the prior year second quarter. For the full year, fiscal 2024 general liability claim expenses increased $20.4 million compared to fiscal 2023.

The liabilities related to our self-insurance programs, which include general liability claims, are estimates that require judgment and the use of assumptions. See the “Critical Accounting Estimates and Assumptions” later in this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on the estimates and assumptions related to these liabilities. Such estimates are inherently uncertain, and future changes in claim trends and assumptions could result in significant adjustments to our liabilities, which could materially and adversely affect our results of operations.

29

Table of Contents

Family Dollar Store Portfolio Optimization and Strategic Alternatives Reviews. During the fourth quarter of fiscal 2023, we announced that we had initiated a comprehensive store portfolio optimization review, which involved identifying stores for closure, relocation or re-bannering based on an evaluation of current market conditions and individual store performance, among other factors. As a result of the portfolio optimization review, we identified approximately 970 underperforming Family Dollar stores, including approximately 600 stores to be closed in the first half of fiscal 2024, and approximately 370 stores to be closed at the end of each store's current lease term. As of February 1, 2025, we had closed approximately 695 stores identified under the portfolio optimization review.

During the second quarter of fiscal 2024, we announced that we had initiated a formal review of strategic alternatives for the Family Dollar business, which could have included among others, a potential sale, spin-off or other disposition of the business. This strategic alternatives review concluded in the fourth quarter of fiscal 2024 and resulted in the decision to sell the Family Dollar business. As a result, we concluded the Family Dollar business met the held for sale and discontinued operations accounting criteria. On March 25, 2025, the Company entered into a definitive agreement to sell the Family Dollar business to Brigade Capital Management, LP and Macellum Capital Management, LLC, for a purchase consideration of $1,007.0 million, subject to a number of adjustments, including with respect to working capital and net indebtedness. The closing of the transaction is subject to satisfaction of customary closing conditions, including receipt of U.S. antitrust approval. Net proceeds are estimated to total approximately $804.0 million. For information on discontinued operations, refer to Note 2 to our consolidated financial statements under the caption “Assets Held for Sale and Discontinued Operations” and Note 15.

Results of Operations

Our results of operations and year-over-year changes are discussed in the following section. Note that the cost of sales rate is calculated by dividing cost of sales by net sales. Gross profit margin is calculated as gross profit (i.e., net sales less cost of sales) divided by net sales. The selling, general and administrative expense rate and operating income margin are calculated by dividing the applicable amount by total revenue. Basis points, as referred to below, are a percentage of net sales for expense categories within gross profit and cost of sales, and are a percentage of total revenue for all other expense categories. A 100 basis point increase equals 1.00% and a 1 basis point increase equals 0.01%.

The following table contains results of operations data for the last three fiscal years:

30

Table of Contents

Net Sales

Fiscal 2024 compared to Fiscal 2023

The increase in net sales from fiscal 2023 to fiscal 2024 was a result of the comparable store net sales increase and net sales of $1.1 billion at non-comparable stores. Comparable store net sales increased 1.8% in fiscal 2024, as a result of a 1.6% increase in customer traffic and a 0.1% increase in average ticket. This increase is based on a 52-week comparison for both periods. The 53rd week in fiscal 2023 accounted for $307.0 million of the total net sales.

The low single-digit comparable store net sales increase was primarily impacted by the macro economic environment which continues to affect our customers due to the impact of inflationary pressures and higher interest rates. We expect these sales trends, and the resulting negative impact on operating income, to continue in the near-to-mid term.

Fiscal 2023 compared to Fiscal 2022

The increase in net sales from fiscal 2022 to fiscal 2023 was a result of the comparable store net sales increase and net sales of $467.1 million at non-comparable stores. Comparable store net sales increased 5.8% in fiscal 2023, as a result of a 7.4% increase in customer traffic, partially offset by a 1.5% decrease in average ticket. This increase is based on a 53-week comparison for both periods. The 53rd week in fiscal 2023 accounted for $307.0 million of the total net sales increase.

Gross Profit

Fiscal 2024 compared to Fiscal 2023

Gross profit margin remained unchanged in fiscal 2024 as the cost of sales rate is 64.2% in both fiscal 2024 and 2023. Changes in the cost of sales rates consist of lower freight costs, offset by increased sales of higher cost consumable merchandise, increased occupancy costs resulting from the loss of leverage from the low single-digit comparable store net sales increase and the 53rd week of sales in 2023, higher distribution costs, increased shrink costs resulting from unfavorable inventory results, and increased markdown costs for slow moving items. 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.

Fiscal 2023 compared to Fiscal 2022

Gross profit margin decreased in fiscal 2023 due to a 170 basis point increase in cost of sales. The cost of sales rate increased to 64.2% in fiscal 2023 from 62.5% in fiscal 2022 primarily due to re-investment in value-product assortments after transitioning to the $1.25 price point during the prior year, increased sales of higher cost consumable merchandise, higher distribution costs, increased shrink costs resulting from unfavorable inventory results, partially offset by lower freight costs and decreased occupancy costs resulting from the leverage from the comparable store net sales increase and leverage from the 53rd week of sales in 2023.

Selling, General and Administrative Expenses

Fiscal 2024 compared to Fiscal 2023

The selling, general and administrative expense rate increased 220 basis points in fiscal 2024 primarily due to higher depreciation expense from store investments, software impairments and related contract termination costs, temporary labor to support our multi-

31

Table of Contents

price rollout, higher utilities costs, higher stock compensation expense resulting from the accelerated vesting of the former Chief Executive Officer’s option award, the loss of leverage from the low single-digit comparable store net sales increase and the loss of leverage from the 53rd week of sales in the prior year. The software impairments and related contract termination costs totaled $58.0 million and were related to enterprise merchandising and store system projects that were not fully implemented and were cancelled in connection with the decision to sell the Family Dollar business.

Fiscal 2023 compared to Fiscal 2022

The selling, general and administrative expense rate increased 140 basis points in fiscal 2023 primarily due to wage investments and minimum wage increases in store payroll, unfavorable development of general liability claims, and higher repairs and maintenance expenses as we focus on store conditions for our customers and associates, partially offset by leverage from the comparable store net sales increase and leverage from the 53rd week of sales at the end of fiscal 2023.

Operating Income

Fiscal 2024 compared to Fiscal 2023

Operating income margin decreased to 8.3% in fiscal 2024 compared to 10.6% in fiscal 2023, resulting from the increase in the selling, general and administrative expense rate.

Fiscal 2023 compared to Fiscal 2022

Operating income margin decreased to 10.6% in fiscal 2023 compared to 13.6% in fiscal 2022, resulting from the decrease in gross profit margin and an increase in the selling, general and administrative expense rate.

Interest Expense, Net

Fiscal 2024 compared to Fiscal 2023

Interest expense, net decreased $5.0 million in fiscal 2024 compared to the prior year, primarily due to higher interest income on investments.

Fiscal 2023 compared to Fiscal 2022

Interest expense, net decreased $14.7 million in fiscal 2023 compared to the prior year, primarily due to higher interest income on investments.

Provision for Income taxes

Fiscal 2024 compared to Fiscal 2023

The effective tax rate for fiscal 2024 was 24.7% compared to 23.8% for fiscal 2023, resulting primarily from higher non-deductible executive compensation, increased tax expense in the current year related to restricted stock vesting and lower Work Opportunity Tax Credits.

Fiscal 2023 compared to Fiscal 2022

The effective tax rate for fiscal 2023 was 23.8% compared to 23.9% for fiscal 2022, resulting primarily from higher Work Opportunity Tax Credits, partially offset by higher tax expense in the current year related to restricted stock vesting.

32

Table of Contents

Liquidity and Capital Resources

We invest capital to build and open new stores, expand and renovate existing stores, enhance and grow our distribution network, operate our existing stores, maintain and upgrade our technology, and support our other strategic initiatives. Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October. We have satisfied our seasonal working capital requirements for existing and new stores and have funded our distribution network programs and other capital projects from internally generated funds and borrowings under our credit facilities and commercial paper program.

The following table compares our cash flows for the last three fiscal years:

Operating Activities

Fiscal 2024 compared to Fiscal 2023

Net cash provided by operating activities decreased $207.5 million in fiscal 2024 compared to fiscal 2023 primarily due to lower current year earnings and increased inventory levels, partially offset by increases in trade accounts payable. The increase in inventory was the result of an increase in store count and inventory from our multi-price initiative. The increase in trade accounts payable was the result of extensions of payment terms with suppliers implemented in late fiscal 2023.

Fiscal 2023 compared to Fiscal 2022

Net cash provided by operating activities increased $982.9 million in fiscal 2023 compared to fiscal 2022 primarily due to decreases in inventory levels. Inventory was elevated at the end of fiscal 2022 due to global supply chain issues that resolved in fiscal 2023, resulting in lower payments for inventory.

Investing Activities

Fiscal 2024 compared to Fiscal 2023

Net cash used in investing activities increased $54.6 million in fiscal 2024 compared with fiscal 2023 due to higher capital expenditures in the current year, partially offset by insurance recoveries related to damaged property and equipment at our distribution center in Marietta, Oklahoma as discussed in Note 5 to our consolidated financial statements.

Fiscal 2023 compared to Fiscal 2022

Net cash used in investing activities increased $551.1 million in fiscal 2023 compared with fiscal 2022 due to higher capital expenditures in fiscal 2023.

Financing Activities

Fiscal 2024 compared to Fiscal 2023

Net cash used in financing activities decreased $118.7 million in fiscal 2024 compared to fiscal 2023 primarily due to lower payments for stock repurchases in fiscal 2024.

Fiscal 2023 compared to Fiscal 2022

Net cash used in financing activities decreased $156.8 million in fiscal 2023 compared to fiscal 2022 primarily due to lower payments for stock repurchases in fiscal 2023.

For detail on our long-term and short-term borrowings and other commitments, refer to the discussion of “Funding Requirements” below, as well as Note 5 and Note 6 to our consolidated financial statements.

33

Table of Contents

Share Repurchases

We repurchased 3,283,837, 3,905,599 and 4,613,696 shares of common stock on the open market at a cost of $403.6 million, $504.3 million and $647.5 million, including applicable excise tax, in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. As of February 1, 2025, we had $952.4 million remaining under our existing $2.5 billion Board repurchase authorization.

Funding Requirements

Our total estimated capital expenditures for fiscal 2025 are approximately $1.2 billion to $1.3 billion, including planned expenditures for supply chain investments, our new and expanded stores, store renovations, information technology investments, and other property improvements. We expect our cash needs for opening new stores and expanding existing stores in fiscal 2025 to total approximately $445.0 million, which includes capital expenditures, initial inventory and pre-opening costs. We believe that we can adequately fund our working capital requirements and planned capital expenditures for the next 12 months and the foreseeable future from net cash provided by operations, our commercial paper program and borrowings under our credit facilities.

Our material contractual obligations consist of long-term and short-term borrowings and related interest payments and operating lease obligations. Additionally, we have commitments related to ocean shipping contracts, software license and support agreements, telecommunication services and store technology assets and maintenance for our stores. Other commitments include letters of credit for imported merchandise, standby letters of credit that serve as collateral for our large-deductible insurance programs and surety bonds that serve as collateral for utility payments at our stores and self-insured insurance programs. For additional information regarding these obligations, including amounts outstanding at February 1, 2025, refer to Note 5, Note 6 and Note 7 to our consolidated financial statements.

Critical Accounting Estimates and Assumptions

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. Actual results could be significantly different from these estimates. Following is a discussion of the estimates that we consider critical.

Inventory Valuation

As discussed in Note 2 to our consolidated financial statements under the caption “Merchandise Inventories,” inventories at the distribution centers are stated at the lower of cost or net realizable value with cost determined on a weighted-average basis. Cost is assigned to store inventories using the retail inventory method on a weighted-average basis. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that is widely used in the retail industry and results in valuing inventories at lower of cost or market when markdowns are taken as a reduction of the retail value of inventories on a timely basis.

Inventory valuation methods require certain management estimates and judgments, including estimates of future merchandise markdowns and shrink, which significantly affect the ending inventory valuation at cost as well as the resulting gross margins. The averaging required in applying the retail inventory method and the estimates of shrink and markdowns could, under certain circumstances, result in costs not being recorded in the proper period.

We estimate our markdown reserve based on the consideration of a variety of factors, including, but not limited to, quantities of slow moving or seasonal carryover merchandise on hand, historical markdown statistics and future merchandising plans. The accuracy of our estimates can be affected by many factors, some of which are outside of our control, including changes in economic conditions and consumer buying trends. Historically, we have not experienced significant differences in our estimated reserve for markdowns compared with actual results.

Our accrual for shrink is based on the shrink results of our most recent physical inventories adjusted, if necessary, for current economic conditions and business trends. These estimates are compared to actual results as physical inventory counts are taken and reconciled to the general ledger. Our physical inventory counts are generally taken between January and October of each year; therefore, the shrink accrual recorded at February 1, 2025 is based on estimated shrink for most of fiscal 2024, including the fourth quarter. We periodically adjust our shrink estimates to reflect our best estimates based on the factors described and, historically, these adjustments have not been material.

Our management believes that our application of the retail inventory method results in an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market each year on a consistent basis.

34

Table of Contents

Self-Insurance Liabilities

The liabilities related to our self-insurance programs for workers’ compensation, general liability and auto are estimates that require judgment and the use of assumptions. Semiannually, we obtain third-party actuarial valuations to aid in valuing these liabilities and in determining the amount to accrue during the year. These actuarial valuations are estimates based on our claims experience for current and prior periods, exposure and severity factors, historical loss development factors, and other actuarial assumptions and the related accruals are adjusted as management’s estimates change.

Management’s estimate for self-insurance liabilities could vary from the ultimate loss sustained given the difficulty in predicting future events. Our self-insurance liabilities associated with workers’ compensation, general liability and auto related to continuing operations are recorded within “Other current liabilities” and “Other liabilities” in the accompanying Consolidated Balance Sheets and amounted to $244.3 million and $187.0 million at February 1, 2025 and February 3, 2024, respectively. Self-insurance liabilities related to discontinued operations totaled $185.0 million and $176.5 million at February 1, 2025 and February 3, 2024, respectively. The increases were primarily due to general liability claims developing and paying out at amounts significantly higher than anticipated, resulting in higher actuarially determined accruals.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets are initially recorded at their fair values. These assets are not amortized but are evaluated annually for impairment. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, significant negative industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock.

For purposes of our goodwill impairment evaluation, the reporting units are Family Dollar, Dollar Tree and Dollar Tree Canada. Goodwill has been assigned to the reporting units based on prior business combinations related to the brands. We have the option to initially perform a qualitative assessment to determine whether it is more likely than not that the fair value is less than the carrying amount. Alternatively, we may bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. In connection with the fiscal 2024 annual impairment evaluation, management’s qualitative assessment indicated that it was more likely than not that the fair values of the Family Dollar reporting unit and the Family Dollar trade name were less than their carrying values. There were no indicators that the fair value of the Dollar Tree or Dollar Tree Canada reporting units were less than their carrying value. Therefore, management performed a quantitative assessment of both the Family Dollar goodwill and trade name.

In fiscal 2024, we estimated the fair value of the Family Dollar reporting unit by using market participant assumptions as there was an expected sale price for the business based on negotiations with potential third party buyers. Based on this fair value, we recognized an impairment loss of $490.5 million which represented the remaining carrying amount of goodwill from the Family Dollar business. The fiscal 2024 goodwill impairment was driven primarily by a decrease in enterprise value attributed to the Family Dollar business using the expected sale price compared to our carrying value. Our evaluation of goodwill resulted in an impairment charge of $1,069.0 million in fiscal 2023 related to the Family Dollar reporting unit. Our evaluation of goodwill did not result in impairment charges being recorded in fiscal 2022.

The Family Dollar trade name comprises a substantial portion of our indefinite-lived intangible assets and management’s judgment utilized in the Family Dollar trade name impairment evaluations is critical. The computations require management to make estimates and assumptions and actual results may differ significantly, particularly if there are significant adverse changes in the operating environment. Indefinite-lived intangible assets, such as the Family Dollar trade name, are not subject to amortization but are reviewed at least annually for impairment. The indefinite-lived intangible asset impairment evaluations are performed by comparing the fair value of the indefinite-lived intangible assets to their carrying values. We estimate the fair value of our trade name intangible asset based on an income approach using the relief-from-royalty method. This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables. Royalty rates are derived using future estimates of earnings before interest, and taxes (“EBIT”), and a profit split analysis that examines how EBIT would be allocated to separate parties in an intellectual property license arrangement.

We base our fair value estimates on assumptions we believe to be reasonable, but which are inherently uncertain. Critical assumptions that are used as part of a tradename evaluation include:

•The potential future revenue, EBIT and cash flows of the reporting unit. The projections use management’s assumptions about economic and market conditions over the projected period as well as our estimates of future performance and reporting unit revenue, gross margin, expenses and other factors. The resulting revenue, EBIT and cash flow estimates are based on our most recent business operating plans, and various growth rates are assumed for years beyond the current business plan period. We believe that the assumptions, estimates and rates used in our impairment evaluations are reasonable; however, variations in the assumptions, estimates and rates could result in significantly different estimates of fair value.

35

Table of Contents

•Selection of an appropriate discount rate. Calculating the present value of future cash flows requires the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants. Given current economic conditions, it is possible that the discount rate will fluctuate in the near term. We engaged third party experts to assist in the determination of the weighted-average cost of capital used to discount the expected income under the relief of royalty method. The weighted-average cost of capital used to discount the cash flows for our evaluation was 10.5% for our fiscal 2024 analysis. The discount rate includes a premium due to the inherently higher risk profile of intangible assets.

Our evaluation of the Family Dollar trade name resulted in impairment charges of $1.4 billion in fiscal 2024 and $950.0 million in fiscal 2023. Our evaluation of the Family Dollar trade name did not result in impairment charges being recorded during fiscal 2022. The fiscal 2024 trade name impairment was driven primarily by a decrease in the royalty rate assumption based on lower future growth rates and EBIT margin assumptions for the Family Dollar reporting unit.

For additional information related to goodwill and indefinite-lived intangible assets, including the related impairment evaluations, refer to Note 2 to our consolidated financial statements under the caption “Goodwill and Nonamortizing Intangible Assets” and Note 15. For additional information related to uncertainties associated with the key assumptions and any potential events and/or circumstances that could have a negative effect on the key assumptions, please refer to “Item 1A. Risk Factors” and elsewhere within this “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If our assumptions and related estimates change in the future, we may be required to record additional impairment charges against earnings in future periods. Any impairment charges that we may take in the future could be material to our results of operations and financial condition.

Assets Held for Sale and Discontinued Operations

A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the business is available for immediate sale in its present condition and an active program to locate a buyer has been initiated. Additionally, the sale must be probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and actions required to complete the plan indicate it is unlikely significant changes to the plan will be made or the plan will be withdrawn. A business classified as held for sale is recorded at the lower of (i) its carrying amount and (ii) estimated fair value less costs to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate. Assets held for sale are not further depreciated or amortized once such a determination is reached.

The results of operations of businesses classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial results. When a business is identified for discontinued operations reporting: (i) results for prior periods are retrospectively reclassified as discontinued operations; (ii) results of operations are reported in a single line, net of tax, in the consolidated statement of operations; and (iii) assets and liabilities are reported as held for sale in the consolidated balance sheets in the period in which the business is classified as held for sale.

As previously noted, in fiscal 2024 we initiated a formal review of strategic alternatives for the Family Dollar business. This strategic alternatives review concluded in the fourth quarter of fiscal 2024 and resulted in the decision to sell the Family Dollar business. Accordingly, we concluded the assets of the Family Dollar business met the criteria for classification as held for sale. We determined the ultimate disposal will represent a strategic shift that will have a major effect on our operations and financial results. As such, the results of Family Dollar are presented as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented and the assets and liabilities of Family Dollar have been reflected as assets and liabilities of discontinued operations in the accompanying Consolidated Balance Sheets for all periods presented. The Company has ceased depreciating and amortizing its long-lived assets for Family Dollar which primarily includes right-of-use assets and property and equipment. On March 25, 2025, the Company entered into a definitive agreement to sell the Family Dollar business to Brigade Capital Management, LP and Macellum Capital Management, LLC, for a purchase consideration of $1,007.0 million, subject to a number of adjustments, including with respect to working capital and net indebtedness. The closing of the transaction is subject to satisfaction of customary closing conditions, including receipt of U.S. antitrust approval. Net proceeds are estimated to total approximately $804.0 million.

We calculated an estimated loss on classification to held for sale of approximately $3.4 billion, reflecting the write-down of the carrying value of the Family Dollar business to fair value less costs to sell. The fair value was determined by using market participant assumptions as there was an expected sale price for the business based on negotiations with the buyer. Costs to sell included estimated incremental, direct costs incurred to transact the sale of the Family Dollar business. Refer to Note 15 to our consolidated financial statements for additional information.

36

Table of Contents

Summary of Significant Accounting Policies

Refer to Note 2 to our consolidated financial statements for a summary of our significant accounting policies and our assessment of recently issued accounting standards.