Dollar Tree, Inc. (NASDAQ:DLTR) Q4 2022 Earnings Call Transcript

Rick Dreiling: Yes. I will take that, Jeff and then you can jump in. The first thing I want to say is we believe in the long-term earnings power of both banners. And we think there is potential there, and I look forward to sharing that with everybody on the Analyst Day. I think if we are honest with ourselves, which we are, the facilities in both banners need work in terms of the quality of the gondolas, floor care, ceiling care, lights, I can go down the list that applies to both banners. I think when you look at the difference between the two banners and what shows up in one versus the other, in terms of store standards is Dollar Tree has no planograms in it. So, it’s incredibly easy just to put stuff on the shelf. And a lot of sins get covered up when you do that.

Family Dollar, every square inch of that thing when we get done by the middle of the year, we will be applying to grant. And out of stocks, rusty shelves and more problems show up when you have a planogram based merchandising strategy. So, I would look at you and say, both stores have a tremendous amount of opportunity. Both banners have a lot of long-term earnings power. So, it’s really not a balance. It’s more about getting it done in both.

Joe Feldman: Got it. That’s helpful. Thanks. And Rick, you had mentioned earlier that you are seeing that trade-down or trade-in from higher income consumers, which I know we have all heard about and are seeing it as well. But how does the health of the consumer factor into your forecast this year? And how you see the consumer health playing out? That would be great. Thanks.

Rick Dreiling: Yes. I mean what we are seeing is the consumer making $80,000 a year is trading down. And that’s €“ timing is everything. We are doing better on so many fronts with a long way to go. They are having an experience they can relate to. But as far as planning for that in our outlook, no, we don’t do that.

Joe Feldman: Got it. Okay. Thank you. Good luck this quarter.

Rick Dreiling: Thank you.

Operator: Thank you. We will now take our next question from Simeon Gutman from Morgan Stanley. Please go ahead.

Simeon Gutman: Hey everyone. Two-parter on Family Dollar. First, on the comp, we would have expected it to be more traffic than ticket given some of the price investments. It’s the opposite. So, maybe related to that last question to diagnose how the customer is spending and maybe give us a peak on the basket composition? And then second, it’s a little bit of a twist on what was asked before. There is a step change that should happen in Family Dollar with EBIT and margin. Your comps are inflecting. Obviously, the business isn’t really generating a lot of profit. I know there is a lot of assumption in that, but curious what’s the assumption that needs to happen for the profit that you have to keep comping at this rate, or there is some profit or is there some profit unlock? Thank you.

Jeff Davis: So in terms of the composition of the basket, like every other consumable retailer, we are seeing the shift towards more consumables. I do think that comp wise , we are seeing transactions improve, which I think is called out. But I think what we are seeing is a larger share of wallet. So, the basket is increasing.