And what we intend to do, we know how well Dollar Tree is performing. As we said on our call, we are going to shift our focus to opening more Dollar Trees than we historically have done in the past. And quite frankly, it’s being driven by the work on the coolers and it’s being driven by the multi-price point. That’s made the box more viable. But I think the rationalization of the portfolio was a natural step. And now what we can do by eliminating a bunch of underperforming stores, which take the bulk of the district managers time, we can now focus them on the stores that are doing better.
Jeff Davis: If I may add just one additional point. If you think about the Family Dollar segment, one of the things that we’re really proud of was that we continue to take market share across units, dollars, traffic. So, what we’re doing there within this banner is working for us. We have found that we are under a little more pressure with our particular higher-penetration or lower-income customer segment. But we believe that other merchandising and operating actions that we’re taking will allow us to further unlock the value of this remaining portfolio of stores that we have within the Family Dollar brand.
Operator: Thank you. Next question is coming from Chuck Grom from Gordon Haskett. Your line is now live.
Rick Dreiling: Hey, good morning, Chuck.
Chuck Grom: Hey, Rick. Hey, Jeff. Just a couple for me. Jeff, can you unpack the margin guide by banner? I’m just trying to isolate if you’re still anticipating another year of a loss at Family Dollar. And then, Rick, just bigger picture, when you look — with input prices dropping, can you talk about how your merchants are adding more value, particularly at the Dollar Tree and particularly at that $1.25 price point?
Jeff Davis: Let me take the first, Rick.
Rick Dreiling: Yeah.
Jeff Davis: So, at Dollar Tree, for example, on the margin, we’re guiding to 36% to 36.5%. That’s a combination of a couple of things. One, as we continue to roll out the multi-price offering, that is going to place a little bit of pressure on us from a margin rate perspective, but you’re really going to like the dollars it’s going to be driving with units. We do anticipate we had mentioned that we’re anticipating about another $0.80 to $0.90 of freight. That’s going to be more heavily realized on the Dollar Tree side. And as I’ve mentioned, we’ll expect to see about 60% of that in the first half of the year. So, the margin on the Dollar Tree side is going to be sort of led by additional freight, and then offset partially as a result of the rollout of the 3,000 stores in multi-price and further penetration in some of the other stores.
But all in all, a very healthy 36% to 36.5% gross margin. And listen, Dollar Tree also is not immune to some of the issues we’re having with shrink as well as the overall mix impact across the business. A little more profound when you get to the Family Dollar side of the business, while they will have a modest impact on the freight because we do import there also. But the impact there is really on the shrink and mix, offset by — or actually lifted by further penetration of our private label product as well as our opportunity within OTC and HBA, which are normally higher-margin opportunities for us.
Rick Dreiling: And the only thing I’d add to that Chuck, especially on the Dollar Tree side, when input cost goes down, the fact that we have fixed price points allows the Dollar Tree team to reengineer the product and bring a greater value to the table. And that’s how that franchise has been built over the years. And so — with $1.25, it might stay at $1.25 and it brings more value to the table to the consumer.
Operator: Thank you. Our next question today is coming from John Heinbockel from Guggenheim Partners. Your line is now live.
Rick Dreiling: Good morning, John.
John Heinbockel: Good morning. I wanted to focus on the multi-price point journey, right? So, going from three doors to eight, how do you think you’ll attack that, right, three to eight all at once in certain stores or staggered? How long do you think it will take to kind of re-planogram Plus, the old Plus, right, into the categories? And then, do you have a view, like, multi-price point penetration, when do we get to 10%? That seems like a fair mile marker.
Rick Dreiling: Yeah, great questions. First thing I’ll say to you, John, is we will stagger the rollout. I like to spread an initiative over time, that way it turns into a gift that keeps on giving. So that’s kind of our first plan on that. The penetration, I would say right now, if Rick McNeely was in the room, the demand is insatiable from the customer. I like the 10% number that you threw out. We’re going to be — we were 8.8% in quarter four. So, yeah, I think it is — right now of all of the things we’re doing, and I got Jeff shaking his head, I would call it the gift that keeps on giving right now. And we’re just really pleased with it.
Jeff Davis: And then, I believe that the last part of the question, if I was hearing it correctly about the timing of doing the re-planograming, if you will, of the Plus section. First of all, we don’t planogram. So, that’s an easier part to look at this. But as we think about doing some reconfiguration of the store to bring in the multi-price in line with other products, we’re starting to do that this year, and that’s the 3,000 stores that we expect to deliver this year.
Rick Dreiling: And our goal, John, is get the multi-price point in the aisle where it belongs rather than being in the center of the store. We think it’s more shoppable and the consumer will trade up.
Operator: Thank you. Our next question today is coming from Michael Montani from Evercore ISI. Your line is now live.
Rick Dreiling: Good morning, Michael.
