Dear Shareholders, 2022 represented a year of significant change for the Dollar Tree organization. Our Board of Directors was reconstituted in March 2022, with seven new Directors joining the Board. Since that time, we have been focused on the transformational change needed to drive growth and unlock long-term shareholder value. As part of this process, we have hired a new team of diverse executive leaders with the knowledge, experience and dedication to implement change aggressively. I am excited about the exceptional leadership team that is now in place, and we are moving as quickly as possible to capture the full potential of each of our business segments, Dollar Tree and Family Dollar. With the current economic climate driving higher income consumers into value retail, we believe we are in an excellent position to deliver the quality, value and convenience that shoppers want and expect today.
Delivering Strong Results in a Year of Dynamic Change
Accomplishments for the Dollar Tree and Family Dollar teams in 2022 included:
- A net sales increase of 7.6% to a company-record $28.3 billion;
- Same-store sales growth of 9.0% in the Dollar Tree segment, its strongest annual increase in nearly three decades;
- Family Dollar’s 2.4% same-store sales increase, comprised of accelerating comps by quarter, and a return to positive comparable transaction count growth in the back half of the year;
- A 210-basis point improvement in gross margin, to 31.5%; and
- Net income of $1.6 billion, leading to earnings per diluted share of $7.21, a 24.3% increase compared to the prior year.
Ongoing Commitment to Our Associates
The cornerstone of our business is our people, and a key focus continues to be on supporting and enabling our associates to be successful. Under our new leadership team, we are increasing average hourly wages for store associates and making investments in field personnel. Importantly, we expect these labor and wage investments will drive improved execution in our stores and overall greater productivity and efficiency. Our associates and field personnel are critical to our transformational journey, and we are committed to these investments in our talent. We are looking to invigorate the culture of our business and not only give our associates the tools they need to perform their roles, but provide them with the opportunities they deserve to grow within the Company.
Driving Productive Sales Growth
To be successful, we must run well-maintained, efficient and productive stores, which drives our intense focus on store standards. When we maintain clean, fully-stocked stores, our customers respond with bigger baskets and repeat visits. In addition to improving sales and the customer experience, improved efficiencies and productivity positively impact the work experience of our associates. Our certified GOLD (Grand Opening Look Daily) stores will serve as a clear example of what our most successful and well-run stores look like for our district and store leadership teams across all regions.
The Dollar Tree and Family Dollar segments are intensely focused on how to be the best retail destination for their unique customer bases. At Dollar Tree, our merchant team successfully managed through the transition to the $1.25 primary price point, an initiative that significantly enhances our ability to provide a meaningful assortment at extreme value to our Dollar Tree shoppers. We also added $3 and $5 Dollar Tree Plus merchandise into more than 1,800 Dollar Tree stores in 2022, and we plan to add this multiple price point product to many more stores in 2023. Separately, we have been aggressively expanding our $3, $4, and $5 frozen and refrigerated product across the Dollar Tree store base, installing additional cooler doors with an attractive selection of protein, pizza, ice cream and more that our customers are responding to positively.
In addition to the opportunities in the Dollar Tree segment, we have a tremendous long-term opportunity to improve the operating performance at Family Dollar. In 2022, we brought Family Dollar pricing into parity with key competitors, and we continue to be pleased with our price positioning. We have a number of sales and margin-driving initiatives underway, albeit in the early stages, to grow our SKU base supported by an increased shelf profile to 78 inches and expand the number of frozen and refrigerated cooler doors, providing shoppers in our communities with consumable products they rely on to feed their families. We are also expanding our private brand offering. These products will include new labels and redefined labels, many of which are being developed in our new test kitchen in Chesapeake, Virginia.
Improving Operating Efficiencies Through Technology
We are also working on new initiatives to improve our technology and supply chain that are incredibly important to our future success. To unlock the full value creation opportunity ahead of us, we must have the right tools and technology in place to support our accelerated growth, and we are prioritizing projects that will have the greatest impact on improving our performance. We are working to enhance our supply chain efficiencies and ensure that our stores have the merchandise they need in a timely manner and can stock it easily and efficiently. This will be a massive step forward for our organization and especially for our hard-working store associates.
Doing the Right Things for All Stakeholders
We recognize that stakeholders within our communities expect the Company to be a responsible corporate citizen and to respond to issues of concern, including diversity, equity and inclusion for all people, the potential impact of climate change, and other sustainability risks. The Board of Directors is committed to addressing these challenges and opportunities, and in 2022 we hired a Chief Diversity Officer and a Chief Sustainability Officer to lead management’s efforts in these important areas. These executives will work with the Board’s Sustainability and Corporate Social Responsibility Committee to focus on key sustainability issues that affect the Company, such as environmental change, human capital management and workplace environment and culture matters. In addition, we continue to update our corporate sustainability reporting in 2023 to share our efforts across a range of topics, including environmental stewardship, DEI (diversity, equity and inclusion) in our workforce, product safety and more. I am confident the Company is well-positioned from a governance perspective to address and manage current and future risks to our business.
Importantly, I want to sincerely thank each of our more than 207,000 associates at Dollar Tree and Family Dollar who are embracing change designed to improve the shopper experience in our stores and to develop their retail careers. Finally, I want to thank all of you for your support and confidence in the Board as we move forward to execute our strategy for long-term value creation. We are eager to share our multi-year vision of the opportunity ahead of us, and the path to get there, at our Investor Conference in June. This long-term opportunity ahead of us is bigger than I imagined before I joined the Dollar Tree team just over one year ago, and I look forward to engaging with you in the months and years ahead.
Sincerely yours,
Richard Dreiling
Chairman and Chief Executive Officer
Read the original letter here.
