Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements: This document contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they address future events, developments and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate,” “may,” “will,” “should,” “predict,” “possible,” “potential,” “continue,” “strategy,” and similar expressions. For example, our forward-looking statements include, without limitation, statements regarding:

• The impact of delays in receiving imported merchandise from Asia on our product availability, product mix, sales and merchandise margin;

• Our expectations regarding higher oceanic shipping and domestic freight and fuel costs, and our plans to manage those cost increases;

• The reliability of, and cost associated with, our sources of supply, particularly imported goods sourced from Asia and higher cost domestic goods;

• Our plans to address the labor shortages at our distribution centers and stores;

• Our expectations regarding increased expenses for higher wages and bonuses paid to associates, including increases in the minimum wage by States and localities and potential federal legislation increasing the minimum wage;

• The potential effect of general business or economic conditions on our business including the direct and indirect effects of the COVID-19 pandemic, inflation, labor shortages, consumer spending levels, unemployment, the physical and financial health of our customers, the effectiveness and duration of government assistance programs to individuals, households and businesses to support consumer spending, and proposals to raise federal corporate tax rates;

• Our expectations regarding reductions in COVID-19-related expenses and the level of shrink in fiscal 2021;

• Our plans to renovate existing Family Dollar stores and build new stores in the H2 store format, including an increase in the number of stores with adult beverages, and the performance of that format on our results of operations;

• Our plans and expectations relating to the introduction of additional price points above $1 in our Dollar Tree stores;

• Our plans and expectations relating to new store openings and the adoption, testing, implementation and performance of new store concepts such as Dollar Tree Plus and our Combo Store format;

• Our expectations regarding higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores, and construction, permitting and inspection delays related to new store openings; and

• The expected and possible outcome, costs, and impact of pending or potential litigation, arbitrations, other legal proceedings or governmental investigations (including the proceeding by the Food and Drug Administration).

A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Our forward-looking statements are all based on currently available operating, financial and business information. The outcome of the events described in these forward-looking statements is subject to a variety of factors, including, but not limited to, the risks and uncertainties summarized below and the more detailed discussions in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, and in this Quarterly Report on Form 10-Q. The following risks could have a material adverse impact on our sales, costs, profitability, financial performance or implementation of strategic initiatives:

• We are experiencing disruptions in our supply chain, including shipping delays, port closings and congestion, that have had and could have an adverse impact on our product availability, product mix, sales and merchandise margin.

• Our profitability is vulnerable to increases in oceanic shipping costs, domestic freight and fuel costs, higher wages, substitution of higher cost domestic goods and increases in other operating costs.

• The labor shortages at our distribution centers and stores has had and could have an adverse impact on the operating efficiency of our distribution centers and our ability to transport merchandise to and operate our stores, and could result in lower sales.

• If the COVID-19 pandemic in North America or at our sources of supply overseas worsens or continues longer than expected, there could be a material adverse impact on our business and results of operations.

• Inflation or other adverse change or downturn in economic conditions could adversely impact our sales or profitability.

• Our business and results of operations could be materially harmed if we experience a decline in consumer confidence and spending as a result of unfavorable economic conditions, for example because government assistance to households and businesses terminate or are reduced.

• We may not be successful in implementing or in anticipating the impact of important strategic initiatives, and our plans for implementing such initiatives may be altered or delayed due to various factors, including lack of customer acceptance, shipping delays, supply chain disruptions and other factors that could affect the timeliness, cost or availability of adequate levels of necessary domestic and imported merchandise, which may have an adverse impact on our business and financial results.

• Duties, tariffs or other restrictions on trade could adversely affect our financial performance.

• Our supply chain may be disrupted by changes in United States trade policy with China.

• We rely on computer and technology systems in our operations, and any material failure, inadequacy, interruption or security failure of those systems including because of a cyber-attack could harm our ability to effectively operate and grow our business and could adversely affect our financial results.

• The potential unauthorized access to customer information may violate privacy laws and could damage our business reputation, subject us to negative publicity, litigation and costs, and adversely affect our results of operations or business.

• Litigation, arbitration and government proceedings may adversely affect our business, financial condition and results of operations.

• Changes in laws and government regulations, including any increase in federal corporate tax rates, or our failure to adequately estimate the impact of such changes, could increase our expenses, expose us to legal risks or otherwise adversely affect us.

We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on our forward-looking statements.

We do not undertake to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events, or otherwise.

Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that we agree with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, we have a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

The Impact of COVID-19

As an essential business, our stores and distribution centers have remained open during the pandemic; however, our business trends and financial results in 2020 were materially different than in prior years. During March 2020, our Dollar Tree and Family Dollar stores began to experience a significant increase in customer demand and sales of essential products and comparable store net sales increased significantly. However, beginning the last week of March 2020 and continuing into April during the peak of the 2020 Easter selling season, comparable store net sales at our Dollar Tree stores decreased. After the 2020 Easter selling season, in both banners, we experienced an increase in demand for and sales of discretionary products and our seasonal business for the other holidays throughout 2020 was strong. Easter sales were strong in both banners during 2021. Our results of operations through the third quarter of fiscal 2020 include approximately $254.3 million of COVID-19-related expenses; these expenses totaled $22.1 million through the third quarter of fiscal 2021.

The future impact of COVID-19 on our customers and our business is difficult to predict. The course of the pandemic, including the spread of the Delta variant, the effectiveness of health measures such as vaccines, and the impact of ongoing economic stabilization efforts is uncertain and government assistance payments may not provide enough funding to support future consumer

spending at levels experienced during the first nine months of fiscal 2021. For example, although the American Rescue Plan Act of 2021 (“Rescue Act”), which was enacted on March 11, 2021, provided U.S. government funding to address the continuing impact of COVID-19 on the economy, public health, individuals and businesses, some of the enacted benefits, including $1,400 direct payments to individuals and supplemental unemployment benefits, were temporary and have been discontinued. Given the level of volatility and uncertainty surrounding the future impact of COVID-19 on our customers, suppliers and the broader economies in the locations that we operate as well as uncertainty around the future impact on our supply chain and the global supply chain, it is challenging to predict our future operations and financial results.

For further discussion of the impacts that COVID-19 had on our financial condition and results of operations during fiscal 2020, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended January 30, 2021.

Overview

We are a leading operator of more than 15,900 retail discount stores and we conduct our operations in two reporting segments. Our Dollar Tree segment is the leading operator of discount variety stores offering merchandise predominantly at the fixed price point of $1.00. Our Family Dollar segment operates general merchandise retail discount stores providing consumers with a selection of competitively-priced merchandise in convenient neighborhood stores.

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. 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 or remodeled during the period in the calculation of comparable store net sales, which has the effect of increasing our comparable store net sales. The term ‘expanded’ also includes stores that are relocated. Stores that have been re-bannered 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 new brand.

At October 30, 2021, we operated stores in 48 states and the District of Columbia, as well as stores in five Canadian provinces. A breakdown of store counts and square footage by segment for the 39 weeks ended October 30, 2021 and October 31, 2020 is as follows:

			39 Weeks Ended
			October 30, 2021																		October 31, 2020
			Dollar Tree						Family Dollar						Total						Dollar Tree						Family Dollar						Total
Store Count:
Beginning			7,805						7,880						15,685						7,505						7,783						15,288
New stores			214						148						362						262						111						373
Re-bannered stores			(1)						(1)						(2)						(3)						4						1
Closings			(34)						(45)						(79)						(23)						(33)						(56)
Ending			7,984						7,982						15,966						7,741						7,865						15,606
Relocations			45						55						100						46						31						77
Selling Square Feet (in millions):
Beginning			67.4						57.7						125.1						64.6						56.7						121.3
New stores			1.9						1.3						3.2						2.3						0.9						3.2
Re-bannered stores			—						—						—						(0.1)						0.1						—
Closings			(0.3)						(0.3)						(0.6)						(0.2)						(0.2)						(0.4)
Relocations			0.1						0.1						0.2						0.1						0.1						0.2
Ending			69.1						58.8						127.9						66.7						57.6						124.3

Stores are included as re-banners when they close or open, respectively.

The average size of stores opened during the 39 weeks ended October 30, 2021 was approximately 8,760 selling square feet for the Dollar Tree segment and 8,960 selling square feet for the Family Dollar segment. We believe that these size stores are in the

ranges of our optimal sizes operationally and give our customers a shopping environment which invites them to shop longer, buy more and make return visits.

The percentage change in comparable store net sales on a constant currency basis for the 13 and 39 weeks ended October 30, 2021, as compared with the preceding year, is as follows:

						13 Weeks Ended October 30, 2021																		39 Weeks Ended October 30, 2021
						Sales Growth						Change in Customer Traffic						Change in Average Ticket						Sales Growth						Change in Customer Traffic						Change in Average Ticket
Consolidated						1.6		%				(1.8)		%				3.5		%				0.4		%				(3.6)		%				4.1		%
Dollar Tree Segment						0.6		%				(1.1)		%				1.8		%				1.7		%				(1.4)		%				3.1		%
Family Dollar Segment						2.7		%				(3.0)		%				5.8		%				(0.8)		%				(6.5)		%				6.1		%

Constant currency basis refers to the calculation excluding the impact of currency exchange rate fluctuations. We calculated the constant currency basis change by translating the current year’s comparable store net sales in Canada using the prior year’s currency exchange rates. We believe that the constant currency basis provides a more accurate measure of comparable store net sales performance. Comparable store net sales are positively affected by our expanded and relocated stores, which we include in the calculation, and are negatively affected when we open new stores, re-banner stores or expand stores near existing stores.

Dollar Tree Initiatives

Following the announcement of our new pricing initiative in September 2021, we increased the price point on a majority of our $1 merchandise to $1.25 in more than 100 legacy Dollar Tree stores by October 30, 2021. We have continued the rollout in November to additional stores and plan to expand the $1.25 price point initiative to more than 2,000 additional Dollar Tree stores in December 2021, and expect to complete the rollout of this initiative to all Dollar Tree stores by the end of the first quarter of fiscal 2022. We believe that the new pricing strategy will enable us to introduce new products and expand our merchandise assortment in Dollar Tree stores while maintaining great value for our customers.

We are also continuing to implement our Dollar Tree Plus initiative which introduces products priced at the $3 and $5 price points and provides our customers with extraordinary value in discretionary categories. As of October 30, 2021, we have approximately 460 Dollar Tree Plus stores and expect to have nearly 600 stores by the end of fiscal 2021, exceeding our previous target of 500 stores. We also plan to accelerate the implementation of the Dollar Tree Plus initiative in fiscal 2022 by adding the concept to an additional 1,500 stores.

The roll-out of our Crafter’s Square initiative to all of our Dollar Tree stores was completed during fiscal 2020. The Crafter’s Square assortment carries mark-ups which are higher than our average mark-up.

After a successful launch of the Instacart platform in the Family Dollar segment, we began testing the online service delivery at Dollar Tree stores in the third quarter of fiscal 2021. As of October 30, 2021, the Instacart platform covers almost 7,000 Dollar Tree stores. This enables our customers to shop online and receive same-day delivery without having to visit a store.

We believe that our Dollar Tree initiatives have and will continue to positively affect our comparable store net sales and earnings.

Family Dollar Initiatives

We are executing several initiatives in our Family Dollar stores to increase sales. In March 2021, we announced the development of a new combination store format, which we refer to as a Combo Store, that leverages the strengths of the Dollar Tree and Family Dollar brands under one roof. We have taken Family Dollar’s great value and assortment and blended in select Dollar Tree merchandise categories to create a new store format targeted for small towns and rural communities. The Combo store provides another way to introduce the multi-price assortment to Dollar Tree customers and the one-dollar assortment to Family Dollar customers. As of October 30, 2021, we had 155 Combo Stores in operation. Due to the success of the initiative, we plan to accelerate expansion of the program in fiscal 2022, and anticipate adding 400 new, renovated, or relocated Combo Stores in fiscal 2022.

After a successful pilot program in 2020, we entered into a partnership with Instacart, an online merchandise delivery platform, in February 2021 that enables our Family Dollar customers to shop online and receive same-day delivery of merchandise without having to visit a store. The Instacart platform covers approximately 6,000 Family Dollar stores across the United States.

We are also continuing to execute our store optimization programs. Our H2 stores have significantly improved merchandise offerings throughout the store, including the addition of approximately 20 Dollar Tree $1.00 merchandise sections and establishing a minimum number of freezer and cooler doors. These stores have higher customer traffic and provide a higher average comparable store net sales lift, when compared to non-renovated stores, in the first year following renovation. H2 stores perform well in a variety

of locations and especially in locations where our Family Dollar stores have been most challenged in the past. As of October 30, 2021, we have approximately 3,750 H2 stores. We have renovated more than 1,250 stores to this format in fiscal 2021 and have also built new stores in this format. In addition, we plan to add adult beverage to 185 stores in fiscal 2021. We believe the addition of adult beverage to our assortment will drive traffic to our stores.

Additional Considerations

The following trends or uncertainties have already impacted or could impact our business or results of operations during 2021 or in the future:

• Shipping Delays. We rely heavily on Trans-Pacific shipping to acquire merchandise for our stores, and we are experiencing significant shipping delays as a result of the shipping capacity shortage which have negatively impacted our sales and the availability of product in the stores. We are also experiencing issues with port congestion and pandemic-related port closings and ship diversions. If the shipping delays do not improve they would continue to have a material adverse impact on product availability and product mix, and on our sales and merchandise margin. Sales could be negatively impacted if imported goods do not arrive in time to stock our stores, including the timely delivery of adequate levels of seasonal merchandise for the important Christmas holidays. If higher cost domestic goods are substituted for delayed imports, our merchandise margin could be adversely impacted. To address delays in shipments, we are prioritizing product categories for shipment in an effort to obtain seasonal assortments in advance of holiday seasons, adding and evaluating the use of long-term and short-term chartered vessels, and adding alternative sources of supply from North American factories.

• Freight Costs. We are experiencing significantly higher international and domestic freight costs as a result of disruptions in the global supply chain. This trend is likely to continue. The combination of increased demand and limited availability of Trans-Pacific shipping capacity has caused spot market prices to increase substantially. We are a large importer of merchandise from Asia and particularly sensitive to freight costs. Freight costs for fiscal 2021 are now expected to be $2.00 per diluted share higher than fiscal year 2020. We are working to reduce our freight costs by using chartered vessels, evaluating and securing long-term contracts with our carriers for vessels dedicated in large part to our needs, and adding alternative sources of supply that do not rely on Trans-Pacific shipping.

• Labor Shortage. We are experiencing a shortage of associates and applicants to fill staffing requirements at our distribution centers and stores due to the current labor shortage affecting businesses. This has adversely affected the operating efficiency of our distribution centers and our ability to transport merchandise from our distribution centers to our stores. The steps we have taken to address the labor shortage at our distribution centers include hosting national hiring events, paying sign-on bonuses, offering enhanced wages in select competitive markets and paying tuition reimbursement.

• Minimum Wage Increases. In 2021, the minimum wage has increased in certain States and localities and we expect additional minimum wage increases by States and localities in 2022. In addition, the federal minimum wage may increase depending on the outcome of legislation proposed in Congress. Minimum wage increases in States and localities are expected to increase our costs by $45.0 to $50.0 million in 2021.

• Build-out and Construction Costs and Delays. We have experienced higher commodity and other costs associated with the build-out of new stores and the renovation of existing stores. In addition, we have experienced delays in new store openings due to inspection, permitting and contractor delays. We anticipate these increased costs and delays may continue for the foreseeable future.

• COVID-19 Costs. The amount of COVID-19-related costs for premium pay including bonuses, supplies, protective equipment, and similar items was $279.0 million in fiscal 2020. We expect these costs to be approximately $30.0 million in fiscal 2021.

• Shrink Costs. We expect shrink at cost as a percentage of net sales to be significantly lower in fiscal 2021 than fiscal 2020.

For additional information regarding the risks related to our business and operations, including risks relating to the implementation of our Dollar Tree and Family Dollar initiatives, see Item 1A. Risk Factors in this Form 10-Q.

Results of Operations

Our results of operations and period-over-period changes are discussed in the following section. Note that 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.

Net Sales

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Net sales						$	6,415.4					$	6,176.7					3.9		%				$	19,232.4					$	18,741.1					2.6		%
Comparable store net sales change, on a constant currency basis						1.6		%				5.1		%										0.4		%				6.5		%

The increase in net sales in the 13 weeks ended October 30, 2021 was a result of sales of $177.5 million at new stores, and comparable store net sales increases in the Family Dollar and Dollar Tree segments.

Enterprise comparable store net sales increased 1.6% on a constant currency basis in the 13 weeks ended October 30, 2021, as a result of a 3.5% increase in average ticket, partially offset by a 1.8% decrease in customer traffic. Comparable store net sales increased the same 1.6% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 2.7% in the Family Dollar segment and 0.6% in the Dollar Tree segment.

The increase in net sales in the 39 weeks ended October 30, 2021 was a result of sales of $514.9 million at new stores and a comparable store net sales increase in the Dollar Tree segment, partially offset by a comparable store net sales decrease in the Family Dollar segment.

Enterprise comparable store net sales increased 0.4% on a constant currency basis in the 39 weeks ended October 30, 2021, as a result of a 4.1% increase in average ticket, partially offset by a 3.6% decrease in customer traffic. Comparable store net sales increased 0.5% when including the impact of Canadian currency fluctuations. On a constant currency basis, comparable store net sales increased 1.7% in the Dollar Tree segment and decreased 0.8% in the Family Dollar segment. In the same period last year, the Family Dollar segment had a comparable store net sales increase of 11.2% as we saw an increase in demand for essential products in the early stages of the COVID-19 pandemic. The Dollar Tree segment had a comparable store net sales increase of 2.1% in the same period last year, as the higher average ticket was partially offset by lower traffic resulting from the COVID-19 pandemic which negatively affected Easter sales.

Gross Profit

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Gross profit						$	1,763.7					$	1,924.1					(8.3)		%				$	5,588.8					$	5,635.2					(0.8)		%
Gross profit margin						27.5		%				31.2		%				(3.7)		%				29.1		%				30.1		%				(1.0)		%

The decrease in gross profit margin in the 13 weeks ended October 30, 2021 was a result of the net of the following:

• Merchandise cost, including freight, increased 360 basis points resulting primarily from higher freight costs on both segments partially offset by higher sales of higher margin discretionary merchandise on the Dollar Tree segment.

• Distribution costs increased 15 basis points resulting from higher distribution center payroll costs, resulting primarily from hourly wage increases on both segments, and higher depreciation costs on the Dollar Tree segment resulting from the two new distribution centers, partially offset by lower COVID-19-related costs. The 13 weeks ended October 30, 2021 and October 31, 2020 included COVID-19 costs of approximately $2.8 million and $10.9 million, respectively. The prior year amount included a per hour premium for all hourly associates.

• Occupancy costs increased 10 basis points primarily due to the loss of leverage from the low comparable store net sales increase for the quarter and higher real estate tax expenses.

• Markdown costs increased 10 basis points primarily due to higher clearance markdowns on the Family Dollar segment and higher dated product markdowns on the Dollar Tree segment.

• Shrink costs decreased 30 basis points resulting from favorable inventory results in relation to accruals and decreases in the shrink accrual rates in both the Family Dollar and Dollar Tree segments in the current quarter.

The decrease in gross profit margin in the 39 weeks ended October 30, 2021 was a result of the net of the following:

• Merchandise cost, including freight, increased 140 basis points resulting from higher freight costs on both segments, partially offset by higher sales of higher margin discretionary merchandise, including higher Easter sales in both segments and improved initial mark-on in both segments.

• Occupancy costs increased 10 basis points primarily due to the loss of leverage from the comparable store net sales decrease on the Family Dollar segment.

• Distribution costs were flat as a percentage of net sales compared to the prior year resulting from COVID-19 expenses in the prior year of $28.7 million, including COVID-19 premium pay of $2 per hour for all hourly associates for hours worked beginning March 8, 2020, offset by hourly wage increases at the distribution centers and higher depreciation costs in the Dollar Tree segment resulting from the two new distribution centers. COVID-19-related costs for the 39 weeks ended October 30, 2021 were $6.1 million.

• Markdown costs decreased 5 basis points primarily due to lower seasonal markdowns in the Dollar Tree segment resulting from the improved sell-through of Easter merchandise in the current year and $10.4 million of uninsured markdown costs for stores affected by civil unrest in the prior year, partially offset by higher clearance markdowns on the Family Dollar segment.

• Shrink costs decreased 45 basis points resulting from favorable inventory results in relation to accruals and decreases in the shrink accrual rates in both the Family Dollar and Dollar Tree segments in the current year.

Selling, General and Administrative Expenses

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Selling, general and administrative expenses						$	1,455.5					$	1,458.9					(0.2)		%				$	4,364.4					$	4,429.2					(1.5)		%
Selling, general and administrative expense rate						22.7		%				23.7		%				(1.0)		%				22.7		%				23.7		%				(1.0)		%

The decrease in the selling, general and administrative expense rate in the 13 weeks ended October 30, 2021 was the result of the net of the following:

• Payroll expenses decreased 80 basis points primarily due to lower incentive compensation expenses and lower COVID-19-related store payroll costs, partially offset by minimum wage increases in the current year. The 13 weeks ended October 30, 2021 and October 31, 2020 included $6.8 million and $28.9 million, respectively, of COVID-19-related payroll costs. The COVID-19 expenses in the current quarter were primarily for quarantine and sick pay as well as the related payroll taxes. In the prior year quarter, COVID-19-related payroll expenses included store payroll costs for a $1 per hour premium paid to all store hourly associates for all hours worked during the quarter through September 26, 2020, bonuses for certain field management associates, quarantine pay and sick pay as well as the related payroll taxes.

• Store facility costs decreased 15 basis points primarily due to lower repairs and maintenance costs and utility costs.

• Other selling, general and administrative expenses were flat as a percentage of total revenue. Travel and advertising costs were higher in the current quarter as the prior year levels were unusually low as a result of the COVID-19 pandemic. The current quarter also includes the benefit associated with the settlement of a contractual dispute.

The decrease in the selling, general and administrative expense rate in the 39 weeks ended October 30, 2021 was primarily the result of a 95 basis point decrease in payroll expenses primarily due to lower COVID-19-related store payroll costs and lower stock and incentive compensation expenses, partially offset by minimum wage increases and higher health insurance costs. The 39 weeks ended October 30, 2021 and October 31, 2020 included $10.2 million and $201.0 million, respectively, of COVID-19-related payroll costs. The COVID-19 expenses in 2021 were primarily for quarantine and sick pay as well as the related payroll taxes. The prior year expenses were for store payroll costs for a per hour premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes.

Operating Income

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Operating income						$	310.5					$	465.5					(33.3)		%				$	1,232.6					$	1,206.3					2.2		%
Operating income margin						4.8		%				7.5		%				(2.7)		%				6.4		%				6.4		%				—		%

Operating income margin decreased to 4.8% for the 13 weeks ended October 30, 2021 compared to 7.5% for the same period last year resulting from the decrease in gross profit margin, partially offset by the decrease in the selling, general and administrative expense rate, as described above. Operating income in the 13 weeks ended October 30, 2021 and October 31, 2020 included $11.6 million and $46.3 million, respectively, of COVID-19-related expenses.

Operating income margin was 6.4% for the 39 weeks ended October 30, 2021 and October 31, 2020. In the current year, the decrease in gross profit margin was offset by the decrease in the selling, general and administrative expense rate, as described above. Operating income in the 39 weeks ended October 30, 2021 included $22.1 million of COVID-19-related expenses. Operating income in the 39 weeks ended October 31, 2020 included $254.3 million of COVID-19-related expenses and $17.6 million of uninsured expenses related to civil unrest.

Interest Expense, Net

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Interest expense, net						$	33.4					$	38.1					(12.3)		%				$	99.4					$	113.1					(12.1)		%

Interest expense, net decreased $4.7 million and $13.7 million in the 13 weeks and 39 weeks ended October 30, 2021, respectively, compared to the same periods last year, resulting from lower average debt outstanding in the current year.

Provision for Income Taxes

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Provision for income taxes						$	60.1					$	97.3					(38.2)		%				$	259.3					$	253.3					2.4		%
Effective tax rate						21.7		%				22.8		%				(1.1)		%				22.9		%				23.2		%				(0.3)		%

The effective tax rate for the 13 weeks ended October 30, 2021 was 21.7% compared to 22.8% resulting primarily from higher Work Opportunity Tax Credits as a percentage of pre-tax income in the current year quarter.

The effective tax rate for the 39 weeks ended October 30, 2021 was 22.9% compared to 23.2% for the same period last year resulting from additional tax deductions in the current year related to restricted stock vesting while last year the restricted stock vesting resulted in an increase in tax expense. This benefit was partially offset by higher state tax rates in the current year.

Segment Information

Our operating results for the Dollar Tree and Family Dollar segments and period-over-period changes are discussed in the following sections.

Dollar Tree

The following table summarizes the operating results of the Dollar Tree segment:

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Net sales						$	3,417.4					$	3,303.2					3.5		%				$	10,003.0					$	9,557.6					4.7		%
Gross profit						1,031.1						1,154.2						(10.7)		%				$	3,207.1					$	3,206.8					—		%
Gross profit margin						30.2		%				34.9		%				(4.7)		%				32.1		%				33.6		%				(1.5)		%
Operating income						$	290.5					$	417.9					(30.5)		%				$	1,019.2					$	1,006.5					1.3		%
Operating income margin						8.5		%				12.7		%				(4.2)		%				10.2		%				10.5		%				(0.3)		%

Net sales for the Dollar Tree segment increased $114.2 million, or 3.5%, for the 13 weeks ended October 30, 2021 compared to the same period last year. The increase was due to sales from new stores of $108.5 million and a 0.6% increase in comparable store net sales. Average ticket increased 1.8% and customer traffic decreased 1.1%.

Net sales for the Dollar Tree segment increased $445.4 million, or 4.7%, for the 39 weeks ended October 30, 2021 compared to the same period last year. The increase was due to sales from new stores of $326.5 million and a 1.7% increase in comparable store net sales. Average ticket increased 3.1% and customer traffic declined 1.4%.

Gross profit margin for the Dollar Tree segment decreased to 30.2% for the 13 weeks ended October 30, 2021 compared to 34.9% for the same period last year as a result of the net of the following:

• Merchandise cost, including freight, increased 475 basis points primarily due to higher freight costs and lower initial mark-on, partially offset by increased sales of higher margin discretionary merchandise.

• Occupancy costs increased 10 basis points as a result of the loss of leverage due to the low comparable store net sales increase in the quarter and higher real estate tax expenses.

• Distribution costs increased 10 basis points resulting primarily from higher depreciation costs related to two new distribution centers and higher hourly wages, partially offset by lower COVID-19-related expenses. Total distribution-related COVID-19 expenses were $1.9 million and $6.6 million for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively. COVID-19-related expenses in the prior year included a per hour premium paid to all distribution center hourly associates for all hours worked during the quarter.

• Markdown costs increased 5 basis points resulting from higher dated product markdowns.

• Shrink costs decreased 25 basis points resulting from favorable inventory results in relation to accruals in the current quarter and a decrease in the shrink accrual rate.

Gross profit margin for the Dollar Tree segment decreased to 32.1% for the 39 weeks ended October 30, 2021 compared to 33.6% for the same period last year as a result of the net of the following:

• Merchandise cost, including freight, increased 195 basis points due primarily to higher freight costs and lower initial mark-on, partially offset by higher sales of higher margin discretionary merchandise, including a higher Easter sell-through. Easter sales were significantly lower last year as a result of the COVID-19 pandemic.

• Distribution costs increased 5 basis points resulting primarily from higher depreciation costs related to two new distribution centers and higher hourly wages in the current year, partially offset by lower COVID-19-related expenses. Total distribution center COVID-19-related expenses were approximately $4.1 million and $16.9 million for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively. COVID-19-related expenses in the prior year included a per hour premium paid to all distribution center hourly associates for all hours worked from March 8, 2020.

• Markdown costs decreased 5 basis points resulting from lower seasonal markdowns due to the higher Easter sell-through in the current year, partially offset by higher dated product markdowns.

• Shrink costs decreased 40 basis points resulting from favorable inventory results in relation to accruals in the current year and a decrease in the shrink accrual rate.

Operating income margin for the Dollar Tree segment decreased to 8.5% for the 13 weeks ended October 30, 2021 from 12.7% for the same period last year. The decrease in operating income margin in the 13 weeks ended October 30, 2021 was the result of the gross profit margin decrease noted above, partially offset by a lower selling, general and administrative expense rate. The selling, general and administrative expense rate decreased to 21.7% in the 13 weeks ended October 30, 2021 compared to 22.2% for the same period last year as a result of the following:

• Payroll expenses decreased 30 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases and higher health insurance expenses. The 13 weeks ended October 30, 2021 and October 31, 2020 included $3.3 million and $17.3 million, respectively, of COVID-19-related payroll expenses. The amounts in the current quarter were primarily for quarantine and sick pay as well as the related payroll taxes. In the prior year quarter, COVID-19-related payroll expenses included store payroll costs for a $1 per hour premium paid to all store hourly associates for all hours worked during the quarter through September 26, 2020, bonuses for certain field management associates, quarantine pay and sick pay as well as the related payroll taxes.

• Other selling, general and administrative expenses decreased 25 basis points due to the current year including the benefit associated with the settlement of a contractual dispute and the realization of certain tax credits. The prior year also included higher costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic.

Operating income in the 13 weeks ended October 30, 2021 and October 31, 2020 included $6.2 million and $28.6 million, respectively, of COVID-19-related expenses.

Operating income margin for the Dollar Tree segment decreased to 10.2% for the 39 weeks ended October 30, 2021 from 10.5% for the same period last year. The decrease in operating income margin in the 39 weeks ended October 30, 2021 was the result of the gross profit margin decrease noted above and a decrease in the selling, general and administrative expense rate. The selling, general and administrative expense rate decreased to 21.9% in the 39 weeks ended October 30, 2021 compared to 23.1% for the same period last year as a result of the following:

• Payroll expenses decreased 95 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases and higher health insurance costs. The 39 weeks ended October 30, 2021 and October 31, 2020 included $5.0 million and $117.0 million, respectively, of COVID-19-related payroll expenses. COVID-19 expenses in the current year were primarily for quarantine and sick pay as well as the related payroll taxes. In the prior year, COVID-19-related payroll expenses included store payroll costs for a $1 per hour premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, quarantine pay and sick pay as well as the related payroll taxes.

• Other selling, general and administrative expenses decreased 15 basis points due to the current year including the benefit associated with the settlement of a contractual dispute, the realization of certain tax credits and lower store supplies expense, partially offset by higher debit and credit fees resulting from higher debit and credit card penetration. The prior year included costs for the installation of plexiglass sneeze guards at all registers in our stores and higher costs for masks, gloves and cleaning supplies due to the COVID-19 pandemic.

Operating income in the 39 weeks ended October 30, 2021 included $12.4 million of COVID-19-related expenses. Operating income in the 39 weeks ended October 31, 2020 included $147.4 million of COVID-19-related expenses and $5.2 million of uninsured expenses related to civil unrest.

Family Dollar

The following table summarizes the operating results of the Family Dollar segment:

						13 Weeks Ended																		39 Weeks Ended
						October 30,						October 31,						Percentage Change						October 30,						October 31,						Percentage Change
(dollars in millions)						2021						2020									2021						2020
Net sales						$	2,998.0					$	2,873.5					4.3		%				9,229.4						9,183.5						0.5		%
Gross profit						732.6						769.9						(4.8)		%				2,381.7						2,428.4						(1.9)		%
Gross profit margin						24.4		%				26.8		%				(2.4)		%				25.8		%				26.4		%				(0.6)		%
Operating income						$	88.6					$	131.4					(32.6)		%				456.3						472.0						(3.3)		%
Operating income margin						3.0		%				4.6		%				(1.6)		%				4.9		%				5.1		%				(0.2)		%

Net sales for the Family Dollar segment increased $124.5 million, or 4.3%, for the 13 weeks ended October 30, 2021 compared to the same period last year. The increase was due to a comparable store net sales increase of 2.7% and $69.0 million of new store sales. For the 13 weeks ended October 30, 2021, average ticket increased 5.8% and customer traffic declined 3.0%.

Net sales for the Family Dollar segment increased $45.9 million, or 0.5%, for the 39 weeks ended October 30, 2021 compared to the same period last year. The increase was due to $188.4 million of new store sales, offset partially by a comparable store net sales decrease of 0.8%. For the 39 weeks ended October 30, 2021, average ticket increased 6.1% and customer traffic declined 6.5%.

Gross profit margin for the Family Dollar segment decreased to 24.4% for the 13 weeks ended October 30, 2021 compared to 26.8% for the same period last year. The decrease is due to the net of the following:

• Merchandise cost, including freight, increased 220 basis points primarily due to higher freight costs.

• Distribution costs increased 20 basis points primarily due to higher hourly wages, partially offset by lower COVID-19-related expenses. Total distribution-related COVID-19 expenses were $0.9 million and $4.3 million for the 13 weeks ended October 30, 2021 and October 31, 2020, respectively. The prior year COVID-19-related expenses included a per hour premium for all distribution center hourly associates for all hours worked during the quarter.

• Markdown costs increased 20 basis points primarily due to higher clearance markdowns.

• Occupancy costs increased 5 basis points primarily due to higher real estate tax expenses.

• Shrink expense decreased 30 basis points resulting from favorable physical inventory results in relation to accruals in the current year quarter and a decrease in the shrink accrual rate.

Gross profit margin for the Family Dollar segment decreased to 25.8% for the 39 weeks ended October 30, 2021 compared to 26.4% for the same period last year. The decrease is due to the net of the following:

• Merchandise cost, including freight, increased 100 basis points primarily due to higher freight costs, partially offset by higher initial mark-on.

• Occupancy costs increased 20 basis points as a result of the loss of leverage from the comparable store net sales decrease and higher real estate tax expenses.

• Markdown costs were unchanged as a percentage of net sales compared to the prior year. Current year results included higher clearance markdowns while the prior year included $7.5 million of uninsured markdowns for stores affected by civil unrest.

• Distribution costs decreased 5 basis points primarily due to lower COVID-19-related costs partially offset by higher hourly wages. Total distribution center COVID-19-related expenses were $2.0 million and $11.8 million for the 39 weeks ended October 30, 2021 and October 31, 2020, respectively. COVID-19-related expenses in the prior year included a per hour premium for all distribution center hourly associates for all hours worked beginning March 8, 2020.

• Shrink expense decreased 50 basis points resulting from favorable physical inventory results in relation to accruals and a decrease in the shrink accrual rate.

Operating income margin for the Family Dollar segment decreased to 3.0% for the 13 weeks ended October 30, 2021 from 4.6% for the same period last year resulting from the gross profit margin decrease noted above, offset partially by a decrease in the selling, general and administrative expense rate. The selling, general and administrative expense rate was 21.4% in the 13 weeks ended October 30, 2021 compared to 22.2% for the same period last year. The current quarter decrease in the selling, general and administrative expense rate was due to the net of the following:

• Payroll expenses decreased 65 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases. The 13 weeks ended October 30, 2021 and October 31, 2020 included $3.5 million and $11.4 million, respectively, of COVID-19-related payroll expenses. The amounts in the current quarter were primarily for quarantine and sick pay as well as the related payroll taxes. The prior year quarter included a $1 per hour premium paid to all store hourly associates for all hours worked through September 26, 2020, quarantine pay and sick pay as well as the related payroll taxes.

• Store facility costs decreased 30 basis points primarily due to lower repairs and maintenance expenses and lower telecommunication expenses.

• Depreciation and amortization expense increased 5 basis points primarily due to expenditures associated with the store optimization program.

• Other selling, general and administrative expenses increased 20 basis points primarily due to increases in advertising and travel expenses, an increase in insurance costs related to general liability claims and increases in tax reserves. Promotional advertising and travel were lower in the prior year quarter due to the COVID-19 pandemic.

Operating income in the 13 weeks ended October 30, 2021 and October 31, 2020 included $5.4 million and $17.4 million, respectively, of COVID-19-related expenses.

Operating income margin for the Family Dollar segment decreased to 4.9% for the 39 weeks ended October 30, 2021 from 5.1% for the same period last year resulting from the gross profit margin decrease noted above, offset partially by a decrease in the selling, general and administrative expense rate. The selling, general and administrative expense rate was 20.9% in the 39 weeks ended October 30, 2021 compared to 21.3% for the same period last year. The current year decrease in the selling, general and administrative expense rate was due to the net of the following:

• Payroll expenses decreased 60 basis points primarily due to lower COVID-19-related store payroll costs and lower incentive compensation expenses, partially offset by minimum wage increases and the loss of leverage from the comparable store net sales decrease. The 39 weeks ended October 30, 2021 and October 31, 2020 included $5.1 million and $83.4 million, respectively, of COVID-19-related payroll expenses. COVID-19 expenses in the current year were primarily for quarantine and sick pay as well as the related payroll taxes. The prior year included a per hour premium paid to all store hourly associates for all hours worked from March 8, 2020 to September 26, 2020, bonuses for certain field management associates, guaranteed bonus payouts and Thank You bonuses for store managers, quarantine pay and sick pay as well as the related payroll taxes.

• Store facility costs decreased 10 basis points primarily due to lower repairs and maintenance expenses and lower telecommunication expenses. The 39 weeks ended October 31, 2020 included $2.5 million of incremental repairs and maintenance expenses for stores damaged by civil unrest.

• Depreciation and amortization expense increased 10 basis points primarily due to the loss of leverage from the comparable store net sales decrease and expenditures associated with the store optimization program.

• Other selling, general and administrative expenses increased 25 basis points primarily due to an increase in advertising expenses, increases in tax reserves and the loss of leverage from the comparable store net sales decrease. Promotional advertising was lower in the prior year due to the COVID-19 pandemic.

Operating income in the 39 weeks ended October 30, 2021 included $9.5 million of COVID-19-related expenses. The 39 weeks ended October 31, 2020 included $104.9 million of COVID-19-related expenses and $12.4 million of uninsured costs related to civil unrest.

Liquidity and Capital Resources

Our business requires capital to build and open new stores, expand and renovate existing stores, expand our distribution network and operate our existing stores. Our working capital requirements for existing stores are seasonal in nature and typically reach their peak in the months of September and October. Historically, we have satisfied our seasonal working capital requirements for existing stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities.

The following table compares cash-flow related information for the 39 weeks ended October 30, 2021 and October 31, 2020:

						39 Weeks Ended
						October 30,						October 31,
(in millions)						2021						2020
Net cash provided by (used in):
Operating activities						$	1,018.7					$	1,733.7
Investing activities						(746.3)						(707.5)
Financing activities						(981.6)						(446.7)

Net cash provided by operating activities decreased $715.0 million primarily due to higher inventory levels in the current year.

Net cash used in investing activities increased $38.8 million primarily due to higher capital expenditures in the current year.

Net cash used in financing activities increased $534.9 million primarily due to $950.0 million of cash paid for stock repurchases in the current year compared to nearly $200.0 million in the prior year, partially offset by the final $250.0 million payment on the Senior Floating Rate Notes in the prior year.

At October 30, 2021, our long-term borrowings were $3.25 billion and we had $1.18 billion available under our Revolving Credit Facility. We also have $425.0 million in Letter of Credit Reimbursement and Security Agreements with various financial institutions, under which $311.5 million was committed to letters of credit issued for routine purchases of imported merchandise as of October 30, 2021.

We repurchased 9,156,898 shares of common stock on the open market for $950.0 million during the 39 weeks ended October 30, 2021. We repurchased 2,154,304 shares of common stock on the open market for $200.0 million during the 39 weeks ended October 31, 2020. Approximately $5.8 million in share repurchases had not settled as of October 31, 2020 and this amount was accrued in the accompanying unaudited condensed consolidated balance sheet as of October 31, 2020. During the 13 weeks ended October 30, 2021, the Board increased our share repurchase authorization by $1.05 billion to an aggregate amount of $2.5 billion, including $1.45 billion available for repurchases under the Board’s previous repurchase authorization approved on March 2, 2021.