CHESAPEAKE, Va. — Dollar Tree Inc. reported third quarter financial results that were in line with expectations and reflect continued execution across all lines of its business transformation.

“In a challenging retail environment where the accumulating pressures of inflation, reduced government benefits and depleted savings have negatively affected lower-income consumers, our top-line performance outpaced most of our peers,” Rick Dreiling, Dollar Tree’s chairman and chief executive officer, said during an earnings call last month. “We accomplished this by taking market share in both segments [Dollar Tree and Family Dollar], which we believe reflects the initial impact of our investments and transformation initiatives.”

Consolidated net sales increased 5.4% to $7.3 billion in the three months to October 28. Enterprise same-store net sales increased 3.9%, driven by a 4.7% increase in traffic, partially offset by a 0.8% decline in average ticket.

Dollar Tree said same-store net sales increased 5.4%, driven by a 7% increase in traffic, partially offset by a 1.5% decline in average ticket. Family Dollar’s 2% same-store net sales increase was comprised of a 1.4% increase in traffic and a 0.7% increase in average ticket.

Gross profit increased 4.9% to $2.1 billion, and gross margin declined 20 basis points to 29.7%, driven by unfavorable sales mix, elevated shrink, product cost inflation, a product recall and investments in distribution center payroll, partially offset by lower freight. Selling, general and administrative expenses were 25.7% of total revenue, compared to 24.4% in the prior-year period. The increase was primarily due to labor investments in store and field payroll, higher information technology system costs, investments in repairs and maintenance, higher utility costs, and depreciation and amortization, partially offset by sales leverage.

“We are especially pleased with these results as they come on top of an 8.6% comp last year. Our consumable comp was up 11.1% and discretionary was up 1.1%,” said Dreiling. “We believe the consumable strength at Dollar Tree this quarter — as well as our strong multiyear discretionary comp — shows customers are embracing our compelling value proposition in this strained economic environment.”

Dollar Tree opened 197 stores in the quarter, ending the period with 16,673 stores operating under the Family Dollar, Dollar Tree and Dollar Tree Canada banners. Management has initiated a comprehensive review of the Family Dollar portfolio to address stores “that are not aligned with the transformative vision for the company.”

Dollar Tree expanded its multi-price offering to 870 Dollar Tree stores in the third quarter, and another 920 stores now offer frozen and refrigerated items priced at $3, $4 and $5.

“Our sales momentum continues to be mostly traffic-driven, as we attract new customers and gain both unit and dollar market share,” Dreiling told investors. “In the last 12 months, we’ve added 4.3 million new customers at Dollar Tree and 2.3 million new customers at Family Dollar. Importantly, most of these first-time customers come back to shop with us multiple times. In fact, our loyal customers are now the third-largest retail customer base in the United States. As importantly, Dollar Tree is attracting customers from a broader range of income levels. Most of our new customers over the past year have household incomes over $125,000, and this income demographic was a significant contributor to Dollar Tree’s quarter-three comp growth.”

Through the first three quarters of fiscal 2023, consolidated net sales increased 6.5% to $21.9 billion. Enterprise same-store net sales increased 5.2%. Dollar Tree same-store net sales increased 5.6%, driven by a 7.5% increase in traffic, partially offset by a 1.8% decline in average ticket. Family Dollar’s 4.8% same-store net sales increase was comprised of a 3.0% increase in traffic along with a 1.7% increase in average ticket.

Consolidated net sales for full-year fiscal 2023 are now expected to range from $30.5 billion to $30.7 billion. Dollar Tree expects to deliver a mid-single-digit comparable-store net sales increase for the year, comprised of a mid-single-digit increase in the Dollar Tree segment and a low-single-digit increase in the Family Dollar segment. Diluted earnings per share is expected to range from $5.81 to $6.01, including the 12-cent charge for the legal reserve taken in the first quarter and the impact of the 53rd week in fiscal 2023.

Dollar Tree projects fourth quarter consolidated net sales of between $8.6 billion and $8.8 billion on a low-single-digit increase in same-store sales for the company as a whole, including a mid-single-digit increase for the Dollar Tree segment, and a decrease of 1.0% to an increase of 1.0% for the Family Dollar segment.