Greetings, and welcome to the Dollar Tree Q4 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Bob LaFleur, Senior Vice President, Investor Relations. Bob, please go ahead.

Good morning, and thank you for joining us today to discuss Dollar Tree's fourth quarter fiscal 2024 results. With me today are Dollar Tree CEO, Mike Creedon; CFO, Jeff Davis; and Chief Transformation Officer, Stewart Glendinning. Before we begin, I would like to remind everyone that some of the remarks that we will make today about the company's expectations, plans and future prospects are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties, which could cause actual results to differ materially from those contemplated by our forward-looking statements. For information on the risks and uncertainties that could affect our actual results, please see the Risk Factors, Business and Management's Discussion and Analysis of Financial Condition and Results of Operations section in our annual report on Form 10-K to be filed on or about March 26, 2025, our most recent press release and Form 8-K and other filings with the SEC. We caution against reliance on any forward-looking statements made today, and we disclaim any obligation to update any forward-looking statements, except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP items to the most directly comparable GAAP financial measures are provided in today's earnings release available on the IR section of our website. These non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, we will refer to our financial results on a GAAP basis. Additionally, unless otherwise stated, all comparisons discussed today for the fourth quarter of fiscal 2024 are against the same period a year ago. Please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website. Following our prepared remarks, Mike, Jeff and Stewart will take your questions. [Operator Instructions] I'd like to now turn the call over to Mike.

Thanks, Bob. Good morning, everyone, and thank you for joining our call today. Today is a very exciting day for our company. As I'm sure most of you saw this morning, we announced that Brigade-Macellum will acquire our Family Dollar business for a total price of just over $1 billion. After a thorough review of our strategic alternatives, the company determined that a sale of Family Dollar is the best way to achieve our value creation goals. Dollar Tree and Family Dollar are two different businesses with limited synergies, and each is at a very different stage of its journey. Separating them will enable each banner to be led and managed by a dedicated team that can focus exclusively on that banner's distinct needs and on realizing each banner's full potential. Separating will also enable investors to own a business they value more without also having to own a business they value less or that may not fit in their investment profile. It should also make it easier for the market to properly value each business. Under the terms of the deal, subject to certain closing adjustments, Dollar Tree will receive just over $800 million in cash proceeds. The deal should close in about 90 days, and Family Dollar will remain headquartered here in Chesapeake. In the fourth quarter, our team was focused on achieving three distinct objectives: successfully closing out the year; bringing the strategic review to a favorable conclusion; and setting Dollar Tree on a path to realize its full potential and create long-term value for our associates, customers and shareholders. With a strong finish to 2024 and the sale of Family Dollar set to close later this year, my leadership team and I will fully dedicate ourselves to Dollar Tree's long-term growth, profitability and returns on capital.…

Thank you, Mike, and good morning. I also want to extend my congratulations to Stewart. Having had the opportunity to work with Stewart over the past few months, I want to echo Mike's comments regarding what has been a smooth transition. Let me start with an overview of the changes in our financial reporting this quarter. Last June, we initiated a formal review of strategic alternatives for Family Dollar, which ultimately resulted in the transaction we announced today. That process officially ended in the fourth quarter with the company's decision to pursue a sale. And accordingly, Family Dollar was classified as discontinued operations. As such, our fourth quarter and full year 2024 results are reported on a continuing operations basis, which includes the results of the Dollar Tree segment and Corporate, support and Other. Family Dollar's results are reported as discontinued operations. In our earnings release this morning, we provided schedules of our 2024 quarterly and annual GAAP and non-GAAP results on a continuing, discontinued and consolidated basis. Unless otherwise stated, my comments today reference our adjusted results from continuing operations. Also for comparability purposes, please keep in mind that Q4 and FY 2023 included a 53rd week, which positively impacted revenue by approximately $560 million and adjusted EPS by approximately $0.35. Fourth quarter adjusted EPS was $2.11 from continuing operations and $0.18 from discontinued operations for a total adjusted enterprise EPS of $2.29, which compares to our outlook range of $2.10 to $2.30. Enterprise results include a $19 million or $0.07 per share benefit from a Mastercard settlement in discontinued ops and a $25 million or $0.09 per share charge for an antidumping duty recorded in continuing operations. Neither of these items were contemplated in our fourth quarter outlook. After netting both items, enterprise adjusted EPS would have been…

Thank you, Jeff. Now let me provide our current perspective on fiscal 2025. With the pending sale of Family Dollar, 2025 will be a transitional year for Dollar Tree as a standalone business. We will be working to separate Family Dollar while simultaneously focusing on driving growth and operating improvements in Dollar Tree. Prior to the closing of the sale, continuing operations, or what we are calling RemainCo, will be burdened with the full cost of corporate shared services. After the sale closes, which we expect will be in June 2025, a transition services agreement, or TSA, will go into effect. This agreement will help offset the shared cost burden until such time as these costs are fully transitioned to the new owners, a process which should unfold throughout 2025 and into 2026. Looking forward to fiscal year 2025, we expect strong top line growth from the Dollar Tree banner, with sales being positively impacted by multi-price expansion, operating improvements in our stores, new store growth and the continuing ramp-up of our recently opened stores, especially the former 99 Cents Only portfolio. Taking all this into consideration, we expect fiscal year 2025 sales will be in the range of $18.5 billion to $19.1 billion based on comparable store sales growth of 3% to 5%. We expect a modest improvement in gross margin based on the mitigation actions we've taken to date on implemented tariffs. That said, the tariff situation remains volatile, and any additional tariffs or unforeseen waterfall effects from the already announced tariffs could affect this assumption. Keep in mind Mike's comments about our ability to mitigate those tariffs over time. Outside of tariffs, we're forecasting favorability in mark-on, markdown and freight, with a partial offset from higher distribution costs related to incremental D&A from our supply chain investments…

Thanks, Stewart. This is a pivotal time at Dollar Tree. We are shifting our long-term operational focus away from an integrated 2-banner model. With the sale of Family Dollar, our leadership team can focus all our energy and resources on growing Dollar Tree. I strongly believe selling Family Dollar and returning to our roots with an expanded assortment at Dollar Tree has created material value. Dollar Tree remains one of the best growth stories in retail, and the separation of the two businesses will allow us to move forward with a single-minded focus of driving growth and profitability. As Stewart indicated, 2025 is going to be a transition year as we pivot to operating Dollar Tree as a standalone entity. After 2025, on a go-forward basis, we will drive top line results by growing comp and opening new stores. We expect increased sales productivity will allow us to expand gross margin, begin leveraging SG&A and grow EPS. Most importantly, by returning a meaningful level of cash to our shareholders, we can leverage that EPS growth even more. I'd like to close with a shout-out to the entirety of the Dollar Tree and Family Dollar teams. They have worked masterfully and tirelessly on behalf of our shareholders and our customers. I could not be more honored to count myself among them. And with that, we're ready to take your questions.

[Operator Instructions] Our first question is coming from Edward Kelly from Wells Fargo. Your line is now open.

Hi. Good morning, everyone. I wanted to start with just the tariff side and mitigation. So it sounds like $20 million a month or about $0.85 a share is not in guidance. Can you talk about the potential mitigation of that, what are efforts that you currently have on deck in order to see -- to mitigate that? Your confidence level around your ability to offset it? And then as part of this, Mike, it does seem like you have new price points on deck, just from what we can see $1.50, $1.75, I don't know if that's a test or not. But how important could that be to offsetting this as well? Just curious as to how you put all this together and you view your opportunity to mitigate what potentially could be ahead?

Thanks, Ed, and good morning. If you look at the tariffs, the first round, our team has been working our tariff strategy for a while now. We went through the round one of tariffs several years ago. And really, we put actions in place as soon as November to start mitigating the first round of tariffs. And as we said, we were able to offset 90% of those first round. With the second round, we continue to leverage the tools that we have, those big five that I talk about in terms of if we have to change the spec or negotiate really, really well with our suppliers and eliminate the product if we have to. And of course, what multi-price has opened up for us and given us the ability to mitigate. If you look at the second round, the 10 on top 10 and the 25 for Mexico and the 25 for Canada, there's still a great deal of uncertainty as to what completely hits, how those change. April 2 is a big day in terms of what happens with reciprocal tariffs. And so our teams are actively looking to mitigate, but given the level of uncertainty, we want to go with what we knew and then we continue to run our plays and our mitigation strategies to offset any other tariffs that come. I think we've demonstrated that when we've got the time, we can mitigate these tariffs, and that's what the team will continue to do. In terms of the different price points, we look at that value. We look at convenience and we look at discovery and we say where can we offer that and maybe move on some pricing as part of not just tariffs, but an inflationary cost environment that we've got to mitigate. And so that's where you're seeing that work where it makes sense. And I think we're positioned better than we ever have before to manage what is a very uncertain and volatile arena that we're in.

Thank you. Your next question is coming from Michael Lasser from UBS. Your line is now live.

Good morning. Thank you so much for taking my question. So Mike, I think the fact that Dollar Tree quantified the 90% mitigation of the first 10% from China and the fact that the second 10% from China is currently being collected is being assumed by the market that that's a cost that should be embedded in the P&L for this year. So a, is that wrong? And b, can you give us a sense of what your overall sourcing portfolio looks like right now such that when the reciprocal tariffs do come out if they do, we can get a sense for the exposures for the core Dollar Tree and that would help us understand the potential financial impact? And then on top of that, to what extent with Dollar Tree willing to use its balance sheet and all the cash that it has on its balance sheet, especially as the Family Dollar sales consummated to offset the potential margin implications of these tariffs and support the EPS outlook from here? Thank you very much.

Yes. Thanks, Michael. The first answer is, no. I mean, we have included the first round of tariffs, our mitigation strategy. And so if you look at the uncovered 10%, if you will, that is in our 2025 forecast. It was premature given the uncertainty in the April 2 reciprocal tariffs and some of the back and forth that we've seen for us to include the second -- the March 4 tariffs, we call them to include the second round of tariffs in our outlook. And so we will continue to look to mitigate those. We've got to see what materializes there. We did dimensionalize it, though, to talk about how it would impact us per month on an unmitigated basis, and that's the $20 million per month if unmitigated. I think we've demonstrated as a company that we've been doing this a long time with our China Plus One strategy coming out of 2017, 2018. We're in a good position to manage that over time, and we'll continue to do that. As far as the balance sheet, Stewart, why don't you take the balance sheet to offset any margin impact?

Yes. Great. Michael, can you just help us in what ways you're thinking about us using our balance sheet to offset margin?

Have a lot of financial flexibility to return excess cash to shareholders.

Okay. Good. Yes. No, certainly. Look, let me address both of those. So first of all, there is actually one hidden benefit in our balance sheet. We are carrying a level of inventory that potentially is not tariffed yet. And course, we'll be able to use that. So there's a sort of -- there's a baked-in benefit in our P&L. Understand that, I just want to reinforce what Mike said. We have baked in all the first round tariffs, the second round tariffs. We gave you a sense of the run rate. So at least you could decide what that looks like as we see the tariffs unfold. But that $20 million we're still working on mitigating. With respect to using our balance sheet to return cash to shareholders, in my prepared remarks, I mentioned that you should expect to see us back in the market repurchasing shares. I mean outside of the tariffs, we are in a place where our balance sheet is very healthy. We have an attractive stock price. And the reality is we are sitting on a lot of cash that we will need to do something with.

Thank you. Next question is coming from Simeon Gutman from Morgan Stanley. Your line is now live.

Hi. Good morning, everyone. Congratulations on the Family Dollar sale. Mike, I wanted to ask you the, I guess, philosophy of how you're going to run the business over the next few years. You have a fresh start now with one asset. And if you look back, inflation has been pretty challenging for Dollar stores and now you still have to navigate tariffs. So, I wanted to ask how you think about margins for the business. Do you invest during the next several years, keeping margin down to reinvest back in the company? You have your competitors. Your biggest one is reinvesting in itself, not sure what Family Dollar's plans will be. But curious, do you let margins run up, or do you have to keep a lot of ammunition and firepower, given the pretty uncertain backdrop that the Dollar stores have been navigating for the last several years?

Yes. I'm excited about the opportunities of Dollar Tree on its own on a standalone basis. If you look at the ability to open stores every year, you look at the great work that our merchants have done, you look at the clarity of message that we can deliver from a Dollar Tree only scenario. We believe that there is a very attractive algorithm over time that has strong margins. And when you look -- we've been in investment mode for the last several years, as you can see from our CapEx, you can see some of the pressures we've put on ourselves through wage increases, through hours investments. And while 2025 is a bit of a year where we have half of the TSA, we have to close the deal on the work with Family Dollar, I look out multiyear and say, this is a very strong business one that we can manage through even an inflationary environment. In a large part, because of the investments we've made over the past couple of years in our stores, in our distribution centers, and what we've done in terms of the ability to provide an assortment, an expanded assortment as a result of our multi-price. So when I look at the multiyear algorithm, I think it's a very compelling business that we feel we can manage well for multiple, very long time.

Thank you. Our next question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Great. Thanks. So Mike, could you elaborate on trends you're seeing from higher income versus middle and lower. I thought that was interesting in your prepared remarks. And maybe just drivers of 3% to 5% comps in the first quarter, relative to the 2% comp that you did in the fourth quarter, have you seen acceleration so far quarter-to-date? And is it traffic or ticket?

Yes. Let me hit the comp builders first. As I look out over 2025, there's a couple of things going on. One, you have a large pool of NSOs -- I'm sorry, new store openings that will become part of our comp, including the 99 Cents only stores. And if you recall from last quarter, opening two 99 Cents only stores or converting them is the equivalent of opening three Dollar Trees. So last year, we had a significant headwind from the self-inflected cannibalization of our new store openings without the maturing of year, two year, three year, four of a new store opening. We start to get that tailwind this year, which is exciting. Multi-price continues to mature. I was very encouraged in Q4. You kind of saw the true strength of multi-price in Q4 with that discretionary growth, significant discretionary growth. And it's the new conversions this year to multi-price, but it's also the maturing of the ones we've done in the past. When I look by cohort, the Q1 conversions, the Q2 conversions, the Q3 conversions, every single one of those strengthened in Q4 versus Q3. And the longer you're on multi-price you get the real benefit of that expanded assortment. And then, this -- last year, we lived through the worst holiday calendar, there is. I mean there were eight fewer days at Easter. There were five fewer days at Christmas. That is in the rearview mirror for another seven years, I think. And so when you look at that improved holiday calendar, that's a boost. And then finally, it's store standards. It's blocking and tackling and improving our stores. We've made some investments in hours. We've made investments in wages. And we believe that will help position us. So the comp, I feel good about.…

Thank you. Next question today is coming from John Heinbockel from Guggenheim Securities. Your line is now live.

Hi, Mike, two related things. What are your product priorities when I think about discretionary particularly around seasonal because you did a lot of new stuff with holiday last year. So priority is there, priorities with regard to multi-price point cooler expansion? And then when you think about comp getting better by maybe 200 basis points, do you think it's equal between discretionary and consumable, each go up by an equal amount? Or is there a difference?

Yes. So we're trying to exceed our customers' expectations at every turn. We believe that you saw in Q4, the real power of our assortment in Christmas and in what we call Harvest or Thanksgiving. The holidays are what drives Dollar Tree. There's -- I don't care what your income is, there's no better place to celebrate the holidays or celebrate in general than Dollar Tree. No one should go anywhere else because we offer the best value. We've got the convenience and you walk in there and our associates do it first. They can't believe what we can bring in at the price points we bring in and so that discovery is so important. So, we will be balanced. We know we have to be there for what the customer needs, which has shifted the mix a bit to consumables over the last couple of years. But we know what really is the DNA of Dollar Tree and it's discretionary. And so look, we'll continue to provide what the customer needs. But our focus is how do we wow them at the seasons? How do we will them at the holidays? And that's a huge focus. When you look at the expanded assortment last year in multi-price, we talked about -- we had to bring in what we could get in quickly. That meant domestic, that meant consumables. Over time, you saw in Q4 what we could do when we bring in the discretionary and really have time to buy. I mean we buy a season a year in advance. And so to be able to really fuel that discretionary business with an expanded assortment, I'm excited about that going forward.

Thank you. Next question today is coming from Rupesh Parikh from Oppenheimer. Your line is now live.

Good morning and thanks for taking my question. So, just going back to 3.0 format store, just any pause or negative surprise you're seeing with that format? And then as you look forward, what are the bigger opportunities to further optimize the performance?

Yes, Rupesh, it's -- the 3.0s continue to perform. The longer you're on it, the program, the better off you are, the better you perform. Remember, we don't do a lot of marketing, if any. Our customers need to discover us. And when they come into the store, they need to discover multi-price. And so, it's very encouraging to see that the Q1 conversions remain our strongest performer. But every single conversion cohort, Q1, Q2, Q3 also grew significantly over the prior quarter, which tells us our customers are finding us. And when you bring in that expanded assortment around the seasons, around the holidays, you really see the power of multi-price. So, I believe that there's some really good learnings there as we circle back around. So, we talk about converting stores, introducing new stores, but the maturing of the stores and going back around to the assortment. One of the things that Rick McNeely and his team does, I think, better than anybody is, they are constantly learning from what worked and what didn't work, and circling back around and changing that assortment. So, we may take a certain section and say we're going to add four feet to that section. Or we may take a section and reduce the SKUs in it based on what's been working and what's not working. We are so early in this game. Last year, somebody asked me what inning are we in? I said we're on the On Deck Circle. This year, let's call it, we're in the First Inning of the multi-price evolution, and I look forward to really continuing to learn from it. Where -- you say, where are the opportunities to learn the most? It is still in the operations, getting that store set up right to begin with and making sure that's both the third-party folks to help us set up and managing that better, which we will do in 2025 and also how ready is a store to be converted. One of the biggest findings we had from 2024 is that you can't just muscle your way through a store and convert it because it just goes back to its poor performance. It must be ready to receive, so you can't have a Store Manager vacancy. You've got to have a strong Assistant Store Manager that manage the freight in the back room. We do those things well; the results are incredible. When we don't do those things well, we're disappointed. That's our focus for 2025 in terms of areas of improvement.

Thank you. Next question is coming from Chuck Grom from Gordon Haskett. Your line is now live.

Hi. Thanks very much. Good morning, everybody. On the multi-price, I think you guys said 220 basis points of an uptick, I believe in the second and third quarter, the numbers were higher. Just wondering, if you could just speak to that directional change for us. And then on the 2025 outlook, on the 3% to 5% comp you're expecting 50 to 80 basis points of deleverage. Can you just speak to the factors that are going against you think you get a little bit more leverage on such a great comp? Thank you.

Yes. I'll take the first one, Chuck, and then Stewart will address the 50 to 80 bps. First of all, the change in multi-price performance, if you look at the starting point and the ending point of what we're converting, the Q1 conversions we did, it was 80% of them were going from what we call 1.0 to 3.0. So they hadn't been touched by the Valley yet. It was all about taking the single $1.25 price point and introducing multi-price. In Q2, we were kind of on balance there, roughly 50-50. And in Q3, it switched and it was only 20% 1.0 to 3.0 and 80% going from the Valley to adding the assortment. One of the things we've done for 2025 is to get back on balance with the conversions. You'll see a slightly smaller number than we did last year. We're targeting about 2,000 conversions this year. And so we look at that and say we've achieved by going with that, achieved a more balanced approach, which helps us perform as we learn. And then finally, I would just say we had talked about absolute comps in Q1, Q2 and Q3, we really are focusing on lift now as you get through more of the chain, some of the stores we're hitting may be significantly negative comping stores. So if I took a negative 10 comping store and turned it into a negative 5 with multi-price, you might look at it and say, hey, I don't like that negative comp, but you love the lift versus where it was. And so you get more of that as we evolve the program.

Thank you.

Let me touch -- sorry, I'll just pick up on the second part of the question, which is why do we don't get the leverage? And I think you need to take into -- a couple of things into account here. First, at the segment level, of course, you are seeing the leverage. But as I shared in my prepared remarks, because of the sale of Family Dollar, you will see that all of the corporate costs now are being borne by the segment. And so you get automatically some deleverage from that. That's helped by some of the TSA, but we only get that in the second half of the year. I think the third thing is to point out that from a corporate SG&A perspective, we did share that we're going to see some increases in corporate SG&A this year. That's related to some investments we're making in IT, but there are also influences there for cost, which were previously being carried by Family Dollar, which now are coming back into the corporate segment. So think about dark stores and think about some allocated costs that were going into Family Dollar. So between the IT and the dark stores and the allocation, that really comprises of the 20% we spoke in SG&A. And it might be easier for you, if I just sort of wrap up those comments by describing the shape of the year for you. And so if you looked at the shape of EPS for the year, you will see a higher backloading this year from an earnings perspective because of two essential elements. The first one is the TSA, I spoke of that $95 million kicking in to offset SG&A costs the second half of the year and then the five days Christmas, which Mike spoke to, which we're expecting to have a meaningful impact on the fourth quarter in our earnings. Hopefully, that's helpful.

Thank you. Our next question is coming from Kate McShane from Goldman Sachs. Your line is now live.

Good morning. Thanks for taking our question. Can you remind us how many combo stores you have with Family Dollar and Dollar Tree and how that unwind might look? And just as a follow-up to all the tariff questions. You mentioned that you can mitigate 90%, I think, of the first round of tariffs, does that mean that the remaining 10% is going to be mitigated with higher prices?

Sure, Kate. Thanks. So this is a clean deal. There are roughly 1,000 combo stores that will go to the new owner. There are what we call full combo, roughly 60, just under 60 that will stay with Dollar Tree, and so there is a little bit of that. Those will be rebranded Dollar Tree only. But going forward, the combo stores will be rebranded just Family Dollar and will convey in the deal. In terms of the 90% mitigation, the 10% is in our forecast. We never stop trying to offset tariffs using every single one of the tools in our toolkit. So there are some items that we will not sell and eliminate because we're not able to mitigate it and maintain the margins we want to maintain. There'll be other cases where in round two and round three of negotiations, we get that final 10%. And look, we'll look at country of origin. We'll decide to make something somewhere else if it fits our profile. And then, yes, finally, in very strategic and surgical ways, we will look at pricing.

Thank you. Our next question today is coming from Paul Lejuez from Citigroup. Your line is now live.

Okay. Thanks guys. I think you already started to take some prices I'm curious if that was driven by the tariffs, that was what was driving that decision? And then just going back to Matt Boss' question, what do you assume in that 3% to 5% comp from a traffic versus ticket perspective? I'm not sure if I heard the answer there? And just how much are recent price moves a driver of AUR and ticket? And then just last, when is there a clean break from the TSA? And are there any guarantees of the leases on the Family Dollar stores by Dollar Tree? Thanks.

Sure. Thanks, Paul. So we've been in an inflationary cost environment for a while now. And so the targeted actions we've taken, there are some products that we know we're the destination for the customer. We know that, that customer needs our product. It's not something we really want to eliminate. We say we don't have to have anything. We can't everything. But in some cases, there are places where we're significantly below the market we have an offering, and we want to continue to offer that for our customers, so very targeted prayer candles. We're the best in nation for prayer candles. They're made in Mexico. And so we want to make sure we can still offer them, so we will look at targeted pricing on things like that. It is -- tariffs are a part of it. But we've been in an inflationary cost environment, state minimum mandated wages, just market wage adjustments, investments. All those things have created an inflationary environment, and we're looking at our full toolkit that the merchants have to address those. The 3% to 5% comp, we really want – we love when we can expand ticket and traffic. I would love to grow traffic. More importantly, I love to take share. But the strength in ticket in Q4, we believe, really showed the power of multiprice and especially showed the power of the holidays and the seasons to Dollar Tree. And so as you look forward, we will look to both. We want to make sure we're growing both ticket and traffic. And then finally, this is a clean deal in terms of how we convey, we have the dark stores from the first round of closures that we did, roughly 300 dark stores. Other than that, this is a clean deal where everything conveys.

Thank you. Our next question today is coming from Karen Short from Melius Research. Your line is now live.

Hi. Thanks very much. Congratulations on something that has been long awaited by many in the investment community. I have two questions. One is what is the right run rate to think about for Dollar Tree banner on operating margin once we get past transition in 2025? And the second question I had was, anything to call out with respect to a breakup fee in this transaction, if there's anything to point out?

In terms of the run rate, I think this company, given the right amount of time has been able to maintain a very healthy gross margin. We know we have opportunity in an elevated inflationary cost environment to manage our costs better. You heard Stewart talk about that in his prepared remarks. You get a little bit in 2025, where it's uneven because you're bearing full corporate shared costs with only six months of a TSA. But when we look out over the multiyear and I start to look at that algorithm of opening new stores, where we can comp and where we can keep our margins, I really like how that plays out over the multiyear. Given the right amount of time, we believe we can put this business in a very attractive position over the long haul. And then deal-specific...

Maybe you look just a couple of comments here. I think just structurally, the operating margin of the business changes as soon as you sell Family Dollar because that had a lot of revenue with a much smaller operating margin. So you will see a pickup immediately. Obviously, the carrying of the full cost in the short run is going to work against the operating margin despite the pickup. It will be net positive, but you will have some pressure from the carrying net total cost. But if you look at our -- the supplemental slides we shared, you'll see in the chart that shows how we are planning to work down those corporate costs. So even before we start talking about improvements in the banner, you will see with our corporate costs coming down over time, we're talking about 100 basis points. All that's going to be flowing down into our operating margin. So it's reasonable to expect a fairly meaningful improvement in our operating margin. We will share more in upcoming call and potentially at an Investor Day later this year, where we'll give you more benefit of the knowledge of what this going forward algorithm will look like, and you'll get more detail at that point.

Thank you. Our final question today is coming from Seth Sigman from Barclays. Your line is now live.

Great. Thanks for taking the question. Good morning, everyone. I wanted to focus on the gross margin. The guidance is for a marked improvement in 2025. Now obviously, you said that you mitigated the first 10% tariffs here. I just want to clarify that means that there's no impact on the gross margin? I think that's how the commentary implied. But just wanted to clarify that. And then there should be some tailwinds. So I'm just curious, what are some of the other offsets to gross margin this year? Or if you could give us the puts and takes, that would be helpful. Thanks.

Yes, this is Stewart. Maybe just picking up on gross margin, keeping on the comments that we made in the prepared remarks, I mean, we have obviously considered that first round tariffs in our gross margin. The second round is not included in there, which is why we gave you the $20 million a month run rate. So that's -- I think that's the first thing. Look, from a tailwind perspective, I don't think there's anything meaningful in our gross margin that will be affecting our tailwinds. You'll have taken, obviously, the benefits that Mike talked about in -- on an ongoing basis, seeing the benefits of multi-price coming through, but that's not going to look dramatically different than what we saw last year as we bring through new multi-price this year. We've talked about freight, seeing some modest benefit in freight. I wouldn't necessarily call that a tailwind. I think there's a market benefit that's coming through there. When you start talking about SG&A, down in SG&A, we will, of course, lap the benefit from the charge we took last year related to general liabilities, but you have other offsetting onetime that we had last year. And we also will see higher depreciation based on the CapEx we put through last year, offsetting that. So I'm not sure on a net basis, from an SG&A standpoint that there's any real onetime upside that you should consider in your model for this year.

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you all for joining us this morning, and have a great day. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.