What caused Dollar Tree's revenue cost fluctuations?

Dollar Tree's revenue and cost fluctuations can be attributed to several key factors:

1. Strategic Shift and Sale of Family Dollar: The sale of Family Dollar to private equity firms for $1 billion is a significant event that has impacted Dollar Tree's revenue and cost structure. This sale allows Dollar Tree to focus on its core business and has resulted in a reduction in Family Dollar segment's revenue, which is reported as discontinued operations.
2. Same-Store Sales Growth: The company's same-store sales have shown growth, with a 2% increase in Q4, driven by a 0.7% rise in traffic and a 1.3% increase in average ticket size. This indicates a positive trend in revenue generation from existing stores.
3. Gross Margin Pressure: Dollar Tree has experienced a decline in gross margin, which contracted by 130 basis points to 37.6% in Q4. This decline is primarily due to the loss of leverage from the extra week of sales in 2023, lower initial mark-on, and higher shrink, distribution, and markdown costs, partly offset by lower freight costs.
4. Selling, General and Administrative (SG&A) Expenses: There has been an increase in SG&A expenses, which rose by 260 basis points to 27.0% of total revenue, primarily due to software impairments and related contract termination costs, and higher expenses across depreciation, stock compensation, professional fees, utilities costs, and the extra week of sales in 2023. However, this was partly offset by lower general liability claim adjustments.
5. Operational Challenges: Dollar Tree faces ongoing challenges from tariffs, with potential exposure of $20 million per month from the second round of tariffs if unmitigated. The company also mentioned that Family Dollar faces challenges due to inflation and reduced government benefits, leading to a significant drop in discretionary comps.
6. Inventory and Supply Chain Issues: The company has been facing headwinds related to product cost inflation and has experienced elevated shrink and unfavorable mix, which have marred the top and bottom lines in the fiscal second quarter. Additionally, the company incurred losses related to the destruction of a distribution center by a tornado in Marietta, OK, which resulted in high SG&A expenses in the forward quarters.

In conclusion, Dollar Tree's revenue and cost fluctuations are primarily driven by strategic decisions, such as the sale of Family Dollar, and operational challenges, including gross margin pressure, SG&A expenses, and inventory and supply chain issues. The company's focus on expanding its 3.0 store format and attracting higher-income customers is expected to positively impact its long-term performance.