Why did Dollar Tree's expenses surge in recent quarters?

Dollar Tree's expenses have surged in recent quarters due to several factors:

1. Cost Impact from Tariffs: The company has faced challenges from tariffs, with potential exposure of $20 million per month from the second round of tariffs if unmitigated. Dollar Tree has mitigated 90% of the cost impact from the first round of tariffs through strategic sourcing and pricing adjustments.
2. Loss of Leverage: The extra week of sales in 2023 has resulted in a loss of leverage, which has contributed to the decline in gross margin.
3. Higher Shrink, Distribution, and Markdown Costs: These costs have increased, which has also impacted the gross margin.
4. Increased Store Payroll and IT Spending: The transition year of 2025 is expected to bring about 50 to 80 basis points of SG&A deleverage due to increased store payroll and IT spending.

In summary, Dollar Tree's expenses have surged due to cost impact from tariffs, loss of leverage, higher shrink, distribution, and markdown costs, and increased store payroll and IT spending. These factors have contributed to the company's strategic decision to sell its Family Dollar business to focus on its core operations and improve profitability.