(DLTR)
(DLTR)
Randy Guiler - Vice President of Investor Relations
Michael A. Witynski - President and Chief Executive Officer
Kevin S. Wampler - Chief Financial Officer
Matthew Boss - J.P. Morgan - Analyst
Scot Ciccarelli - RBC Capital Markets - Analyst
John Heinbockel - Guggenheim - Analyst
Chuck Grom - Gordon Haskett - Analyst
Michael Lasser - UBS - Analyst
Karen Short - Barclays - Analyst
Peter Keith - Piper Sandler - Analyst
Edward Kelly - Wells Fargo - Analyst
Operator
Good day and welcome to the Dollar Tree, Inc. First Quarter Earnings Conference Call. [Operator Instructions]
At this time, I'd like to turn the conference over to Mr. Randy Guiler, VP, Investor Relations. Please go ahead.
Randy Guiler - Vice President of Investor Relations
Thank you, Stephanie. Good morning and welcome to our call to discuss Dollar Tree's first fiscal quarter 2021. With me on today's call will be our President and CEO, Mike Witynski; and our CFO, Kevin Wampler.
Before we begin, I would like to remind everyone that various remarks that we will make about expectations, plans and prospects for the Company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Results may differ materially from those indicated by these forward-looking statements as a result of various important factors included in our most recent press release, most recent 8-K, 10-Q and annual report, which are on file with the SEC.
We have no obligation to update forward-looking statements and you should not expect us to do so. Following our prepared remarks, we will open the call to your questions. Please limit your questions to one and one related follow-up.
I will now turn the call over to Mike Witynski, Dollar Tree's President and Chief Executive Officer.
Michael A. Witynski - President and Chief Executive Officer
Thank you, Randy. Good morning, everyone. Our record first quarter performance reflects the progress we continue to make on numerous initiatives to provide even greater value and convenience to our shoppers. Dollar Tree delivered its strongest quarterly same-store sales since 2017, while improving its operating margin by 290 basis points. Family Dollar effectively cycled a 15.5% comp sales increase from the prior year by driving its best post-merger quarterly operating profit. Combined, the enterprise produced positive same-store sales against a tough 2020 comparison, and a 220 basis point improvement in operating margin driven by higher gross margins and better expense leverage. Overall, a very solid start to the year.
During the initial post-merger years, much of the Company's energy and focus was dedicated to integration-related projects such as stabilizing and restructuring the organization, improving store maintenance, harmonizing our technology, designing and testing store formats, optimizing our real estate portfolio, elevating the operational execution in our stores, offering improved assortments and value and ultimately consolidating our store support centers.
These priorities were critical as we prepared the combined business for long-term profitable growth. Now over the last 18 months, we have transitioned to an aggressive approach under one aligned leadership team, dedicating our major efforts to customer focus initiatives with clarity, focus and speed. Examples of the innovation efforts are our brick and mortar initiatives include refining and growing our Dollar Tree Plus! multi-price initiative, continuing to evolve and improve the H2 store format with expanded home, seasonal and other discretionary categories, introducing the new combo stores for rural markets, testing fresh produce and frozen meat products in select stores, initiating self-checkout in smaller number of stores.
And on our digital and omni-channel initiatives, they include launching FamilyDollar.com as a selling site, partnering with InstaCart for same-store delivery, which expands our customer reach and creating our new retail media network, the Chesapeake Media Group. I'm enthusiastic about the long-term impact of these actions designed to drive shopper satisfaction and loyalty. Giving us the ability to meet the evolving needs of our shoppers better than any other company can, especially inside the beltway and in rural America. I will share more details - more detailed update on these exciting initiatives later on in the call.
But for now, for the quarter, our Dollar Tree segment delivered its best quarterly same-store sales since Q3 of 2017. The 4.7% comp increase was comprised of a 9.5% increase in ticket, partially offset by a 4.4% decline in traffic. Notably, we saw double-digit increase in traffic in April, which represented our best monthly comp traffic increase in years. From a cadence perspective, March was the strongest comp month with stronger pre-Easter sales compared to the prior year, followed by April. February was slightly negative as we lost more than 2,500 store days due to closures related to storms through Texas and Central US.
Gross margin improved 180 basis points from the prior year, as we saw record sell through on seasonal merchandise, including Valentine's Day, Easter and Easter Candy. Compared to the prior year's quarter, the discretionary mix as a percentage of net sales increased 710 basis points to 52.3%. Categories performing well included crafts, party, our Easter seasonal toys and floral.
Our inventory turn improved 22 basis points for the quarter. Our merchant teams continues to source great products that provide wonderful value at the margins we need. With the product already purchased for the back half of the year, I am thrilled with the discretionary back to school, crafts, holiday and seasonal assortments that will be hitting store shelves within the next few months. As COVID restrictions ease and customers continue to gather with friends and family for celebrations, we plan to fulfill that need with our compelling mix with even more exciting discretionary items at the Dollar price point that our shoppers well.
Family Dollar highlights for the quarter include its best post-merger quarterly operating profit at $211.4 million. Let me repeat that. Family Dollar achieved its best post-merger quarterly operating profit at $211.4 million. Cycling a very strong 15.5% comp from the prior year, same-store sales came in at a decline of 2.8% equating to a positive 12.7% on a two-year stack. Average ticket was up over 11% and traffic cycling the initial pandemic-related demand for the consumables from a year ago was down nearly 13% for the quarter. The Family Dollar merchants continue to do a terrific job, refining the assortment to deliver meaningful value that is resonating with our shoppers. The discretionary side of the business saw a 14.7% comp increase. Consumable comp, again, cycling unprecedented demand from last year, it was down 7.7%.
Regarding Family Dollar's comp cadence through the quarter, February was the strongest comp followed by April. March was cycling a 20 plus comp from the prior year. From a category perspective, the strong performers were primarily on the discretionary side of the business, including party, apparel, home decor, beauty care and floral. We continue to see encouraging results for stores added fresh produce and frozen meats to their assortment in late 2020.
We are seeing materially higher average tickets, when a basket contains produce or meats. I am excited to share that we will continue to expand on this initiative in 2021 and beyond, as we are focused on meeting the needs of shoppers in all markets. On the previous earnings call, I spoke to the fact that Family Dollar customer satisfaction survey scores had improved three consecutive quarters across each of the four key categories, store cleanliness, product assortment, customer service and speed of checkout. Credit to our field leadership and our merchant and operations teams, each of those scores improved again for the first quarter, making it four quarters in a row. Increasing store productivity at Family Dollar has been a critical component of the turnaround.
In addition to all the sales and traffic driving initiatives that have been increasing average sales per store, we believe Family Dollar is squarely positioned to continue serving more customers and gaining market share with its compelling discretionary mix. Especially as Family Dollar shoppers are benefiting from stimulus dollars, increase in that participation, child tax credits and earning higher wages.
Now regarding Dollar Tree Canada, the team had a strong quarter one. From an operating income standpoint, the Canada team exceeded their budget despite challenges to sales in April related to increased COVID restrictions. From a real estate perspective, we completed 575 projects, including 106 new stores, 36 relocations, 414 Family Dollar H2 renovations, 19 store closures. We ended the quarter with 15,772 stores.
Before I hand it over to Kevin, I want to let you know that in April, we released our updated corporate sustainability report. The report is available on the homepage at our website dollartree.com. I'm very proud of the team's progress related to our ESG program in fiscal 2020. Accomplishments included that we conducted a detailed assessment of our impact on the environment and measured our carbon footprint to establish an initial baseline.
We developed our first generation of climate goals aimed to reducing emissions and increase the use of renewable energy. We participated in the chemical footprint project for the second consecutive year. We partnered with ADT Commercial for comprehensive and innovative security solutions and we formed our diversity equity inclusion executive council. And lastly, we launched our inaugural Choose to Give workplace giving campaign. We will remain steadfastly committed to improvement, especially is related to our ESG goals and initiatives designed to minimize corporate sustainability risks, while reducing cost and driving efficiencies.
I will go into more detail on several of our initiatives after Kevin's speech to the Q1 performance and our outlook. Kevin?
Kevin S. Wampler - Chief Financial Officer
Thanks, Mike, and good morning. For the first quarter, consolidated net sales increased 3% to $6.48 billion, comprised of $3.32 billion of Dollar Tree and $3.16 billion of Family Dollar. Our enterprise same-store sales increased 0.8% or 0.9% when adjusted for Canadian currency fluctuations. Comps for the Dollar Tree segment increased 4.7% or 4.8% when adjusted for the Canadian currency fluctuations.
Family Dollar same-store sales decreased 2.8% cycling the very strong 15.5% increase in the prior year's first quarter. Overall, gross profit for the enterprise increased 9.4% to $1.96 billion. Gross margin improved 180 basis points to 30.3%. Gross profit margin for the Dollar Tree segment improved 180 basis points to 33.7% when compared to the prior year's quarter.
The factors impacting the segment's gross margin performance included merchandise costs including freight improved 85 basis points, improvements in merchandise mix were partially offset by increased freight costs and slightly lower mark-on, a 50 basis point improvement in shrink, resulting from favorable inventories and a decrease in the shrink accrual rate, a 30 basis point improvement in markdowns related to improved sell-through of Easter related products compared to the pandemic affected prior year, and 25 basis points of leverage on occupancy costs from the stronger comp sales. These improvements were partially offset by distribution costs, which increased 10 basis points, primarily due to higher payroll and depreciation costs.
Gross profit margin for the Family Dollar segment improved 140 basis points to 26.8% in the first quarter. The year-over-year improvement was due to the following. Merchandise costs including freight improved 85 basis points related to merchandise mix and initial mark-on, which were partially offset by higher freight costs. Shrink improved 60 basis points based on favorable inventory results.
Distribution costs improved 20 basis points compared to the prior year quarter. These improvements were partially offset by deleverage and occupancy cost based on the comparable store sales declined in the first quarter. Consolidated selling, general and administrative expenses improved 40 basis points to 22.3% of total revenue compared to 22.7% in Q1 last year. For the first quarter, the SG&A rate for the Dollar Tree segment as a percentage of total revenue improved 110 basis points to 21.6% when compared to the prior year's quarter.
Payroll cost improved 110 basis points, primarily due to decreased COVID-19 related store payroll costs and leverage related to the comp store sales increase. Other SG&A decreased by 5 basis points, resulting from lower store supply expense partially offset by increased inventory service expense. Store facility costs increased 10 basis points due to higher repairs and maintenance costs.
Family Dollar, the first quarter SG&A rate as a percentage of total revenue was 20.2% compared to 19.9% in the prior year's quarter. Store facility costs increased 25 basis points, driven mainly by higher snow removal costs. Other SG&A expenses increased 20 basis points, and depreciation and amortization expense increased 5 basis points, both due to deleverage on the comp sales.
Payroll cost decreased 25 basis points, primarily due to decrease COVID-19 related store payroll costs, partially offset by deleverage related to the comp store sales decline. Corporate and support expenses as a percentage of total revenue were essentially flat compared to the prior year's quarter. Operating income increased 42.1% to $519.9 million compared with $365.9 million in the same period last year and operating income margin was 8% in the first quarter compared to 5.8% in the prior year's quarter.
The first quarter of 2021 included total incremental operating costs of $7.4 million for COVID-19 related expenses compared to $73.2 million in the first quarter of 2020. Non-operating expenses totaled $33 million, which was comprised of net interest expense. Our effective tax rate was 23.1% compared to 23.9% in the prior year's first quarter.
Company had net income of $374.5 million or $1.60 per diluted share. This compared to net earnings of $247.6 million or $1.04 per share in the prior year's quarter. Our combined cash and cash equivalents at quarter end totaled $1.47 billion compared to $1.42 billion at the end of fiscal 2020. Outstanding debt as of May 1 was $3.25 billion.
In Q1, we repurchased approximately 2.15 million shares for $250 million. We currently have $2.15 billion remaining on our share repurchase authorization. Inventory for Dollar Tree at quarter end increased 13.5% from the same time last year, while selling square footage increased 4.1%. Inventory per selling square foot increased 9%. This includes a significant increase in goods and transit year-over-year, excluding this increase inventory per selling square foot would be down 1.7%.
Inventory for Family Dollar at quarter end increased 11.9% from the same period last year, while selling square footage increased 1.9%. Inventory per selling square foot increased 9.8%. Capital expenditures were $224.9 million in the first quarter versus $235.8 million in Q1 of last year. For fiscal 2021, we expect that consolidated capital expenditures will be approximately $1.2 billion consistent with our initial 2021 outlook.
Depreciation and amortization totaled $172.7 million for Q1 compared to $165.5 million in the first quarter of last year. For fiscal 2021, we continue to expect consolidated depreciation and amortization to range from $720 million to $730 million. Our outlook for the remainder of 2021 includes the following assumptions. We are forecasting a low single-digit consolidated comparable sales increase for the year. We expect the COVID expense run rate for Q2 through Q4 to be consistent with Q1 at approximately $7.5 million per quarter.
As noted in our March earnings call, minimum wage increases in states and localities will increased store payroll by $45 million to $50 million for the year. Additionally, we expect pressure on wages due to the current shortage of workers available for our stores and distribution centers. With regards to freight, the market conditions have continued to deteriorate since our update in March. We are now expecting cost to be significantly higher than is projected our - led by import freight due to the continued disruption in the global supply chain from equipment shortages and capacity issues.
Freight costs in the remaining three quarters of fiscal 2021 are projected to be $0.70 to $0.80 per diluted share higher than the comparable period in 2020. These additional costs will have the biggest effects on Q2 and Q3. These disruptions affect the timing of inventory receipts, it could affect sales and mix. We expect shrink will continue to be a tailwind as we go through the year. Higher sales, lower store inventory levels and better process is continue to drive better results. Net interest expense is expected to be approximately $34 million in Q2 and approximately $137 million for fiscal 2021. For fiscal 2021, we expect net income per diluted share will range between $5.80 and $6.05.
Our outlook assumes a tax rate of 23.7% for the second quarter and 23.4% for fiscal 2021. And weighted average diluted share counts are assumed to be 232.9 million shares for Q2 and 233.3 million shares for the full year. Our outlook does not include any additional share repurchases.
And I'll now turn the call back over to Mike.
Michael A. Witynski - President and Chief Executive Officer
Thanks, Kevin. Through 2020 and into 2021, we have demonstrated great momentum in our business. I believe this is attributed to all the work and developing great strategic store formats. Refining our assortments and accelerating many key sales and traffic driving initiatives, we have a resilient business model and we are and what I believe is the most attractive sector in retail, value and convenience is more important to the customer now than ever before.
Unlike most retailers, we are currently faced with higher freight costs, both international and domestic, worker shortages and uncertainty related to inflation. These are issues - these issues are rising as COVID abates and they are not systemic to Dollar Tree and not expected to be permanent. In fact, we believe we have increased the long-term earnings potential for both banners. As always, we are working hard to adapt and react and navigate the business based on the current environment. I have great confidence in our team, and I'm extremely proud of their commitment, dedication and focus.
Now, I'd like to provide an update on several of our key initiatives. We incorporated the Dollar Tree Plus! multi-price assortment and to an additional 128 Dollar Tree stores in Q1, bringing the total to more than 240 store locations by quarter end and the offering is currently just over 280 stores. Feedback from shoppers on the compelling offering has been extremely well received and very favorable. The Dollar Tree Plus! assortment has expanded into select stores in Colorado, as well as states in the Southeast, such as Georgia, Alabama, Louisiana and the Carolinas. The newest generation is seeing sales lift of more than double prior versions, which is why it's been so important for us to evolve and refine before a larger rollout.
We are committed to reaching our 500 store target, although the timing may shift beyond August, due to the stronger than forecasted sell-through and the inventory availability. We will definitely continue to expand Dollar Tree Plus! in fiscal 2022. More details about the expansion will be provided later this year.
Last quarter, we introduced our newest strategic store format, our combination or combo store. We continue to be extremely pleased with the performance of these stores. At quarter end, we had 61 combo stores in rural communities. Of which, 34 are new stores, 19 are renovated stores and 8 are relocation or expansions.
We continue to experience a 20% comp lift in renovated combo stores. The new stores are exceeding their performance. The combo store leverages both Dollar Tree and Family Dollar brands to serve small towns across the country. The store combines Family Dollars great value and assortment with Dollar Tree's thrill of the hunt at a $1 price point. Creating a new store format targeted for populations ranging from 3,000 to 4,000 people. Remember, these are markets where we would have traditionally not open a Dollar Tree store alone. We will open more than 100 combo stores this year and are in the process of building a strong pipeline for fiscal 2022 and beyond.
You can get more information at familydollar.com/combostores. We continue to be very pleased with our partnership with InstaCart. We are offering InstaCart in more than 6,000 Family Dollar stores across 47 markets. During the quarter, approximately 5,500 of these stores had at least one order and 96% of those stores had multiple orders. We are seeing a materially higher average ticket as well as higher gross margin on these transactions. Sales continued at a healthy pace on a weekly basis. As expected, we've seen a softening in the growth trajectory, as vaccinations are on the rise and more shoppers are comfortable visiting our retail store locations.
Last month, we introduced our new retail network, the Chesapeake Media Group. This new platform provides our shoppers with compelling content never seen before on Family Dollar digital space. We serve 95 million weekly digital impressions and have approximately 14 million subscribers to our digital Smart Coupon program. We currently have commitments from our largest CPG brands for more than 40 campaigns. These engagements are coming to life through ad placement on the Family Dollar app and familydollar.com, email and social media, influencing purchase decisions in real time.
We believe the Chesapeake Media Group will enhance the opportunity to further drive loyalty and store traffic for Family Dollar, while increasing by in partner awareness and product sales, ultimately, driving market share gains for Family Dollar. These are just a few examples of our ability to act with more speed, clarity and focus. On initiatives, since many of the integration priorities are now behind us.
I could not be more excited about the opportunities ahead of us, especially, the H2 combo store formats and our Dollar Tree Plus! initiative. As an organization, we are certainly in a much better position to be aggressive and drive innovation. Looking forward, we believe our strategic store formats, our store growth plans Dollar Tree Plus! and many key sales and traffic driving initiatives, along with our robust balance sheet will enable us to drive long-term value for our stakeholders.
Operator, we are now ready to take questions.Thanks, Kevin. Through 2020 and into 2021, we have demonstrated great momentum in our business. I believe this is attributed to all the work and developing great strategic store formats. Refining our assortments and accelerating many key sales and traffic driving initiatives, we have a resilient business model and we are and what I believe is the most attractive sector in retail, value and convenience is more important to the customer now than ever before.
Unlike most retailers, we are currently faced with higher freight costs, both international and domestic, worker shortages and uncertainty related to inflation. These are issues - these issues are rising as COVID abates and they are not systemic to Dollar Tree and not expected to be permanent. In fact, we believe we have increased the long-term earnings potential for both banners. As always, we are working hard to adapt and react and navigate the business based on the current environment. I have great confidence in our team, and I'm extremely proud of their commitment, dedication and focus.
Now, I'd like to provide an update on several of our key initiatives. We incorporated the Dollar Tree Plus! multi-price assortment and to an additional 128 Dollar Tree stores in Q1, bringing the total to more than 240 store locations by quarter end and the offering is currently just over 280 stores. Feedback from shoppers on the compelling offering has been extremely well received and very favorable. The Dollar Tree Plus! assortment has expanded into select stores in Colorado, as well as states in the Southeast, such as Georgia, Alabama, Louisiana and the Carolinas. The newest generation is seeing sales lift of more than double prior versions, which is why it's been so important for us to evolve and refine before a larger rollout.
We are committed to reaching our 500 store target, although the timing may shift beyond August, due to the stronger than forecasted sell-through and the inventory availability. We will definitely continue to expand Dollar Tree Plus! in fiscal 2022. More details about the expansion will be provided later this year.
Last quarter, we introduced our newest strategic store format, our combination or combo store. We continue to be extremely pleased with the performance of these stores. At quarter end, we had 61 combo stores in rural communities. Of which, 34 are new stores, 19 are renovated stores and 8 are relocation or expansions.
We continue to experience a 20% comp lift in renovated combo stores. The new stores are exceeding their performance. The combo store leverages both Dollar Tree and Family Dollar brands to serve small towns across the country. The store combines Family Dollars great value and assortment with Dollar Tree's thrill of the hunt at a $1 price point. Creating a new store format targeted for populations ranging from 3,000 to 4,000 people. Remember, these are markets where we would have traditionally not open a Dollar Tree store alone. We will open more than 100 combo stores this year and are in the process of building a strong pipeline for fiscal 2022 and beyond.
You can get more information at familydollar.com/combostores. We continue to be very pleased with our partnership with InstaCart. We are offering InstaCart in more than 6,000 Family Dollar stores across 47 markets. During the quarter, approximately 5,500 of these stores had at least one order and 96% of those stores had multiple orders. We are seeing a materially higher average ticket as well as higher gross margin on these transactions. Sales continued at a healthy pace on a weekly basis. As expected, we've seen a softening in the growth trajectory, as vaccinations are on the rise and more shoppers are comfortable visiting our retail store locations.
Last month, we introduced our new retail network, the Chesapeake Media Group. This new platform provides our shoppers with compelling content never seen before on Family Dollar digital space. We serve 95 million weekly digital impressions and have approximately 14 million subscribers to our digital Smart Coupon program. We currently have commitments from our largest CPG brands for more than 40 campaigns. These engagements are coming to life through ad placement on the Family Dollar app and familydollar.com, email and social media, influencing purchase decisions in real time.
We believe the Chesapeake Media Group will enhance the opportunity to further drive loyalty and store traffic for Family Dollar, while increasing by in partner awareness and product sales, ultimately, driving market share gains for Family Dollar. These are just a few examples of our ability to act with more speed, clarity and focus. On initiatives, since many of the integration priorities are now behind us.
I could not be more excited about the opportunities ahead of us, especially, the H2 combo store formats and our Dollar Tree Plus! initiative. As an organization, we are certainly in a much better position to be aggressive and drive innovation. Looking forward, we believe our strategic store formats, our store growth plans Dollar Tree Plus! and many key sales and traffic driving initiatives, along with our robust balance sheet will enable us to drive long-term value for our stakeholders.
Operator, we are now ready to take questions.
Operator
Thank you. [Operator Instructions] Our first question comes from Matthew Boss with J.P. Morgan.
Matthew Boss - J.P. Morgan - Analyst
Great, thanks. So maybe just start off, Mike, could you just speak to the cadence of performance of the Dollar Tree concept. Maybe particularly around events such as Easter, and how its performance continued in May? And then just with that, as we think about the remainder of the year, how are you planning receipts around event as we think about your discretionary side and the party opportunity for the remainder of the year?
Michael A. Witynski - President and Chief Executive Officer
Yeah. Thanks, Matt. So we - our Dollar Tree cadence of sales, we had a great Easter with record sell through, our receipts came in on time to the plan and our sell-through is a strongest we've ever seen. The challenge that Dollar Tree had to their comp was in February, when we had that huge snowstorm and that equated to well over 1%.
So if you think about a Dollar Tree, the 4.7% if it wasn't for that storm could it came in at a 5.7% or plus comp. May has been on plan. And to your point, we are seeing strong sales in party is, people are having gatherings again and our receipts are flowing to meet our needs for graduation. Our graduation receipts are in place and through into the stores. And then we are, of course, prioritizing any of the seasonal events and we believe that the receipts will come in according to our plan throughout the summer. And then certainly, as we approach the back to school and Halloween and fall selling time.
Matthew Boss - J.P. Morgan - Analyst
Great. And then maybe a follow-up for Kevin, could you just help us break down the drivers of second quarter and back-half gross margins at the core Dollar Tree banner. Clearly, there is an impact from freight, but does this change your margin profile multi-year in your view. And I think in the prepared remarks, you mentioned comments regarding higher long-term operating margin targets and maybe you initially would have thought by brand. If you could just elaborate on that, I think that would be really, really helpful?
Kevin S. Wampler - Chief Financial Officer
Sure. Thanks, Matt. As we look at it obviously one significant headwind this year in the sense of freight, which we've tried to lay out for everybody to help them understand, obviously, we don't believe it's permanent, but obviously the global supply chain issues that are out there that everybody is working through and go through that.
I would tell you this, Matt, I think obviously the big question that you and others continue to ask is, as we've said, we do believe Dollar Tree can return to that 35% to 36% range from a gross profit standpoint, which is an important aspect. If we take the freight out of the picture this year, I think we would be right there on the cusp of that. So I think that just gives you indication that obviously our mix of product continues to be good as Mike spoke to in many of the discretionary categories. We've seen some great progress in our shrink and obviously we have more work to do, but we have made some great progress and do you expect that to continue to be a tailwind as we go through the year.
And I think then as we go down the - look at the rest of things I think as the sales go helps leverage things, I don't think our leverage point as it relates to SG&A has really changed all that much, it's traditionally been in that 2% range. And I don't think that's really change. So I think all those things go into it. I think we have a great foundation built and as the - this unusual event in the supply chain abate, so I think that will give us the ability to flow that through.
Michael A. Witynski - President and Chief Executive Officer
Yeah. Matt, I think some of the key components, just as - just to reiterate what Kevin saying is we can control our margin through the product we carry. Our teams just finished in April by trip, we're getting great value at the margins we need and that discretionary mix we're driving. And just like with our Crafter's Square, we - last year we finished rolling it out to all stores and now this year, we're actually expanding it and expanding the seasonal part of our crafts.
So we can manage our mix, we can - we're controlling our shrink, which is a component of margin. And if you think about what I really like about the first quarter, of course, we'd be last year by 710 basis points and hit of 52.3%. But if you go back to 2019, for the first quarter, our discretionary mix was 49.4% and we liked our mix back then and we grew above a normal baseline of 2019. So those are the levers we can pull, so that we can hit back 35% to 36% margin.
Matthew Boss - J.P. Morgan - Analyst
That's great color. Best of luck guys.
Operator
Thank you. Our next question comes from Scot Ciccarelli with RBC Capital Markets.
Scot Ciccarelli - RBC Capital Markets - Analyst
Good morning, guys. Thanks for the time. I want to ask about the sales performance for Dollar Tree. And I know you guys had a 4.7% comp. But to be fair, we are seeing extremely strong results across something retailers on a stack basis. And yet Dollar Tree saying there just under 4%, which is well below we think own Family Dollar operations. So I guess the question is, do you think there's any headwinds impacting that business. Is it may be a function of trip consolidation versus a little price point model or any other colors your thoughts would be great? Thanks.
Michael A. Witynski - President and Chief Executive Officer
Yeah, Scott. Thanks for the question. As I said, no, we don't see anything structurally wrong with the Dollar Tree's capability to deliver that low-single digit comp store growth quarter after quarter. And we agree with a 4.7%, if it wasn't for that snowstorm, we'd be sitting at a 5.7% to 6% and we probably won't be having the conversation. But Dollar Tree is doing great customers are responding and they're responding to the categories of party and seasonal and crabs. So, no, I don't see anything structurally in the way of Dollar Tree continuing to grow the comp.
Scot Ciccarelli - RBC Capital Markets - Analyst
Just more of a - we're hoping to get on a steady kind of low single digit kind of comp cadence and work regardless of what the economic environment is?
Michael A. Witynski - President and Chief Executive Officer
Absolutely.
Scot Ciccarelli - RBC Capital Markets - Analyst
Got it. Okay thanks a lot guys.
Operator
Thank you. Our next question comes from John Heinbockel with Guggenheim.
John Heinbockel - Guggenheim - Analyst
So a quick follow-up on freight, right. So it looks like the full year impact might be 80 bps or 90 bps. When you think about trying to gauge how much of that might be structural. Is it 0% in your mind. How long do you think your best guess this kind of takes to play out. And then what are you doing to mitigate and I assume the numbers you gave us are netted mitigation to mitigate that right on any level including pricing?
Kevin S. Wampler - Chief Financial Officer
Let me start, John, and I'll let Mike add anything that he would like to add. I'm just going to try to give you some better color, I guess, in general around freight to begin with. So obviously as we went - through Q1 and again we finalize our import contracts in late April and that's well known that we've talked about that in the past. But I think what we've seen out there is a capacity constraints and we've seen a dislocation between what we call the contracted rates in the spot market.
And so really where we're seeing from where we were at the beginning year to where we are now, the biggest drivers of the increased freight is really important freight and really just seeing higher rates to move product due to the capacity constraints as well as looking at the spot market, because we will use the spot market sell as well based upon all things. So that's by far the biggest category. I think the next thing, we've seen that is tightened as we went through the Q1 is related to domestic freight inbound and outbound, it's just the pressure from lack of drivers, as well as just trying - everybody is trying to move freight across the country right now. And so it's putting pressure on drivers as well as you may have been paying surge rates to get goods moved.
And then the third thing I would tell you that's up from the beginning of the year is the fuel prices have come up above where our assumptions were at the beginning of the year, obviously, we saw that spike during the quarter with a couple of events that took place out there. So those are some of the things just in general that are driving the rate itself. And again, as we work through the year, our expectation right now is that the global supply chain will take pretty much the full year to work through this.
And it's - and that's really within our assumptions as to what those costs related to that are. For some reason, it breaks loose earlier that could be a benefit to us, but that will be yet to be seen. Structurally, I don't know that we believe that there is anything structurally there, specifically for our business, I think we obviously have to look at the capacity and try to think through that and how we continue to get ahead of that in our planning.
Michael A. Witynski - President and Chief Executive Officer
Yeah, John. Just to tell. Kevin, I don't believe it's structural at all. I believe it's the downstream implications of COVID. And then the huge demands and the industry right now is upside down, where the equipment is. And the delay is still at the ports out on the West Coast and the East Coast. The time that it takes to unload the ships the amount our ships that are backed up and the equipment is in the wrong place. And then just a high demand as stores open up that were closed last year and are bringing product in. So clearly, this is a bubble. It's not structural for us. And we're doing - we're looking at, like every other retailer looking at all other SG&A items and as you heard Kevin speak to, our shrink is a tailwind and that's offsetting these higher costs.
We don't have the $289 million in COVID costs from last year. So that's going to offset some of this cost. And then in our teams are navigating the challenge of the inflationary per challenges and pressures that we have and the teams look at the cost of goods and negotiate that and as you mentioned on the prices we will absolutely, we're going to monitor and maintain the needed price gaps by market. And we'll keep in mind, our customers and our shareholders.
John Heinbockel - Guggenheim - Analyst
And then just lastly quick, you talked about Dollar Tree Plus!, right, the new iteration driving 2x, the sales lift. Is that more items that you're merchandising? Is it more customers actually buying that product? What's the driver of the 2x?
Michael A. Witynski - President and Chief Executive Officer
Yeah, it's a little bit of both. It's the - we organized around it, as I shared. We've got a team dedicated to this. They're driving great value and exciting products and it is a few more expanded categories. And we're bringing it all together. We're just bringing all the things that we've learned through the iterations, as we roll it out. So the sales are strong. The basket is still twice the size and we've done a lot of customer intercepts and it is all very, very favorable and positive. So we like what we're seeing in the Family Dollar plus or Dollar Tree Plus!.
John Heinbockel - Guggenheim - Analyst
Thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from Chuck Grom with Gordon Haskett.
Chuck Grom - Gordon Haskett - Analyst
Hey, thanks. Can you guys talk about rising input cost outside of freight, clearly concerned with rising inflationary pressures out there in the market. Over the past 15 years, you guys have done a really good job managing through this period, I was wondering if today's different in any way?
Michael A. Witynski - President and Chief Executive Officer
Yes, no. I mean, it's - we see inflationary costs that is more than 15, 35 years, Dollar Tree's held a $1 retail price point over 35 years of inflation. And they've been able to manage it. We've seen oil at $185 a barrel and our model gives us great flexibility to change the item, change the mix, drop an item. And I would say, after 35 years being the only retailer in 35 years of inflation that hasn't raised the price. And in those 35 years, you walk our store now, we've got a better product mix, we've got a better value for our customers and at better margins.
So, yes, we're used to managing through these inflations, we've got all kinds of different levers that we can pull to do that effectively. And I'm confident in our team. And again, we just finished a great buy and we're getting the margins we need and then you pull the other leverages of markdowns and shrink and manage it altogether.
Chuck Grom - Gordon Haskett - Analyst
Okay. Good answer. And then on Family Dollar margin rate, I believe was 6.7%. I think that's the best since you've acquired the company. Just when we look ahead, how sustainable do you think those margin rates could be given that you seem to have the arms around the business?
Michael A. Witynski - President and Chief Executive Officer
Yeah, I'll let Kevin speak to after this, but I - directionally, we absolutely believe we can continue to expand that bottom line margin at Family Dollar. And it's these initiatives. It's the great strategic format that we have. We've got the H2 to continues to drive a 10% lift, we got that combo store that drive 20% lift. So getting more sales per square foot in these stores is important. Our merchant team is going to keep refining that assortment, better price points, more value and expanding that discretionary business is key for us. And that's why, it's so exciting about Family Dollar, what they've been able to do. It's now - Family Dollar is now a top 10 retailer in discretionary in the United States. And we've doubled our discretionary share of market in the US.
So and the team is going to continue to refine this and yet we still have a lot of growth on the seasonal part of it. So yes, we just had the record Valentine's and a record Easter sales at Family Dollar. And the best sell-through ever, but we've got tons of upside. So we absolutely believe that driving our sales per square foot, driving our store count and our renovations of the H2s will keep the top line going. Our merchants are absolutely going to keep this mix and margin improvement. And then with the Chesapeake Media Group that we have gone, we'll be able to have stickiness making real time offerings to our customers. So yes, we've got a lot of great initiatives aligned to keep that top line going and then leveraging it to a better bottom line.
Kevin S. Wampler - Chief Financial Officer
Chuck, just from, I guess, the absolute numbers side of it. We do believe that these numbers are sticky right and that's our expectation. So it's our expectation to continue to improve over time. We have the headwind of the freight this year, but I mean, all other things are going in a very positive direction, which gives us the confidence that we can continue to grow our Family Dollar business in a very profitable way and with the way we've been moving the discretionary business, which is an important piece of it. That's what gives us that confidence.
Chuck Grom - Gordon Haskett - Analyst
Thank you and good luck.
Operator
Thank you. Our next question comes from Michael Lasser with UBS.
Michael Lasser - UBS - Analyst
Good morning. Thanks a lot for taking my question. Number 1 piece of feedback that we've heard this morning is your transportation cost assumption went from $80 million 90 days ago to something in the range of $210 million to $240 million. Now with essentially tripled recognizing that gas price is going up, the markets remain tight. What is change and what cut you off guard to had such as seem to impact on your profitability and you did even anticipated 90 days ago.
And as you mentioned you final contracts in April they kick in May, and now is it that you have to wait until the following May either cost from all into your profitability to be impacted by this. So while - I think what investors want to hear is whether or not 2022 profitability can get - can be substantially higher as the imbalance between the demand for transportation and supplies of the transportation come back more imbalanced?
Kevin S. Wampler - Chief Financial Officer
Michael, it's Kevin. From the standpoint, I gave some color. I'd tell you that from a contractual basis, we do sign annual contracts, we do have the multi-year contracts as well. and then the other piece, to your point, what's difference compared to where we were three months ago and as I said, by far the biggest component is the import piece of this. And it's really related to capacity as well as then how much of the spot market we will need to move product. And the spot market is very dislocated from what contractual rates are at this point in time based upon demand out there. So that is where we really probably got a little more surprises that maybe we expected, obviously. But again, it's - that will take care of itself over time. Our contracts they do go through April of next year, but that is the way to think about it. So this will continue a little bit in the first quarter, but we have higher costs already in Q1 this year. So we'll see, that's a long ways away and a lot of things will change between now and that then.
Michael Lasser - UBS - Analyst
Okay. My follow-up question is on Dollar Tree Plus! in the combo stores. The combo store, the way you've spoken about them is with a lot of enthusiasm and also alluding to some, the major parameters around the store that you seeing big lift to sales and profits on the store, whereas you're alluding to more unique financial characteristic around the Dollar Tree Plus! test where it's just providing a little bit of a lift or seemingly a bit of a lift to do Dollar Tree Plus! items and providing less of a lift or at least talking rest about with [Phonetic] - to the entire store. So can you characterize why you're talking about these in different ways. And does this suggest anything about the long-term potential of Dollar Tree Plus!, because this could presumably be and all of the Dollar Tree store whereas you might only have a few hundred combo stores over time?
Michael A. Witynski - President and Chief Executive Officer
Yeah. So the difference is there are two totally different strategic formats. We'll start with the combo store is going after small town rural America. We've identified these are towns of about 3,000 to 4,000 people. The Family Dollar would go into and we would do, okay. And what we thought is, these are talented at Family Dollar went normally go in. So here we have two powerful brands, what if we brought them together into a small town to meet that customer needs. And by doing so we absolutely are getting, customers are very enthusiastic about our sales are higher than if it was just a Family Dollar.
So now we're in a small town, there is 3,000 of them. We're going to get to over 100 this year and we're going to continue to grow this and we have the seed points identified on a map. And we're going to keep growing this rural format. And, yes, it's got a better sales per square foot, more productive store. It's a better margin, because you've got Dollar Tree items in there, leading off with what they are known for on the seasonal, the party, the celebration, the greeting cards and the home. And then offset by everyday needs, the customer needs to live their life in the rural America with the discretionary side, decorating their home, dressing of their children and their kids and feeding the Family.
So it's a great format. And we're going to continue to grow that in rural America. Now separate that from DT Plus!, which is a Dollar Tree format. And what we're trying to do is, we will always defend that $1 price point. It's the most defensible retail strategy in America, nobody has been able to hold the Dollar price point for 35 years, overall those inflations. And we've got a great assortment and great excitement, there is great brand recognition.
What we're trying to do is bring in now, what if we take that same passion and value at a dollar and give the offering of a $3 and $5 item to those customers in home, in party, in seasonal and certainly in the crafting area. And we're bring in those items of the customer and they're responding while they enjoy it, they appreciate the value, they recognize it and as lifting our sales. So there are two totally different strategies and they're getting great responses from the customer for different reasons. And we will continue to grow the Dollar Tree Plus! as we refine and roll this out.
Michael Lasser - UBS - Analyst
Great. Thank you so much and good luck.
Operator
Thank you. Our next question comes from Karen Short with Barclays.
Karen Short - Barclays - Analyst
Hi, thanks very much for taking my question. I just wanted to clarify one thing and then I had a bigger picture question. When you said May was on plan. Can you just clarify what you mean by that at each respective banner? And then I had a bigger picture question.
Michael A. Witynski - President and Chief Executive Officer
Yeah. May is on plan. But from how we look at our sales and everything happening in the marketplace. And on a consolidated basis, we're hitting where we're expecting.
Karen Short - Barclays - Analyst
Okay. And then, I guess - sorry, go on.
Michael A. Witynski - President and Chief Executive Officer
Yes, I'm sorry. I didn't know it was our two questions in there. Karen?
Karen Short - Barclays - Analyst
Well, I mean, I guess I'm wondering if you could just give us what plan was specifically at each banner for May.
Michael A. Witynski - President and Chief Executive Officer
Yes. We don't - in the middle of the quarter, we don't share where we're at.
Kevin S. Wampler - Chief Financial Officer
Karen, we gave, obviously, our outlook for the consolidated comp sales for the full year. We don't break it down by quarter at this point.
Karen Short - Barclays - Analyst
Okay. And then I guess what I'm wondering is, in terms of the Dollar Tree Plus! banner, it sounds like maybe you're pushing out, there may be a little bit of delay in reaching that 500, probably, I'm assuming that's more of a permitting issue. But I guess the question is, what would it take to accelerate Dollar Tree Plus!, not necessarily this year, but increase the number of meaningfully in 2022?
Michael A. Witynski - President and Chief Executive Officer
Well, there's nothing structurally that's going to hold it - yes, there is nothing structurally that will hold us back rolling out DT Plus!. What we are going to continue to manage it against as all the projects we have, we got 600 new stores, 1250 H2 renovations, Dollar Tree Plus! and our other various initiatives. So we will look at this and balance it, but Karen, there is nothing structurally that can't hold us back at rolling this out at the pace that we want.
Regarding this year, really the delay is more than just a great pull through. It is selling double our expectations. So as I shared on March 3, we had already in January at our buying trip, we had already bought for this year. And we potentially could sell what we bought in 300 stores, instead of rolling out to the 500. So we're just managing that, our buyers are - merchants are working hard at chasing product and bring it in. And we're going to open these right. I don't want to keep opening stores and that's not have a great inventory to satisfy that customer demand.
So that's the thing that's kind of driving our cadence right now. But we're absolutely committed to get to the 500. We're going to keep buying and chasing the product to feed these correctly, but we're going to make sure that when we opened one, we have the inventory to keep feeding it and meet that great demand from the customer.
Karen Short - Barclays - Analyst
But can I just follow-up on that, presumably, by the end of this year, you will have had four buying trips as you look to 2022. So I guess, what I'm asking is if you're in looking at 2022, what would internally be the decision factor to not reallocate resources to opening more of the Dollar - expanding the Dollar Tree Plus! as opposed to some of the other projects?
Michael A. Witynski - President and Chief Executive Officer
Yeah. Then just looking at the return and then what return we get on it, what the lift is, what the resources take. So it would - as we manage through this year, we'll look at all those things.
Karen Short - Barclays - Analyst
Okay, thanks very much.
Operator
Thank you. [Operator Instructions] Our next question comes from Peter Keith with Piper Sandler.
Peter Keith - Piper Sandler - Analyst
Right. Good morning, guys. Thanks for taking the question. I guess, I'll just ask a quick follow-up on the last comment, with the Dollar Tree Plus! stores seeing double the sales lift. What's the total comp lift today versus non-Dollar Tree Plus! stores in a comparable market?
Michael A. Witynski - President and Chief Executive Officer
Yeah. Peter, thanks for the question, clarification. It's not double the lift, it's double the sales we thought it would do in the $3 and $5 items. That's why this cadence thing is, it's selling the $3 and $5 multi-price items faster than what we expected. So that's the clarity. And we still see the double the basket size when this is in there.
The other thing I would share that what we are able to do is now that we've got a broader geographic view. We're seeing the results from customers at every household economic sector. So we measure our stores and what the demographics and household the salary is in - household income in those stores. And it is getting the same response and 30,000 under 50,000 to 60,000, 70,000 to 80,000 and even 100,000 and over, we're seeing the same results. So our customers recognize that great value at $3 and $5 and it's working across all geographies right now. So that's really what we can share basket size is great. It's working across all geographies and it's doing better than what we thought in the $3 and $5 items.
Peter Keith - Piper Sandler - Analyst
Okay, thank you. Thank you.
Operator
Thank you. Your next question comes from Edward Kelly with Wells Fargo.
Edward Kelly - Wells Fargo - Analyst
Hey, guys. I just wanted to follow-up on freight just one more time. So can you just talk a bit more about how much of the freight impact you think May, ultimately be transitory. And I guess it should be - this question, because it looks like you expect to earn $6.50 to $680 this year in EPS, excluding freight. If you normalize - and this is normalizing, we see some growth on top of that, I mean, you always have share repo as well. I mean it's not hard to get your earnings well into the $7 range in 2022. So maybe a better way, said, has your internal thinking on 2022 changed at all on the freight headwind that you've seen to date. And what's the variable, like the key variable to there being a flaw in the logic that I just laid out?
Kevin S. Wampler - Chief Financial Officer
Thanks for the question, Ed. I think it's a good question. One of the reasons, obviously, return to give giving guidance for the full year with this release today. And we also obviously gave the information on what we believe the freight costs are - what that will be this year and really that's to dimensionalize that for you and all of our shareholders, basically, in the sense of helping them understand, again we don't structural again. Will there be a piece of it that sticks through next year as well. We don't know that yet. Obviously, we'll come to those conclusions as we work.
But the point being is, we do believe that we've set this great foundation in the earnings power of both banners and the Company in total is significantly better than what will be able to post this year, giving this - what we would call a temporary headwind of this freight. So again, that was really the way we wanted to frame it for you all, give you that kind of a viewpoint. And to your point, if it all went away next year. I would not foresee a reason why we couldn't get to $7 as I hit here today, obviously knowing a lot of things will change between now and next March. But that's the way we think about it and that's why we kind of want to frame it up.
Michael A. Witynski - President and Chief Executive Officer
Yeah. I'd just reiterate what Kevin said, that's why we are very excited about the initiatives that we have gone, we're driving our top line, we're getting great margins. And that's why I stated, I absolutely believe we've increased the long-term earnings potential for both of these banners to drive that EPS growth and that this - that freight is - it's temporary, it is now permanent and is due to the tailwinds of COVID and just the world and container rough, the ocean freight is just upside down right now, but it will not last forever.
Edward Kelly - Wells Fargo - Analyst
Mike, can I just ask one follow-up and so. As it pertains to your store growth, you have a lot of irons in the fire here multiple formats opportunities a lot going on between combo H2 plus core Canada, etc. Why couldn't you grow stores faster over time? And is that something that's possible when things settle down and you have more confidence in the outlook of all of this?
Michael A. Witynski - President and Chief Executive Officer
Yes, absolutely. And remember the combo store is store growth. I mean when we open a new store that will be a combo store in rural America. And as I've shared on March 3, we have 1250 H2 remodels this year. We believe, next year, we have about another 1250, and then we'll pretty much be done with remodeling the current fleet of Family Dollar.
And then we will take that capital in all of that energy and all of our resources to top line total store growth. This year at 600, it could go to 700, 758, I mean, absolutely. But right now, we have - there is only - there is over 5,000 projects we have going. But you're right, we move our resources where we need them. But ultimately, when the remodels to get done, we will absolutely point that to total store new store growth. And the great thing is our balance sheet allows us to do that.
Edward Kelly - Wells Fargo - Analyst
Excellent. Thank you.
Operator
Thank you. This concludes today's Q&A session. I would like to now turn the conference back to Mr. Randy Guiler for closing remarks.
Randy Guiler - Vice President of Investor Relations
Thank you, Stephanie. And thank you for joining us for today's call. Our next earnings conference call to discuss Q2 results is tentatively scheduled for Thursday, August 26. Thank you and have a good day.
Operator