Good day, and welcome to Dollar Tree, Inc.'s third quarter earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Randy Guiler, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Aaron. Good morning, and welcome to our conference call to discuss Dollar Tree's performance for the third fiscal quarter of 2019. Participating on today's call will be our President and CEO, Gary Philbin; and our CFO, Kevin Wampler. Before we begin, I would like to remind everyone that various remarks that we will make about future 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. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, included in the 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 our forward-looking statements, and you should not expect us to do so. At the end of our prepared remarks, we will open the call to your questions. [Operator Instructions] Now I will turn the call over to Gary Philbin, Dollar Tree's President and Chief Executive Officer.

Thanks, Randy. Good morning, everyone. The third quarter represent another period of solid sales performance for both brands, Dollar Tree and Family Dollar. Our store optimization efforts and sales driving initiatives are working. The teams have completed more than 1,150 Family Dollar H2 renovations, nearly 200 Dollar Tree rebanners and more than 1,000 Dollar Tree Snack Zones and launched our Dollar Tree Plus! test already this year. These efforts have driven top line sales and transaction counts at both banners. Fiscal 2019 has been a unique year as a result of several factors. We planned and accomplished the material acceleration of our Family Dollar store optimization initiatives and the consolidation of our 2 support centers to Chesapeake, Virginia. Additionally, the global helium shortage, which has an outsized impact on our party business, and the continued uncertainty regarding trade and the related tariffs have impacted our business. I'm proud of our team's efforts and the sales execution through this environment. We worked hard to maintain focus on our customers and our values in store. Our results for the third quarter included sales increase of 3.7% to $5.75 billion. Consolidated same-store sales increase of 2.5%, and our EPS of $1.08 was within our guidance range. Other highlights for the quarter included completing 247 Family Dollar H2 renovations, completing 512 Dollar Tree Snack Zones, bringing our total to 2,087 across the chain, and repurchasing $11.6 million (sic) [ 125,048 ] shares as part of our share buyback program. And in mid-October, we hosted our fourth annual nationwide hiring event focused on hiring more than 25,000 associates in communities all across the country. This event provides individuals with the opportunity to join the Dollar Tree or Family Dollar teams. These new associates can earn the opportunity to be promoted through the field organization. As…

Thanks, Gary, and good morning. Consolidated net sales for the third quarter increased 3.7% to $5.75 billion, comprised of $3.07 billion at Dollar Tree and $2.67 billion at Family Dollar. Enterprise same-store sales increased 2.5%. On a segment basis, same-store sales for Dollar Tree increased 2.8% and for Family Dollar, increased 2.3%. Overall, gross profit was $1.7 billion compared to $1.67 billion in the prior year's quarter. Gross margin was 29.7% of sales compared to 30.2% in Q3 of 2018. Gross profit margin for the Dollar Tree segment decreased 60 basis points to 34.2% when compared to the prior year's quarter. Factors impacting the segment's gross margin performance for the quarter included merchandise costs, including freight, increased approximately 55 basis points, primarily due to higher freight costs. And distribution costs increased approximately 10 basis points, primarily due to higher payroll costs and depreciation. Gross profit margin for the Family Dollar segment was 24.5% during the third quarter compared with 25.3% in the comparable prior year period. The year-over-year decline was due to the following: Merchandise costs, including freight, increased approximately 30 basis points, driven primarily by an increase in freight costs and higher sales of lower-margin consumable merchandise, partially offset by improved initial mark on. Shrink increased approximately 15 basis points resulting from unfavorable physical inventory results in the quarter. Distribution costs increased approximately 15 basis points due to increased payroll costs at the DCs. Occupancy costs increased approximately 10 basis points due to an increase in real estate taxes; and markdown expense increased approximately 5 basis points, resulting from higher clearance activity in the quarter. Consolidated selling, general and administrative expenses as a percentage of net sales in the quarter increased 30 basis points to 23.5% from 23.2% in the same quarter last year. For the third quarter, the…

Thanks, Kevin. Like I mentioned at the beginning of the call, 2019 has been a year of distinct opportunities. We planned and executed the material acceleration of our Family Dollar store optimization initiatives, snack Zone resets at more than 1,000 Dollar Tree stores and the consolidation of our 2 banners to our store support center in Southeast Virginia. We accomplished this against the backdrop of the helium shortage, the uncertainty regarding trade and related tariffs, continued impact of freight costs and DC costs affected by the increasing starting wage rates. I'm proud of the sales results at both Dollar Tree and Family Dollar that were accomplished in the quarter. This was done in the first 3 quarters of the year with more than 2,000 stores disrupted from our initiatives. We invested in our stores, our starting rates in specific markets and have our fleet of stores ready for the fourth quarter and the key holidays. As stated in today's press release, we also announced that we will do at least another 1,000 H2 renovations in 2020. Our confidence in this model grows as we have more across our fleet of stores and various types of settings, demographics and densities of population. We will announce our new RILA and other store level capital plans for 2020 at the end of Q4. The impact on our gross margin in specific areas is ours to control and do better. We are focused on making improvements across several categories as we finish the year and start 2020. These areas include improving our shrink results, enhancing efficiencies within our supply chain to better manage freight costs, driving sales on the discretionary side of our business to reduce mix headwinds to margin, and tariff mitigation efforts. For shrink, our plans are focused on enhancing allocations and…

[Operator Instructions] We'll go first to Scot Ciccarelli with RBC Capital Markets.

Can you talk about the margin profile on the remodeled Family Dollar stores? And related to that, given the mix that you have in those remodeled stores, which is much more consumable based. Is there a reason to believe gross margins can improve on a go-forward basis? Or is that higher mix of consumables in these stores effectively reset the gross margin profile for Family Dollar?

Scot, this is Gary. We're pleased with H2 because when we went into this, we knew we were adding in more frozen food doors and some more food that obviously has an impact on margin. But we also went into it with the thought of let's offset that with some of what we do on immediate consumption, the queuing lines, the WOW tables. I just think some better adjacencies to run the store. Early on, we saw some degradation in margin. But as we sit here now, H2 is neutral to the fleet, but we didn't do this to be neutral. I really -- our goal here is to have margin expansion within H2. So we're on the right path. We've got traffic going in these stores. And obviously, you've heard us call out that comp. Our next workflow is maintain all that and add margin expansion to H2. We like everything that the customers are telling us about it. We like the results on the top line and sales, and we got to get going on the margin mix now.

And what kind of -- on a go-forward basis, Gary, that's helpful. But what kind of margin improvement do you think is realistic if we're looking out over the next, I don't know, 4 to 8 quarters? Because, I mean, we've seen several hundred basis points of gross margin degradation in that business, and I guess I just kind of keep coming back to the question, do we have a true reset here? Or is that something once we establish the better top line, we can kind of dig our way out?

Well, I've always said we need to get to an inflection point on the fleet. We were rebuilding the stores, basically one store at a time with H2. We did over 1,000 in the first 3 quarters this year. We're planning on doing 1,000 next year. I need the top line sales. I think that's what H2 has given us. The work on the margin, Q3 for Family Dollar, I think it was about an 80 points difference year-over-year comparison. The expansion that can rise across the whole fleet are some of the things I talked about. We got to focus on the discretionary seasonal apparel, electronics. All those are the categories that I think get teed up in the right way in H2. It doesn't mean that the rest of the fleet can't benefit from some of the same elements and efforts across the fleet. So we're putting together our '20 plan with specific initiatives around those discretionary categories to drive the -- maybe get the same benefit that we've really seen on the consumables side. We've got more folks coming through the front door here. And that is as important as anything that we do and now I got to get them over to the other side of the store to buy more of the discretionary product. That's doable. More to come when we announced our 2020 plan.

We'll go next to Michael Lasser with UBS.

So at what point do you think you'll have a reasonable level of visibility into the business? The factors that you mentioned outside of tariff that contributed to your 10% to 15% decline, the reduction in your 4Q guidance, including mix, payroll pressures at the DCs and increased run rate for repairs and maintenance, utilities and depreciation should have been somewhat known and not really surprising. So is it -- once you get past this, then as we get into the first part of next year, you feel confident you have a level of visibility into the profitability of this business? Or is it going to take longer than that?

Michael, it's Kevin. I think as we look at it, the items we called out, obviously, the shift in mix as we've seen the -- basically, the consumable business outpaced even what we had forecasted. And really, that's in both brands, more so in the Family Dollar brand and the Dollar Tree brand, but it's in both brands. So the Dollar Tree brand, we've got some good things going with frozen food, refrigerated and in center aisle as well. So a lot of things going on there. And again, a little bit of overall effect from the helium shortage and the halo effect to the party department in general. On the Family Dollar side, obviously we haven't seen the discretionary business kick in, as well as we'd like it to, Gary, what he was just speaking to. A lot of opportunity there, getting customers in the door is key, obviously, and getting the foot traffic and having that opportunity to sell them that discretionary item is very, very important. I think as we obviously look at other pieces of the business, obviously, we called out DC costs. Really, this is not an area we've called out in the past so much. It's really been more of a -- more -- a bigger topic as of late as we've gone into the, what we would call our seasonal peak here in the end of Q3 and beginning of Q4 as we look at basically getting all the merchandise through these buildings. And with unemployment where it's at, it's obviously required us to bring up basically starting wages and making sure we can engage with those associates and train them appropriately.

Michael, Gary. I would just add this. Keep in mind, this was a year that was everything we talked about at the beginning of the year. The store initiatives, 2,000 stores at various times torn up. Keep in mind, at the DC level, we were also not just shifting rebanners back and forth, we are also shifting product back and forth, especially with the impact of our Dollar sections in some of our WOW items. So along the way, we combined a store support center, too. With all those balls in the air, I give credit to our store teams and our store support teams to get that done. Everything we're talking about here gives us the consistency, visibility as we go forward in '20. We have done all this, really, with major initiatives, both in our store base, in our store support center. So listen, the things that we're focused on are the right things to drive the business. And with all that going on, we drove sales throughout the year. And with H2 stores, building momentum throughout the year, I'm really pleased with where we will end up on the top line and the initiatives around the margin piece, we got to get after on each of them.

Totally reasonable, Gary. It just seems like investors want some time frame on when they can hold you accountable to an improvement in profitability and better visibility because there have been a lot of disappointment over the last few years and having some sense of when that might turn would be helpful to the investment community. And as part of that, are you still committed to the 14% to 18% EPS growth off your original GAAP guidance that you provided earlier -- in the year for 2020? And why would that no longer be the case?

Michael, as we said before, that was at a point in time with what we knew at that point in time. Obviously, we're working through and finishing up our 2020 plans. Obviously, the biggest unknown as we sit here today for us and many other retailers is tariffs and where does that land at the end of the day. So obviously, we're committed to improving our business and improving on the many things we've talked about already this morning, but whether -- we'll give, obviously, guidance when we get to our fourth quarter call. And hopefully, we'll have some clarity around all those things.

We'll go next to Paul Trussell with Deutsche Bank.

I know you give guidance on a consolidated basis. But to the extent possible, could you give maybe a little bit more detail regarding your expectations per banner, as we think about comps and gross margin and SG&A into fourth quarter? And then as a follow-up, just bigger picture for Dollar Tree. Margins look like they're going to be down this year. And just curious if you can walk through what some of those -- what you view as more temporary in nature as we kind of turn the page into 2020? Is this a business that you believe can get back to expanding margins?

Paul, this is Kevin. I think as we look at it, again, we don't give guidance by banner. Obviously, when you look at it from a -- what I can give you a little feel for, for Q4, is, if you look at the guidance we gave today and you can back into a range of operating income based on all the data we've given you. And I would tell you that it's basically a little -- right around 9% or just above. If you compare that to prior year, excluding the items such as the markdowns for aged goods, clearance of inventory and in-store impairment, I would tell you that the pressure between basically gross profit and SG&A is fairly consistent. So we're seeing pressure on both line items. So that just gives you some directional ability to think about that. I think as we look at this year and as we look at obviously the fourth quarter, fourth quarter is a big quarter for Dollar Tree from a seasonal perspective. So we get a pretty good boost in sales just from a seasonal set, which obviously has always provided us the ability to basically provide a good gross margin. And I don't see that in there. But our seasonal set this year performed very well. We had a very good Halloween set. We had a very good performance with our Halloween seasonal, and we feel good about going into the fourth quarter with our Christmas set. So I think that always bodes well. Obviously, we do have the 6 less selling days, but that doesn't mean we're not going to try to make sure we do everything we can to get every last sales dollar that we can at the end of the day.

Paul, this is Gary. Let me sort of answer your question. What's temporary and start with Dollar Tree. The things that have we've been chasing this year start with shrink. It's a both banner issue. But shrink is something I have an expectation that we're going to do better on next year. We're coming off of a second year of not great performance, and we can do better. I think the freight piece, we started talking about it last year was certainly a bigger impact in the first half. We're going to see some of that modify in the second half, but we're still significantly up year-over-year. And the distribution costs, I think, listen, I don't know if it's temporary or not. I know that it impacts us when we have more folks coming into a DC. And it's really not even what you had to pay for us again the DC. It's almost the productivity that you lose in the DC because you've got new folks that you got to train and retain. Those are the things that I think were the one-offs for both banners that I would expect us to make improvement on in the initiatives we talk about. The mix on product, to me, is a bigger issue at Family Dollar than it is at Dollar Tree. We are happy with what H2 has done. But across 2019, we've worked hard on keeping sales going. And we just got to find some of the same elements that drive customer traffic into those sections as they do on the consumables. For Dollar Tree, I don't know how to think about tariffs. But it's always just going to be about incorporating the next WOW into the stores. We'd like what Snack zone has done for a little pressure on mix. That's why we got Crafters Square going. A year before that, we started out in Snack Zone, but we put in the Hallmark. So it's always what we push and pull to drive customers on both foot traffic and sales and margin. We're going to do that again as we go into '20. So those are going to be the pieces that we talk about category by category. Hope that's helpful.

We'll go next to Peter Keith with Piper Jaffray.

So I want to look at the tariff impact. Certainly, it's a very volatile situation with a lot of unknown changes. It sounds like, though, the impact to Q4 is really just because of the timing with 4A implemented, you didn't have time to adjust. Are you still confident as you look at the 2020 that you think will be able to mitigate most of the List 3 and List 4 tariff pressures?

Peter, this is Gary. Yes. List 1, 2 and 3, I think the teams have been through a couple of cycles now of working with our vendors to either at lower cost or redesign packaging, so we can land it. And in some cases, we're moving outside of China, as you've heard us talk about. And even on this last trip, as we are buying already fall and Halloween next year, we've moved additional product out of China. So you're not going to be able to pick up that entire supply chain. But that's where we do sometimes, item by item, vendor by vendor, as we see those opportunities. As we go into 4A and 4B, it's more of our product. And as always, I want to go into 2020, I think, with some compelling product, and we're going to do the smart things around what we have to do to do the best we can to mitigate. I've also told our merchant teams, at the end of the day, I want to be able to see what it is. We might be changing or the opportunity to move price away from a vendor to another country before we do it. So 4A, what we've seen is when it gets announced and we don't have much time to mitigate, that's what we're calling out with the Q4 impact. Going forward, when we get a chance to get on our regular cycle buy and meet with our vendors, yes, we can mitigate more of it. I just don't have a full vision of that until we go on a big buying trip in January, which will be our first time really to meet with all of our vendors. And I'm assuming at that point, 4B is in effect as well.

Okay. And then just on the discussion of mix, particularly with the H2 remodels, one thing I'm trying to get my head around is, it would seem that with the increase of $1 items that you would be experiencing greater buying scale with similar items from Dollar Tree and Family Dollar. So it does seem to me that, at least from the outside, that there would be some benefits to mix from $1 item. So are we misreading that? Or is it just that the discretionary weakness is overarching negative on the business.

No. Well, you heard me talk a little bit about an H2 4-wall margin is about neutral to the fleet, and so that the overall mix change that we're experiencing is no different at H2. What's different is that we invested heavily with more of our lower-margin frozen food and additional expansion of some key categories in center of the store food as well. That's lower margin. That's been offset, you're exactly right, with the impact of the dollar sections, with the queuing assortment, with Dollar WOW tables, with immediate consumption. So the fact that we're back to fleet neutral margin, I think, shows the power of some of those sections we just got hampered up another level to get margin accretion going in H2 stores. So the way I look at with the team, we almost take a look at, here's the sections we've invested in, what's our sales and margin on a frozen food category and is that being offset with some of those other sections. And that's pretty much what we're seeing right now.

We'll take our next question from Joseph Feldman with Telsey.

I just wanted to get a little more understanding of like the higher price point cash. And how are people responding to that so far?

I would say, as folks come in, I would say it's 1/3 folks have seen the product and buy it, 1/3 of our loyal customers have commented that they don't like the multi price go in our stores and 1/3 are somewhere in the middle. Here's my view from everything we've interviewed our customers with. It's not -- so far, we've had a priority on more consumables, which I think were an item that we want to just get out there across categories. The next phase of the test is more about what I would call the Dollar Tree WOW side of it. We went over on our buying trip this July to buy specific categories. So I would call them more on our variety, discretionary side, things that people haven't seen. And we'll see how customers respond. But I think that's more to what our customers are going to enjoy seeing incredible values on and allow us into our Dollar Tree WOW umbrella to say, "that's a great item I don't see anywhere else. And I know that costs more when I do see it." And I think that's going to be what we push on into some of this showing up in stores now, but into 2020. So when we get a chance to test and learn and put new products in, especially when we can design them and import them or find discretionary items domestically, I just think that's going to be the next phase of the test that gives us another important data point. Our customers that buy it tend to buy more than the average Dollar Tree transaction, but I go back to what success, and success in this is really to increase the reach of Dollar Tree to another segment of customers, another chance to increase margin as well, and as always, protect the brand to say this is the WOW factor at Dollar Tree. So those are the things that are in the mix. I think we have some exciting product coming in, and we stay close to watching that week by week.

And then one follow-up. I know you outlined a couple of efforts on the freight side that you can do like optimize LTL and back to historical backhaul levels. Like how challenging a project is that to improve the freight side? Like, is that something that we can see happen pretty quickly into next year?

Well, we are seeing some modest year-over-year declines right now with it. And the things that we're doing, we're in control. But we need to bid out the process. Now somebody has to sign up for the lower bid and give us great service, both on inbound and outbound, to get those rates. So I'd like to think that it's something that as we read some of the same headlines, we are not in the same position as the truck driver shortage exactly at this time a year ago. I think that bodes well for us. The opportunity when we get better service on the outbound, allows us to do more backhauls. So we're going to go into 2020, pushing all the levers we know to do to get both lower freight and better service, and we'll understand better once our important third-party suppliers and independent truckers continue to give us service as we expect to as we finish out Q4 into 2020.

Ladies and gentlemen, due to time constraints, we have time for just a couple more questions. We'll go next to John Heinbockel with Guggenheim Securities.

Gary, curious when you think about the real estate composition of the 1,000 remodels you're going to do with Family Dollar this year -- this coming year, how will that be different than this past year? Is there a desire to maybe cluster more? And if you do cluster more, can that lift be brand perception at non-remodeled stores, if you do that?

Well, we do take a look where is the number of stores. We went into this knowing that we want to fix some of the oldest stores in the fleet. So based on the last year talks, we went into with the best opportunity based on volume. We did need a certain size. And really, what we're skating to is, by the time we face these next 1,000, we ought to be close to 40% of our fleet or a little better, being less than 5 years old. And I think to your point, that does give our customer give a perception of what they've seen at Family Dollar. So it's not necessarily that everything has to be H2. We've got some great stores out there that are not, but we are changing the face of what the customer sees with this store initiative, along with what we closed, along with what we rebannered to Dollar Tree. So the combination of all those things gets us closer to an inflection point, which is I think what you're talking about, what does that customer see. And inside the store, the consistency around store standards, conditions and stocks are important across all the factors of the different stores that we run. So that's what we're aiming for. And as we get more and more stores with the same opportunity, we're still measuring it what's our biggest return on capital as we go and invest in these stores. But I think just by the nature of our fleet with where we are across the country, we're starting to get some critical mass into some key geographies.

And then lastly, when you look at the private brand penetration opportunity, recognizing it's all consumable at FDO. But is that another 500 basis point penetration opportunities or much bigger than that? Where do you think that shakes out?

Well, we've already said, we're in the low 20s as a brand, which is pretty darn good. I mean, it's not grocery store-esque because we're not a grocery store. But I think across the categories, what I would like to see is something closer to 100 basis point improvement consecutively over a number of years. I think that's the opportunity in front of us. And I think it speaks to, one, having great product and values in store. And number two, our customer just needs it because she's stretching her budget and the commitment on what we compare and save to national brands, I think, fits in our wheelhouse. I think the magic to it, as always, is introducing customers because they'll step up to private brands on something that first is something that they try on because it's a detergent, and then they'll go to HPA products, and then we'll go to food products. And the team has done a wonderful job on rebranding across the different categories. And I think that's opportunity still with runway to it.

We'll go next to Karen Short with Barclays.

Just one clarification question on tariffs and a bigger picture question. In terms of the $19 million, is it still fair to think of that split kind of 70% Dollar Tree and 30% Family Dollar in terms of the impact? I think that was the original split you gave back a couple of quarters ago.

Karen, the -- as you look at the $19 million, it's more skewed to Dollar Tree than the 70%. So the vast majority really relates to Dollar Tree. A small piece of it does relate to Family Dollar.

Okay. And then, I guess, just in terms of Family Dollar 2.0, I guess, I'm wondering if you could give a little color on what its second year sales lift is? I know it's still early days, but any color there? And I guess, maybe a little color on why you think it's -- you're having more challenges in terms of getting good discretionary spend in those stores?

I would say, when we think -- let me answer the second question first. It's still a customer that comes in and I think is responding to what we've done. I mean you just buy consumables on a weekly basis. The discretionary is tied sometimes to the seasons, but more times when I have for our customer, a little more jingle in our pocket across those discretionary categories. So it's a piece of -- always, we got to have the right values in front of our customer, across each of the categories. So maybe a part of this, Karen, I would even say, as we went in just knowing 2,000 stores are going to be disrupted, 1,000 plus at Family Dollar, we went into this year saying this is not the year to not have foot traffic coming in. H2 has been giving that to us. We've been hitting the gas. It's not just been H2 that's driving the comp. So all boats have been rising. I think that was important with knowing we were going to have the down stroke on the store initiative going into it. So I think we just had some better compelling values in front of the customer on the consumable side. And not that we didn't give all the thoughts to how we laid out the store, but I think we got to get back to the basics of blocking and tackling on the discretionary side. What was your other piece of the question?

Year 2, H2 comp.

We're early -- I mean, yes, we like the comps. I'd like to -- as we get more stores into this, I mean we just finished up 1,100-change of H2. That profile is -- has stayed consistent with the addition of more stores across geographies, across densification of population. So we do like that. I think as we get into the second year here, it's -- the stores are still cycling some of their grand opening activities from last year. So more to come as we get more stores into that bucket.

Okay. Can I just have one more question regarding Dollar Tree banner?

Sure.

Is there any variation in terms of the various stores on urban versus suburban versus rural? I mean you kind of gave that 1/3, 1/3, 1/3 comment in terms of the customer response. But is there any pattern on any of those markets in particular?

For Dollar Tree?

Yes.

Or Dollar Tree Plus!? No, I would say -- I can't tell you there's a nuance here that really says there's much of a difference. I think it's more about the product, Karen, than anything else at this point.

And ladies and gentlemen, we'll take our final question today from Matthew Boss with JPMorgan.

So Gary, maybe larger picture, how would you assess the health of the low-income consumer today? Any changes to the competitive landscape that you've seen impacting any of your strategies? Or is it best to just think primarily that this is company-specific execution here?

Well, listen, we've been building -- rebuilding our execution and rebuilding our banner. So I think that speaks to satisfying this customer. I think that's what H2 calls out that when we get a shopping environment that's compelling, exciting and has the items they want, they will respond to it. To answer your question on the customer, listen, I think unemployment's at an all-time low. I think folks in general can find a job these days. I think the opportunity is still, oftentimes, they're one doctor bill or one car repair bill away from not being in such good shape. And that's really our opportunity to make sure that we have the right items to help them navigate a budget from beginning of the month to the end of the month. So I would say things are maybe slightly better because of jobs. But I never like to stray too far from a customer that is keenly focused on value, convenience, and that's the crosshairs of our Family Dollar ought to just win the customer with everything that we've been talking about, with H2 and the entire fleet.

Great. And then, Kevin, maybe just a follow-up on gross margin. At the Dollar Tree banner, so this is the second straight quarter of 55 basis points merchandise costs headwind net of freight and 10 basis points of distribution pressure. How do these 2 items specifically shape up in the fourth quarter? And then do you still view 35% of the structural multiyear gross margin for the Dollar Tree concept?

I think as we look at it, as we've said, we look at freight in fourth quarter, we said domestic, we feel like we're headed in a little bit better direction could be flat to slightly down year-over-year. So that's a good news item. Obviously, somewhat offset by the fact that our import freight is going up. So I think overall, I think we would look for the freight effect maybe to be a little less as we go through Q4. I think as we look at just margin in general, obviously, as we've talked about, helium is a component of this. It does affect -- it does have a halo effect on what is one of our biggest departments and one of our most profitable departments. And so we feel a little bit of that, but the team is working really hard to create other exciting items within that department that will drive that business, whether we have helium or not, which, obviously, we're working hard to make sure we have helium as well. So some moving pieces there. I would expect, though, that as if we do the things we need to do to execute on improving our freight going forward that you'll see it be less of an issue as we get into Q4 and the new year.

And this does conclude our Q&A session. At this time, I'd like to turn the call back to Randy Guiler for closing remarks.

Thank you, Aaron, and thank you for joining us for today's call. Our next quarterly earnings conference call to discuss Q4 and full year results is tentatively scheduled for Wednesday, March 4, 2020.

And ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may now disconnect.