Rick Dreiling
Chairman & Chief Executive Officer at Dollar Tree
Thanks, Bob. Good morning, everyone. This past year our organization made meaningful progress in the ongoing transformation of our core business, which includes building a foundation for sustainable growth. While I have been Chairman and CEO for a year now, we are still in the early stages of this transformation journey. We're off to a good start and we remain focused and we are excited about the remaining transformation work that lies ahead of us. You've heard me say that sales per square foot transactions in units are among the most important benchmarks in retail. I am pleased to report that we are seeing growth across all three and momentum is building across the business. We are making progress on the operational objectives of our transformation and in some areas we are seeing positive results earlier than we expected.
While the transformation process is dynamic, we remain focused on delivering against our core growth objectives and as always, navigating through the challenges we encounter along the way. As I previewed on our last call, we are also taking decisive steps to strengthen the Family Dollar brand and better position it to achieve its full potential. We took a thoughtful and deliberate approach to address underperforming stores by considering each individual store's performance, local operating environment, and our broader need for scale and operating efficiencies across the portfolio. As part of the portfolio review process, we have identified approximately 600 Family Dollar stores that we will close in the first half of fiscal 2024. Additionally, approximately 370 more Family Dollar and 30 Dollar Tree stores will close at the end of each store's current lease term.
We believe rationalizing these unprofitable locations will help to unlock meaningful value at the enterprise level. Collectively, we estimate net sales loss from stores we intend to close this year is approximately $730 million on an annual run rate basis. On the other hand given their historical underperformance, we would get back approximately $0.30 of annual run rate EPS net of any stranded costs. Now let me shift gears and discuss our fourth quarter results. On a consolidated basis, net sales increased 12% to $8.6 billion including a $560 million benefit from this year's 53rd week. Enterprise comp grew by 3% with 4.6% higher traffic offsetting a 1.5% lower ticket. Adjusted operating income increased by 21% to $749 million. Adjusted EPS grew 25% to $2.55.
While our quarter four reported EPS on an adjusted basis was below our quarter four outlook, these results include $0.17 of net costs primarily related to actuarial insurance adjustments that were not contemplated in our outlook. Jeff will provide more detail on this in his remarks. But without these unanticipated costs, quarter four operating results exceeded our expectations. Looking at performance by banner. Dollar Tree segment comps were up 6.3% on 7.1% more traffic and a 0.7% decrease in ticket. Traffic and ticket both improved sequentially. This strong quarter four comp came on top of an 8.7% comp last year. Dollar Tree's consumable comp was up 10.8% and its discretionary comp was up 3.1%, a 200 basis point sequential increase from quarter three and an impressive accomplishment given the general weakness in discretionary demand across retail.
The quarter's consumable comp came on top of a 9% comp last year. As pleased as we are with Dollar Tree's quarter four performance, it's worth noting that we believe January's winter storms negatively impacted comp by about 70 basis points. In quarter four, Dollar Tree continued to take unit market share in consumables. According to Nielsen, our unit volume grew 8% while the market declined 1.5%. These strong gains in traffic and market share are supported by Dollar Tree's ability to attract new and higher income customers. Continuing recent trends, Dollar Tree added 3.4 million new customers in 2023 mostly from households earning over $125,000 a year. We attribute Dollar Tree's exceptional performance to the range of initiatives we have been implementing. One of the most important initiatives at Dollar Tree is our multi-price point strategy, which we're calling More Choices.
The underlying premise here is that we can present a more relevant assortment to our customers if we are free to offer items at a variety of price points. Here we are making tremendous progress. We have substantially completed the rollout of $3, $4, and $5 frozen and refrigerated items which are now available in more than 6,500 stores. Today, we typically offer multi-price frozen product in three coolers within our usual 10 cooler bank. Over time that will evolve to eight out of 10 as we expand the assortment. By the end of 2023, we introduced $3 and $5 center store merchandise to approximately 5,000 Dollar Tree stores and expect to add another 2,000 stores this year. We are especially excited about the next phase of our multi-price expansion strategy. Dollar Tree's Chief Merchandising Officer Rick McNeely and his team are continuously working on new ways to deliver value while expanding our assortment across a wider range of price points.
This expanded assortment will offer Dollar Tree shoppers a wider range of choices across a variety of categories, including food and snacks, beverages, pet care, personal care, and more. This year across 3,000 stores we expect to expand our multi-price assortment by over 300 items at price points ranging from $1.50 to $7. But even as our multi-price assortment expands over time, the vast majority of the items sold in Dollar Tree stores will remain at our entry level fixed price point. Over time you will also see us fully integrate multi-price merchandise more into our stores so our shoppers will find $5 bags of dog food next to our traditional $1.25 pet treats and toys and our $3 bags of candy will be found in the candy aisle. This is the next exciting chapter of the Dollar Tree value story; new items, more choices, and more savings.
Now let's turn to Family Dollar. Here persistent inflation and reduced government benefits continue to pressure the lower income consumers that comprise a sizable portion of Family Dollar's customer base. Accordingly, Family Dollar's quarter four comp declined 1.2% as a 0.7% traffic increase was more than offset by 2% ticket decline. Family Dollar's consumables comp decelerated sequentially to 2.2% in quarter four from 6.2% in quarter three. Discretionary comp was down a full 12%. As challenging as this was, it was a slight sequential improvement over quarter three. Categories like apparel, home decor, electronics, and general merchandise remain weak as lower income consumers continue to be very deliberate about their spending. Family Dollar continued to take unit and dollar market share in consumables even as lower income consumers struggle with reduced SNAP benefits and other macro pressures.
In fact we estimate the reduced SNAP payments for total quarter four comps by about 5 points and when coupled with the weak discretionary demand, the comp impact was closer to 7 points. Looking forward, we expect reduced SNAP benefits will be a headwind through at least the first half of FY '24 before comparisons ease. While the operating environment remains difficult, I don't believe the challenges we face are structural and I continue to believe that a well-run and well-located Family Dollar store is a powerful retail force. As I mentioned earlier, we are taking aggressive actions to address underperforming stores. Looking through the transient factors that weighed on comps throughout 2023, I am encouraged by the fact that in a more normalized operating environment our comps would have been higher. We believe our ongoing market share gains are a strong validation of the many initiatives we have underway.
We are gaining traction in the vast majority of stores where they've been implemented and I continue to believe that the Family Dollar banner is well-positioned for long-term improvement as we continue to focus on operational excellence and financial performance. Before I turn the call over to Jeff, I'd like to update you on some of the key milestones we have achieved so far in our transformation journey. In real estate, we opened 641 new stores last year, which was at the high end of our target of 600 to 650. Selling square footage increased 3.6%, which was ahead of target. We are placing a greater emphasis on Dollar Tree openings given the attractive returns and performance and we expect the vast majority of our new store openings in fiscal 2024 will be Dollar Trees. I'm excited about the overall quality of our project pipeline for both banners.
In supply chain; our DC in Matthews, North Carolina is now providing rotacart deliveries to approximately 600 Family Dollar stores and we are also testing rotacart deliveries to Dollar Tree stores from our DC here in Chesapeake. By the end of this year over 3,000 stores should be receiving rotacart deliveries from a total of six DCs, four for Dollar Tree and two for Family Dollar. As expected, we are already seeing a meaningful reduction in unloading times at stores using rotacarts and we expect those efficiencies will continue to build. Expanding and modernizing our trailer fleet is an important part of the rotacart initiative. To this end, we added nearly 900 new trailers with liftgates to the fleet in 2023 and expect to add 2,000 more this coming year. By the end of 2023, nine of our DCs were temperature controlled. By the end of this year, all 25 of our DCs should be either fully temperature controlled or have dedicated temperature controlled facilities onsite.
Temperature controlled DCs help reduce cross-docking costs and allow us to carry OTC and other temperature sensitive products throughout our distribution network. They also increase productivity by providing associates with a safer and more comfortable working environment. And finally, we continue to make progress on our completely revamped Family Dollar DC in West Memphis, which should improve the overall efficiency of our distribution network. As you probably saw in the news last month, Family Dollar reached a resolution with the US Department of Justice regarding its West Memphis DC and we are pleased to have this situation behind us. As part of our ongoing transformation efforts, we continue to strengthen and enhance our food and product safety protocols and our compliance oversight. In our IT modernization, our new warehouse management system is up and running at its first DC.
Concurrent with this rollout, we are also deploying and integrating our new transportation management and labor management system. Over time we expect these enterprise-wide solutions to contribute to the optimization of our distribution network and labor efficiency. We have also installed new network infrastructure in over 3,800 stores bringing improved Internet connectivity, security, and in-store WiFi access to better support store operations. Since our last report, we have also begun implementation work on both our new enterprise-wide POS solution and our new human capital and payroll management system. We have also launched new mobile apps for both Family Dollar and Dollar Tree. The Family Dollar app allows us to offer more targeted promotions and a better customer experience. The Dollar Tree app gives shoppers the ability to see new products, view weekly ads, receive notifications about great deals, and do price checks.
In private brands, we launched approximately 250 new SKUs and converted over 300 control brands to private brands. The private brand program is one of the most significant initiatives underway at Family Dollar and I'm excited that we now have a highly competitive offering that expands our assortment across multiple categories and offers the Family Dollar consumer national brand equivalent products at compelling values. By the end of last year our private brand penetration reached 15%, 100 basis points ahead of our target and a great head-start towards reaching our 20% goal by 2026. On category resets, I'd like to take this opportunity to recognize Family Dollar's Chief Merchandising Officer, Larry Gatta, and his team for their efforts to expand and improve our merchandising assortment. By the end of 2023, we successfully raised the merchandise high profile just 78 inches across the banner and optimized our assortment with the addition of approximately 900 net new SKUs.
These efforts are already having a meaningful impact on our results adding 130 basis points to our quarter four comp, which helped offset at least some of the impact from the softer macro environment and comparatively weaker discretionary demand. This reset was a major undertaking for Larry's team and our new planograms will allow us to expand and improve our product assortment and help Family Dollar gain additional market share. We are also moving forward with our goal of increasing the number of cooler doors in Family Dollar stores. We added over 17,000 cooler doors last year, which was 1,000 doors above our target and brought our average across the Family Dollar segment to 26 coolers per store, which is approaching our goal of 30 coolers per store. In summary, we continue to execute well around factors that we can control.
I've said before that our progress on this journey will include challenges with the belief that we will succeed more often than not in our efforts. But the direction and destination remain clear, which is the long-term health and success of our business for the benefit of our customers, associates, stakeholders, and partners. Our growth initiatives are central to this journey and we are focused on continually improving even in the face of a rapidly evolving macro landscape. We have an outstanding team with a cultural foundation focused on service to the customer and improving our performance each and every day. We remain relentlessly focused on retail fundamentals and continue to take market share. While challenges and macroeconomic factors will always be part of any retail journey, we continue to face them head-on as they arise. We're excited about where we are and optimistic about where we are headed.
With that, I'll turn the call over to Jeff.
