Rick Dreiling
Chairman & Chief Executive Officer at Dollar Tree
Thanks, Bob. Good morning, and thank you for joining us on our call today. I'd like to begin my remarks today by extending my heartfelt gratitude to members of our Dollar Tree community, following the devastating tornado in Marietta, Oklahoma. While the tornado destroyed our Dollar Tree distribution center there, I'm especially thankful that no one was injured in our facility. I am also extremely proud of the resilience displayed by our team members in the aftermath of this tragic event.
Fortunately, our distribution network is flexible, and while we expect to absorb incremental operating cost, we believe we will keep store-level disruption to a minimum. The leadership team at Dollar Tree is also highly sensitive to the wider impact of this disaster on our associates, their families, and the broader Marietta community. With this in mind, we set up a temporary site at a local hotel to help support our associates in their time of need. We brought in food and other essential supplies, such as batteries, chargers, diapers, and toiletries.
Our associates have access to over $200,000 in immediate response grants and mental health services. For everyone impacted by the recent situation in Marietta, I want to thank you for everything you've done during this difficult time. It's during these periods of adversity that the strength and character of our organization shines through. Whether it's dealing with natural disasters or important strategic decisions, our associates and the communities they serve are always top of mind. As I'm sure you saw in our announcement earlier today, we are initiating a formal review of strategic alternatives for the Family Dollar business.
The decision to explore strategic alternatives includes evaluating how each separate banner might appeal differently to different sets of owners. It also includes evaluating whether accelerating Dollar Tree's growth and completing Family Dollar's transformation might be best accomplished by separate, dedicated leadership teams. Separating the two businesses could enhance the performance of each one individually and allow them both to reach their true valuation potential. Let me provide some additional background and context. We have been on a multi-year journey to transform this organization and fully unlock its intrinsic value.
An important step in this process was our portfolio review and the decision to close 970 underperforming Family Dollar stores. Many of these stores had been underinvested in for years and the capital investment required to fix them could not deliver an acceptable rate of return. Moving forward with a streamlined portfolio should help accelerate Family Dollar's transformation and improve the long-term returns of the business. While we are working to transform Family Dollar, we continue to aggressively grow the Dollar Tree banner by expanding our multi-price offering, accelerating our rate of new store openings, and pursuing accretive transactions like our recent acquisition of up to 170 stores out of the 99 Cents Only bankruptcy.
These stores are highly complementary to the Dollar Tree banner and are expected to produce sales, profits, and returns that are well above our portfolio average. We are pleased to bring these locations under the Dollar Tree banner and look forward to their openings later this year. Today, each banner is at a different stage of its respective journey and each has its own set of unique needs. This is why we believe now is the right time to conduct a thorough review of strategic alternatives for Family Dollar so we can determine what is the proper operational and ownership structure to best support and enable its transformation.
At the same time, that should allow us to fully unlock the value of the Dollar Tree banner. In the end, we want to ensure that both the Dollar Tree and Family Dollar banners have the right strategic, operational, and capital structures necessary to meet the evolving needs of their customers and to maximize value creation in each business. As I said in my opening, our associates in the communities they serve are always top of mind for us. For 65 years, Family Dollar has played an incredibly important role in neighborhoods across America by helping families do more with less. This would not be possible without the dedication of our incredible Family Dollar associates.
One of the priorities of this strategic review is to make sure that Family Dollar is properly positioned for long-term prosperity. All that said, we are still in the very early stages of this review. We have not made any prejudgments regarding the eventual outcome of this process, especially given the wide range of potential outcomes. As I'm sure you can appreciate, there is a lot of work to be done and we do not intend to provide any further updates unless and until the Board has approved a specific course of action or determine that further disclosures are appropriate or necessary.
I thank you in advance for your understanding on this matter. With that, let's move on to our first quarter results. First quarter adjusted diluted EPS of $1.43 was at the higher end of our outlook range. These results reflect favorable freight costs and careful expense management during the quarter. You've heard me say many times that the three key fundamentals in retail, our growth in transactions, sales per square foot, and units. And I'm pleased to report, all three of these metrics continue to move in the right direction.
Let me now cover some key financial highlights from the quarter. On a consolidated basis, net sales increased 4.2% to $7.6 billion. Enterprise comp was 1% as a 2.1% increase in traffic was partially offset by a 1.1% decline in average ticket. In both segments, comp growth was driven by traffic gains that were partially offset by lower average tickets. The average ticket declines reflected weaker discretionary demand, particularly in the Dollar Tree segment. Looking at performance by banner, Dollar Tree comps increased 1.7% on a 2.8% increase in customer traffic, partially offset by a 1.1% decrease in average ticket.
Dollar Tree's consumable comp was 7.4% and its discretionary comp declined 3.2%. While a 7.4% consumables comp is respectable in its own right it is worth noting that this came on top of a 6.9% consumables comp last year. On the other hand, this was the first discretionary comp decline we've seen at Dollar Tree since the first quarter of 2020 at the outset of the pandemic. Dollar Tree's quarter one comp came in below expectations, because Easter was especially challenging for us this year. Easter is historically a major driver of discretionary demand.
In fact, to put things in perspective, Easter discretionary sales represent about 1% of our annual sales. For the largest retailers, that figure is closer to 0.1%. Looked at another way, Easter is 10 times more important to Dollar Tree than it is for other retailers. This year, an early Easter, combined with the extra week in our fourth quarter last year, left us with a much shorter selling season. Also, unusually cold and wet weather throughout much of the country negatively impacted the way many families celebrate this traditionally spring-oriented outdoor-centric holiday. In fact, recent consumer research showed that Easter gatherings were down 20% this year and that 6 million fewer American households purchased Easter products in 2024. This dampened consumer demand across our seasonal discretionary assortment, which caters heavily to these types of celebrations. We also saw related softness in non-Easter discretionary categories, like garden supplies, outdoor, toys, and other seasonal items. While the calendar shift was contemplated in our first quarter comp guidance, the unusual weather was not.
Overall, the soft Easter highly influenced the monthly cadence of our quarter one comp. It's also important to note that this softness was Dollar Tree-specific and concentrated in the eight days to 10 days prior to Easter. Comps before and after that were essentially in line with our quarterly expectations. All in, we believe Easter was a 150 basis point drag on Dollar Tree's first quarter comp. Despite this, Dollar Tree took meaningful consumable market share in the quarter with our dollar growth exceeding the market by 660 basis points and our unit growth exceeding the market by 520 basis points.
Last quarter, I announced the next phase of our multi-price strategy called More Choices. As part of this program, we are expanding our multi-price assortment by over 300 items at price points above $1.25 in approximately 3,000 Dollar Tree stores by year-end. Importantly, these multi-price items are being fully integrated into aisles throughout the store rather than concentrated in a single center store aisle. Before I expand on this program, let me take a moment to reiterate what multi-price is and what it is not. Multi-price has never been about raising prices on existing items. It's about adding new items at new price points that are incremental to our core assortment.
Multi-price offers our customers the high quality products that they've come to expect at price points that represent a compelling value proposition in the categories that are most relevant to them. Multi-price is designed to complement our core $1.25 strategy, not replace it. Even as we expand our multi-price assortment, we expect that at least 80% of the items in any Dollar Tree store will remain at that entry-level price point. Now, back to the rollout. By the end of the quarter, we had converted roughly 10% of Dollar Tree stores to the new in-line multi-price configuration. To date, we are pleased with the performance of this latest group of stores, which are out-comping our $1.25 only in Dollar Tree Plus stores.
As we roll out our latest concept to 2,000 more stores over the balance of this year, we are proactively taking steps to minimize any operational disruption by using teams of dedicated third-party specialists to complete the conversions. I'm excited about our multi-price journey. Post conversion comps are running at or above expectations at the vast majority of stores that we've transitioned. That said, there is a bit of a learning curve with multi-price as we evolve from our fixed price legacy.
This is a new discipline for us and it will take us a little bit of time to fully build out our core competencies. But we're off to a good start, and so far, I'm pleased with the customer response to our new offerings. Shifting over to Family Dollar. Topline performance in quarter one was in line with our expectations. Comps were up 0.1% as we cycled a 6.6% comp in quarter one of last year. Customer traffic increased 0.9%, which was partially offset by a 0.8% decrease in average ticket. Both traffic and ticket trends improved on a sequential basis as the multiple merchandising initiatives and growth strategies we've launched over the past several quarters continue to progress.
Family Dollar's consumable comp was up 1.4% and its discretionary comp was down 4.7%. While Family Dollar's discretionary comp is still negative, it is worth pointing out that the underlying trend has gradually improved. The pace of mix shift towards consumables at Family Dollar has definitely slowed and since quarter one of last year, our two-year stack discretionary comp has improved by 1,000 basis points. While our lower income consumers continue to deal with inflation, higher interest rates, and reduced government benefits, we are encouraged that the worst of the SNAP headwinds appear to be behind us.
While lower SNAP benefits were a meaningful 280 basis point drag on Family Dollar's first quarter comp, this was a 200 basis point sequential improvement over the quarter four SNAP headwinds. Similar to Dollar Tree, Family Dollar also continues to gain consumables market share, with our dollar growth exceeding the market by 180 basis points and our unit growth exceeding the market by 80 basis points. Lastly, on Family Dollar, let me take a moment and update you on the portfolio optimization.
We closed 506 underperforming Family Dollar stores in the first quarter. The remaining 90 or so stores we identified in the initial round of closures were closed in May. None of the stores that closed in quarter one are included in our comp results, although any revenues and expenses from the time they were open are included in our quarter one P&L. Before I turn things over to Jeff, I want to again emphasize that our operating performance in both segments remains strong. At Dollar Tree, we continue to acquire new customers and gain market share as our next generation of multi-price resonates with a broader base of consumers and at Family Dollar, we believe the decisive actions we took to solidify the portfolio will have a positive impact on operations and returns.
As a more streamlined organization, I am confident that Family Dollar's best days are ahead of it based on the wide range of growth initiatives that are in place. With that, I'll turn the call over to Jeff.
