Rick Dreiling
Chairman & Chief Executive Officer at Dollar Tree
Thanks, Bob. I'd like to welcome all of you that have joined our call this morning. I'm sure that many of you had a chance to attend our investor conference in June. I hope the information we've presented was valuable to you and that you left the event with a better understanding of the key growth strategies that we have in place to deliver $10 or more EPS by 2026.
I am confident that the team has identified the right levers to unlock the true value of our business. We are making good progress and continue to act with urgency to accelerate the pace of improvement in our merchandising, store operations, supply chain and IT infrastructure. Our renewed merchandising efforts represent a major opportunity to unlock value. We outlined our multi-price journey at Dollar Tree, detailed our real estate and merchandising initiatives at Family Dollar, and reviewed our plans to improve store standards across the Enterprise. We have also launched efforts to drive sales productivity and increase operating efficiency, like, simplifying the truck unloading process and improving in-stock levels.
You heard me say many times that retail is all about growing units, growing transactions and growing sales per square foot. When these retail fundamentals move in the right direction, everything else follows. I am pleased to report that all three are heading in the right direction for us. For the past two quarters, both segments posted positive unit growth in consumables, while the market has been negative. Second quarter traffic was up over 3% at Family Dollar and nearly 10% at Dollar Tree; the fourth consecutive quarter of growth at Family Dollar and the second for Dollar Tree. And finally, sales per square foot is up 4% at Family Dollar and 6% at Dollar Tree. When it comes to our momentum in these key retail fundamentals, our ongoing merchandising efforts and the investments in labor and stores are paying dividends, and setting the stage for everything else to follow.
Now let me review some of our second quarter highlights. A little later, Jeff will provide a more detailed review of our results and update you on our outlook for the balance of the year. For the quarter, on a consolidated basis, we delivered an 8.2% increase in sales to $7.3 billion with 6.9% Enterprise comp growth and $287.8 million of operating income, which led to EPS of $0.91.
In our Dollar Tree segment, our 7.8% comp was driven by 9.6% more traffic with a modest offset from average ticket. Dollar Tree's momentum remains strong with this quarter's comp coming in on top of a 7.5% comp last year. Meanwhile, the Family Dollar segment continues to make good progress in its operational turnaround. The second quarter comp of 5.8% was nicely balanced between 3.4% more traffic and 2.3% average ticket growth with the strong comp trends being supported by our improved price position and merchandising efforts.
While the challenging macro environment continues to pressure our sales mix in both segments, I am pleased with the gains in traffic, new customers and market share. Regarding the industry-wide shift in consumer purchasing behaviors to consumables, we believe this is reflective of the current macroeconomic environment and continuing rotation to a pre-pandemic balance after years of elevated spending across discretionary categories. We believe we are winning in consumables as more customers come to see Dollar Tree and Family Dollar as the compelling destinations for value.
At Dollar Tree, our multi-price strategy provides flexibility to respond to changing customer needs. At Family Dollar, our improved price image and wide range of merchandising initiatives are clearly resonating with consumers. In this environment, consumers from all income levels are increasingly seeking value. We are well-positioned to capture incremental share of wallet when higher-income consumers respond to our strong price value proposition and when lower-income customers concentrate their spending on needs-based consumables.
This is particularly true across food and other consumables, where value-oriented retailers are taking unit and dollar share. As a result, food categories are disproportionately driving sales momentum across the value retail landscape. Dollar Tree and Family Dollar are no exception. Our food business is especially well-positioned in the current environment and we are seeing extremely high volume growth across our frozen and center store food categories.
There is also growing evidence that consumers are seeking value through private brands. Expanding and improving our private brand assortment will be a significant growth vehicle for us going forward. To this end, the private brand expansion program at Family Dollar remains on track. This year, we launched over 125 private brand items, which we will further accelerate when our new family wellness and vitamin products hit store shelves in the fourth quarter. We are already seeing encouraging results across our private brands with second quarter penetration expanding by 55 basis points, units sold growing by 4% and private brand comps increasing over 15%.
New customers are the lifeblood of retail and a critical part of driving traffic and market share. In the past year, we have added nearly 5 million new customers across both segments with 2.6 million of these customers having a household income over $125,000. Importantly, our research tells us that a very high percentage of these new customers come back visiting an average of five times in the year following their initial trip. In fact, we now rank in the top 10 retailers, measured by annual new customer activations. These positive traffic and new customer trends are leading to strong market share gains.
For the second quarter in a row, both segments gained market share in consumables as our unit volume grew while the markets' unit volume shrank. According to Nielsen data, our second quarter consumable unit volume growth outpaced the market by over 1,100 basis points at Dollar Tree and 530 basis points at Family Dollar with both segments extending their margin of outperformance from last quarter.
Shifting from our recent sales performance, I'd like to take a few minutes to update you on several key initiatives across our Company. In merchandising, we have increased our Dollar Tree Plus target to 4,900 stores by year-end, up from 4,300 stores that we articulated in June. At the end of the second quarter, our Dollar Tree Plus assortment was available in over 3,600 locations and the $3, $4 and $5 frozen and refrigerated assortment was available in nearly 5,600 stores.
At Family Dollar, we are on track to complete planogram resets at all of our stores by November, and we are pleased with the sales lift from these resets so far. In real estate, we remain on pace to hit our target of 600 to 650 new store openings this year with roughly two-thirds of those coming in the back half of the year. We also continue to make progress with our emerging formats at Family Dollar. We completed 271 H2.5 renovations, bringing the total number of H2.5 locations to 830. We opened or converted 90 Family Dollar stores under our rural combo format. Overall, we are on track to complete at least 1,000 Family Dollar renovations by year-end.
In supply chain, Mike Kindy and his team are investing in temperature control across our distribution center network. Adding full temperature control to our DCs improves the work environment for our associates and drives improved operating performance. It also drives efficiency by reducing cross-docking expenses and increasing flexibility to store the full range of OTC, HBA products. We recently expanded temperature controls at two additional DCs, which brings us to four in total. By year-end, we expect to upgrade eight additional DCs with the balance rolled out by the end of 2024.
While still in its early days, we continue to make good progress on our Rotacart rollout. Beta testing on Rotacart deliveries is currently underway and we are on track for our DC and Matthews, North Carolina, to be Rotacart enabled by the end of this year.
Moving on to IT. We're also making good progress on needed upgrades to our infrastructure, particularly on our new store and inventory management systems. Meanwhile, our new warehouse and transportation management systems are progressing through their development stages with rollouts anticipated to begin early next year.
With the continued focus on our people, we saw double-digit improvements during the second quarter in employee turnover and store vacancy levels across both segments. As the investments we're making in store-level wages, benefits and elevated standards begin to yield clear and tangible results.
As I mentioned at our investor conference, we had a significant number of stores that don't open on time or close early due to staffing shortages. I'm happy to report that we saw a measurable improvement in this area during the second quarter at both Dollar Tree and Family Dollar. If we eliminated all eight openings in early closings, it could add 1.5 points to our overall comp.
In summary, when it comes to the factors that we can control, we continue to execute at a high level. As our recent sales performance shows, consumers are clearly responding to our merchandising initiatives. At the same time, Mike Creedon and his team are acting with urgency to upgrade our store conditions and improve operational consistency across our store fleet.
We are making the investments we need to make to accelerate our topline performance, generate greater operating efficiencies, and improve profitability. We've built a strong cultural foundation as an organization and we are focused on delivering better results for all our key constituents including our more than 200,000 associates.
And speaking of our associates, we've just spent the last two weeks meeting with our field leadership at our headquarters here in Virginia. A team of more than 1,300 leaders, who represent more than 200,000 associates, and the energy coming out of those sessions was amazing. Our people are the key to a great customer experience and I am so grateful for the progress we've made in our turnaround efforts over such a short period of time.
I will now turn the call over to Jeff to review our financial results and outlook for the balance of the year.
