Michael A. Witynski
President and Chief Executive Officer at Dollar Tree
Thank you, Randy. Good morning. Thank you for joining us on today's call. I would first like to take a moment to recognize our store associates, distribution center staff, our field leadership and our world-class merchants. Our teams are working around the clock to do everything they can to defend against the current inflationary environment, keep our shelves stocked and provide customers with undeniable value and great service in easy-to-shop, close-to-home store locations. Their hard work and dedication is critical to our Company's success and I'd like to extend sincere thanks for their unwavering commitment to our customers.
We experienced a strong finish to the third quarter as shoppers are increasingly focused on value in this inflationary environment. We continue to see accelerated progress in our key strategic initiatives, including Dollar Tree Plus, Combo Stores and our H2 format.
During the past quarter freight costs were significantly higher than expected. Our fourth quarter outlook, which Kevin will provide later in the call, reflects the higher cost structure we experienced in the third quarter. However, our EPS for the third quarter was at the higher end of the range as the performance of the rest of the business offset these higher freight costs.
Freight and supply chain disruptions, of course, continue to be our biggest challenge in the near term by far and the impact will continue for a while. But this challenge is transitory. As we detailed last quarter, our team continues to take robust action to mitigate the impact of freight costs and supply chain disruptions. We believe that based on the steps that we have taken, we will benefit meaningfully as these challenges abate.
The Dollar Tree segment delivered a comp sales increase of 60 basis points against its toughest quarterly compare in nearly three years. On a two-year comp stack basis, this was a sequential improvement of 170 basis points from the prior quarter. Discretionary continues to perform well with a 3.2% comp for the quarter. Consumables were impacted by assortment constraints and past dues. Our $3 and $5 Plus assortment continues to resonate well with our shoppers as we had tremendous sell-through on our Halloween merchandise and fall decor. And for the year our multi-price point merchandise will exceed our sales plan and we will end this fiscal year with Dollar Tree Plus in nearly 600 stores, exceeding our previous target of 500 stores by the end of the year.
Family Dollar delivered a positive 2.7% comp against the 6.4% increase a year ago. This represented the third consecutive quarter that Family Dollar two-year comp stack has exceeded 9%. The consumable side of the business comped over 3% while discretionary was slightly negative as we cycled stimulus dollars from the prior year. We are extremely pleased with the Family Dollar brand as the business continues to gain share.
Comps of both banners were driven by an increase in average ticket, partially offset by a decline in transaction count. The last month of the quarter, October, represented the strongest comp for both banners.
Our digital offerings continued to evolve, while we are steadfastly focused on best meeting our customers' changing needs. In October, we announced our expanded partnership with Instacart to now include same-day delivery from nearly 7,000 Dollar Tree stores. Nearly 100 million US households now have delivery options from 13,000 of our store locations. We are very pleased with the initial results from the latest expansion.
Turning to the $1.25 price point. Our leadership team has been planning for the expansion of this initiative since late summer. As you know, in September we announced our plans to add price points above $1 to all Dollar Tree Plus stores and on a test and learn basis to selected legacy Dollar Tree stores. As a result of the positive customer feedback and store performance during the initial phase, we have introduced the initiative to nearly 200 additional legacy Dollar Tree stores.
In today's press release, we announced for the first time in Dollar Tree's 35-year history we are lifting the $1 price point cap at all Dollar Tree stores on the majority of our assortment. The $1.25 price point enhances our ability to materially expand assortments, introduce new products and sizes and provide families with more of their daily essentials. We will have greater flexibility to continue providing incredible value and help customers get the everyday items they need and celebratory and seasonal products that Dollar Tree is best known for.
Additionally, we are now reintroducing many customer favorites and key traffic driving domestic and consumable products that Dollar Tree had previously discontinued due to the constraints of the $1 price point. The new price point will also enable us to mitigate the historically high merchandising cost increases, including freight and distribution costs as well as higher operating costs such as wage increases. Our teams are focused on speed, execution and customer research and our shoppers are responding favorably. When surveyed the majority of our customers indicated they were already aware of the previously-announced new price point and not surprisingly, many have also indicated they are seeing price increases across the market and that Dollar Tree is still providing the products they need at undeniable value.
We are extremely focused on flawless execution and are providing our leadership team out in the field with tools to support a seamless transition. Actions include providing teams with a conversion checklist to ensure consistently achieve [Phonetic] across markets and stores, dedicate adequate store hours to complete the preparation tasks, including removing the signage and display elements referring to the EveryThing's At Dollar, implementing the new signage regarding the $1.25 price point on displays, end caps and shelf strips throughout the store, hosting clear communications to customers in entry ways and at the checkout and we are equipping our store teams with messaging for responding to customer inquiries.
We have closely monitored the performance of the test stores and sharper reaction through extensive customer intercepts and third-party surveys since our initial test began. We will continue to gather feedback throughout the process to ensure we remain fiercely committed to our brand promise of providing customers with extreme value every day along with more thrills, more fun and more new items every week.
For 35 years, we've been able to manage through inflationary periods to maintain the Everything for $1 philosophy that distinguished Dollar Tree and made it one of the most successful retail concepts for three decades. However, we strongly believe this is the appropriate time to shift away from the constraints of the $1 price point in order to continue offering extreme value to our customers.
The independent surveys of shoppers across US have indicated that 77% of the shoppers were almost immediately aware of the price point change. And of those 77%, 31% already knew before they visited the store and 17% became immediately aware upon entering store, while 29% were aware within minutes of entering the store. Critically, 91% of those surveyed indicated they would shop with the same or increased frequency. We will continue to monitor the success of these initiatives and we believe we will see improvement in the survey results since now we have the ability to further expand the product offering and reintroduce key traffic-driving items.
Upon validating the store execution, customer reception and the performance results were as anticipated, we expanded the program to nearly 200 additional stores across three major markets and we are pleased to say the results have been relatively consistent. As expected, we are seeing lifts in comp sales, partially offset by smaller decline in unit sales. We are seeing an initial lift to product margins that will normalize over time as our merchant teams evolve our assortments. Importantly, we expect this initiative will enable us to mitigate the higher freight other inflationary costs in order to return to our historical gross margin of 35% to 36% in fiscal 2022 while improving the merchandising we are providing for our customers.
All the steps I mentioned have set a solid foundation to streamline the execution of this important milestone in our Company's history. We have been working hard to prepare this for -- this key strategic initiative to ensure that we are providing customers with great products while unlocking long-term shareholder value. We are focused on aggressively executing our plan to roll out the new price point across the entire footprint of legacy Dollar Tree stores. Our teams will be introducing the new price point in more than 2,000 additional legacy Dollar Tree stores in December and complete the rollout to all stores by the end of the first quarter in fiscal 2022.
Concurrently our company's merchants are working to continually enhance the offerings to drive traffic, capture market share and further grow customer loyalty. We are working with our suppliers and we have already begun introducing new items every week, including seasonal crafts, party supplies, food essentials and more. Beyond the changes at our legacy Dollar Tree stores, we are also continuing to expand the availability of $3 and $5 Plus assortment.
As I noted a few moments ago, we will exceed our previous goal of now adding the Plus concept to nearly 600 stores by the end of the year. We plan to add the Plus assortment to another 1,500 stores in fiscal 2022 and complete at least 5,000 stores in total by the end of fiscal 2024.
We are enthusiastic about the opportunity and improved performance of Dollar Tree by continuing to deliver extreme value to our customers at the new 1.25 price point, driving comp sales and improving store productivity, enhancing flexibility to better manage the overall business in an inflationary environment. And as previously mentioned, we are turning Dollar Tree gross margins back to the chain's historical 35% to 36% annual range in fiscal 2022.
I will now hand the call over to Kevin to provide details on Q3 performance and our outlook.