Jeff Davis
Chief Financial Officer at Dollar Tree
Thank you, Mike, and good morning, everyone. I am delighted to join the Dollar Tree team at such a pivotal [Phonetic] time. I've been in my seat for almost eight weeks and I have experienced tremendous energy and excitement across the entire organization as a team is an embracing change. While the company has been around for decades, I believe we are in the early phase of significantly improving our long-term operating performance. In October, I had an opportunity to meet several of you, had store visits and I look forward to connecting with a larger group in the near future, more details to come.
Since Mike and Rick already covered our third quarter sales results, I will now move directly to the discussion of operating income. Unless otherwise stated, all third quarter comparisons are against the same period last year. To supplement my comments, we are introducing a quarterly presentation on our website at corporate.dollartree.com/investors, which outlines several key operating metrics. We hope you will find this additional information helpful to better understand our business.
Operating income increased 22.8% to $381.3 million, or 5.5% of total revenue, a 70 basis point improvement in operating income margin. This was led by a 240 basis point improvement in gross profit margin, partially offset by a 170 basis point increase in our SG&A expense rate.
Gross profit increased 17.5%. The Dollar Tree segment gross margin improved 520 basis points, primarily from higher initial mark-on, related to the move to $1.25 price point, lower freight cost and sales leverage, partially offset by greater penetration of lower-margin consumable merchandise and product cost inflation. Family Dollar's gross margin declined 100 basis points, largely due to a product mix shift and product cost inflation. We expect to see continued pressure across both segments related to the inflationary cost environment and merchandise mix, as our consumable sales are expected to continue outpacing the discretionary.
SG&A as a percentage of total revenue increased 170 basis points to 24.4%. The increase is principally related to elevated repairs and maintenance, as part of our commitment to improve store standards, investments in store hourly wages and higher inflationary cost across the number of expense categories, including utilities.
Corporate support and other expenses increased 30 basis points to 1.4%, primarily from increased stock compensation expense, higher incentive comp and professional fees. From a bottom line basis, net income improved 23.1% to $266.9 million, or $1.20 per diluted share, in comparison to $0.96 per diluted share last year.
Moving to the balance sheet. My comments reflect balance comparisons to the end of Q3 2022 versus Q3 2021. Combined cash and cash equivalents totaled $439 million, compared to $701 million. The reduction in cash is largely attributed to the repurchase of approximately 2.86 million shares for $397.5 million in Q3 of this year. Inventory increased 31.1% primarily from inflationary product and freight costs, expansion of $1.25 and multi-price Plus inventory and store growth.
Also recall last year, shoppers pulled forward purchases, well ahead of the holiday season, concerned about product availability, while we were chasing transpacific deliveries of discretionary products, as our inventory levels dipped well below normal operating levels. This year, shoppers' purchasing behavior appears to be more closely timed to holiday dates. Finally, unit counts are at similar levels to October 2019. Our inventory is fresh. We have limited-dated inventory, well within manageable levels. Capital expenditures were $391.2 million in the third quarter versus $295.6 million last year. For fiscal 2022, we now expect capital expenditures to total approximately $1.2 billion.
As we look to Q4, we see the following affecting our business. We will anniversary a significant number of Dollar Tree stores, approximately 2,500 in December and 3,000 in January, the transition to the $1.25 price point a year ago. We previously experienced an outsized benefit to comps and margins associated to the transition. The economy continues to pressure middle and low household income customers, resulting in needs-based purchasing. We expect consumables to outperform discretionary, which negatively impacts gross margin. We are cycling advanced child tax credit payments, which were distributed mid-month from July to December in 2021.
On a year-over-year basis, we are facing higher costs from suppliers related to this inflationary environment. While at Family Dollar, we do have the flexibility to adjust price. At Dollar Tree, where we are at a fixed price points, it takes us time to adjust quantities and pack sizes for cost changes, which can lead to near-term pressure to margins. We will continue to invest in store and DC standards and expect to have higher year-over-year expenses in repairs and maintenance. In addition to being right on price, we will be right on wage as it continues to be a competitive market for talent.
We are raising our sales outlook for the year. Consolidated net sales for the year are now expected to range from USD28.14 billion to USD28.28 billion compared to our previous outlook range of USD27.85 billion to USD28.10 billion. We expect to deliver mid-single digit comp sales increase for the year, comprised of a high-single digit increase at Dollar Tree stores and a low-single digit increase in Family Dollar. Selling square footage is expected to grow by approximately 2.8% as we are experiencing supply chain delays related to procuring equipment and fixtures for store openings.
For Q4, we estimate consolidated net sales will range from USD7.54 billion to USD7.68 billion based on a mid-to-high single-digit increase in same-store sales for the enterprise. At the end of Q2, we expected fiscal 2022 diluted earnings per share to be in the range of $7.10 to $7.40. Due to several factors, including, but not limited to, an acceleration of consumable product mix shift and elevated product cost pressure, we expect to be in the lower half of the previous outlook range.
Other considerations for our updated 2022 outlook include the following: we expect consolidated depreciation and amortization to be approximately $770 million. Net interest expense is expected to be $30 million in Q4 and $127 million for the year. Our outlook assumes a tax rate up 24.3% for the fourth quarter and 23.7% for fiscal 2022. Weighted average diluted share counts are assumed to be 222.3 million shares for Q4 and 224.2 million shares for the full year. Our outlook does not include any share repurchases. As of October 29, we had $1.85 billion remaining on our existing share repurchase authorization.
I'll now turn the call back to Mike.