Rick Dreiling
Chairman and Chief Executive Officer at Dollar Tree
Thanks, Bob, I'd like to welcome everyone joining us on the call today. In brief, thanks to the dedication and hard work of our teams and continued execution towards our business transformation, third quarter results were well within our expected range. In a challenging retail environment were the accumulating pressures of inflation, reduced government benefits, and depleted savings have negatively affected lower-income consumers, our top-line performance outpaced most of our peers. We accomplished this by taking market share in both segments, which we believe reflects the initial impact of our investments and transformation initiatives.
Despite Family Dollar's softer comps and $0.05 per share of unexpected costs from the previously announced voluntary recall of OTC and other products, we delivered $0.97 of EPS. Our sales momentum continues to be mostly traffic-driven, as we attract new customers and gain both a unit and dollar market share. In the last 12 months, we've added 4.3 million new customers at Dollar Tree and 2.3 million new customers at Family Dollar. Importantly, most of these first-time customers come back to shop with us multiple times after their first visit. In fact, our loyal customers are now the third-largest retail customer base in the United States.
As importantly Dollar Tree's is attracting customers from a broader range of income levels. Most of our new customers over the past year have household incomes over $125,000 and this income demographic, which is a significant contributor to Dollar Tree's quarter three comp growth. At Family Dollar, our price-value perception remains strong after last year's price investments, which we cycled in July. That said Family Dollar fell short of our quarter three comp expectations. Similar to what other retailers have reported, we experienced softening trends throughout the quarter, particularly in October as lower-income consumers responded to the accumulated impact of inflation and reduced government benefits, we saw a notable pullback in spending, particularly in higher-margin discretionary categories.
I will now review some of our third quarter highlights. For the third quarter, on a consolidated basis, we delivered a 5.4% increase in our net sales to $7.3 billion. This was driven by comp growth of 3.9% with traffic up 7% in average ticket down a little less than 1%. Operating income came in at $301.7 million, which resulted in EPS of $0.97, including the negative $0.05 impact from the OTC recall.
In the Dollar Tree segment, our comp was up 5.4% with traffic increasing by 7%, and average ticket decreasing by 1.5%. We are especially pleased with these results as they come on top of a 0.6% comp last year. Our consumable comp was up 11.1% and discretionary was up 1.1%. We believe the consumable strength at Dollar Tree this quarter as well as our strong multi-year discretionary comp shows customers are embracing our compelling value proposition in this strange economic environment. According to Nielsen, Dollar Tree gained an impressive 30 basis points of consumables market share in the third quarter as our unit volume grew 6%, while market unit volume declined.
In the Family Dollar segment, our comp was up 2% with traffic increasing 1.4% and average ticket increasing 0.7%. Our consumable comp was especially strong at 6.2%, while discretionary was down meaningfully at 12.5%, particularly in categories like home decor, electronics, and toys. In our view, these trends underscore how lower-income households are under increasing financial stress and directing their spending towards needs-based goods. While traffic and ticket were both positive for the quarter results did soften substantially as we move through the quarter with average ticket turning negative in October as our customers pulled back and we realize the adverse impact of the OTC recall. Even with these external challenges, Family Dollar grew market share in consumables with both unit and dollar growth exceeding the market by wide margins.
Although our low prices enabled us to operate from a position of strength in consumables, our lower-income customers at Family Dollar had been especially pressured by reductions in government SNAP benefits. Nationwide third quarter SNAP benefits were down 23% on a year-over-year basis, which was much more than the 5% reduction in quarter one or the 16% reduction in quarter two. Timing-wise the month-by-month deceleration in our quarter-three comps match the progressive reductions in national SNAP payments throughout the quarter. In addition to pressure from lower SNAP payments, Family Dollar's comps were negatively affected by lower tax refunds this year. With that said, I believe that the wide range of growth initiatives we have in place will help us maintain our momentum relative to the competition. As a value retailer, we are uniquely positioned to meet customers' needs in a challenging economic environment. We remain focused on the factors that we can control, and we'll continue to navigate as best we can around those that we don't.
Now, let me take a few minutes to update you on our transformation journey. Our merchandising, IT and supply chain initiatives are on-time and on-budget and we are pleased with our progress to date. At Dollar Tree, we're ahead of schedule in our multi-price journey. Our Dollar Tree Plus assortment is now available in 4,500 stores and we are on track to finish the year with more than 4,900. Our Dollar Tree frozen and refrigerated assortments are now in 6,500 stores, significantly ahead of our original year-end target of 5,500. Customers are clearly responding to our expanded multi-price assortment as our research shows us that 17% of US households have purchased a multi-priced product from a Dollar Tree store at lealeast inn the past 12 months. Importantly, these customers are adding multi-priced products on top of their traditional baskets. For example in quarter three, the average multi-price basket included three multi-priced items and 11.6 traditional $25 items.
At Family Dollar, we completed our planogram resets by November as scheduled, improving and expanding our product assortment while increasing our shelf profile and merchandising to 78 inches across the portfolio. We're on track to renovate more than 1,000 Family Dollar stores by year-end. We have now upgraded 600 Family Dollar stores to our H2.5 rule to extra small box format. In quarter three, private brand penetration at Family Dollar reached 14%, a quarter ahead of schedule and we are on pace to hit our 20% target by 2026. We are also on track to add over 70 new SKUs to our Family wellness product line and more than 100 new private brand SKUs in total by the end of December. Within that same timeframe, we also expect to complete our conversion of 300 control brands to private brands.
In real estate, we opened 197 new stores in quarter three and we are on track to meet our target of 600 new stores to 650 new stores this year. In supply chain, we are preparing to implement our streamlined delivery process for stores serviced by our math used in North Carolina distribution center with roto carts and liftgate trailers starting next month. We have been testing our roto carts and the feedback has been extremely positive. We remain on schedule for all of our distribution centers to be using roto carts by the end of 2027. Across our teams, the investments we've made in our people, including increased wages in key markets, simplified work at the store level, and increased communications throughout the company are driving meaningful improvements in store turnover and associate satisfaction.
Additionally, as we prepared for our busiest season of the year, I am proud to report that our Annual National Hiring Day in May and October was a huge success. We hired nearly 14,000 part-time associates to work in our stores, for the current holiday season, an all-time record for this event. While we still have a lot of work to do in this transformational journey. I am pleased with what we've accomplished to date. We are focused on our plans to accelerate sales and grow earnings and I remain confident in our ability to execute this ambitious undertaking. That said, this journey also needs to be dynamic and adapt to changing market conditions and our learnings along the way. We believe being thoughtful about our store portfolio will help enhance our results. To maximize value creation, we need to periodically reevaluate our portfolio in terms of current market conditions, individual store performance, and overall portfolio considerations.
To this end, we have initiated a comprehensive review of our Family Dollar portfolio to address underperforming stores that are not aligned with our transformative vision for the company. This will involve among other things, identifying stores as candidates for closure, rebannering, or relocation with the goal of ensuring that each asset under the Family Dollar banner is delivering its full value for our shareholders on a sustainable basis. I'm a strong believer in the Family Dollar brand and what it means to our customers and associates in thousands of communities across the country. Going forward, we need to ensure that the Family Dollar portfolio is well-positioned for success and meets the financial and operating objectives of our organization and the expectations of our valued customers and associates. We believe that this action will fortify our base, strengthen our brand, and allow Family Dollar to achieve its full growth potential.
Jeff will now review our financial results and outlook for the remainder of the year.
