Item 1. BUSINESS

Overview

We are the leading operator of discount variety stores offering merchandise at the fixed price of $1.00. We believe the variety and value of products we sell for $1.00 sets us apart from our competitors. At January 31, 2015, we operated 5,367 discount variety retail stores. Our stores operate under the names of Dollar Tree, Deals, Dollar Tree Deals, Dollar Tree Canada, Dollar Giant and Dollar Bills. In 5,148 of these stores, we sell substantially all items for $1.00 or less in the United States and $1.25(CAD) or less in Canada. In substantially all of the remaining stores, operating as Deals or Dollar Tree Deals, we sell items for $1.00 or less but also sell items for more than $1.00.

We believe our optimal store size is between 8,000 and 10,000 selling square feet. This store size provides the appropriate amount of space for our broad merchandise offerings while allowing us to provide ease of shopping to our customers. As we have been expanding our merchandise offerings, we have added freezers and coolers to approximately 3,620 stores to increase sales and shopping frequency. At January 29, 2011, we operated 4,101 stores in the United States and Canada. At January 31, 2015, we operated 5,157 stores in 48 states and the District of Columbia, as well as 210 stores in Canada. Our revenue and assets in Canada are not material. Our selling square footage increased from approximately 35.1 million square feet in January 2011 to 46.5 million square feet in January 2015. Our store growth has resulted primarily from opening new stores.

Business Strategy

Value Merchandise Offering. We strive to exceed our customers' expectations of the variety and quality of products that they can purchase for $1.00 by offering items that we believe typically sell for higher prices elsewhere. We buy approximately 59% to 61% of our merchandise domestically and import the remaining 39% to 41%. Our domestic purchases include basic, seasonal, closeouts and promotional merchandise. We believe our mix of imported and domestic merchandise affords our buyers flexibility that allows them to consistently exceed the customer's expectations. In addition, direct relationships with manufacturers permit us to select from a broad range of products and customize packaging, product sizes and package quantities that meet our customers' needs.

Mix of Basic Variety and Seasonal Merchandise. We maintain a balanced selection of products within traditional variety store categories. We offer a wide selection of everyday basic products and we supplement these basic, everyday items with seasonal, closeout and promotional merchandise. We attempt to keep certain basic consumable merchandise in our stores continuously to establish our stores as a destination and increase the traffic in our stores. Closeout and promotional merchandise is purchased opportunistically and represents less than 10% of our purchases.

Our merchandise mix consists of:

• consumable merchandise, which includes candy and food, health and beauty care, and everyday consumables such as paper and chemicals, and in select stores, frozen and refrigerated food;

• variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and

• seasonal goods, which include, among others, Valentine's Day, Easter, Halloween and Christmas merchandise.

We added freezers and coolers to certain stores and increased the amount of consumable merchandise carried by those stores. We believe this initiative helps drive additional transactions and allows us to appeal to a broader demographic mix. We added freezers and coolers to 460 additional stores in 2014. Therefore, as of January 31, 2015, we have freezers and coolers in 3,620 of our stores. We plan to install them in 320 additional stores by the end of fiscal 2015.

The following table shows the percentage of net sales of each major product group for the years ended January 31, 2015 and February 1, 2014:

	January 31,		February 1,
Merchandise Type	2015		2014
Consumable	49.3	%	49.4	%
Variety categories	46.4	%	46.3	%
Seasonal	4.3	%	4.3	%

At any point in time, we carry approximately 6,800 items in our stores and as of the end of 2014 approximately 35% of our items are automatically replenished. The remaining items are pushed to the stores and a portion can be reordered by our store managers on a weekly basis. Through automatic replenishment and our store managers’ ability to order product, each store manager is able to satisfy the demands of his or her particular customer base.

Customer Payment Methods. All of our stores in the United States accept cash, checks, debit cards and credit cards. Along with the rollout of freezers and coolers, we have increased the number of stores accepting Electronic Benefits Transfer (EBT) cards and food stamps (under the Supplemental Nutrition Assistance Program (“SNAP”)) to approximately 5,000 stores as of January 31, 2015.

Convenient Locations and Store Size. We primarily focus on opening new stores in strip shopping centers anchored by large retailers who draw target customers we believe to be similar to ours. Our stores are successful in metropolitan areas, mid-sized cities and small towns. The range of our store sizes allows us to target a particular location with a store that best suits that market and takes advantage of available real estate opportunities. Our stores are attractively designed and create an inviting atmosphere for shoppers by using bright lighting, vibrant colors and decorative signs. We enhance the store design with attractive merchandise displays. We believe this design attracts new and repeat customers and enhances our image as both a destination and impulse purchase store.

For more information on retail locations and retail store leases, see Item 2 "Properties” beginning on page 19 of this Form 10-K.

Profitable Stores with Strong Cash Flow. We maintain a disciplined, cost-sensitive approach to store site selection in order to minimize the initial capital investment required and maximize our potential to generate high operating margins and strong cash flows. We believe that our stores have a relatively small shopping radius, which allows us to profitably concentrate multiple stores within a single market. Our ability to open new stores is dependent upon, among other factors, locating suitable sites and negotiating favorable lease terms.

The strong cash flows generated by our stores allow us to self-fund infrastructure investment and new stores. Over the past five years, cash flows from operating activities have exceeded capital expenditures.

For more information on our results of operations, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 25 of this Form 10-K.

Cost Control. We believe that our substantial buying power and our flexibility in making sourcing decisions contributes to our successful purchasing strategy, which includes targeted merchandise margin goals by category. We also believe our ability to select quality merchandise helps to minimize markdowns. We buy products on an order-by-order basis and have no material long-term purchase contracts or other assurances of continued product supply or guaranteed product cost. No vendor accounted for more than 10% of total merchandise purchased in any of the past five years.

Our supply chain systems continue to provide us with valuable sales information to assist our buyers and improve merchandise allocation to our stores. Controlling our inventory levels has resulted in more efficient distribution and store operations.

Information Systems. We believe that investments in technology help us to increase sales and control costs. Our inventory management system has allowed us to improve the efficiency of our supply chain, improve merchandise flow, increase inventory turnover and control distribution and store operating costs. It is also used to provide information to calculate our estimate of inventory cost under the retail inventory method, which is widely used in the retail industry. Our automatic replenishment system replenishes key items, based on actual store level sales and inventory. At the end of 2014, approximately 35% of our items are on automatic replenishment.

Point-of-sale data allows us to track sales and inventory by merchandise category at the store level and assists us in planning for future purchases of inventory. We believe that this information allows us to ship the appropriate product to stores at the quantities commensurate with selling patterns. Using this point-of-sale data to plan purchases of inventory has helped us manage our inventory levels.

Corporate Culture and Values. We believe that honesty and integrity, doing the right things for the right reasons, and treating people fairly and with respect are core values within our corporate culture. We believe that running a business, and certainly a public company, carries with it a responsibility to be above reproach when making operational and financial decisions. Our executive management team visits and shops our stores like every customer, and ideas and individual creativity on the part of our associates are encouraged, particularly from our store managers who know their stores and their customers. We have standards for store displays, merchandise presentation, and store operations. We maintain an open door

policy for all associates. Our distribution centers are operated based on objective measures of performance and virtually everyone in our store support center is available to assist associates in the stores and distribution centers.

Our disclosure committee meets at least quarterly and monitors our internal controls over financial reporting to ensure that our public filings contain discussions about the risks our business faces. We believe that we have the controls in place to be able to certify our financial statements. Additionally, we have complied with the listing requirements for the Nasdaq Stock Market.

Seasonality. For information on the impact of seasonality, see Item 1A. "Risk Factors" beginning on page 10 of this Form 10-K and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 25 of this Form 10-K.

Growth Strategy

Store Openings and Square Footage Growth. The primary factors contributing to our net sales growth have been new store openings, an active store expansion and remodel program, and selective mergers and acquisitions. In the last five years, net sales increased at a compound annual growth rate of 10.0%. We expect that the majority of our future sales growth will come primarily from new store openings and from our store expansion and relocation program.

The following table shows the average selling square footage of our stores and the selling square footage per new store opened over the last five years. Our growth and productivity statistics are reported based on selling square footage because our management believes the use of selling square footage yields a more accurate measure of store productivity.

Year	Number of Stores	Average Selling Square Footage Per Store	Average Selling Square Footage Per New Store Opened
2010	4,101	8,570	8,400
2011	4,351	8,640	8,360
2012	4,671	8,660	8,060
2013	4,992	8,660	8,020
2014	5,367	8,660	8,060

We expect to increase the selling square footage in our Dollar Tree stores in the future by opening new stores in underserved markets and strategically increasing our presence in our existing markets via new store openings and store expansions (expansions include store relocations). In fiscal 2015 and beyond, we plan to predominantly open Dollar Tree stores that are approximately 8,000 - 10,000 selling square feet and we believe this size allows us to achieve our objectives in the markets in which we plan to expand. At January 31, 2015, approximately 2,974 of our stores, totaling 65% of our selling square footage, were 8,000 selling square feet or larger.

Our Deals stores, which offer an expanded assortment of merchandise including items that sell for more than $1.00, provide us an opportunity to leverage our Dollar Tree infrastructure in different merchandise concepts, including higher price points, without disrupting the single-price point model in our Dollar Tree stores. We operated 219 Deals stores as of January 31, 2015.

In addition to new store openings, we plan to continue our store expansion program to increase our net sales per store and take advantage of market opportunities. We target stores for expansion based on the current sales per selling square foot and changes in market opportunities. Stores targeted for expansion are generally less than 6,000 selling square feet in size. Store expansions generally increase the existing store size by approximately 2,750 selling square feet.

Since 1995, we have added a total of 695 stores through several mergers and acquisitions. Our acquisition strategy has been to target companies that have a similar single-price point concept that have shown success in operations or companies that provide a strategic advantage. We evaluate potential acquisition opportunities as they become available. On July 27, 2014, we executed an Agreement and Plan of Merger to acquire Family Dollar Stores, Inc. For more information regarding the pending acquisition, see "Family Dollar Acquisition" below and Item 8. "Financial Statements and Supplementary Data, Note 11 - Pending Acquisition and Related Debt" beginning on page 61 of this Form 10-K.

From time to time, we also acquire the rights to store leases through bankruptcy or other proceedings. We will continue to take advantage of these opportunities as they arise depending upon several factors including their fit within our location and selling square footage size parameters.

Merchandising and Distribution. Expanding our customer base is important to our growth plans. We plan to continue to stock our new stores with a compelling mix of ever-changing merchandise that our customers have come to appreciate. Consumable merchandise typically leads to more frequent return trips to our stores resulting in increased sales. The presentation and display of merchandise in our stores are critical to communicating value to our customers and creating a more exciting shopping experience. We believe our approach to visual merchandising results in higher sales volume and an environment that encourages impulse purchases.

A strong and efficient distribution network is critical to our ability to grow and to maintain a low-cost operating structure. In 2014, we expanded our Joliet, Illinois distribution center to 1.5 million square feet. In 2013, we completed construction on a new 1.0 million square foot distribution center in Windsor, Connecticut which began shipping merchandise in June 2013 and expanded our Marietta, Oklahoma distribution center to 1.0 million square feet. In addition, we leased an additional 0.4 million square feet at our San Bernardino, California distribution center in 2013. We believe our distribution center network is currently capable of supporting approximately $10.5 billion in annual sales in the United States. New distribution sites are strategically located to reduce stem miles, maintain flexibility and improve efficiency in our store service areas. We also are a party to an agreement which provides distribution services from two facilities in Canada.

Our stores receive approximately 90% of their inventory from our distribution centers via contract carriers. The remaining store inventory, primarily perishable consumable items and other vendor-maintained display items, are delivered directly to our stores from vendors. For more information on our distribution center network, see Item 2 “Properties” beginning on page 19 of this Form 10-K.

Family Dollar Acquisition

Dollar Tree's proposed acquisition (the "Acquisition") of Family Dollar Stores, Inc. was approved by the Family Dollar shareholders on January 22, 2015. We believe that the combined company will benefit from the following competitive strengths:

Size and Scale. Upon consummation of the Acquisition, we will become one of the largest retailers in North America, with approximately 13,000 stores in operation across 48 states, the District of Columbia and five Canadian Provinces. By banner, our store base and infrastructure will include Dollar Tree’s approximately 5,300 stores (including over 200 Deals stores) and 10 distribution centers and Family Dollar’s over 8,100 stores and 11 distribution centers, subject to adjustment for any stores that are divested in connection with the Acquisition. Dollar Tree has not yet reached an agreement with the Federal Trade Commission (‘‘FTC’’) regarding the number of stores that it will be required to divest but continues to believe that it will need to divest no more than roughly 300 stores, although the actual number of divestitures may be above or below 300, as the number of divestitures that the FTC will require remains subject to uncertainties.

Complementary business models across fixed- and multi-price points. Dollar Tree is the nation’s leading operator of fixed-price point stores, selling everything for $1 or less and Family Dollar is a leading national operator of multi-price point stores, selling the majority of its products at $10 or less. Following the Acquisition, we will create a diversified and complementary business model across both fixed-price and multi-price points which will allow us to offer our customers a broader assortment of compelling, fresh and fun merchandise at incredible values.

Targets broad range of customers and geographies. Dollar Tree targets customers within a broad range of Middle America with stores located primarily in suburban areas while Family Dollar targets low- and lower-middle income households through its urban and rural locations. We plan to operate and grow both banners. The Dollar Tree and Family Dollar store concepts are complementary and co-locate successfully in the same market with little cannibalization. Consequently, following the Acquisition we believe we will be able to significantly extend our reach to a broader base of customers and serve them with even greater value, choice and convenience.

Complementary product offering, providing a broad, compelling and fresh merchandise assortment at incredible values. Upon the consummation of the Acquisition, we will be able to leverage our complementary merchandise assortments across Dollar Tree and Family Dollar stores to deliver a broad, compelling and fresh product offering to our customers. Dollar Tree’s assortment consists of consumable merchandise (49%); variety merchandise (47%); and seasonal merchandise (4%) while Family Dollar’s assortment consists of consumable merchandise (73%); home products (10%); seasonal and electronics (10%); and apparel and accessories (7%). These complementary assortments will enable the combined company to leverage Dollar Tree's variety and seasonal expertise and Family Dollar's consumables expertise across both store banners and enhance the overall quality of our combined business’s merchandise offering.

Stable and recession resilient business. We believe that the retail segment in which we operate is a stable and recession resilient industry that grows through various economic cycles and experiences less volatility relative to other retail segments.

Dollar Tree has achieved consistent growth in net sales over each of the last 10 years and has successfully delivered positive same stores sales for 28 consecutive quarters through varying economic environments. Following the 2008 recession, Dollar Tree and Family Dollar stores have become a more frequent shopping channel for consumers who are increasingly price and value conscious. We believe that this industry backdrop coupled with our diversified geographic footprint and merchandise offering positions us well to generate stable, consistent demand going forward through various economic cycles.

Strong free cash flow generation to support planned debt repayment. We have always been prudent with our use of capital and following consummation of the Acquisition we intend to maintain our disciplined approach to capital deployment to invest in new store growth while supporting our existing infrastructure and store efficiency initiatives. Our business model offers a highly profitable and capital efficient platform with new stores requiring relatively minimal investment, while delivering robust operating income margins and initial investment payback within only a few years. We believe we will be able to share our best practices in capital deployment and store development across our combined platform to generate significant excess cash flow going forward and enable rapid debt repayment with the goal of returning to an investment grade rating profile within approximately five years.

Best in class management team with proven track record. Our management team includes experienced, long-standing members of the Dollar Tree family with a consistent track record of delivering industry leading profitability and returns on capital over the last 10 years. Led by Chief Executive Officer, Bob Sasser, our management team is responsible for our financial outperformance over the past decade. Together with the Family Dollar team, we intend to leverage our management expertise across a larger retail network in an effort to achieve higher levels of sales and profitability.

Competition

Our segment of the retail industry is highly competitive and we expect competition to increase in the future. We operate in the discount retail business, which is currently and is expected to continue to be highly competitive with respect to price, store location, merchandise quality, assortment and presentation, and customer service. Our competitors include single-price dollar stores, multi-price dollar stores, mass merchandisers, discount retailers, drug stores, convenience stores, independently operated discount stores, and a wide variety of other retailers. In addition, several competitors have sections within their stores devoted to "one dollar" price point merchandise, which further increases competition. We believe we differentiate ourselves from other retailers by providing high value, high quality, low cost merchandise in attractively designed stores that are conveniently located. Our sales and profits could be reduced by increases in competition. There are no significant economic barriers for others to enter our retail sector.

Trademarks

We are the owners of several federal service mark registrations including "Dollar Tree," the "Dollar Tree" logo, the Dollar Tree logo with a “1”, and "One Price...One Dollar." In addition, we own a concurrent use registration for "Dollar Bill$" and the related logo. We also acquired the rights to use trade names previously owned by Everything's A Dollar, a former competitor in the $1.00 price point industry. Several trade names were included in the purchase, including the marks "Everything's $1.00 We Mean Everything!," and "Everything's $1.00." With the acquisition of Deals, we became the owners of the trademark "Deal$”. With the acquisition of Dollar Giant, we became the owners of the trademark “Dollar Giant” and others in Canada. We have federal trademark registrations for a variety of private labels that we use to market some of our product lines. Our trademark registrations have various expiration dates; however, assuming that the trademark registrations are properly renewed, they have a perpetual duration.

Employees

We employed approximately 18,100 full-time and 71,900 part-time associates on January 31, 2015. Part-time associates work an average of less than 30 hours per week. The number of part-time associates fluctuates depending on seasonal needs. We consider our relationship with our associates to be good, and we have not experienced significant interruptions of operations due to labor disagreements.

DLTR - Dollar Tree, Inc.