Adjustments for Non-Cash Items

Stock-Based Compensation

Changes in Working Capital

Capital Expenditures (CapEx)

Proceeds from / Repayments of Debt

Share Repurchases

Dividend Payments

Net Change in Cash

82cd95f5fa942fb7455842d085e7b988cf0a6e1b7668991218c24ee4d85c1d06

Dollar General Corporation (DG) is the largest discount retailer in the United States by number of stores, operating 20,345 locations across 48 U.S. states and Mexico as of August 2, 2024 **[0001558370-24-012525_dg-20240802x10q.htm:16]**. The company offers a wide range of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products, and pet supplies, as well as non-consumable items like seasonal merchandise, home decor, domestics, and basic apparel **[0001558370-24-012525_dg-20240802x10q.htm:16]**. DG's merchandise includes both national brands and its own private brand selections, typically priced at $10 or less **[0001558370-24-012525_dg-20240802x10q.htm:16]**.

1. **Consumables** - Offers a broad selection of everyday products including food, paper and cleaning products, health and beauty items, and pet supplies, driving net sales and customer traffic **[0001558370-24-003813_dg-20240202x10k.htm:79]** **[0001558370-23-019576_dg-20231103x10q.htm:17]**.
2. **Seasonal Items** - Provides a variety of merchandise that changes with the seasons, appealing to customers looking for timely and relevant products **[0001558370-24-003813_dg-20240202x10k.htm:79]**.
3. **Home Products** - Features home decor and domestic items, catering to customers seeking affordable home essentials **[0001558370-24-003813_dg-20240202x10k.htm:79]**.
4. **Apparel** - Sells basic clothing options, focusing on value and affordability for everyday wear **[0001558370-24-003813_dg-20240202x10k.htm:79]**.

59ab7712cedbbae16ede7739f9c153f6ac1dd3bdc49ea3564cf0256b67ef32c1

13f8822f9646a52b6941e64102ebd6954446a53f7236d75defc62ccd4df01970

1. Given that new store returns are expected to decline to approximately 17% in 2025 from historic targets of over 20% due to higher occupancy and operating costs  **[DG_3410954_9]** , what specific strategies are you implementing to mitigate these higher costs and improve new store profitability, and how confident are you in achieving these improvements?

2. You mentioned the decision not to open additional pOpshelf stores in 2025 due to weaker discretionary spending  **[DG_3410954_10]** ; how does this impact your long-term growth strategy, and what measures are you taking to adapt to changing consumer trends in discretionary categories?

3. With ongoing gross margin pressures from increased promotional markdowns and a sales mix shift towards consumables  **[DG_3410954_4]** , how do you plan to balance the need to drive top-line growth with maintaining profitability, and what initiatives are in place to improve gross margins going forward?

4. Despite the progress you've made in your Back to Basics initiative, shrink and damages remain a headwind as noted in your guidance  **[DG_3410954_4]** ; can you provide more details on the specific actions you're taking to address shrink, and when do you expect to see a meaningful improvement?

5. Your leverage ratio remains above your target of approximately 3x adjusted debt to adjusted EBITDAR  **[DG_3410954_4]** ; given the ongoing capital investments and pressure on earnings, how do you plan to improve your debt metrics, and are there any plans to adjust capital allocation priorities to protect your investment-grade credit ratings?

e3e4e474a73e9f7d693b65f5517e6c5023fe8b3d024085296a2e8f6c29793953

Consumables

Seasonal

Home Products

Apparel

Total Revenue

d62991402abbc3f5178f73becd26b41eea7f652542bc602235ceda7d1aaf5912

- Family Dollar
- Dollar Tree
- Big Lots
- 99 Cents Only
- Walmart
- Target
- Kroger
- Aldi
- Walgreens
- CVS
- Rite Aid

These competitors operate in many of the areas where Dollar General operates and engage in extensive advertising and marketing efforts. Some have greater financial, distribution, marketing, and other resources, which may allow them to secure better arrangements from suppliers  **[0001558370-24-003813_dg-20240202x10k.htm:8]** .

fbc7f5ab500877e7fdcf074876e81d9ec00018ccfb7cb32d3879637b731a7209

ec8ad77b8ee5c99b63e4f80b87c51d2b3f6bfe6dd783a3a6ff9e55d449ec5dd7

74298b6ecc297a53e8ba67d1c19fb7d982db7f2feea9c9e3f6e068fbceb61fca

### Q3 2025 Earnings Call
- **Issued Period**: Q3 2025
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Net Sales Growth**: **4.8% to 5.1%**  **[DG_3410954_4]** .
  2. **Same-Store Sales Growth**: **1.1% to 1.4%**  **[DG_3410954_4]** .
  3. **EPS (Earnings Per Share)**: **$5.50 to $5.90**  **[DG_3410954_4]** .
  4. **Effective Tax Rate**: **23%**  **[DG_3410954_4]** .
  5. **Capital Spending**: **$1.3 billion to $1.4 billion**  **[DG_3410954_4]** .
  6. **Real Estate Projects**: **2,435 projects** (730 new stores, 1,620 remodels, 85 relocations)  **[DG_3410954_4]** .
  7. **Hurricane-Related Expenses**: Negative impact of **$32.7 million** in Q3 and estimated **$10 million** in Q4  **[DG_3410954_4]** .

### Q2 2025 Earnings Call
- **Issued Period**: Q2 2025
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Net Sales Growth**: **4.7% to 5.3%**  **[DG_3400213_6]** .
  2. **Same-Store Sales Growth**: **1% to 1.6%**  **[DG_3400213_6]** .
  3. **Gross Margin**: Expected pressure due to promotional markdowns and sales mix  **[DG_3400213_6]** .
  4. **EPS (Earnings Per Share)**: **$5.50 to $6.20**  **[DG_3400213_6]** .
  5. **Effective Tax Rate**: **23%**  **[DG_3400213_6]** .
  6. **Capital Spending**: **$1.3 billion to $1.4 billion**  **[DG_3400213_6]** .
  7. **Real Estate Projects**: **2,435 projects** (730 new stores, 1,620 remodels, 85 relocations)  **[DG_3400213_6]** .
  8. **Shrink**: Expected headwind, with improvement anticipated later  **[DG_3400213_6]** .
  9. **SG&A**: Incremental pressure from repairs, maintenance, and wage inflation (~4%)  **[DG_3400213_6]** .

### Q1 2025 Earnings Call
- **Issued Period**: Q1 2025
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Net Sales Growth**: **6% to 6.7%**  **[DG_3391249_4]** .
  2. **Same-Store Sales Growth**: **2% to 2.7%**  **[DG_3391249_4]** .
  3. **EPS (Earnings Per Share)**: **$6.80 to $7.55**  **[DG_3391249_4]** .
  4. **Effective Tax Rate**: **22.5% to 23.5%**  **[DG_3391249_5]** .
  5. **Capital Spending**: **$1.3 billion to $1.4 billion**  **[DG_3391249_5]** .
  6. **Real Estate Projects**: **2,435 projects** (730 new stores, 1,620 remodels, 85 relocations)  **[DG_3391249_5]** .
  7. **Promotional Markdown Headwinds**: Expected through the first half  **[DG_3391249_5]** .
  8. **Shrink**: Greater headwind than anticipated, with improvement expected later  **[DG_3391249_5]** .
  9. **SG&A**: Headwind from incentive compensation normalization and depreciation  **[DG_3391249_5]** .

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: FY 2024
- **Guidance**:
  1. **Net Sales Growth**: **6% to 6.7%**  **[DG_3378166_4]** .
  2. **Same-Store Sales Growth**: **2% to 2.7%**  **[DG_3378166_4]** .
  3. **EPS (Earnings Per Share)**: **$6.80 to $7.55**  **[DG_3378166_4]** .
  4. **Negative Impact on EPS**: **$0.50** due to higher incentive compensation  **[DG_3378166_4]** .
  5. **Effective Tax Rate**: **22.5% to 23.5%**  **[DG_3378166_4]** .
  6. **Capital Spending**: **$1.3 billion to $1.4 billion**  **[DG_3378166_4]** .
  7. **Quarterly Dividend**: **$0.59 per share**  **[DG_3378166_4]** .
  8. **First Quarter 2024 Guidance**:
     - **Comp Sales Increase**: **1.5% to 2%**  **[DG_3378166_5]** .
     - **EPS**: **$1.50 to $1.60**  **[DG_3378166_5]** .

d36bca963a6af082e13c2e5523759cf45d62efab9e654517a2ad063016ee7807

| Name               | Position                                              | Start Date       | Short Bio                                                                                                                                                                                                 |
|--------------------|-------------------------------------------------------|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Todd J. Vasos      | Chief Executive Officer and Director                  | October 2023     | Todd J. Vasos has served as the Chief Executive Officer of Dollar General since **October 2023**. He previously held the position of Chief Executive Officer from **June 2015 to November 2022**  **[0001558370-24-003813_dg-20240202x10k.htm:33]** **[0001104659-24-044304_tm2332854d3_def14a.htm:14]** **[0001104659-24-044304_tm2332854d3_def14a.htm:45]** .                                      |
| Kelly M. Dilts     | Executive Vice President and Chief Financial Officer  | May 2023         | Kelly M. Dilts has been serving as the Executive Vice President and Chief Financial Officer of Dollar General since **May 2023**. She joined Dollar General in **July 2019** as Senior Vice President, Finance  **[0001558370-24-003813_dg-20240202x10k.htm:33]** **[0001104659-24-044304_tm2332854d3_def14a.htm:37]** .                           |
| Steven R. Deckard  | Executive Vice President, Store Operations and Development | January 2024     | Steven R. Deckard has served as Executive Vice President, Store Operations and Development at Dollar General since **January 2024**. He has over 18 years of employment experience with the company  **[0001558370-24-003813_dg-20240202x10k.htm:34]** .                                        |
| Kathleen A. Reardon| Executive Vice President and Chief People Officer     | August 2020      | Kathleen A. Reardon has served as Executive Vice President and Chief People Officer at Dollar General since **August 2020**. She joined Dollar General as Director of Human Resources in **September 2009**  **[0001558370-24-003813_dg-20240202x10k.htm:34]** **[0001558370-24-003813_dg-20240202x10k.htm:33]** **[0001558370-23-004574_dg-20230203x10k.htm:31]** .                           |
| Emily C. Taylor    | Executive Vice President and Chief Merchandising Officer | September 2020   | Emily C. Taylor has served as the Executive Vice President and Chief Merchandising Officer at Dollar General since **September 2020**. She joined Dollar General in **1998** and has held various roles of increasing responsibility  **[0001558370-24-003813_dg-20240202x10k.htm:34]** **[0001558370-23-004574_dg-20230203x10k.htm:31]** .     |
| Rhonda M. Taylor   | Executive Vice President and General Counsel          | March 2015       | Rhonda M. Taylor has served as Executive Vice President and General Counsel at Dollar General since **March 2015**. She joined the company as an Employment Attorney in **March 2000**  **[0001558370-24-003813_dg-20240202x10k.htm:34]** **[0001558370-23-004574_dg-20230203x10k.htm:32]** .                                                   |
| Carman R. Wenkoff  | Executive Vice President and Chief Information Officer | July 2017        | Carman R. Wenkoff has served as the Executive Vice President and Chief Information Officer at Dollar General since **July 2017**. Before joining Dollar General, he was the Chief Information Officer and Chief Digital Officer at Subway  **[0001558370-24-003813_dg-20240202x10k.htm:35]** **[0001558370-23-004574_dg-20230203x10k.htm:32]** .|
| Roderick J. West   | Executive Vice President, Global Supply Chain         | September 2023   | Roderick J. West has served as Executive Vice President, Global Supply Chain at Dollar General since **September 2023**. He has approximately 18 years of employment experience with Dollar General  **[0001558370-24-003813_dg-20240202x10k.htm:35]** .                                         |
| Anita C. Elliott   | Senior Vice President and Chief Accounting Officer    | December 2015    | Anita C. Elliott has served as Senior Vice President and Chief Accounting Officer at Dollar General since **December 2015**. She joined Dollar General as Senior Vice President and Controller in **August 2005**  **[0001558370-24-003813_dg-20240202x10k.htm:35]** **[0001558370-23-004574_dg-20230203x10k.htm:32]** .                         |

b85327b6cd9cf19d690ea6c5761d97aea5c8a52492d02e5f942e02920aeaac5d

**Annual guidance for FY 2024:**
- **Net Sales Growth**: 4.8% to 5.1%  **[DG_3410954_4]**  (lowered from 4.7% to 5.3%  **[DG_3400213_6]** )  
- **Same-Store Sales Growth**: 1.1% to 1.4%  **[DG_3410954_4]**  (lowered from 1% to 1.6%  **[DG_3400213_6]** )  
- **EPS**: $5.50 to $5.90  **[DG_3410954_4]**  (lowered from $5.50 to $6.20  **[DG_3400213_6]** )  
- **Effective Tax Rate**: 23%  **[DG_3410954_4]**  (no change from prior guidance  **[DG_3400213_6]** )  
- **Capital Spending**: $1.3 billion to $1.4 billion  **[DG_3410954_4]**  (no change from prior guidance  **[DG_3400213_6]** )  
- **Real Estate Projects**: 2,435 projects (730 new stores, 1,620 remodels, 85 relocations)  **[DG_3410954_4]**  (no change from prior guidance  **[DG_3400213_6]** )  
- **Hurricane-Related Expenses**: Negative impact of $32.7 million in Q3 and estimated $10 million in Q4  **[DG_3410954_4]**  (no prior guidance)  

05eeaa1956f2a0756000233d2545db9cd7cff1680676f5abcded42e1192be89e

| Program Details          | Program 1         |
|--------------------------|-------------------|
| Approval Date            | **August 29, 2012**  **[0001558370-24-016024_dg-20241101x10q.htm:18]**  |
| End Date/Duration        | **No expiration date**  **[0001558370-24-016024_dg-20241101x10q.htm:18]**  |
| Total Additional Amount  | **$16.0 billion**  **[0001558370-24-016024_dg-20241101x10q.htm:18]**  |
| Remaining Authorization  | **$1.38 billion**  **[0001558370-24-016024_dg-20241101x10q.htm:30]**  |
| Details                  | The program allows for repurchases from time to time in open market transactions or privately negotiated transactions. The company did not repurchase any shares during the first three quarters of 2024 and does not plan to repurchase shares during the fourth quarter of 2024 to preserve its investment-grade credit rating and maintain financial flexibility.  **[0001558370-24-016024_dg-20241101x10q.htm:30]**  |

aec5f8a150f5ad592c786de7abb6f9d85496918adede356e832597a7b9fdbbad

| Name              | Start Date | End Date | Reason for Change |
|-------------------|------------|----------|-------------------|
| Ernst & Young LLP | 2001  **[0001558370-24-003813_dg-20240202x10k.htm:55]**    | Present  | Current auditor   |

b44975862ffb71345587f745b06aaeceb3f969a5a922828852f43015a1880eed

ba380ba2691cf5bccc962943b57599511ad5c0445fa04f366fabbadef54e915a

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

• Total Revenue: 10,183.4 million (+5% YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:3]** **[0001558370-24-016024_dg-20241101x10q.htm:7]**   
• Consumables Revenue: 8,445.7 million (+6% YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:23]** **[0001558370-24-016024_dg-20241101x10q.htm:26]**   
• SG&A: 2,612.5 million (+10% YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:3]** **[0001558370-24-016024_dg-20241101x10q.htm:7]**   
• Operating Income: 323.8 million (**-25%** YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:3]** **[0001558370-24-016024_dg-20241101x10q.htm:7]**   
• Net Income: 196.5 million (**-29%** YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:3]** **[0001558370-24-016024_dg-20241101x10q.htm:7]**   
• Basic EPS: 0.90 (**-28%** YoY)  **[0001558370-23-019576_dg-20231103x10q.htm:8]** **[0001558370-24-016024_dg-20241101x10q.htm:11]**   

18f345e32ec28e1646846aaf258bc1cc0642551b8c975928414afa2e6eff364c

1. **Second Half Profit Recovery**  
   **Q:** How confident are you in driving second-half profit acceleration?  
   **A:** Management is confident that their Back to Basics initiatives will fuel strong top and bottom-line growth in the back half, reiterating full-year guidance.  **[DG_3391249_14]** 

2. **Margin Outlook**  
   **Q:** Are current margins appropriate given reinvestments and challenges?  
   **A:** They believe operating margins can improve from here, aiming for a return to **10%+ EPS growth** over the longer term, balancing investments with opportunities in cost control and margin drivers.  **[DG_3391249_12]** 

3. **Shrink Impact**  
   **Q:** Is shrink worse than expected, and how are you offsetting it?  
   **A:** Shrink was worse than anticipated in Q1 but shows positive indicators for improvement in H2 and into 2025. They're offsetting risks with drivers like DG Media Network, private brands, global sourcing, and supply chain efficiencies.  **[DG_3391249_9]** 

4. **Promotional Environment**  
   **Q:** How do increased promotions affect margins and pricing strategy?  
   **A:** The promotional environment is as expected, similar to pre-COVID levels. They balance everyday value with promotions, feel good about their pricing, and mitigate margin risks through strong category management.  **[DG_3391249_9]** **[DG_3391249_12]** 

5. **Consumer Behavior**  
   **Q:** How are customers behaving between consumables and discretionary, and progress on Back to Basics?  
   **A:** Consumers are cautious, focusing on essentials but spending on discretionary items during important times. Back to Basics initiatives have crossed the halfway mark, with improvements seen in supply chain, merchandising, and store operations.  **[DG_3391249_10]** 

6. **Inventory Reduction**  
   **Q:** Will inventory reductions continue, and how are in-stocks and supply chain?  
   **A:** Reducing inventory remains a priority to simplify operations and improve cash flow. In-stocks are improving, and supply chain stability is increasing with new distribution centers enhancing product flow.  **[DG_3391249_17]** 

7. **Non-Consumables Outlook**  
   **Q:** What's the outlook for non-consumable sales and assumptions for the year?  
   **A:** The non-consumable business is active, with consumers making trade-offs. A strong holiday lineup and balanced promotions are expected to strengthen discretionary sales in the back half.  **[DG_3391249_13]** 

8. **Real Estate Plans**  
   **Q:** Why change the real estate plan, shifting toward remodels over new stores?  
   **A:** They're reducing new stores by about **70** this year, reallocating capital to increase remodels, particularly in mature stores. Deferred stores are moved into 2025, and they're excited about this reallocation.  **[DG_3391249_11]** 

9. **Balancing Consumables and Discretionary**  
   **Q:** How will you balance consumables and discretionary growth to mitigate margin pressure?  
   **A:** They don't believe the shift to consumables is permanent, going where the consumer wants. They'll foster discretionary sales with more options and value as consumers are ready to spend more freely.  **[DG_3391249_16]** 

10. **Investments to Address Shrink**  
    **Q:** Are investments to address shrink fully accounted for, or will costs rise?  
    **A:** Confident that investments made are appropriate, including **$150 million** in wage increases and adding **120** district managers. They see positive signs indicating shrink improvements, with expenses factored into guidance.  **[DG_3391249_15]** 

11. **Feedback on Remodels**  
    **Q:** Have store remodels and removing self-checkout made a difference?  
    **A:** Positive customer feedback received; customers appreciate staff interaction at checkout. Having someone at the front is expected to help with shrink, and these actions should pay dividends moving forward.  **[DG_3391249_18]** 

e4eecb458c303dac6ea312f6c27459bf7a05526c80323acf3970134563ff9249

| Year  | Amount Due (Millions) | Debt Type                          | Interest Rate (%) | % of Total Debt                                                                 |
|-------|------------------------|------------------------------------|-------------------|---------------------------------------------------------------------------------|
| 2024  | 519.4                 | Current Portion of Long-Term Obligations | N/A               | 8.3% = (519.4 / 6,242.4) * 100 **[0001558370-24-016024_dg-20241101x10q.htm:6]**                                         |
| 2024  | 1,445.1               | Current Portion of Operating Lease Liabilities | N/A               | 23.1% = (1,445.1 / 6,242.4) * 100 **[0001558370-24-016024_dg-20241101x10q.htm:6]**                                      |
| 2028  | 500.0                 | 5.20% Senior Notes                | 5.20              | 8.0% = (500.0 / 6,242.4) * 100 **[0001558370-24-016024_dg-20241101x10q.htm:15]**                                         |
| 2033  | 1,000.0               | 5.45% Senior Notes                | 5.45              | 16.0% = (1,000.0 / 6,242.4) * 100 **[0001558370-24-016024_dg-20241101x10q.htm:15]**                                      |

eb9ccac8d8f96b79aca2b7c72bbd6b70a7eeeb6db077b9c2d9e380f26b185c50

6b7645e67e5e669381c550146a2f5c0512278f0dcd3f7f2b50547723946db38c

Total Number of Stores (stores)

New Stores Opened in the Third Quarter of 2024 (stores)

Remodeled Stores in the Third Quarter of 2024 (stores)

Relocated Stores in the Third Quarter of 2024 (stores)

New Stores Opened Year to Date 2024 (stores)

Remodeled or Relocated Stores Year to Date 2024 (stores)

Number of Same-Stores (stores)

Number of pOpshelf Stores (stores)

Same-Store Sales Percentage Change in the Third Quarter of 2024 (percent)

Same-Store Sales Percentage Change Year to Date 2024 (percent)

Average Transaction Amount Change in the Third Quarter of 2024 (percent)

Customer Traffic Change in the Third Quarter of 2024 (percent)

Average Transaction Amount Change Year to Date 2024 (percent)

Customer Traffic Change Year to Date 2024 (percent)

Average Sales Per Square Foot (USD per square foot)

Inventory Turnover (times)

05311471c7f7313275d3eb323c61f8f8443fbeca7b581c5cdeb1fe2b4e78f4cb

- **Positive impact of "Back to Basics" strategy leading to improving sales and customer traffic.** The company has observed positive customer traffic growth in recent quarters, attributed to investments in labor and operational improvements.  **[DG_3378166_10]**
- **Strong long-term growth potential with expansion plans and attractive store economics.** The company plans to open **700 to 900 new stores** annually, including thousands of opportunities for the mini-market format, which has **strong sales**, **strong margins**, a payback of **less than two years**, and IRR at the **upper end** of expectations.  **[DG_3378166_12]**
- **Confidence in returning to over 10% EPS growth in the long term, driven by multiple strategic initiatives.** The company expects to overcome near-term headwinds and leverage drivers like **inventory optimization**, **DG Media Network**, **private brands**, **global sourcing**, and **category management** to deliver sustainable growth and shareholder value.  **[DG_3378166_11]**

3de410d3b2bf3112e6a3de399aabd587fd6ca68e1d0832e286057b5762de0b8a

- **Strong customer traffic growth, including trade-down from higher-income segments, is leading to positive sales and transaction trends, indicating that Dollar General's value proposition is resonating with consumers.**  **[DG_3391249_10]**
- **The "Back to Basics" initiatives are yielding positive results, with significant progress in supply chain efficiency, merchandising, and store operations, expected to drive sales growth and margin improvements in the second half of the year and beyond.**  **[DG_3391249_12]** **[DG_3391249_10]**
- **Management is confident in returning to 10%+ EPS growth over the longer term, supported by ongoing investments in the business, including store remodels, wage increases, additional district managers, and cost-saving initiatives like the "Save to Serve" program.**  **[DG_3391249_12]** **[DG_3391249_11]** **[DG_3391249_15]**

140f8e3f4cc46549a7ece51aaafbfd56cbfb6f375d882f3739e3ab6dec3dcb8d

1. **Margin Outlook and EPS Growth**  
   **Q:** Is getting back to 7%+ margins by 2025 still achievable?  
   **A:** Management believes they are strengthening their foundation for long-term growth and still aim to return to **10% to 10%+ EPS growth** on an adjusted basis over the long term.  **[DG_3378166_11]**  They acknowledge headwinds like shrink but are confident about overcoming them through actions such as reducing shrink, optimizing inventory, and leveraging long-term growth drivers like the **DG Media Network**, private brands, and category management.  **[DG_3378166_11]** 

2. **Shrink Management**  
   **Q:** What's being done about shrink, and how does it impact margins?  
   **A:** Shrink remains a significant headwind, but management is taking decisive actions to control it.  **[DG_3378166_11]**  They removed self-checkout in **9,000 stores**, converting them to assisted check-stands to reduce shrink immediately.  **[DG_3378166_11]**  They've also invested in inventory control measures and aim to return to pre-pandemic shrink levels by **2025 and into 2026**.  **[DG_3378166_11]** 

3. **Promotional Environment and Gross Margins**  
   **Q:** Are you seeing changes in the promotional backdrop and gross margins?  
   **A:** They expect the promotional environment to revert to pre-pandemic levels, anticipating an uptick in promotions.  **[DG_3378166_13]**  While this may pressure margins, their size and scale allow them to secure substantial CPG support, and margins tend to remain stable through higher markdowns.  **[DG_3378166_13]**  Shrink is expected to be a headwind, but actions taken should bend that trend in the back half of the year.  **[DG_3378166_13]** 

4. **Traffic Trends and Back to Basics Strategy**  
   **Q:** How is the Back to Basics strategy supporting comp guidance?  
   **A:** The Back to Basics strategy is yielding positive results, with improvements in comps, traffic numbers, and customer data.  **[DG_3378166_10]**  They've invested **$150 million in labor** in 2023, reallocating labor to critical areas like front registers and inventory accuracy.  **[DG_3378166_10]**  Supply chain enhancements have improved on-time rates, enabling smoother store operations and supporting a robust Q1 comp guidance of **1.5% to 2%**.  **[DG_3378166_10]** 

5. **Mini-Market Format Expansion**  
   **Q:** What's the potential for the mini-market format and its economics?  
   **A:** Management sees thousands of opportunities for the mini-market format across the U.S., especially in areas lacking fresh food options.  **[DG_3378166_12]**  They are pleased with the sales economics and **4-wall profitability**, noting an **IRR at the upper end** of new store expectations and a **payback of less than 2 years**.  **[DG_3378166_12]** 

e346046e60cdf5a3eb5a8217f916dd01b42715b37a40e2888d6eaab3b0162461

- **Shrink is worse than expected in Q1, negatively impacting gross margin by 59 basis points, and continues to be the most significant headwind.**  **[DG_3391249_15]** ,  **[DG_3391249_4]**
- **Shift in sales mix towards lower-margin consumables and away from higher-margin discretionary items is causing margin pressure, raising concerns if this shift becomes permanent.**  **[DG_3391249_16]** ,  **[DG_3391249_12]**
- **Significant investments in wages (over $150 million last year) and additional labor (adding 120 district managers) are increasing operating expenses, pressuring margins, with uncertainty about the timing and effectiveness of these investments on reducing shrink and improving operations.**  **[DG_3391249_15]**

7fb1246215601362a010ed36de74fd7f87849be48142f92e4b67aed2ee8fbb49

- **Market Share Gains:** Dollar General is regaining market share, particularly among mid- to high-end consumers, indicating that value continues to attract customers even in a competitive environment. Todd Vasos mentioned that they are capturing more of their fair share compared to previous quarters.  **[DG_3410954_17]**
- **Positive Outlook on Earnings Growth:** The company expects to return to double-digit EPS growth over time, supported by progress in their Back to Basics initiatives, shrink reduction efforts, and operational efficiencies. Both Todd Vasos and Kelly Dilts expressed confidence in achieving higher sales and margins in the future.  **[DG_3410954_12]** ,  **[DG_3410954_22]**
- **Expansion of Same-Day Delivery:** Dollar General's new same-day delivery pilot is showing promising early results, with customers gravitating towards the service. The company plans to expand this offering significantly, potentially enhancing top-line growth and margin potential, while leveraging their DG Media Network for additional revenue opportunities.  **[DG_3410954_14]**

164dafac2a30229bdaddf0588055c8d94a186c3be86deafdd29f984721cda34f

1. **Return to Double-Digit EPS Growth**  
   **Q:** Can you restore double-digit EPS growth in 2025 despite incentive comp returning?  
   **A:** Management is pleased with progress on initiatives like Back to Basics and Project Elevate, and feels confident about returning to long-term **double-digit EPS growth** over time. However, they acknowledge there's more work to do and are focused on capturing as much growth as possible.  **[DG_3410954_12]** 

2. **Operating Margin Outlook**  
   **Q:** How do you view operating margins over time, and can they improve from current levels?  
   **A:** Management aims to improve operating margins beyond the roughly **5%** level expected this year (excluding hurricane costs). They believe there are levers to enhance margins without significant investments in labor or other expenses, and are committed to achieving better rates while focusing on long-term **double-digit EPS growth**.  **[DG_3410954_22]** 

3. **Gross Margin Improvement through Shrink Reduction**  
   **Q:** How are you thinking about gross margin expansion and shrink reduction's impact?  
   **A:** **Shrink reduction** is the biggest opportunity for gross margin improvement. While progress has been made, it's a continuous journey that takes time due to the inventory cycle. Shrink should be a tailwind in the fourth quarter and into 2025, with a goal to reach **pre-pandemic shrink levels**.  **[DG_3410954_19]** 

4. **Capital Expenditures and Allocation Plans**  
   **Q:** Any initial thoughts on FY25 CapEx given increased real estate projects?  
   **A:** CapEx as a percentage of sales is expected to be similar to this year's, focusing on high-return projects like remodels and new stores. Pressures in 2025 include **incentive compensation**, **wage rate pressures**, and **depreciation**, but management is excited about investing in the mature store base.  **[DG_3410954_15]** 

5. **Remodel Returns and Project Elevate Impact**  
   **Q:** Has the expected comp lift from remodels changed, and what's the mix going forward?  
   **A:** The expected comp lift from remodels is now **6%–8%**, down from **8%–11%** previously, due to fewer cooler additions. However, **IRRs remain higher** than new store returns. **Project Elevate** is expected to add an additional **3%–5%** comp lift with strong IRRs, and management is excited about touching **80%–90%** of the store base over the next 3–5 years.  **[DG_3410954_16]** 

6. **Same-Day Delivery Pilot and Growth Prospects**  
   **Q:** What have you learned from the same-day delivery pilot, and its margin implications?  
   **A:** The pilot has expanded to **75 stores**, with customers gravitating towards it. Using a third-party provider keeps costs low with no labor burden on stores. Management is refining costs and is excited about the potential top-line and margin benefits, including leveraging their **media network** for additional growth.  **[DG_3410954_14]** 

7. **Consumer Behavior and Sales Trends**  
   **Q:** Any notable changes in consumer spending between consumables and discretionary?  
   **A:** Consumer behavior remains similar, with shoppers buying close to need and being selective. **Private brands** and the **$1** Value Valley offerings performed well, indicating consumers are seeking value. Discretionary sales showed some optimism, with strong performance in **Halloween** categories.  **[DG_3410954_13]** 

8. **Market Share Gains**  
   **Q:** Have you seen changes in opportunities from competitor door closures?  
   **A:** There has been a rebound in capturing market share, particularly among **mid- to high-end consumers**. Management is pleased to have gained more of their fair share this quarter compared to last and aims to continue this trend into early 2025.  **[DG_3410954_17]** 

9. **Traffic and Ticket Trends**  
   **Q:** Why is traffic dropping while ticket is increasing, opposite of historical patterns?  
   **A:** Traffic softened due to lapping positive traffic from last year, but management is focused on driving traffic. The increase in **ticket size**, especially from discretionary purchases, is a positive sign that consumers are spending, though they remain frugal. Efforts are ongoing to boost traffic in the coming quarters.  **[DG_3410954_20]** 

10. **Components of Comp Lift from Remodels**  
    **Q:** In remodels, how much of comp lift is from traffic versus ticket?  
    **A:** Initially, remodels drive higher **ticket sales** due to enhanced offerings, with **traffic increasing over time** as word of mouth spreads. Project Elevate is expected to follow this pattern, leading to ticket growth first and traffic growth subsequently.  **[DG_3410954_21]** 

11. **SG&A Leverage Point**  
    **Q:** How are you thinking about SG&A leverage point for next year?  
    **A:** The SG&A leverage point remains at a **2%–4% comp sales increase**. Management aims for comps to build to this level over the longer term to achieve leverage on SG&A expenses.  **[DG_3410954_21]** 

12. **Comp Algorithm and Cost Structure Evolution**  
    **Q:** How does the comp algorithm change with more remodels, and can costs be adjusted?  
    **A:** With Project Elevate, management believes they can restore the contribution of real estate programs to comp sales. They are focusing on cost structure improvements in areas like **shrink**, **damages**, **depreciation**, and **retail salaries** to support a return to long-term double-digit EPS growth.  **[DG_3410954_11]** 

808c92e8083dc6eb850ec9a12263a1579d073bb990bdd965a7ac0b8004e74430

- **Continued market share gains** with **strong new store productivity**, indicating that **the small box value model is not structurally challenged**  **[DG_3400213_9]** .
- **Immediate positive consumer response** to increased promotions and markdowns, expected to **drive customer traffic and sales growth** in the back half of the year  **[DG_3400213_12]** .
- **Significant reduction in inventory** while **improving in-stock levels**, leading to **higher inventory efficiency** and considered a **bright spot** in the quarter  **[DG_3400213_16]** .

09dadd33fe1faafbdf09ec885fee2ba0c756522c1615fc749954b32a136f6ccd

1. **Business Model Viability**  
   **Q:** Is the small-box model structurally challenged, and how will you rebuild margins?  
   **A:** Todd Vasos asserts they fundamentally don't believe the model is structurally challenged.  **[DG_3400213_9]**  New store productivity remains strong, with continued market share gains and cannibalization in line with history.  **[DG_3400213_9]**  The consumer is financially strapped, especially at month-end, so they're going on the offense with markdowns and promotions to regain market share.  **[DG_3400213_9]**  Kelly Dilts says margin rebuilding over time will come from sales growth, managing costs, and mitigating shrink and mix headwinds.  **[DG_3400213_9]**  Cash from operations was up **127%**, enabling continued investment in the business.  **[DG_3400213_9]** 

2. **Margin Outlook**  
   **Q:** Will margins stay subdued during the transition, and does it change reinvestment plans?  
   **A:** Todd Vasos acknowledges margin pressure during the transformation but sees ample opportunity to improve margins, particularly by reducing shrink, which they expect to turn into a tailwind in Q4 and more substantially in 2025.  **[DG_3400213_10]**  Their back-to-basics plan shows progress in operations, staffing, and shrink reduction.  **[DG_3400213_10]** 

3. **Traffic Trends**  
   **Q:** How did traffic and ticket evolve, and any concerns on low-income consumers?  
   **A:** Todd Vasos notes they gained **1%** in traffic but aim for more.  **[DG_3400213_11]**  Competitors, especially in Bentonville, are capturing available traffic, so they're going on the offense to regain share.  **[DG_3400213_11]**  Kelly Dilts adds that June was the strongest month, with a step down in July, particularly in transactions.  **[DG_3400213_11]**  The last week of each month was the weakest, indicating customers running out of money.  **[DG_3400213_11]**  Surveys show the core customer feels worse off financially than six months ago.  **[DG_3400213_11]** 

4. **Guidance Conservatism**  
   **Q:** Is there more conservatism in the new guidance?  
   **A:** Kelly Dilts explains the guidance reflects softer sales trends and the impact of markdowns.  **[DG_3400213_12]**  They're assuming a macro environment that's neutral to slightly softening, with the low end of guidance contemplating further softening of the core customer's ability to spend.  **[DG_3400213_12]**  The high end assumes stable trends similar to Q2.  **[DG_3400213_12]** 

5. **Competitive Positioning**  
   **Q:** Why aren't you seeing normal share gains during tough times?  
   **A:** Todd Vasos believes the trade-in from higher-income customers has been slower due to a still decent job market and lower unemployment.  **[DG_3400213_13]**  Middle to upper-income consumers are relying more on online channels, which may slow their trade-in to Dollar General.  **[DG_3400213_13]** 

6. **Pricing and Markdowns**  
   **Q:** How are price gaps evolving, and what markdown actions are you taking?  
   **A:** Todd Vasos feels good about their everyday price position, which remains competitive.  **[DG_3400213_14]**  They're increasing promotional activities in categories like food, cleaning, paper, and pet to drive traffic.  **[DG_3400213_14]**  Kelly Dilts adds that markdown rates in the second half will be similar to last year, returning to 2019 levels on a full-year basis.  **[DG_3400213_14]** 

7. **Expense Leverage**  
   **Q:** Can you lower the comp needed to leverage expenses, and any unlocks like rolltainers?  
   **A:** Todd Vasos acknowledges labor rates are up more than anticipated.  **[DG_3400213_15]**  They're working on initiatives like rolltainer sort to improve store efficiency, not to reduce labor hours but to enhance customer experience.  **[DG_3400213_15]**  They're exploring other SG&A levers to manage expenses.  **[DG_3400213_15]** 

8. **Inventory Management**  
   **Q:** With inventories down and in-stocks up, how do you view this dynamic?  
   **A:** Todd Vasos feels good about reducing inventory while maintaining fresh, sellable goods.  **[DG_3400213_16]**  They've reduced non-consumable inventory, improving store space and customer experience.  **[DG_3400213_16]**  Kelly Dilts commends the team for reducing inventory while improving in-stocks, focusing on optimization and rightsizing what's brought into distribution centers and stores.  **[DG_3400213_16]** 

2c7505d81aec01201c063d1711afa3af3430790939292d94a77865080cb34d1d

- **Weaker-than-expected same-store sales growth due to reduced spending by financially constrained core customers who are running out of money by the end of the month; the company acknowledged that they did not get their fair share of available market share gains**.  **[DG_3400213_9]** **[DG_3400213_11]**
- **Increased competition from mass retailers, particularly in the South, with Dollar General noting that competitors like Walmart are doing a better job of attracting customers and gaining market share, which may indicate structural challenges to their business model**.  **[DG_3400213_9]** **[DG_3400213_11]** **[DG_3400213_13]**
- **Pressure on margins due to increased promotional activity and markdown investments required to drive traffic and sales, along with ongoing headwinds from inventory shrinkage and higher wage rate inflation than initially expected, leading to a reduction in EPS guidance**.  **[DG_3400213_9]** **[DG_3400213_6]** **[DG_3400213_14]**

fa5e721570592eb8462d77811579472e14df8aadbc2d496443410060e796c4a4

- **Declining Operating Profit and Margins:** Operating profit decreased by **25.3%** to **$323.8 million** in Q3, with operating margin decreasing by **129 basis points**, indicating profitability challenges.  **[DG_3410954_3]**
- **Consumer Financial Pressure Leading to Sales Mix Shifts:** Core customers remain financially constrained, focusing on consumables and value offerings like the **Value Valley** section, which outperformed by more than **600 basis points**, but this shifts sales away from higher-margin discretionary categories.  **[DG_3410954_1]** , **[DG_3410954_2]** , **[DG_3410954_7]** , **[DG_3410954_13]**
- **Increased Expenses and SG&A Pressure:** Hurricane-related costs impacted SG&A by **$32.7 million** in Q3 and are expected to add an additional **$10 million** in Q4, adding to expense pressures alongside increased markdowns and promotional activities.  **[DG_3410954_3]** , **[DG_3410954_4]**

36c152e329fa40a5e63da8f7eb5884c6151c3069651d4f9b0b918e7a44cca234

- **Ongoing shrink challenges are significantly impacting margins**, with shrink increasing more than 100 basis points in both Q4 and the full year. Management acknowledges that **getting shrink back to pre-pandemic levels will take until 2025 or even 2026**, indicating prolonged margin pressure.  **[DG_3378166_7]**
- **Gross margins are expected to remain pressured due to higher promotional activity**, as the promotional environment is anticipated to revert to pre-pandemic levels in 2024. This, along with continued sales mix headwinds from customers trading down, is expected to **negatively impact profitability**.  **[DG_3378166_13]**
- **Elevated inventory levels in consumables**, with an increase of approximately 19% to 20%, suggest potential overstocking or slower turnover. Management plans to reduce per-store inventory levels in 2024, which could **pressure future margins and indicate demand challenges**.  **[DG_3378166_14]**

540fb5a5d99cb3a5d30f8224710abf3f3380b5156dfeeff167f71fa215344544

Dollar General Corp (DG)

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