DOLLAR GENERAL CORP

Previous wording

We are the largest discount retailer in the United States by number of stores, with 20,149 stores located in 48 U.S. states and Mexico as of May 3, 2024, with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States. Our first stores in Mexico opened in 2023. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel. Our merchandise includes national brands from leading manufacturers, as well as our own private brand selections with prices often at substantial discounts to national brands. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

Current wording

We are the largest discount retailer in the United States by number of stores, with 20,345 stores located in 48 U.S. states and Mexico as of August 2, 2024, with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States. Our first stores in Mexico opened in 2023. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel. Our merchandise includes national brands from leading manufacturers, as well as our own private brand selections with prices often at substantial discounts to national brands. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

Previous wording

We believe our convenient store formats, locations, and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years and through a variety of economic cycles. We are mindful that the majority of our customers are value-conscious, and many have low and/or fixed incomes. As a result, we are intensely focused on helping our customers make the most of their spending dollars. Our customers continue to feel constrained in the current macroeconomic environment, and accordingly we expect their spending to continue to be pressured, particularly in our non-consumables categories. Our core customers are often among the first to be affected by negative or uncertain economic conditions and among the last to feel the effects of improving economic conditions, particularly when trends are inconsistent and of an uncertain duration. The primary macroeconomic factors that affect our core customers include unemployment and underemployment rates, inflation, wage growth, changes in U.S. and global trade policy, and changes in U.S. government policy and assistance programs (including cost of living adjustments), such as the Supplemental Nutrition Assistance Program (“SNAP”), unemployment benefits, and economic stimulus programs. Our customers were impacted by the elimination of the emergency allotment of SNAP benefits and lower tax refunds resulting from the elimination of COVID-related stimulus programs, each of which occurred in the first quarter of 2023, and continue to be impacted by the overall macroeconomic environment. Additionally, our customers continue to experience elevated expenses that generally comprise a large portion of their household budgets, such as rent, healthcare, energy and fuel prices, as well as cost inflation in frequently purchased household products (including food). In addition, the Department of Education’s COVID-19 pandemic student loan forbearance program ended in September 2023, and payment obligations generally resumed in October 2023. The impact of this program’s conclusion on our customer and our business has not been material, although we can make no assurance that it will not be material in the future. Finally, significant unseasonable or unusual weather patterns or extreme weather can impact customer shopping behaviors, although we did not identify any such impact to any significant degree in the first quarter of 2024.

Current wording

We believe our convenient store formats, locations, and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years and through a variety of economic cycles. We are mindful that the majority of our customers are value-conscious, and many have low and/or fixed incomes. As a result, we are intensely focused on helping our customers make the most of their spending dollars. The primary macroeconomic factors that affect our core customers include unemployment and underemployment rates, inflation, wage growth, changes in U.S. and global trade policy, and changes in U.S. government policy and assistance programs (including cost of living adjustments), such as the Supplemental Nutrition Assistance Program (“SNAP”), unemployment benefits, and economic stimulus programs. In addition, the Department of Education’s COVID-19 pandemic student loan forbearance program ended in September 2023, and payment obligations generally resumed in October 2023. The impact of this program’s conclusion on our customer and our business has not been material, although we can make no assurance that it will not be material in the future. Finally, significant unseasonable or unusual weather patterns or extreme weather can impact customer shopping behaviors, although we did not identify any such impact to any significant degree in the second quarter of 2024.

Previous wording

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction amount. Historically, sales in our consumables category, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales in our non-consumables categories, which tend to have higher gross margins, have been the key drivers of more profitable sales growth and average transaction amount. Our sales mix has continued to shift toward consumables and is currently at historic highs. Certain of our initiatives are intended to address this sales mix trend; however, there can be no assurances that these efforts will be successful.

Current wording

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction amount. Historically, sales in our consumables category, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales in our non-consumables categories, which tend to have higher gross margins, have been the key drivers of more profitable sales growth and average transaction amount. Our sales mix has continued to shift toward consumables, which currently constitutes a historically high proportion of our

Previous wording

Further, we are continuing to evaluate and evolve the pOpshelf concept, including expanding at a more measured pace in the softer discretionary sales environment, and have converted certain pOpshelf stores to Dollar General stores. pOpshelf is a unique retail concept focused on categories such as seasonal and home décor, health and beauty, home cleaning supplies, and party and entertainment goods. At the end of the first quarter of 2024, we operated 221 standalone pOpshelf stores.

Current wording

Further, we continue to evaluate and evolve the pOpshelf concept, in light of the softer discretionary sales environment, and have continued to convert certain pOpshelf stores to Dollar General stores. pOpshelf is a unique retail concept focused on categories such as seasonal and home décor, health and beauty, home cleaning supplies, and party and entertainment goods. At the end of the second quarter of 2024, we operated 229 standalone pOpshelf stores.

Previous wording

We also remain focused on capturing growth opportunities. In the first quarter of 2024, we opened a total of 197 new stores, remodeled 463 stores, and relocated 21 stores. We have increased the total number of planned real estate projects in fiscal 2024 to 2,435, which reflects a planned decrease in new store openings and a planned increase in store remodels. We now plan to open approximately 730 new stores (including any new pOpshelf stores or stores in Mexico), remodel approximately 1,620 stores, and relocate approximately 85 stores.

Current wording

We also remain focused on capturing growth opportunities. In the second quarter of 2024, we opened a total of 213 new stores, remodeled 478 stores, and relocated 25 stores. In fiscal 2024 we plan to open approximately 730 new stores (including any pOpshelf stores or stores in Mexico), remodel approximately 1,620 stores, and relocate approximately 85 stores.

Previous wording

Certain of our operating expenses, such as wage rates and occupancy costs, have continued to increase in recent years, due primarily to market forces such as labor availability, increases in minimum wage rates and increases in property rents and interest rates. We have made significant investments in retail labor, primarily through labor hours, to further enhance our store standards, including on-shelf availability, and compliance efforts as well as the customer and associate experience in our stores.

Current wording

Certain of our operating expenses, such as wage rates and occupancy costs, have continued to increase in recent years, due primarily to market forces such as labor availability, increases in minimum wage rates and increases in property rents and interest rates. Significant or rapid increases to federal, and further increases to state or local, minimum wage rates or salary levels could significantly adversely affect our earnings if we are not able to otherwise offset these increased labor costs elsewhere in our business. Furthermore, in April 2024 the U.S. Department of Labor announced a

Previous wording

Significant or rapid increases to federal, and further increases to state or local, minimum wage rates or salary levels could significantly adversely affect our earnings if we are not able to otherwise offset these increased labor costs elsewhere in our business. Furthermore, in April 2024 the U.S. Department of Labor announced a final rule that, if implemented, will increase in two phases the minimum salary thresholds required for employees who are exempt from the Fair Labor Standards Act’s overtime requirements. Such rule is currently the subject of pending legal challenges, the outcome of which is uncertain. We do not currently expect that such rule, if implemented as currently written, will have a material impact on our financial results in fiscal 2024, but it could materially increase labor costs and potentially have a material negative impact on our operating results beginning in 2025. We are analyzing our alternatives to address such overtime regulations and the resulting financial impact.

Current wording

final rule that, if implemented, will increase in two phases the minimum salary thresholds required for employees who are exempt from the Fair Labor Standards Act’s overtime requirements. Such rule is currently the subject of pending legal challenges, the outcome of which is uncertain. We do not currently expect that such rule will have a material impact on our financial results in fiscal 2024, but if implemented as currently written, it could materially increase labor costs and potentially have a material negative impact on our operating results beginning in 2025. We are analyzing our alternatives to address such overtime regulations and the resulting financial impact.

Previous wording

While we believe the overall growth rate of inflation is moderating, we expect some inflationary pressures will continue to affect our operating results and our vendors and customers. Moreover, increases in market interest rates have had a negative impact on our interest expense. Both inflation and higher interest rates have significantly increased new store opening costs and occupancy costs, and while we continue to have strong new store returns and plan to grow our store base significantly in 2024, these increased costs have negatively impacted our projected new store returns and influenced our 2024 new store growth plans.

Current wording

While we believe the overall growth rate of inflation is continuing to moderate, ongoing inflationary pressures will continue to affect our operating results and our vendors and customers. Moreover, increases in market interest rates have had a negative impact on our interest expense. Both inflation and higher interest rates have significantly increased new store opening costs and occupancy costs, and while we continue to have strong new store returns and plan to grow our store base significantly in 2024, these increased costs have negatively impacted our projected new store returns and influenced our 2024 new store growth plans.

Previous wording

Our diverse teams are a competitive advantage, and we proactively seek ways to continue investing in their development. Our goal is to create an environment that attracts, develops, and retains talented personnel, particularly at the store manager level, because employees who are promoted from within our company generally have longer tenures and are greater contributors to improvements in our financial performance. We are taking actions designed to reduce our higher than targeted store manager turnover, including through our labor investment and allocation of labor hours, simplifying in-store activities, and reducing excess inventory.

Current wording

Our diverse teams are a competitive advantage, and we proactively seek ways to continue investing in their development. Our goal is to create an environment that attracts, develops, and retains talented personnel, particularly at the store manager level, because employees who are promoted from within our company generally have longer tenures and are greater contributors to improvements in our financial performance. We are taking actions designed to reduce our higher than targeted store manager turnover, including through budgeting and allocation of labor hours, simplifying in-store activities, and reducing excess inventory.

Previous wording

Highlights of our 2024 first quarter results of operations, compared to the 2023 first quarter, and our financial condition at May 3, 2024, are set forth below. Basis points amounts referred to below are equal to 0.01% as a percentage of net sales.

Current wording

Highlights of our 2024 second quarter results of operations, compared to the 2023 second quarter, and our financial condition at August 2, 2024, are set forth below. Basis points amounts referred to below are equal to 0.01% as a percentage of net sales.

Previous wording

Accounting Periods. We utilize a 52-53 week fiscal year convention that ends on the Friday nearest to January 31. The following text contains references to years 2024 and 2023, which represent the 52-week fiscal years ending or ended January 31, 2025 and February 2, 2024, respectively. References to the first quarter accounting periods for 2024 and 2023 contained herein refer to the 13-week accounting periods ended May 3, 2024 and May 5, 2023, respectively.

Current wording

Accounting Periods. We utilize a 52-53 week fiscal year convention that ends on the Friday nearest to January 31. The following text contains references to years 2024 and 2023, which represent the 52-week fiscal years ending or ended January 31, 2025 and February 2, 2024, respectively. References to the second quarter accounting periods for 2024 and 2023 contained herein refer to the 13-week accounting periods ended August 2, 2024 and August 4, 2023, respectively.

Previous wording

The following table contains results of operations data for the first 13-week periods of 2024 and 2023, and the dollar and percentage variances among those periods:

Current wording

The following table contains results of operations data for the second 13-week periods and the 26-week periods of 2024 and 2023, and the dollar and percentage variances among those periods:

Previous wording

Gross Profit. For the 2024 period, gross profit increased by 1.2%, and as a percentage of net sales decreased by 145 basis points to 30.2%, compared to the 2023 period. The decrease in the gross profit rate was driven primarily by increased shrink and markdowns, a greater proportion of sales coming from the consumables category, and lower inventory markups, partially offset by a lower LIFO provision.

Current wording

Gross Profit. For the 2024 period, gross profit increased by 0.5%, and as a percentage of net sales decreased by 112 basis points to 30.0%, compared to the 2023 period. The decrease in the gross profit rate was driven primarily by increased markdowns, increased inventory damages, a greater proportion of sales coming from the consumables category, and increased shrink, partially offset by a lower LIFO provision.

Previous wording

*Selling, General & Administrative**Expenses (“SG&A”).*SG&A was 24.7% as a percentage of net sales in the 2024 period compared to 23.7% in the comparable 2023 period, an increase of 97 basis points. The primary expenses that were a higher percentage of net sales in the current year period were retail labor, depreciation and amortization, incentive compensation and repairs and maintenance.

Current wording

*Selling, General & Administrative**Expenses (“SG&A”).*SG&A was 24.6% as a percentage of net sales in the 2024 period compared to 24.0% in the comparable 2023 period, an increase of 57 basis points. The primary expenses that were a higher percentage of net sales in the current year period were retail labor, depreciation and amortization, store occupancy costs, and utilities, partially offset by a decrease in incentive compensation.

Previous wording

Interest Expense, net. Interest expense, net decreased by $10.6 million to $72.4 million in the 2024 period primarily due to higher cash balances.

Current wording

Interest Expense, net. Interest expense, net decreased by $16.2 million to $68.1 million in the 2024 period primarily due to higher cash balances.

Previous wording

*Income Taxes.*The effective income tax rate for the 2024 period was 23.3% compared to a rate of 21.8% for the 2023 period. The tax rate for the 2024 period was higher than the comparable 2023 period primarily due to the effect of certain rate-impacting items on lower earnings before taxes and expense attributable to stock-based compensation.

Current wording

*Income Taxes.*The effective income tax rate for the 2024 period was 22.3% compared to a rate of 22.9% for the 2023 period. The tax rate for the 2024 period was lower than the comparable 2023 period primarily due to the effect of certain rate-impacting items, such as federal tax credits, on lower earnings before taxes.

Previous wording

Net Sales. The net sales increase in the 2024 period was primarily due to sales from new stores and a same-store sales increase of 2.4% compared to the 2023 period, partially offset by the impact of store closures. The increase in same-store sales primarily reflects an increase in customer traffic, partially offset by a decrease in average transaction amount. The decrease in average transaction amount was driven by a decline in items per transaction and lower average item retail prices. Same-store sales increased in the consumables category and declined in the home products, seasonal, and apparel categories. For the 2024 period, there were 19,015 same-stores, which accounted for sales of $9.5 billion.

Current wording

Net Sales. The net sales increase in the 2024 period was primarily due to sales from new stores and a same-store sales increase of 1.4% compared to the 2023 period, partially offset by the impact of store closures. The increase in same-store sales primarily reflects a 2.6% increase in customer traffic, partially offset by a 1.1% decrease in average transaction amount. The decrease in average transaction amount was driven by a decline in items per transaction and lower average item retail prices. Same-store sales increased in the consumables category, and declined in the home products, seasonal and apparel categories. For the 2024 period, there were 19,201 same-stores which accounted for sales of $19.3 billion.

Previous wording

Our inventory balance represented approximately 48% of our total assets exclusive of operating lease assets, goodwill and other intangible assets as of May 3, 2024. Our ability to effectively manage our inventory balances can have a significant impact on our cash flows from operations during a given fiscal year. Inventory purchases are often somewhat seasonal in nature, such as the purchase of warm-weather or Christmas-related merchandise. Efficient management of our inventory has been and continues to be an area of focus for us.

Current wording

Our inventory balance represented approximately 46% of our total assets, exclusive of operating lease assets, goodwill and other intangible assets, as of August 2, 2024. Our ability to effectively manage our inventory balances can have a significant impact on our cash flows from operations during a given fiscal year, as discussed below. Inventory purchases are often somewhat seasonal in nature, such as the purchase of warm-weather or Christmas-related merchandise. Efficient management of our inventory has been and continues to be an area of focus for us.

Previous wording

Unless otherwise noted, all references to the 2024 and 2023 periods in the discussion of cash flows from operating, investing and financing activities below refer to the 13-week periods ended May 3, 2024 and May 5, 2023, respectively.* *

Current wording

Unless otherwise noted, all references to the 2024 and 2023 periods in the discussion of cash flows from operating, investing and financing activities below refer to the 26-week periods ended August 2, 2024 and August 4, 2023, respectively.* *

Previous wording

*Cash flows from operating activities.*Cash flows from operating activities were $663.8 million in the 2024 period, which represents a $472.7 million increase compared to the 2023 period. Changes in merchandise inventories resulted in a $49.6 million increase in the 2024 period as compared to a decrease of $601.1 million in the 2023 period as further discussed below. Changes in accrued expenses resulted in a $14.8 million increase in 2024 compared to a $176.8 million decrease in 2023 due primarily to the timing of accruals and payments for incentive compensation and sales tax. Changes in accounts payable resulted in a $95.7 million decrease in the 2024 period compared to a $116.4 million increase in the 2023 period, due primarily to the timing of inventory receipts and related payments. Net income decreased $151.1 million in the 2024 period compared to the 2023 period. Changes in income taxes in the 2024 period compared to the 2023 period are primarily due to the amount of income tax accrued.

Current wording

*Cash flows from operating activities.*Cash flows from operating activities were $1.653 billion in the 2024 period, which represents a $926.0 million increase compared to the 2023 period. Changes in merchandise inventories resulted in a $23.4 million decrease in the 2024 period as compared to a decrease of $817.0 million in the 2023 period as further discussed below. Changes in accounts payable resulted in a $306.3 million increase in the 2024 period compared to a $107.8 million increase in the 2023 period, due primarily to the timing of inventory receipts and related payments. Changes in accrued expenses resulted in a $109.8 million increase in 2024 compared to a $12.4 million decrease in 2023 due primarily to the timing of accruals and payments for incentive compensation and sales tax. Net income decreased $245.7 million in the 2024 period compared to the 2023 period. Changes in income taxes in the 2024 period compared to the 2023 period are primarily due to the amount of income tax accrued and timing of payments.

Previous wording

On an ongoing basis, we closely monitor and manage our inventory balances, which may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. Total merchandise inventories decreased by 1% in the 2024 period compared to an increase of 9% in the 2023 period. The decrease in the 2024 period

Current wording

On an ongoing basis, we closely monitor and manage our inventory balances, which may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. Total merchandise inventories were flat in the 2024 period compared to an increase of 11% in the 2023 period. Percent changes in our four inventory categories for the 2024 period compared to the 2023 period were as follows:

Previous wording

As of May 3, 2024 our common stock repurchase program had a total remaining authorization of approximately $1.38 billion. The authorization allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. To preserve our investment grade credit rating and maintain financial flexibility, we did not repurchase any shares under this program in the first quarter of 2024 and do not plan to repurchase shares during the remainder of the year. The repurchase authorization has no expiration date, and future repurchases will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under our debt agreements, cash requirements, excess debt capacity, results of operations, financial condition and other factors. The repurchase program may be modified or terminated from time to time at the discretion of our Board of Directors. For more about our share repurchase program, see Note 9 to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this report.

Current wording

As of August 2, 2024 our common stock repurchase program had a total remaining authorization of approximately $1.38 billion. The authorization allows repurchases from time to time in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions. To preserve our investment grade credit rating and maintain financial flexibility, we did not repurchase any shares under this program in the first half of 2024 and do not plan to repurchase shares during the remainder of the year. The repurchase authorization has no expiration date, and future repurchases will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under our debt agreements, cash requirements, excess debt capacity, results of operations, financial condition and other factors. The repurchase program may be modified or terminated from time to time at the discretion of our Board of Directors. For more about our share repurchase program, see Note 9 to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this report.