UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~QUARTERLY REPORT~~

~~PURSUANT TO SECTION~~☒Quarterly Report Pursuant to Section 13 ORor 15(d)

~~OF THE SECURITIES EXCHANGE ACT OF~~ of the Securities Exchange Act of 1934

For the quarterly period ended ~~November 3, 2017~~July 30, 2021

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission File Number:001-11421

DOLLAR GENERAL CORPORATION

(Exact name of Registrant as specified in its charter)

TENNESSEE		61-0502302
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)

100 MISSION RIDGE

GOODLETTSVILLE, TN37072

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: ~~(615)~~ (615) 855-4000

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.875 per share	DG	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The ~~registrant~~Registrant had ~~271,563,597~~233,310,218 shares of common stock outstanding on ~~December 1, 2017.~~August 20, 2021.

TABLE OF CONTENTS


Part I	Financial Information

	Item 1. Financial Statements		2

		Condensed Consolidated Balance Sheets	2
		Condensed Consolidated Statements of Income	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Statements of Shareholders’ Equity	5
		Condensed Consolidated Statement of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7
		Report of Independent Registered Public Accounting Firm	13

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

	Item 3. Quantitative and Qualitative Disclosures About Market Risk		24

	Item 4. Controls and Procedures		24

Part II	Other Information

	Item 1. Legal Proceedings		25

	Item 1A. Risk Factors		25

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25

	Item 6. Exhibits		25

Cautionary Disclosure Regarding Forward Looking Statements			26

Exhibit Index			28

Signature			29

PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL ~~STATEMENTS.~~STATEMENTS.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

November 3,

February 3,

2017

2017

(Unaudited)

(see Note 1)

ASSETS

Current assets:

Cash and cash equivalents

$
226,192

$
187,915

Merchandise inventories

3,597,195

3,258,785

Income taxes receivable

99,678

11,050

Prepaid expenses and other current assets

230,269

220,021

Total current assets

4,153,334

3,677,771

Net property and equipment

2,654,936

2,434,456

Goodwill

4,338,589

4,338,589

Other intangible assets, net

1,200,481

1,200,659

Other assets, net

27,416

20,823

Total assets

$
12,374,756

$
11,672,298

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of long-term obligations

$
401,532

$
500,950

Accounts payable

1,978,032

1,557,596

Accrued expenses and other

553,596

500,866

Income taxes payable

4,646

63,393

Total current liabilities

2,937,806

2,622,805

Long-term obligations

2,719,568

2,710,576

Deferred income taxes

690,795

652,841

Other liabilities

282,432

279,782

Commitments and contingencies

Shareholders’ equity:

Preferred stock

—

—

Common stock

237,598

240,811

Additional paid-in capital

3,176,406

3,154,606

Retained earnings

2,334,534

2,015,867

Accumulated other comprehensive loss

(4,383)

(4,990)

Total shareholders’ equity

5,744,155

5,406,294

Total liabilities and shareholders' equity

$
12,374,756

$
11,672,298


	July 30,		January 29,
	2021		2021
ASSETS
Current assets:
Cash and cash equivalents	$	313,666	$	1,376,577
Merchandise inventories		5,279,273		5,247,477
Income taxes receivable		127,011		90,760
Prepaid expenses and other current assets		272,768		199,405
Total current assets		5,992,718		6,914,219
Net property and equipment		4,104,193		3,899,997
Operating lease assets		9,805,081		9,473,330
Goodwill		4,338,589		4,338,589
Other intangible assets, net		1,199,810		1,199,870
Other assets, net		47,417		36,619
Total assets	$	25,487,808	$	25,862,624

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of operating lease liabilities	$	1,127,841	$	1,074,079
Accounts payable		3,369,984		3,614,089
Accrued expenses and other		973,025		1,006,552
Income taxes payable		8,234		16,063
Total current liabilities		5,479,084		5,710,783
Long-term obligations		4,156,765		4,130,975
Long-term operating lease liabilities		8,661,716		8,385,388
Deferred income taxes		781,477		710,549
Other liabilities		271,631		263,691
Commitments and contingencies
Shareholders’ equity:
Preferred stock		—		—
Common stock		204,142		210,687
Additional paid-in capital		3,504,850		3,446,612
Retained earnings		2,429,821		3,006,102
Accumulated other comprehensive loss		(1,678)		(2,163)
Total shareholders’ equity		6,137,135		6,661,238
Total liabilities and shareholders' equity	$	25,487,808	$	25,862,624

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

For the 13 weeks ended

For the 39 weeks ended


November 3,

October 28,

November 3,

October 28,

2017

2016

2017

2016

Net sales

$
5,903,606

$
5,320,029

$
17,341,536

$
15,977,352

Cost of goods sold

4,137,150

3,732,519

12,085,575

11,095,461

Gross profit

1,766,456

1,587,510

5,255,961

4,881,891

Selling, general and administrative expenses

1,349,025

1,194,519

3,871,589

3,499,060

Operating profit

417,431

392,991

1,384,372

1,382,831

Interest expense

23,995

23,877

72,747

72,310

Other (income) expense

—

—

3,502

—

Income before income taxes

393,436

369,114

1,308,123

1,310,521

Income tax expense

140,903

133,799

481,318

473,564

Net income

$
252,533

$
235,315

$
826,805

$
836,957

Earnings per share:

Basic

$
0.93

$
0.84

$
3.02

$
2.96

Diluted

$
0.93

$
0.84

$
3.02

$
2.95

Weighted average shares outstanding:

Basic

272,319

280,441

273,567

283,152

Diluted

272,881

281,283

274,076

284,126

Dividends per share

$
0.26

$
0.25

$
0.78

$
0.75


	For the 13 weeks ended				For the 26 weeks ended
	July 30,		July 31,		July 30,		July 31,
	2021		2020		2021		2020
Net sales	$	8,650,198	$	8,684,241	$	17,051,162	$	17,132,690
Cost of goods sold		5,912,539		5,866,006		11,557,835		11,718,763
Gross profit		2,737,659		2,818,235		5,493,327		5,413,927
Selling, general and administrative expenses		1,888,091		1,775,608		3,734,909		3,504,516
Operating profit		849,568		1,042,627		1,758,418		1,909,411
Interest expense		39,430		39,326		79,822		69,819
Income before income taxes		810,138		1,003,301		1,678,596		1,839,592
Income tax expense		173,119		215,700		363,828		401,545
Net income	$	637,019	$	787,601	$	1,314,768	$	1,438,047
Earnings per share:
Basic	$	2.71	$	3.15	$	5.55	$	5.73
Diluted	$	2.69	$	3.12	$	5.52	$	5.69
Weighted average shares outstanding:
Basic		234,924		250,281		236,736		251,031
Diluted		236,406		252,190		238,354		252,908

Dividends per share	$	0.42	$	0.36	$	0.84	$	0.72

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

For the 13 weeks ended

For the 39 weeks ended

November 3,

October 28,

November 3,

October 28,


2017

2016

2017

2016

Net income

$
252,533

$
235,315

$
826,805

$
836,957

Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $128, $129, $381 and $387, respectively

201

200


607

601

Comprehensive income

$
252,734

$
235,515

$
827,412

$
837,558


	For the 13 weeks ended				For the 26 weeks ended
	July 30,		July 31,		July 30,		July 31,
	2021		2020		2021		2020
Net income	$	637,019	$	787,601	$	1,314,768	$	1,438,047
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $86, $86, $173 and $173, respectively		243		243		485		486
Comprehensive income	$	637,262	$	787,844	$	1,315,253	$	1,438,533

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

(Unaudited)

(In ~~thousands)~~thousands, except per share amounts)

For the 39 weeks ended


November 3,

October 28,


2017

2016

Cash flows from operating activities:

Net income

$
826,805

$
836,957

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

298,571

282,386

Deferred income taxes

37,573

(3,207)

Loss on debt retirement

3,502

—

Noncash share-based compensation

24,948

27,676

Other noncash (gains) and losses

12,787

1,935

Change in operating assets and liabilities:

Merchandise inventories

(340,090)

(405,456)

Prepaid expenses and other current assets

(15,198)

(30,471)

Accounts payable

384,101

439,259

Accrued expenses and other liabilities

58,901

50,683

Income taxes

(147,375)

(74,892)

Other

(1,645)

(456)

Net cash provided by (used in) operating activities

1,142,880

1,124,414

Cash flows from investing activities:

Purchases of property and equipment

(488,616)

(405,899)

Proceeds from sales of property and equipment

1,005

4,333

Net cash provided by (used in) investing activities

(487,611)

(401,566)

Cash flows from financing activities:

Issuance of long-term obligations

599,556

—

Repayments of long-term obligations

(751,927)

(1,302)

Net increase (decrease) in commercial paper outstanding

59,400

453,000

Borrowings under revolving credit facilities

—

1,584,000

Repayments of borrowings under revolving credit facilities

—

(1,835,000)

Costs associated with issuance and retirement of debt

(9,524)

—

Repurchases of common stock

(298,735)

(679,416)

Payments of cash dividends

(212,934)

(212,249)

Other equity and related transactions

(2,828)

10,408

Net cash provided by (used in) financing activities

(616,992)

(680,559)

Net increase (decrease) in cash and cash equivalents

38,277

42,289

Cash and cash equivalents, beginning of period

187,915

157,947

Cash and cash equivalents, end of period

$
226,192

$
200,236

Supplemental schedule of noncash investing and financing activities:

Purchases of property and equipment awaiting processing for payment, included in Accounts payable

$
75,249

$
46,647


								Accumulated
	Common			Additional				Other
	Stock	Common		Paid-in		Retained		Comprehensive
	Shares	Stock		Capital		Earnings		Loss		Total
Balances, April 30, 2021	236,205	$	206,680	$	3,457,160	$	2,588,006	$	(1,921)	$	6,249,925
Net income	—		—		—		637,019		—		637,019
Dividends paid, $0.42 per common share	—		—		—		(98,304)		—		(98,304)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		243		243
Share-based compensation expense	—		—		16,370		—		—		16,370
Repurchases of common stock	(3,309)		(2,896)		—		(696,900)		—		(699,796)
Other equity and related transactions	409		358		31,320		—		—		31,678
Balances, July 30, 2021	233,305	$	204,142	$	3,504,850	$	2,429,821	$	(1,678)	$	6,137,135

Balances, May 1, 2020	251,722	$	220,259	$	3,332,283	$	3,659,804	$	(2,892)	$	7,209,454
Net income	—		—		—		787,601		—		787,601
Dividends paid, $0.36 per common share	—		—		—		(89,659)		—		(89,659)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		243		243
Share-based compensation expense	—		—		15,509		—		—		15,509
Repurchases of common stock	(3,184)		(2,785)		—		(598,751)		—		(601,536)
Other equity and related transactions	495		432		34,027		—		—		34,459
Balances, July 31, 2020	249,033	$	217,906	$	3,381,819	$	3,758,995	$	(2,649)	$	7,356,071

Balances, January 29, 2021	240,785	$	210,687	$	3,446,612	$	3,006,102	$	(2,163)	$	6,661,238
Net income	—		—		—		1,314,768		—		1,314,768
Dividends paid, $0.84 per common share	—		—		—		(198,136)		—		(198,136)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		485		485
Share-based compensation expense	—		—		39,903		—		—		39,903
Repurchases of common stock	(8,268)		(7,235)		—		(1,692,913)		—		(1,700,148)
Other equity and related transactions	788		690		18,335		—		—		19,025
Balances, July 30, 2021	233,305	$	204,142	$	3,504,850	$	2,429,821	$	(1,678)	$	6,137,135

Balances, January 31, 2020	251,936	$	220,444	$	3,322,531	$	3,162,660	$	(3,135)	$	6,702,500
Net income	—		—		—		1,438,047		—		1,438,047
Dividends paid, $0.72 per common share	—		—		—		(180,276)		—		(180,276)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		486		486
Share-based compensation expense	—		—		34,477		—		—		34,477
Repurchases of common stock	(3,635)		(3,180)		—		(661,436)		—		(664,616)
Other equity and related transactions	732		642		24,811		—		—		25,453
Balances, July 31, 2020	249,033	$	217,906	$	3,381,819	$	3,758,995	$	(2,649)	$	7,356,071

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


		For the 26 weeks ended
		July 30,		July 31,
		2021		2020
Cash flows from operating activities:
Net income		$	1,314,768	$	1,438,047
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			312,682		278,617
Deferred income taxes			70,755		14,493
Noncash share-based compensation			39,903		34,477
Other noncash (gains) and losses			51,036		6,177
Change in operating assets and liabilities:
Merchandise inventories			(80,038)		283,957
Prepaid expenses and other current assets			(72,072)		(27,237)
Accounts payable			(245,382)		560,918
Accrued expenses and other liabilities			(25,479)		273,208
Income taxes			(44,080)		48,245
Other			(4,549)		(3,567)
Net cash provided by (used in) operating activities			1,317,544		2,907,335
						��
Cash flows from investing activities:
Purchases of property and equipment			(518,466)		(424,167)
Proceeds from sales of property and equipment	��		1,805		1,051
Net cash provided by (used in) investing activities			(516,661)		(423,116)

Cash flows from financing activities:
Issuance of long-term obligations			—		1,494,315
Repayments of long-term obligations			(2,936)		(1,037)
Net increase (decrease) in commercial paper outstanding			18,400		(425,200)
Borrowings under revolving credit facilities			—		300,000
Repayments of borrowings under revolving credit facilities			—		(300,000)
Costs associated with issuance of debt			—		(13,574)
Repurchases of common stock			(1,700,148)		(664,616)
Payments of cash dividends			(198,107)		(180,268)
Other equity and related transactions			18,997		25,445
Net cash provided by (used in) financing activities			(1,863,794)		235,065
Net increase (decrease) in cash and cash equivalents			(1,062,911)		2,719,284
Cash and cash equivalents, beginning of period			1,376,577		240,320
Cash and cash equivalents, end of period		$	313,666	$	2,959,604

Supplemental noncash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities		$	893,773	$	869,137
Purchases of property and equipment awaiting processing for payment, included in Accounts payable		$	119,336	$	89,290

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Basis of presentation

~~1.Basis of presentation~~

The accompanying unaudited condensed consolidated financial statements of Dollar General Corporation ~~and~~(which individually or together with its subsidiaries, ~~(the~~as the context requires, is referred to as the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Such financial statements consequently do not include all of the disclosures normally required by U.S. GAAP for annual financial statements or those normally made in the Company’s Annual Report on Form 10-K, including the condensed consolidated balance sheet as of ~~February 3, 2017~~January 29, 2021 which was derived from the audited consolidated financial statements at that date. Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended ~~February 3, 2017~~January 29, 2021 for additional information.

The Company’s fiscal year ends on the Friday closest to January 31. Unless the context requires otherwise, references to years contained herein pertain to the Company’s fiscal year. The Company’s ~~2017~~2021 fiscal year is scheduled to be a 52-week accounting period ending on ~~February 2, 2018,~~January 28, 2022, and the ~~2016~~2020 fiscal year was a ~~53-week~~52-week accounting period that ended on ~~February 3, 2017.~~January 29, 2021.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the Company’s customary accounting practices. In management’s opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the consolidated financial position as of ~~November 3, 2017~~July 30, 2021 and results of operations for the 13-week and ~~39-week~~26-week accounting periods ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016~~July 31, 2020 have been made.

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Because the Company’s business is moderately seasonal, the results for interim periods are not necessarily indicative of the results to be expected for the entire year. In addition, the effect of the COVID-19 pandemic on consumer behavior beginning in the first quarter of 2020 resulted in a departure from seasonal norms experienced in recent years and may continue to disrupt the historical quarterly cadence of the Company’s results of operations for an unknown period of time.

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels, sales for the year and the expected rate of inflation or deflation for the year. The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation. The Company recorded a LIFO provision ~~(benefit)~~ of ~~$0.5~~$36.0 million and ~~$(3.8)~~$0.1 million in the respective 13-week periods, and ~~$0.8~~$48.2 million and ~~$(8.1)~~$1.7 million in the respective ~~39-week~~26-week periods, ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016.~~July 31, 2020. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation.

In ~~May 2014,~~March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued ~~comprehensive new~~ accounting standards updates pertaining to reference rate reform. This collective guidance is in response to accounting concerns regarding contract modifications and hedge accounting because of impending rate reform associated with structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of LIBOR related to regulators in several jurisdictions around the ~~recognition of revenue, which specified an effective date~~world having undertaken reference rate reform initiatives to identify alternative reference rates. The guidance provides optional expedients and exceptions for ~~annual reporting periods beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB deferred the effective date~~applying U.S. GAAP to ~~annual reporting periods beginning after December 15, 2017, with earlier adoption permitted only for annual reporting periods beginning after December 15, 2016.~~contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ~~new guidance allows companies to use either a full retrospective or a modified retrospective approach in the~~ adoption of this ~~guidance.~~guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company formed a project team to assess and implement the standard by compiling a list of the applicable revenue streams, evaluating relevant contracts and comparing the Company’s current accounting policies to the new standard. As a result of the efforts of this project team, the Company has identified customer incentives and gross versus net considerations as the areas in which it would most likely be affected by the new guidance. The Company is continuing to assess all the impacts of the new standard and the design of internal control over financial reporting, but based upon the terms of the Company’s agreements and an evaluation of the materiality of these transactions related to customer incentives and gross versus net considerations, the Company does not expect the adoption of this guidance to have a material ~~effect on the Company’s consolidated results of operations,~~

~~financial position or cash flows. The Company currently expects to complete this work in 2017 and to adopt this guidance on February 3, 2018 using the modified retrospective approach.~~

In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. The Company is currently assessing the impact ~~that adoption of this guidance will have~~ on its consolidated financial statements. Specifically, the Company has formed a project team that is developing test plans for its lease accounting system, identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with its lease accounting software vendor, among other activities. The Company anticipates a material impact to its consolidated financial statements as it is party to a significant number of lease contracts.

In October 2016, the FASB issued amendments to existing guidance related to accounting for intra-entity transfers of assets other than inventory. These amendments require an entity to recognize the income tax consequences of such transfers when the transfer occurs and affects the Company’s historical accounting for intra-entity transfers of certain intangible assets. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted subject to certain guidelines. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is assessing the impact that adoption of this guidance will have on its consolidated financial statements, and currently expects such adoption would result in an increase in deferred income tax liabilities and a decrease in retained earnings of approximately $32 million to $36 million under existing tax legislation.

2.	Earnings per share

2.~~Earnings per share~~

Earnings per share is computed as follows (in thousands, except per share data):


	13 Weeks Ended November 3, 2017					13 Weeks Ended October 28, 2016
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount

											13 Weeks Ended July 30, 2021					13 Weeks Ended July 31, 2020
													Weighted					Weighted
											Net		Average	Per Share		Net		Average	Per Share
											Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	252,533	272,319	$	0.93	$	235,315	280,441	$	0.84	$	637,019	234,924	$	2.71	$	787,601	250,281	$	3.15
Effect of dilutive share-based awards			562					842					1,482					1,909
Diluted earnings per share	$	252,533	272,881	$	0.93	$	235,315	281,283	$	0.84	$	637,019	236,406	$	2.69	$	787,601	252,190	$	3.12


	39 Weeks Ended November 3, 2017					39 Weeks Ended October 28, 2016
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount

											26 Weeks Ended July 30, 2021					26 Weeks Ended July 31, 2020
													Weighted					Weighted
											Net		Average	Per Share		Net		Average	Per Share
											Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	826,805	273,567	$	3.02	$	836,957	283,152	$	2.96	$	1,314,768	236,736	$	5.55	$	1,438,047	251,031	$	5.73
Effect of dilutive share-based awards			509					974					1,618					1,877
Diluted earnings per share	$	826,805	274,076	$	3.02	$	836,957	284,126	$	2.95	$	1,314,768	238,354	$	5.52	$	1,438,047	252,908	$	5.69

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is determined based on the dilutive effect of share-based awards using the treasury stock method.

Share-based awards that were outstanding at the end of the respective periods but were not included in the computation of diluted earnings per share because the effect of exercising such awards would be antidilutive, were ~~2.5~~less than 0.1 million in each of the respective 13-week periods, and 0.1 million and ~~1.9~~0.3 million in the respective ~~2017~~26-week periods, ended July 30, 2021 and ~~2016 13-week periods, and 2.6 million and 1.6 million in the respective 2017 and 2016 39-week periods.~~July 31, 2020.

3.	Income taxes

~~3.Income taxes~~

Under the accounting standards for income taxes, the asset and liability method is used for computing the future income tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns.

Income tax reserves are determined using the methodology established by accounting standards for income taxes which require companies to assess each income tax position taken using the following two-step approach. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position.

The Company’s ~~2013~~2016 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”).The IRS, at its discretion, may choose to examine the Company’s ~~2014~~2017 through ~~2016~~2019 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, with few exceptions, the Company’s ~~2012~~2017 and later tax years remain open for examination by the various state taxing authorities.

As of ~~November 3, 2017,~~July 30, 2021, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were ~~$1.3~~$8.2 million, ~~$0.8~~$0.6 million and ~~$0.8~~$0.0 million, respectively, for a total of ~~$2.9~~$8.8 million. This total amount is reflected in noncurrent ~~Other~~other liabilities in the condensed consolidated balance sheet.

The ~~Company believes it is reasonably possible that the~~Company’s reserve for uncertain tax positions ~~may~~is expected to be reduced by ~~approximately $0.3~~$4.1 million in the coming twelve months ~~principally~~ as a result of ~~the effective settlement~~expiring statutes of ~~uncertain tax positions.~~limitations. As of ~~November 3, 2017,~~July 30, 2021, approximately ~~$1.3~~$8.2 million of the reserve for uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions.

The effective income tax rates for ~~each of~~ the 13-week and ~~39-week~~26-week periods ended ~~November 3, 2017~~July 30, 2021 were ~~35.8%~~21.4% and ~~36.8%,~~21.7% respectively compared to rates of ~~36.2%~~21.5% and ~~36.1%, respectively,~~21.8% for the 13-week and ~~39-week~~26-week periods ended ~~October 28, 2016.~~ July 31, 2020.

The income tax ~~rate~~rates for the ~~2017~~ 13-week ~~period was~~and 26-week periods in 2021 were lower than the comparable 13-week ~~comparable 2016 period~~and 26-week periods in 2020 primarily due to the ~~recognition~~greater impact of ~~greater federal Work Opportunity Tax Credits~~permanent differences resulting from a decrease in pre-tax income for the 2021 periods compared to the 2020 periods.

4.Leases

As of July 30, 2021, the Company’s primary leasing activities were real estate leases for most of its retail store locations and certain of its distribution facilities. Substantially all of the Company’s leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the ~~2017 period. The tax~~condensed consolidated balance sheets. Finance lease assets are included in net property and equipment, and finance lease liabilities are included in long-term obligations, in the condensed consolidated balance sheets. At July 30, 2021, the weighted-average remaining lease term for the Company’s operating leases was 9.8 years, and the weighted average discount rate for ~~the 2017 39-week period~~such leases was ~~higher than the comparable 2016 period primarily due to recognition of a tax benefit~~3.8%. Operating lease costs are reflected as selling, general and administrative costs in the ~~2016 period associated with stock based compensation that did not reoccur, to~~condensed consolidated statements of income. For the ~~same extent,~~26-week periods ended July 30, 2021 and July 31, 2020, such costs were $730.0 million and $678.6 million, respectively. Cash paid for amounts included in the ~~2017 period.~~measurement of operating lease liabilities of $735.8 million and $680.4 million, respectively, were reflected in cash flows from operating activities in the condensed consolidated statements of cash flows for the 26-week periods ended July 30, 2021 and July 31, 2020.

5.	Current and long-term obligations

~~4.Current and long-term obligations~~

Current and long-term obligations consist of the following:

November 3,

February 3,

(In thousands)

2017

2017

Senior unsecured credit facilities

Term Facility

$
175,000

$
425,000

Revolving Facility

—

—

4.125% Senior Notes due July 15, 2017

—

500,000

1.875% Senior Notes due April 15, 2018 (net of discount of $40 and $111)

399,960

399,889

3.250% Senior Notes due April 15, 2023 (net of discount of $1,380 and $1,552)

898,620

898,448

4.150% Senior Notes due November 1, 2025 (net of discount of $649 and $700)

499,351

499,300

3.875% Senior Notes due April 15, 2027 (net of discount of $423)

599,577

—

Unsecured commercial paper notes

549,900

490,500

Capital lease obligations

8,261

3,643

Tax increment financing due February 1, 2035

7,765

8,840

Debt issuance costs, net

(17,334)

(14,094)

3,121,100

3,211,526

Less: current portion

(401,532)

(500,950)

Long-term portion

$
2,719,568

$
2,710,576


	July 30,		January 29,
(In thousands)	2021		2021
Revolving Facility	$	—	$	—
3.250% Senior Notes due April 15, 2023 (net of discount of $452 and $583)		899,548		899,417
4.150% Senior Notes due November 1, 2025 (net of discount of $372 and $412)		499,628		499,588
3.875% Senior Notes due April 15, 2027 (net of discount of $273 and $294)		599,727		599,706
4.125% Senior Notes due May 1, 2028 (net of discount of $360 and $383)		499,640		499,617
3.500% Senior Notes due April 3, 2030 (net of discount of $594 and $623)		1,006,743		999,377
4.125% Senior Notes due April 3, 2050 (net of discount of $4,901 and $4,945)		495,099		495,055
Unsecured commercial paper notes		18,400		—
Other		162,326		164,365
Debt issuance costs, net		(24,346)		(26,150)
	$	4,156,765	$	4,130,975

On ~~February 22, 2017,~~September 10, 2019, the Company entered into an ~~unsecured~~ amended and restated credit agreement, providing for ~~a $175.0 million senior unsecured term loan facility (the “Term Facility”) and~~ a $1.25 billion ~~senior~~ unsecured five-year revolving credit facility (the “Revolving Facility”) ~~(collectively, the “Facilities”) that provides for the issuance~~ of ~~letters of credit~~which up to $175.0 ~~million. The Term Facility~~million is ~~scheduled to mature on October 20, 2020, and the Revolving Facility is scheduled to mature on February 22, 2022.~~available for letters of credit.

Borrowings under the ~~Facilities~~Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of ~~November 3, 2017~~July 30, 2021 was ~~1.10%~~1.015% for LIBOR borrowings and ~~0.10%~~0.015% for base-rate borrowings. The Company is also required to pay a facility fee, payable on any used and unused commitment amounts of the ~~Facilities,~~Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of ~~November 3, 2017,~~July 30, 2021, the ~~commitment~~facility fee rate was ~~0.15%~~0.11%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the ~~Facilities~~Revolving Facility are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings. ~~The weighted average all-in interest rate for borrowings under the Facilities was 2.3% as of November 3, 2017.~~

The ~~Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required principal amortization under the Facilities. The Facilities contain~~Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional liens; sell all or substantially all of the Company’s assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The ~~Facilities~~Revolving Facility also ~~contain~~contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of ~~November 3, 2017,~~July 30, 2021, the Company was in compliance with all such covenants. The ~~Facilities~~Revolving Facility also ~~contain~~contains customary events of default.

As of ~~November 3, 2017, the entire balance of the Term Facility was outstanding and, under the Revolving Facility,~~July 30, 2021, the Company had no0 outstanding borrowings, outstanding letters of credit of ~~$9.5~~$2.9 million, and borrowing availability of ~~$1.24~~approximately $1.25 billion under the Revolving Facility that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$690.6 million.~~$1.05 billion. In addition, as of ~~November 3, 2017,~~July 30, 2021, the Company had outstanding letters of credit of ~~$40.0~~$53.4 million which were issued pursuant to separate agreements.

As of ~~November 3, 2017,~~July 30, 2021, the Company had ~~outstanding~~a commercial paper program under which the Company may issue unsecured commercial paper notes (the “CP Notes”) of $549.9 million classified as long-term obligations on the condensed consolidated balance sheet due to its intent and ability to refinance these obligations as long-term debt. Under this program, the Company may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company intends to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of ~~November 3, 2017,~~July 30, 2021, the Company’s condensed consolidated balance sheet reflected outstanding unsecured CP Notes of $18.4 million, which had a weighted average borrowing rate of ~~1.4%~~0.15%. CP Notes totaling $181.0 million were held by a wholly-owned subsidiary of the Company and are therefore not reflected on the condensed consolidated balance sheets.

On April ~~11, 2017,~~3, 2020, the Company issued ~~$600.0 million~~$1.0 billion aggregate principal amount of ~~3.875%~~3.5% senior notes due ~~2027~~2030 (the ~~“2027~~“2030 Senior Notes”), net of discount of ~~$0.4~~$0.7 million, ~~which~~and $500.0 million aggregate principal amount of 4.125% senior notes due 2050 (the “2050 Senior Notes”), net of discount of $5.0 million. The 2030 Senior Notes are scheduled to mature on April ~~15, 2027.~~3, 2030 and the 2050 Senior Notes are scheduled to mature on April 3, 2050. Interest on the ~~2027~~2030 Senior Notes and the 2050 Senior Notes is payable in cash on April 153 and October 153 of each ~~year, with the first payment commencing on October 15, 2017.~~year. The Company incurred ~~$5.2~~$13.6 million of debt issuance costs associated with the issuance of the ~~2027~~2030 Senior Notes and the 2050 Senior Notes.

During the second quarter of 2021, the Company entered into interest rate swaps on a portion of the 2030 Senior Notes. ~~The net proceeds from~~These interest rate swaps are being accounted for as fair value hedges, with the ~~offering~~derivative asset or liability offset by a corresponding adjustment to the carrying value of the ~~2027~~2030 Senior ~~Notes were used~~Notes. Such arrangements are not material to ~~repay all of~~ the Company’s ~~outstanding senior notes due in 2017 as discussed below and for general corporate purposes.~~

On April 27, 2017, the Company redeemed $500.0 million aggregate principal amount of outstanding 4.125% senior notes due 2017 (the “2017 Senior Notes”), resulting in a pretax loss of $3.4 million which is reflected in Other (income) expense in the condensed consolidated ~~statement of income for the 39-weeks ended November 3, 2017. The Company funded the redemption price for the 2017 Senior Notes with proceeds from the issuance of the 2027 Senior Notes.~~financial statements.

6.	Assets and liabilities measured at fair value

~~5.Assets and liabilities measured at fair value~~

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The Company does not have any fair value measurements categorized within Level 3 as of ~~November 3, 2017.~~July 30, 2021.

The following table presents the Company’s ~~assets and~~ liabilities ~~disclosed~~required to be measured at fair value as of ~~November 3, 2017,~~July 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Quoted Prices

in Active

Markets

Significant

for Identical

Other

Significant

Total Fair

Assets and

Observable

Unobservable

Value at

Liabilities

Inputs

July 30,

(In thousands)

(Level 1)

(Level 2)

(Level 3)

2021

Liabilities:

Long-term obligations (a)

4,479,736

180,726

—

4,660,462

Deferred compensation (b)

44,357

—

44,357

Quoted Prices






in Active

Markets

Significant

for Identical

Other

Significant

Total Fair

Assets and

Observable

Unobservable

Value at

Liabilities

Inputs

Inputs

November 3,

(In thousands)

(Level 1)

(Level 2)

(Level 3)

2017

Liabilities:

Long-term obligations (a)

$
2,480,290

$
740,271

$
—

$
3,220,561

Deferred compensation (b)

23,532

—

—

23,532

(a)

~~(a)~~

Included in the condensed consolidated balance sheet at book value as ~~Current portion of long-term obligations of $401,532 and~~ Long-term obligations of ~~$2,719,568.~~

$4,156,765.

(b)

~~(b)~~

Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of ~~$1,441~~$2,444 and noncurrent Other liabilities of ~~$22,091.~~

$41,913.

~~6.Commitments~~7.Commitments and contingencies

Legal proceedings

From time to time, the Company is a party to various legal matters ~~involving claims incidental to~~in the ~~conduct~~ordinary course of its business, including actions by employees, consumers, suppliers, government agencies, or others. The Company has recorded accruals with respect to these matters, where appropriate, which are reflected in the Company’s consolidated financial statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made. In 2019, the Company recorded an accrual of $31.0 million for losses the Company believes are both probable and reasonably estimable relating to certified class actions and associated matters including the matters discussed below under Consumer/Product Litigation.

Except as described below and based on information currently available, the Company believes ~~based upon information currently available,~~ that ~~such~~its pending legal matters, both individually and in the aggregate, will be resolved without a material adverse effect on the Company’s consolidated financial statements as a whole. However, litigation and other legal matters involve an element of uncertainty. Future developments could cause these actions or claims to have a material adverse effect on the Company’s results of operations, cash flows, or financial position. In addition, certain of these matters, if decided adversely to the Company or settled by the Company, may result in liability material to the Company’s financial position or may negatively affect operating results ifAdverse decisions and settlements, including any required changes to the Company’s business, ~~operation are required.~~

~~Wage and Hour Litigation~~

~~The Company is defending the following wage and hour matters (collectively the “Wage/Hour Litigation”):~~

~~California Wage/Hour Litigation~~: Plaintiffs allege that they and a putative statewide class of other “key carriers” were not provided with meal and rest periods and were provided inaccurate wage statements and termination pay in violation of California law, including California’s Private Attorney General Act (the “PAGA”). The plaintiffs seek to proceed on a statewide class basis and to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties and attorneys’ fees and costs.

~~Pennsylvania Wage/Hour Litigation~~: Plaintiff alleges that he and other similarly situated current and former hourly employees were subjected to unlawful policies and practices and were denied regular and overtime wages in violation of federal and Pennsylvania law. The plaintiff seeks to proceed on a nationwide collective basis under federal law and a statewide class basis under Pennsylvania law and to recover alleged unpaid wages, liquidated damages, statutory damages, and attorneys’ fees and costs.

~~Tennessee Wage/Hour Litigation~~: Plaintiffs allege that they and other similarly situated current and former “key holders” were not paid for all hours worked in violation of federal, Illinois and Tennessee law. The plaintiffs seek to proceed on a nationwide collective basis under federal law and a statewide class basis under Tennessee and Illinois law and to recover alleged unpaid wages, statutory and common law damages, liquidated damages, pre- and post-judgment interest and attorneys’ fees and costs.

The Company is vigorously defending the Wage/Hour Litigation and believes that its policies and practices comply with federal and state laws and that these actions are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or other ~~similar action,~~developments in such matters could affect the consolidated operating results in future periods or ~~the size of any putative class~~result in liability or ~~classes. Likewise, at this time it is not possible~~other amounts material to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate any potential loss or range of loss in these matters; however, if the Company is not successful in its defense efforts, the resolution of these actions could have a material adverse effect on the Company’s annual consolidated financial ~~statements as a whole.~~statements.

~~Other Employment Litigation~~

~~The Company is defending the following employment-related matters (collectively the “Employment Litigation”):~~

~~California Suitable Seating Litigation~~: The plaintiff alleges that the Company failed to provide her and other current and former California store employees with suitable seats in violation of California law. The plaintiff seeks to recover penalties under the PAGA, injunctive relief, and attorneys’ fees and costs.

~~EEOC Litigation~~: The United States Equal Employment Opportunity Commission (“EEOC”) filed suit against the Company alleging the Company’s use of post offer, pre-employment physical assessments, as applied to candidates for the general warehouse position in the Bessemer, Alabama distribution center, violates the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act.

The Company is vigorously defending the Employment Litigation and believes that its employment policies and practices comply with federal and state law and that these matters are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or in a similar fashion, or the size of any putative class or classes. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate any potential loss or range of loss in these matters; however if the Company is not successful in its defense efforts, the resolution of these matters could have a material adverse effect on the Company’s consolidated financial statements as a whole.

Consumer/Product Litigation

In December 2015 the Company was first notified of several lawsuits in which ~~the~~ plaintiffs allege violation of state law, including state consumer protection laws, relating to the labeling, marketing and sale of certain Dollar General private-label motor oil. Each of these lawsuits, as well as additional, similar lawsuits filed after December 2015, was filed in, or removed to, various federal district courts of the United States (collectively ~~“the Motor~~“Motor Oil Lawsuits”).

On June 2, 2016, the ~~United States Judicial Panel on Multidistrict Litigation (“JPML”) granted the Company’s motion to centralize the~~ Motor Oil Lawsuits were centralized in a matter styled In re Dollar General Corp. Motor Oil Litigation, Case MDL No. 2709, before the United States District Court for the Western District of Missouri (“Motor Oil MDL”). ~~Subsequently,~~In their consolidated amended complaint, the plaintiffs in the Motor Oil MDL ~~filed a consolidated amended complaint, in which they seek~~sought to certify ~~two~~2 nationwide classes and multiple statewide sub-classes and for each putative class member some or all of the following relief: compensatory damages, injunctive relief, statutory damages, punitive damages and attorneys’ fees.

The parties reached an agreement, which was granted final approval by the court ~~recently granted in part and denied in part the Company’s motion~~on June 22, 2021, to ~~dismiss the allegations raised in the consolidated amended complaint. To the extent additional consumer lawsuits alleging violation of laws relating to the~~

~~labeling, marketing and sale of Dollar General private-label motor oil have been or will be filed, the Company expects that such lawsuits will be transferred to~~resolve the Motor Oil ~~MDL.~~MDL for an amount that is immaterial to the Company’s consolidated financial statements as a whole.

~~In May 2017,~~The Company previously reached agreements with the ~~Company received a Notice of Proposed Action from the Office~~Offices of the New Mexico Attorney General ~~(the “New Mexico AG” or “Attorney General”) which alleges~~and the Louisiana Attorney General to resolve, for amounts immaterial to the Company’s consolidated financial statements as a whole, allegations that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated New Mexico and Louisiana law (the “New Mexico and Louisiana Motor Oil ~~Matter”~~Matters”). ~~The State is represented in connection with this matter by counsel for the plaintiffs in the Motor Oil MDL.~~

On May 25, 2017, in response to the Notice of Proposed Action, the Company filed an action in New Mexico federal court seeking a declaratory judgment that the Attorney General is prohibited by, among other things, the United States Constitution, from pursuing the New Mexico Motor Oil Matter and an order enjoining the Attorney General from pursuing such an action. (~~Dollar General Corporation v. Hector H. Balderas~~, D.N.M., Case No. 1:17-cv-00588). Thereafter, on June 20, 2017, the New Mexico Attorney General filed an action in the First Judicial District Court, County of Santa Fe, New Mexico pertaining to the New Mexico Motor Oil Matter. (~~Hector H. Balderas v. Dolgencorp, LLC~~, Case No. D-101-cv-2017-01562). The Company removed this matter to New Mexico federal court on July 26, 2017, and filed a motion to dismiss the action. The matter was transferred to the Motor Oil MDL and the State has moved to remand it to state court. (~~Hector H. Balderas v. Dolgencorp, LLC, D.N.M., Case No. 1:17-cv-772).~~

On September 1, 2017, the Mississippi Attorney General, who also is represented by the counsel for ~~the~~ plaintiffs in the Motor Oil MDL, filed an action in the Chancery Court of the First Judicial District of Hinds County, Mississippi ~~which alleges~~alleging that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated Mississippi law. (~~Jim Hood v. Dollar General Corporation, Case No. G2017-1229 T/1) (the “Mississippi Motor Oil Matter”).~~ The Company removed this matter to Mississippi federal court on October 5, 2017, and ~~filed a motion to dismiss the action. The matter~~it was ~~conditionally~~ transferred to the Motor Oil ~~MDL and~~MDL. On July 7, 2021, the ~~State moved~~matter was remanded to ~~vacate the JPML’s conditional transfer order. The State also moved to remand it to state~~Mississippi federal court. (~~Jim Hood v. Dollar General Corporation, N.D. Miss., Case No. 3:17-cv-801-LG-LRA).~~

The Company is vigorously defending these matters and believes that the labeling, marketing and sale of its private-label motor oil comply with applicable federal and state requirements and are not misleading. The Company further believes that these matters are not appropriate for class or similar treatment. At this time, however, except as to the Motor Oil MDL and the New Mexico and Louisiana Motor Oil Matters, it is not possible to predict whether these matters ultimately will be permitted to proceed as a class or in a similar fashion ~~whether on a statewide or nationwide basis,~~ or the size of any putative class or classes. Likewise, ~~at this time, it is not possible~~except as to ~~estimate~~Motor Oil MDL and the ~~value of the claims asserted,~~New Mexico and Louisiana Motor Oil Matters, no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. ~~For these reasons, the Company is unable to estimate the potential loss or range of~~Based on its belief that a loss in these ~~matters; however, if~~matters is both probable and reasonably estimable, as noted above, during 2019, the Company recorded an accrual for an amount that is ~~not successful in its defense efforts, the resolution of the Motor Oil MDL, the New Mexico Motor Oil Matter or the Mississippi Motor Oil Matter could have a material adverse effect on~~immaterial to the Company’s consolidated financial statements as a whole.

~~Shareholder Litigation~~

The Company is defending litigation filed in January and February 2017 in which the plaintiffs, on behalf of themselves and a putative class of shareholders, allege that between March 10, 2016 and December 1, 2016, the Company and certain of its officers (the “Individual Defendants”) violated federal securities laws by misrepresenting the impact to sales of changes to certain federal programs that provide supplemental nutritional assistance to individuals. (~~Iron Workers Local Union No. 405 Annuity Fund v. Dollar General Corporation, et al., M.D. Tenn. Case No. 3:17-cv-00063;~~ ~~Julia Askins v. Dollar General Corporation, et al., M.D. Tenn., Case No. 3:17-cv-00276;~~ ~~Bruce Velan v. Dollar General Corporation, et al~~., M.D. Tenn., Case No. 3:17-cv-00275) (collectively “the Shareholder Litigation”). The plaintiffs in the Shareholder Litigation seek the following relief: compensatory damages, unspecified equitable relief, pre- and post-judgment interest and attorneys’ fees and expenses. The court has consolidated the cases, appointed a lead plaintiff and entered a preliminary scheduling order. A motion to dismiss filed by the Company and the Individual Defendants is pending.

The Company believes that the statements at issue in the Shareholder Litigation complied with the federal securities laws and intends to vigorously defend this matter. At this time, it is not possible to predict whether the Shareholder Litigation will be permitted to proceed as a class or the size of any putative class. Likewise, at this time, it is not possible to estimate the value of the claims asserted in this action, and no assurances can be given that the Company will be successful in its defense on the merits or otherwise. For these reasons, the Company is unable to estimate the potential loss or range of loss in this matter; however if the Company is not successful in its defense efforts, the resolution of the Shareholder Litigation could have a material adverse effect on the Company’s consolidated financial statements as a whole.

8.	Segment reporting

The Company is also defending shareholder derivative actions filed in April, July and August 2017, in which each plaintiff asserts, purportedly on behalf of the Company, some or all of the following claims against the Company’s board of directors and certain of its officers based upon factual allegations substantially similar to those in the Shareholder Litigation: alleged breach of fiduciary duties, unjust enrichment, violation of federal securities laws, abuse of control, and gross mismanagement. (~~Robert Anderson v. Todd Vasos, et al., M.D. Tenn. Case No. 3:17-cv-00693;~~ ~~Sharon Shaver v. Todd J. Vasos, et al., Chancery Court for the Twentieth Judicial District of Davidson County, Tennessee, Case No. 17-797-I;~~ ~~Glenn Saito v. Todd Vasos, et al~~., M.D. Tenn., Case No. 3:17-cv-01138) (collectively “the Derivative Litigation”). The plaintiffs in the Derivative Litigation seek, purportedly on behalf of the Company, some or all of the following relief: compensatory damages, injunctive relief, disgorgement, restitution and attorneys’ fees and expenses. The ~~Anderson~~ ~~and~~ ~~Saito~~ ~~cases have been consolidated and stayed pending resolution of the motion to dismiss in the Shareholder Litigation, and a similar stay has been ordered in the~~ ~~Shaver~~ ~~action.~~

~~7.Segment reporting~~

The Company manages its business on the basis of ~~one~~1 reportable operating segment. As of ~~November 3, 2017,~~July 30, 2021, all of the Company’s operations were located within the United States with the exception of certain ~~subsidiaries in Hong Kong and China and a liaison office in India,~~product sourcing operations, which collectively are not material with regard to assets, results of operations or otherwise to the condensed consolidated financial statements. The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise.


	13 Weeks Ended				39 Weeks Ended
	November 3,		October 28,		November 3,		October 28,

									13 Weeks Ended				26 Weeks Ended
									July 30,		July 31,		July 30,		July 31,
(in thousands)	2017		2016		2017		2016		2021		2020		2021		2020
Classes of similar products:
Consumables	$	4,625,401	$	4,137,748	$	13,425,273	$	12,293,395	$	6,612,950	$	6,496,350	$	12,991,085	$	13,199,799
Seasonal		636,519		575,912		2,017,150		1,873,715		1,090,311		1,161,611		2,140,693		2,079,523
Home products		346,339		329,715		1,007,137		968,161		561,190		586,021		1,132,505		1,084,303
Apparel		295,347		276,654		891,976		842,081		385,747		440,259		786,879		769,065
Net sales	$	5,903,606	$	5,320,029	$	17,341,536	$	15,977,352	$	8,650,198	$	8,684,241	$	17,051,162	$	17,132,690

9.	Common stock transactions

~~8.Common stock transactions~~

On August 29, 2012, the Company’s Board of Directors (the “Board”) authorized a common stock repurchase program, which the Board has since increased on several occasions. ~~Most recently, on August 24, 2016,~~On March 17, 2021, the ~~Company’s~~ Board ~~of Directors~~ authorized a ~~$1.0~~$2.0 billion increase to the existing common stock repurchase ~~program. As of November 3, 2017, a~~program, bringing the cumulative total ~~of $5.0~~to $12.0 billion ~~had been~~ authorized under the program since its inception ~~and approximately $634.6 million remained available for repurchase.~~in 2012. The repurchase authorization has no expiration date and allows repurchases from time to time in ~~the~~ 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. The timing, manner and number of shares ~~purchased depends~~repurchased will depend on a variety of factors, ~~such as~~including price, market conditions, compliance with the covenants and restrictions under ~~the Company’s~~any applicable debt agreements and other factors. Repurchases under the program may be funded from available cash or borrowings, including under the ~~Facilities~~Revolving Facility and issuance of CP Notes discussed in further detail in Note 4.5.

Pursuant to its common stock repurchase program, during the ~~39-week~~26-week periods ended ~~November 3, 2017,~~July 30, 2021 and ~~October 28, 2016,~~July 31, 2020, the Company repurchased in the open market approximately ~~4.0~~8.3 million shares of its common stock at a total cost of ~~$298.7 million~~$1.7 billion and approximately ~~8.2~~3.6 million shares of its common stock at a total cost of ~~$679.4 million,~~$0.7 billion, respectively.

The Company paid ~~quarterly~~a cash ~~dividends~~dividend of ~~$0.26~~$0.42 per share during ~~each of~~ the first ~~three~~two quarters of ~~2017.~~2021. On ~~December 5, 2017,~~August 25, 2021, the ~~Company’s~~ Board ~~of Directors approved~~declared a quarterly cash dividend of ~~$0.26~~$0.42 per share, which is payable on ~~January 23, 2018~~or before October 19, 2021 to shareholders of record ~~at the close of business~~ on ~~January 9, 2018.~~October 5, 2021. The amount and declaration of future cash dividends is subject to the sole discretion of the ~~Company’s~~ Board ~~of Directors~~ and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

~~Review~~ Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors ~~and Shareholders~~ of

Dollar General Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of ~~November 3, 2017, and~~July 30, 2021, the related condensed consolidated statements of income, ~~and~~ comprehensive income, and shareholders’ equity for the thirteen ~~week~~ and ~~thirty-nine~~twenty-six week periods ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016, and~~July 31, 2020, the condensed consolidated ~~statements~~statement of cash flows for the ~~thirty-nine~~twenty-six week periods ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016. These~~July 31, 2020, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements ~~are the responsibility of the Company’s management.~~for them to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our review~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of January 29, 2021, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March 19, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial ~~information~~statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States),~~PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar General Corporation and subsidiaries as of February 3, 2017, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the fiscal year then ended (not presented herein) and we expressed an unqualified opinion on those consolidated financial statements in our report dated March 24, 2017. In our opinion, the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries as of February 3, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


	/s/ Ernst & Young LLP

~~December 7, 2017~~
Nashville, Tennessee
August 26, 2021

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~General

~~General~~

This discussion and analysis is based on, should be read with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in our Annual Report on Form 10-K for the fiscal year ended ~~February 3, 2017.~~January 29, 2021. It also should be read in conjunction with the disclosure under “Cautionary Disclosure Regarding Forward-Looking Statements” in this report.

Impact of COVID-19

The COVID-19 (coronavirus) pandemic has resulted in widespread and continuing impacts on the global economy and continues to affect our business, as well as our customers, suppliers, and other business partners. In addition, the pandemic has contributed to, and may continue to contribute to, financial results that differ significantly from our historical results and seasonal variations that are significantly different from our historical patterns.

In early March 2020, we began seeing heightened demand from customers, particularly for consumable products such as paper, food and cleaning products, which continued throughout 2020, although with some variability as to the volume and product mix. Beginning in April 2020, demand significantly increased for many non-consumable products, including home, seasonal and apparel, resulting in an overall significant mix shift into non-consumable categories, which continued through the first quarter of 2021, although this trend began to reverse in the second quarter of 2021. We believe these buying patterns were influenced in part by the economic stimulus payments and enhanced unemployment benefits. We also have been acquiring new customers since the beginning of the pandemic, and we are pleased with the retention rates. Finally, general trends in customer behavior toward trip consolidation, and purchases of larger average basket amounts, which began in 2020 as customers shopped our stores less frequently than in 2019, have continued in 2021.

Heightened customer demand and the shifts in customer behavior significantly benefited our results of operations, and in particular, sales, gross profit, operating income and net income, for fiscal 2020 and the first and second quarters of 2021. We anticipate a less favorable overall net impact of the pandemic to operating income and net income for fiscal 2021 than fiscal 2020 primarily due to the moderating positive impact to our net sales and the impacts that the phase out of various economic stabilization efforts such as economic stimulus payments and enhanced unemployment benefits may have on our customers.

We expect to continue to be affected, although the extent and duration is unknown, by the COVID-19 pandemic and its effects on the economy in a variety of ways, including changing consumer demand (whether higher or lower) in certain product categories; supply chain constraints, delays and interruptions (including product shortages and vendor allocation issues); increased distribution and transportation costs; increased payroll expenses; and increased costs in an effort to maintain safe work and shopping environments. Our operating environment during COVID-19 remains very fluid, and developments in this environment, including additional government economic stabilization efforts or actions, or the failure to take such efforts or actions, may materially impact our business, results of operations and financial condition. As a result, the quarterly cadence of our results of operations may continue to vary from historical patterns for an extended period of time.

Due to the significant uncertainty surrounding the COVID-19 pandemic and its effects, including its duration; the duration and intensity of new variants; the availability, adoption rates and effectiveness of vaccines; the extent and duration of any government response efforts, programs and benefits; and impact on employment trends, consumer behavior and the supply chain, there may be consequences that we do not anticipate at this time or that develop in unexpected ways. We will continue to monitor the evolving situation, and we will continue to take actions as necessary to serve our employees, customers, communities and shareholders.

Executive Overview

We are ~~among~~ the largest discount ~~retailers~~retailer in the United States by number of stores, with ~~14,321~~17,683 stores located in 4446 states as of ~~November 3, 2017,~~July 30, 2021, with the greatest concentration of stores in the southern, southwestern, midwestern and eastern United States. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty ~~aid~~ 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 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.

~~Because the customers we serve are value-conscious, many with low or fixed incomes, we are intensely focused on helping them make the most of their spending dollars.~~ 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 ~~macroeconomic environments. Like other retailers,~~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 ~~have been operating for several years in an environment with ongoing macroeconomic challenges and uncertainties.~~are intensely focused on helping our customers make the most of their spending dollars. Our core customers are often among the first to be affected by negative or uncertain economic conditions and ~~are~~ among the last to feel the effects of improving economic conditions, particularly when ~~as in the recent past, economic~~ trends are inconsistent and ~~their duration unknown.~~of an uncertain duration. The primary macroeconomic factors that affect our core customers include the unemployment and underemployment rates, wage growth, ~~fuel prices~~changes in U.S. and global trade policy, and changes to certain government assistance programs, such as the ~~2016 changes to the~~ Supplemental Nutrition Assistance Program, unemployment benefits, economic stimulus payments, and the child tax credit. In 2020 and the first half of 2021, our customers experienced impacts from many of these factors, as detailed above under “Impact of COVID-19”. We are monitoring the potential impact of changes to SNAP benefits and unemployment benefit programs, as well as the monthly payments of the child tax credit, all of which ~~has had~~may impact our customers during the ~~effect~~second half of ~~not only reducing benefit levels but also eliminating benefit eligibility for certain individuals.~~2021. Additionally, our customers are impacted by increases in those expenses that generally comprise a large portion of their ~~budget,~~household budgets, such as rent, healthcare, and ~~healthcare, which have increased during 2016 and the first three quarters of 2017 at a rate greater than many of our core customers’ growth~~fuel prices; as well as cost inflation in ~~income.~~frequently purchased household products. Finally, significant unseasonable or unusual weather patterns can impact customer shopping behaviors.

Our same-store sales performance in the second and third quarters suggests that the negative effect of the above macroeconomic factors as a whole may have moderated slightly as compared to previous quarters. However, we continue to believe the overall net effect of the macroeconomic factors listed above has negatively impacted our customer traffic and, along with deflationary pressures, including both lower commodity costs and pricing actions on our products, has adversely affected same-store sales for the past several quarters. We ~~continue to monitor these factors as they continue to have the potential to negatively affect our sales results.~~

~~During 2017 we have continued to make progress on our initiatives as we continue to pursue long-term growth opportunities. At the same time, we~~ remain committed to ~~the following~~our long-term operating priorities as we consistently strive to improve our performance while retaining our customer-centric ~~focus:~~focus. These priorities include: 1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing our position as a low-cost operator, and 4) investing in our ~~people as a competitive advantage.~~diverse teams through development, empowerment and inclusion.

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction ~~amount, as well as an ongoing focus on enhancing our margins while maintaining both everyday low price and affordability.~~

For the first three quarters of 2017, consistent with historical performance, our sales of consumables, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales of

non-consumables, which tend to have higher gross margins, have contributed to profitable sales growth. In addition, during the first three quarters of 2017, our mix of consumables sales has continued to shift somewhat toward lower margin consumable departments such as perishables and tobacco. We expect the trends of consumables, and lower margin consumables, comprising a larger percentage of our sales to continue throughout at least the remainder of the year and potentially into 2018. Our initiatives target these trends, although there can be no assurance we will be successful in their reversal.

Our initiatives are designed to increase customer traffic and average transaction amounts as we believe same-store sales growth is key to achieving our financial objectives. During the first three quarters of 2017, we have made significant progress on many of these initiatives, which include the continued expansion of coolers, the rollout of additional strategies across each of our merchandise departments, including a redesign of our Health and Beauty department to drive further product awareness and market share, a continued focus on improving our in-stock position and the addition of a queue line in a portion of our existing store base. We will continue to utilize our customer segmentation information and other tools, which have provided us with deeper insights into the spending habits of each of our core customer segments, to refine these initiatives and drive our category management process as we optimize our merchandise assortment and expand into those products that we believe are most likely to drive customer traffic to our stores. We also continue to enhance our advertising effectiveness by expanding our digital capabilities and further integrating our traditional and digital media mix to reach our customers where, when and how they decide to engage with us while also targeting a higher return on investment. These efforts are now being led by our Chief Digital and Customer Engagement Officer, a new position created to help drive these initiatives. Many of these initiatives support our plans to continue investing in our existing store base, with a goal to drive increased customer traffic and average transaction amount and as a result our same-store sales.

~~We demonstrate our commitment to the affordability needs of our core customer by pricing more than 80% of our stock-keeping units at $5 or less as of the end of the third quarter of 2017. Even as~~amount. As we work to provide everyday low prices and meet our customers’ affordability needs, we ~~also~~ remain focused on enhancing our margins through effective category management, inventory shrink reduction initiatives, private brands penetration, distribution and transportation efficiencies, global sourcing, and pricing and markdown optimization. ~~With respect~~Several of our strategic and other sales-driving initiatives are also designed to capture growth opportunities and are discussed in more detail below.

Historically, our sales in our consumables category, ~~management, we strive~~which tend to ~~maintain~~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 contributed to more profitable sales growth and an ~~appropriate~~increase in average transaction amount. Prior to 2020, our sales mix ofhad continued to shift toward consumables, and, ~~non-consumables~~within consumables, toward lower margin departments such as perishables. This trend did not occur in 2020 or the first quarter of 2021 (as discussed above under “Impact of COVID-19”), though we did begin to see some reversion toward the prior mix trends beginning in the second quarter of 2021. We continue to expect some sales ~~because, as noted above,~~mix challenges to persist, and we expect the mix trend reversion toward consumables will continue. Several of our initiatives, including certain of those discussed below, are intended to address these mix challenges; however, there can be no assurances that these efforts will be successful.

We continue to make progress on and invest in certain strategic initiatives that we believe will help drive profitable sales ~~affects profitability due~~growth, both with new and existing customers, and capture long-term growth opportunities. Such opportunities include leveraging existing and developing new digital tools and technology to ~~the varying gross margins between,~~provide our customers with additional shopping access points and even ~~within,~~greater convenience. This technology includes our Dollar General app, which contains a variety of tools to enhance the ~~consumables~~in-store shopping experience. Additionally, DG Pickup, which is a buy online, pickup in-store initiative, is now available in more than 17,000 stores across the chain. Further, our non-consumables initiative, which offers a new, differentiated and ~~non-consumables categories. To support our efforts~~ limited assortment that will change throughout the year, is contributing

to ~~reduce inventory shrink, we expect to continue to implement additional in-store defensive merchandising~~improved overall sales and technology-based tools, such as Electronic Article Surveillance and video-enabled exception-based reporting into 2018, as the results suggest these measures help reduce shrink and improve our in-stock position. Increasing carrier and fuel rates pressured our overall gross margin performance in stores where it has been deployed. We plan to significantly expand the number of stores with the full or “lite” version of our non-consumables initiative offering in 2021, and to complete our initial rollout of the non-consumables initiative in the vast majority of our Dollar General stores by the end of fiscal 2022.

Additionally, in the third quarter of ~~2017, and~~2020, we ~~anticipate these negative effects continuing for at least the remainder~~introduced pOpshelf, a unique retail concept that incorporates certain of the ~~year~~lessons learned from NCI in a differentiated format that is focused on categories such as seasonal and ~~into early 2018. However,~~home décor, health and beauty, home cleaning supplies, and party and entertainment goods. At the end of the second quarter of 2021, we ~~continue~~operated 16 standalone pOpshelf locations and two pOpshelf store-within-a-store offerings within existing Dollar General Market stores. Our goal is to ~~seek~~operate up to 50 pOpshelf locations, as well as up to 25 pOpshelf store-within-a-store offerings by the end of fiscal 2021.

In the second quarter of 2021, we completed our rollout of the “DG Fresh” initiative, a self-distribution model for frozen and refrigerated products that is designed to reduce product costs, enhance item assortment, improve our ~~stem miles~~in-stock position, and ~~optimize loads~~enhance sales. DG Fresh contributed to ~~improve~~our strong sales performance in the first half of 2021, driven by higher in-stock levels and the introduction of new products in select stores. In addition, DG Fresh benefitted gross profit in the first half of 2021 through improved initial markups on inventory purchases, which were partially offset by increased distribution and transportation ~~efficiencies.~~ costs. DG Fresh now serves essentially all stores across the chain, and we expect the overall net benefit to our financial results to continue throughout 2021. Moving forward, we plan to focus on further optimization of the distribution footprint and product assortment within DG Fresh to further drive profitable sales growth.

To support our other operating priorities, we remain focused on capturing growth opportunities. In ~~2017,~~the first half of 2021, we ~~intend to open approximately 1,285 stores, which includes our originally planned 1,000~~opened 530 new stores, as well as store locations acquired in June 2017 in 35 states from a small-box multi-price point retailer. As of the end of the third quarter, we have converted 263 of the acquired store sites to the Dollar General banner. Additionally, we intend to relocate or remodel approximately 760remodeled 1,020 stores, ~~in 2017.~~and relocated 58 stores. For ~~the 2018 fiscal year,~~2021, we plan to open approximately ~~900~~1,050 new stores (including any pOpshelf stores), remodel approximately ~~1,000 mature store locations,~~1,750 stores, and relocate approximately 100 stores, for ~~an approximate~~a total of ~~2,000~~2,900 real estate projects.

We continue to innovate within our channel and are able to utilize the most productive of our various Dollar General store formats based on the specific market opportunity. ~~As has been~~We recently introduced two new larger format stores (one at approximately 8,500 square feet and the ~~case throughout~~other at approximately 9,500 square feet), which allows us to further expand our offering and our ability to serve our customers. We expect the ~~first three quarters~~8,500 square foot box, along with our existing Dollar General Plus format of ~~2017, we expect that~~a similar size, to become our base prototypes for the majority of new stores moving forward, replacing our traditional 7,300 square foot store format ~~will continue~~and higher-cooler count Dollar General Traditional Plus format. The innovation in store formats is expected to ~~be the primary store layout for new stores, relocations and remodels in the remainder of 2017. In addition, our smaller format store (less than 6,000 square feet) allows~~allow us to capture additional growth opportunities within our existing markets. Additionally, the larger formats allow for expanded high-capacity-cooler counts; an extended queue line; and a broader product assortment, including NCI, a larger health and beauty section, and produce in ~~metropolitan areas as well as rural areas with a low number of households.~~select stores. We continue to incorporate ~~into our existing store base~~ lessons learned from our various store formats and layouts into our existing store base. These lessons contribute to innovation in developing new formats, with a goal of driving increased customer traffic, average transaction amount, same-store sales and overall store productivity. Additionally, we have a smaller format store (less than 6,000 square feet), which is expected to allow us to capture growth opportunities in urban areas.

To support our new store growth and drive productivity, we continue to make investments in our distribution center network. Our fifteenth distribution center in Jackson, Georgia began shipping in October 2017. We began construction on our sixteenth distribution center in Amsterdam, New York in June 2017 to support our northeast growth.

We have established a position as a low-cost operator, ~~continuously~~always seeking ways to reduce or control costs that do not affect our customers’ shopping ~~experience.~~experiences. We plan to continue enhancing this position over time ~~as we aim to continually streamline our business~~ while ~~also~~ employing ongoing cost discipline to reduce certain expenses as a percentage of sales. Nonetheless, we seek to maintain flexibility to invest in the business as necessary to enhance our long-term competitiveness and profitability.

We ~~believe~~also have launched “Fast Track”, an initiative aimed at further enhancing our convenience proposition and in-stock position as well as increasing labor efficiencies within our stores. The first phase of Fast Track involved sorting process optimization within our distribution centers, as well as increased shelf-ready packaging, to allow for greater store-level stocking efficiencies, followed by the second-phase pilot of a self-checkout option in a limited number of stores. We completed the sorting process optimization at all of our non-refrigerated distribution centers in 2019. Additionally, we expect to continue to add self-checkout capabilities in additional stores throughout 2021 and beyond. These and the other strategic initiatives discussed above will require us to incur upfront expenses for which there may not be an immediate return in terms of sales or enhanced profitability.

Certain of our operating expenses, such as wage rates and occupancy costs, have continued to increase in recent years, due primarily to market forces, including labor availability, increases in minimum wage rates and increases in

property rents. Further federal, state and/or local minimum wage increases could have a material negative impact on our operating expenses, although the magnitude and timing of such impact is uncertain. We have experienced incremental payroll, distribution and transportation costs related to the COVID-19 pandemic and its associated impacts. Labor shortages and shipping capacity shortages continue to pressure our business, resulting in significantly higher supply chain costs and shipping delays in some instances. As we move through 2021, we expect continued inflationary pressures due to higher input costs will continue to affect us as well as our vendors, including higher commodity, transportation and other costs, all of which may result in continued pressure to our operating results. While we expect these ~~actions will assist in maintaining~~challenges to persist, certain of our ~~ability~~initiatives and plans are intended to ~~leverage Selling, General & Administrative (“SG&A”) expenses at a lower same-store sales growth percentage over~~help offset these challenges; however, they are somewhat dependent on the ~~long term. In addition, we remain committed to simplifying or eliminating store-level tasks~~scale and ~~processes so that those time savings~~timing of the increases, among other factors. There can be ~~reinvested by~~no assurance that our ~~store managers and their teams in important areas such as enhanced customer service, higher in-stock levels and improved store standards.~~ mitigation efforts will be successful.

Our ~~employees~~diverse teams are a competitive advantage, and we ~~are always searching for~~proactively seek ways to continue investing in ~~them. We invest in our employees in an effort~~their development. Our goal is to create an environment that attracts, develops, and retains talented personnel, ~~as we believe that,~~ 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. Our store managers play a critical role in our customer experience and individual store profitability, and beginning in March 2017 we implemented certain investments in compensation and training for this position in the form of increased SG&A expenses that we believe have already contributed to improved customer experience scores, higher sales and improved turnover metrics.

To further enhance shareholder ~~return,~~returns, we ~~continued to repurchase~~repurchased shares of our common stock ~~during~~and paid quarterly cash dividends in the first ~~three quarters~~half of ~~2017, although at a lower amount than in 2016,~~2021. We expect to continue our share repurchase activity, and ~~we continued~~ to pay quarterly cash ~~dividends. We plan to continue both~~dividends, throughout the remainder of ~~these activities in the fourth quarter of 2017,~~2021, subject to Board discretion and approval.

~~During the third quarter of 2017, multiple hurricanes made landfall~~We utilize key performance indicators (“KPIs”) in the ~~southern United States. The storms resulted~~management of our business. Our KPIs include same-store sales, average sales per square foot, and inventory turnover. Same-store sales are calculated based upon stores that were open at least 13 full fiscal months and remain open at the end of the reporting period. We include stores that have been remodeled, expanded or relocated in ~~extensive damage and flooding throughout~~our same-store sales calculation. Changes in same-store sales are calculated based on the ~~South and Southeast, especially~~comparable 52 calendar weeks in the ~~coastal areas. We estimate these storms resulted in~~current and prior years. The method of calculating same-store sales varies across the retail industry. As a ~~positive impact~~result, our calculation of same-store sales is not necessarily comparable to ~~same-store~~similarly titled measures reported by other companies. Net sales per square foot is calculated based on total sales for the ~~2017 third quarter~~preceding 12 months as of ~~approximately 30-35 basis points. Conversely,~~ the ~~storms~~ending date of the reporting period divided by the average selling square footage during the period, including the end of the fiscal year, the beginning of the fiscal year, and ~~accompanying flooding resulted~~the end of each of our three interim fiscal quarters. Inventory turnover is calculated based on total cost of goods sold for the preceding four quarters divided by the average inventory balance as of the ending date of the reporting period, including the end of the fiscal year, the beginning of the fiscal year, and the end of each of our three interim fiscal quarters. Each of these measures is commonly used by investors in ~~$24.8 million~~retail companies to measure the health of ~~expense,~~the business. We use these measures to maximize profitability and ~~an estimated~~for decisions about the allocation of resources.

A continued focus on our four operating priorities as discussed above contributed to our overall ~~net negative impact of approximately $0.05 to diluted earnings per share~~operating and financial performance in the ~~2017 third quarter.~~2021 and 2020 periods, which were enhanced by increased consumer demand, as discussed above under “Impact of Covid-19”.

Both the U.S. House and Senate have passed bills related to the Tax Cuts and Jobs Act (“Act”) with both versions now headed to conference to attempt to resolve differences between the bills. As currently drafted, the bills are expected to have a favorable, material impact on the Company’s effective tax rate and net income as reported under generally accepted accounting principles both in the quarter in which the Act is passed and subsequent reporting periods to which the Act is effective. The likelihood, timing, and details of a final, reconciled bill and whether such a bill will ultimately be enacted are uncertain. There can be no assurances that a final, reconciled bill, if enacted, would have the same impact as either the current House or Senate bill.17

Highlights of our ~~2017 third~~2021 second quarter results of operations compared to the ~~2016 third~~2020 second quarter and our financial condition at ~~November 3, 2017~~July 30, 2021 are set forth below. Basis points amounts referred to below are equal to 0.01% as a percentage of net sales.

●

Net sales ~~increased 11.0%~~decreased 0.4% to ~~$5.9~~$8.65 billion. Sales in same-stores ~~increased 4.3% due to increases~~decreased 4.7% primarily reflecting a decrease in ~~average transaction amount and~~ customer traffic. Average sales per square foot for all stores over the ~~53-week~~52-week period ended ~~November 3, 2017~~July 30, 2021 was ~~$230.~~

$265.

●

Gross profit, as a percentage of net sales, was ~~29.9%~~31.6% in the ~~2017~~2021 period ~~compared to 29.8%~~and 32.5% in the ~~2016~~2020 period, ~~an increase~~a decrease of 880 basis points, primarily reflecting ~~higher initial markups on inventory purchases~~increased transportation costs and an ~~improved rate of inventory shrinkage, among other factors discussed below.~~

increased LIFO provision.

●

SG&A expense, as a percentage of net sales, was ~~22.9%~~21.8% in the ~~2017~~2021 period compared to ~~22.5%~~20.4% in the ~~2016~~2020 period, an increase of 40138 basis points, ~~reflecting increased~~due in part to higher retail labor ~~incentive compensation~~ and store occupancy costs as ~~well as hurricane-related costs, among other factors discussed below.~~

a percentage of net sales.

●

Operating profit decreased 18.5% to $0.85 billion in the 2021 period compared to $1.04 billion in the 2020 period.

●

Interest expense increased by $0.1 million ~~to $24.0 million~~ in the ~~2017~~2021 period.

●

The effective income tax rate for the 2021 period was 21.4% compared to a rate of 21.5% for the 2020 period primarily due to a greater impact of permanent income tax differences in the 2021 period.

●

Net income was ~~$252.5~~$637.0 million, or ~~$0.93~~$2.69 per diluted share, in the ~~2017~~2021 period compared to net income of ~~$235.3~~$787.6 million, or ~~$0.84~~$3.12 per diluted share, in the ~~2016~~2020 period.

Highlights of the year-to-date period of ~~2017~~2020 include:

●

Cash generated from operating activities was ~~$1.14~~$1.32 billion for the ~~2017~~2021 period, ~~compared to $1.12~~a decrease of $1.59 billion, inor 54.7%, from the comparable ~~2016~~2020 period.

●

Total cash dividends of ~~$212.9~~$198.1 million, or ~~$0.78~~$0.84 per share, were paid during the ~~2017~~2021 period, compared to ~~$212.2~~$180.3 million, or ~~$0.75~~$0.72 per share, in the comparable ~~2016~~2020 period.

●

Inventory turnover was ~~4.7~~4.6 times on a rolling four-quarter basis. On a per store basis, inventories at ~~November 3, 2017 decreased~~July 30, 2021 increased by ~~4.9% over~~13.7% compared to the balances at ~~October 28, 2016.~~

July 31, 2020.

The above discussion is a summary only. Readers should refer to the detailed discussion of our results of operations below in the current year periods as compared with the prior year periods as well as our financial condition at ~~November 3, 2017.~~July 30, 2021.

Results of Operations

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 ~~2017~~2021 and ~~2016,~~2020, which represent the 52-week fiscal ~~year~~years ending ~~February 2, 2018~~or ended January 28, 2022 and ~~the 53-week fiscal year ended February 3, 2017,~~January 29, 2021, respectively. References to the ~~third~~second quarter accounting periods for ~~2017~~2021 and ~~2016~~2020 contained herein refer to the 13-week accounting periods ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016,~~July 31, 2020, respectively. ~~References to the year-to-date accounting periods for 2017 and 2016 contained herein refer to the 39-week accounting periods ended November 3, 2017 and October 28, 2016, respectively.~~

Seasonality. The nature of our business is ~~seasonal to a certain extent.~~somewhat seasonal. Primarily because of sales of Christmas-related merchandise, ~~sales~~operating profit in our fourth quarter (November, December and January) ~~have~~has historically been higher than ~~sales achieved~~operating profit in each of the first three quarters of the fiscal year. Expenses, and to a greater extent operating profit, vary by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, the seasonal nature of our business may affect comparisons between periods.

Consumer behavior driven by the COVID-19 pandemic and the U.S. government’s response thereto, including economic stimulus legislation, has

1718

resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.

The following table contains results of operations data for the ~~third~~second 13-week periods and ~~first 39-week~~the 26-week periods of ~~2017~~2021 and ~~2016,~~2020, and the dollar and percentage variances among those periods:


	13 Weeks Ended						2017 vs. 2016				39 Weeks Ended						2017 vs. 2016

																					13 Weeks Ended						2021 vs. 2020				26 Weeks Ended						2021 vs. 2020
(amounts in millions, except	November 3,			October 28,			Amount		%		November 3,			October 28,			Amount		%		July 30,			July 31,			Amount		%		July 30,			July 31,			Amount		%
per share amounts)	2017			2016			Change		Change		2017			2016			Change		Change		2021			2020			Change		Change		2021			2020			Change		Change
Net sales by category:
Consumables	$	4,625.4		$	4,137.7		$	487.7	11.8	%	$	13,425.3		$	12,293.4		$	1,131.9	9.2	%	$	6,613.0		$	6,496.4		$	116.6	1.8	%	$	12,991.1		$	13,199.8		$	(208.7)	(1.6)	%
% of net sales		78.35	%		77.78	%						77.42	%		76.94	%						76.45	%		74.81	%						76.19	%		77.04	%
Seasonal		636.5			575.9			60.6	10.5			2,017.2			1,873.7			143.4	7.7			1,090.3			1,161.6			(71.3)	(6.1)			2,140.7			2,079.5			61.2	2.9
% of net sales		10.78	%		10.83	%						11.63	%		11.73	%						12.60	%		13.38	%						12.55	%		12.14	%
Home products		346.3			329.7			16.6	5.0			1,007.1			968.2			39.0	4.0			561.2			586.0			(24.8)	(4.2)			1,132.5			1,084.3			48.2	4.4
% of net sales		5.87	%		6.20	%						5.81	%		6.06	%						6.49	%		6.75	%						6.64	%		6.33	%
Apparel		295.3			276.7			18.7	6.8			892.0			842.1			49.9	5.9			385.7			440.3			(54.5)	(12.4)			786.9			769.1			17.8	2.3
% of net sales		5.00	%		5.20	%						5.14	%		5.27	%						4.46	%		5.07	%						4.61	%		4.49	%
Net sales	$	5,903.6		$	5,320.0		$	583.6	11.0	%	$	17,341.5		$	15,977.4		$	1,364.2	8.5	%	$	8,650.2		$	8,684.2		$	(34.0)	(0.4)	%	$	17,051.2		$	17,132.7		$	(81.5)	(0.5)	%
Cost of goods sold		4,137.2			3,732.5			404.6	10.8			12,085.6			11,095.5			990.1	8.9			5,912.5			5,866.0			46.5	0.8			11,557.8			11,718.8			(160.9)	(1.4)
% of net sales		70.08	%		70.16	%						69.69	%		69.44	%						68.35	%		67.55	%						67.78	%		68.40	%
Gross profit		1,766.5			1,587.5			178.9	11.3			5,256.0			4,881.9			374.1	7.7			2,737.7			2,818.2			(80.6)	(2.9)			5,493.3			5,413.9			79.4	1.5
% of net sales		29.92	%		29.84	%						30.31	%		30.56	%						31.65	%		32.45	%						32.22	%		31.60	%
Selling, general and administrative expenses		1,349.0			1,194.5			154.5	12.9			3,871.6			3,499.1			372.5	10.6			1,888.1			1,775.6			112.5	6.3			3,734.9			3,504.5			230.4	6.6
% of net sales		22.85	%		22.45	%						22.33	%		21.90	%						21.83	%		20.45	%						21.90	%		20.46	%
Operating profit		417.4			393.0			24.4	6.2			1,384.4			1,382.8			1.5	0.1			849.6			1,042.6			(193.1)	(18.5)			1,758.4			1,909.4			(151.0)	(7.9)
% of net sales		7.07	%		7.39	%						7.98	%		8.65	%						9.82	%		12.01	%						10.31	%		11.14	%
Interest expense		24.0			23.9			0.1	0.5			72.7			72.3			0.4	0.6			39.4			39.3			0.1	0.3			79.8			69.8			10.0	14.3
% of net sales		0.41	%		0.45	%						0.42	%		0.45	%						0.46	%		0.45	%						0.47	%		0.41	%
Other (income) expense		—			—			—	—			3.5			—			3.5	—
% of net sales		0.00	%		0.00	%						0.02	%		0.00	%
Income before income taxes		393.4			369.1			24.3	6.6			1,308.1			1,310.5			(2.4)	(0.2)			810.1			1,003.3			(193.2)	(19.3)			1,678.6			1,839.6			(161.0)	(8.8)
% of net sales		6.66	%		6.94	%						7.54	%		8.20	%						9.37	%		11.55	%						9.84	%		10.74	%
Income tax expense		140.9			133.8			7.1	5.3			481.3			473.6			7.8	1.6			173.1			215.7			(42.6)	(19.7)			363.8			401.5			(37.7)	(9.4)
% of net sales		2.39	%		2.52	%						2.78	%		2.96	%						2.00	%		2.48	%						2.13	%		2.34	%
Net income	$	252.5		$	235.3		$	17.2	7.3	%	$	826.8		$	837.0		$	(10.2)	(1.2)	%	$	637.0		$	787.6		$	(150.6)	(19.1)	%	$	1,314.8		$	1,438.0		$	(123.3)	(8.6)	%
% of net sales		4.28	%		4.42	%						4.77	%		5.24	%						7.36	%		9.07	%						7.71	%		8.39	%
Diluted earnings per share	$	0.93		$	0.84		$	0.09	10.7	%	$	3.02		$	2.95		$	0.07	2.4	%	$	2.69		$	3.12		$	(0.43)	(13.8)	%	$	5.52		$	5.69		$	(0.17)	(3.0)	%

13 WEEKS ENDED ~~NOVEMBER 3, 2017~~JULY 30, 2021 AND ~~OCTOBER 28, 2016~~JULY 31, 2020

Net Sales. The net sales ~~increase~~decrease in the ~~2017~~2021 period ~~reflects~~was primarily due to a same-store sales ~~increase~~decrease of ~~4.3%~~4.7% compared to the ~~2016~~2020 period. ~~Same-stores include stores that have been open for at least 13 months and remain open at~~We believe the ~~end~~effect of the ~~reporting period.~~onset of the COVID-19 pandemic on consumer behavior had a significant positive effect on net sales and same-store sales, particularly in the 2020 period in our non-consumable categories, which affects the comparisons between periods. For the ~~2017~~2021 period, there were ~~12,971~~16,488 same-stores which accounted for sales of ~~$5.5~~$8.2 billion. The ~~increase~~decrease in same-store sales primarily reflects ~~increases~~a decline in customer traffic, partially offset by an increase in average transaction amount ~~and customer traffic as discussed above~~which was driven by higher average item retail prices. Same-store sales declined in all categories with the largest percentage decrease in the ~~Executive Overview, as well as hurricane-related impacts. Same-store~~apparel category. Net sales ~~increased in the consumables, seasonal and apparel categories, and declined in the home products category. Same-store sales results in the three non-consumables categories, when aggregated,~~ were ~~positive. The net sales increase was~~ positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit.For the ~~2017~~2021 period, gross profit decreased by 2.9%, and as a percentage of net sales decreased by 80 basis points to 31.6%, compared to the 2020 period. Increased transportation costs and an increased LIFO provision contributed to the decrease in the gross profit rate. In recent years a greater percentage of our sales have come from our consumables category, which generally has a lower gross profit rate than our other product categories, creating downward pressure on our overall gross profit rate. This sales trend began to reverse in the second quarter of 2020 and continued each subsequent quarter through the first quarter of 2021, as non-consumables sales increased at a higher rate than consumables sales. In relative terms, the mix of sales shifted back to consumables in the current year period, which also contributed to the decrease in the gross profit rate, along with an increase in inventory damages. These factors were partially offset by higher inventory markups and a reduction in inventory shrink as a percentage of net sales.

Selling, General & Administrative Expenses (“SG&A”). SG&A was 21.8% as a percentage of net sales in the 2021 period compared to 20.4% in the comparable 2020 period, an increase of 138 basis points, which was primarily impacted by the reduction in net sales in the 2021 period. The primary expenses that were a greater percentage of net sales in the current year period were retail labor, store occupancy costs, employee benefits, depreciation and amortization, utilities, workers’ compensation and general liability expenses, and taxes and licenses, partially offset by lower incentive compensation expense.

Interest Expense. Interest expense increased by $0.1 million to $39.4 million in the 2021 period.

Income Taxes. The effective income tax rate for the 2021 period was 21.4% compared to a rate of 21.5% for the 2020 period which represents a net decrease of 0.1 percentage points. The tax rate for the 2021 period was lower than the comparable 2020 period primarily due to a greater impact of permanent differences resulting from a decrease in pre-tax income for the 2021 period compared to the 2020 period.

26 WEEKS ENDED JULY 30, 2021 AND JULY 31, 2020

Net Sales. The net sales decrease in the 2021 period reflects a same-store sales decrease of 4.7% compared to the 2020 period. For the 2021 period, there were 16,488 same-stores which accounted for sales of $16.2 billion. The decrease in same-store sales reflects a decline in customer traffic partially offset by an increase in average transaction amount which was driven by higher average item retail prices. Same-store sales decreased in all categories, with the largest percentage decrease in the consumables category. Net sales were positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit. For the 2021 period, gross profit increased by ~~11.3%~~1.5%, and as a percentage of net sales increased by 862 basis points to ~~29.9%~~32.2% compared to the ~~2016~~2020 period. Higher ~~initial~~inventory markups, ona lower inventory ~~purchases~~shrink rate and ~~an improved rate~~a reduction in markdowns as a percentage of ~~inventory shrinkage~~net sales each contributed to the increase in the gross profit rate. In addition, consumables sales decreased while non-consumables sales increased in the current year period, which also contributed to the increase in the gross profit rate. These factors were partially offset by a greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, the sales of lower margin products comprising a higher proportion of consumables sales,increased transportation costs, an increased LIFO provision, and increased ~~transportation costs.~~inventory damages.

Selling, General & Administrative Expenses.SG&A ~~Expense.~~ ~~SG&A expense~~ was ~~22.9%~~21.9% as a percentage of net sales in the ~~2017~~2021 period compared to ~~22.5%~~20.5% in the comparable ~~2016~~2020 period, an increase of 40144 basis ~~points.~~points, which was primarily impacted by the reduction in net sales. The ~~2017~~primary expenses that were a higher percentage of net sales in the current year period ~~results reflect increased~~were retail labor, store occupancy costs, depreciation and amortization, utilities, taxes and licenses, workers’ compensation and general liability expenses, employee benefits and administrative compensation (driven by share-based compensation), partially offset by lower incentive compensation expense.

Interest Expense. Interest expense increased by $10.0 million to $79.8 million in the 2021 period primarily due to ~~our investment~~higher outstanding debt balances in store manager compensation, and increases in incentive compensation and occupancy costs, each of which increased at a rate greater than the increase in net sales. Partially offsetting these increased expenses were lower utilities costs and a reduction in advertising costs. The 2017 period results include

~~approximately $24.8 million of hurricane-related costs, the majority of which were store inventory and property losses. In the 2016 period, we incurred charges of $13.0 million associated~~connection with the ~~acquisition~~issuance of ~~former Walmart Express store locations and related closure of existing stores plus an incremental $7.7 million of expenses primarily related to natural disasters.~~ debt in the 2020 period.

Income Taxes.The effective income tax rate for the ~~2017~~2021 period was ~~35.8%~~21.7% compared to a rate of ~~36.2%~~21.8% for the ~~2016~~2020 period which represents a net decrease of ~~0.4 percentage points.~~ ~~The tax rate for the 2017 period was lower than the comparable 2016 period primarily due to the recognition of greater federal Work Opportunity Tax Credits in the 2017 period.~~

~~39 WEEKS ENDED NOVEMBER 3, 2017 AND OCTOBER 28, 2016~~

~~Net Sales~~. The net sales increase in the 2017 period reflects a same-store sales increase of 2.6% compared to the 2016 period. In the 2017 period, our 12,971 same-stores accounted for sales of $16.2 billion. The increase in same-store sales was primarily due to increases in average transaction amount and customer traffic relative to the comparable 2016 period, as same-store sales increased in the consumables, seasonal and apparel categories, and declined in the home products category. Same-store sales results in the three non-consumables categories, when aggregated, were positive. The net sales increase was positively affected by new stores, modestly offset by sales from closed stores.

~~Gross Profit.~~ For the 2017 period, gross profit increased by 7.7%, and as a percentage of net sales decreased by 25 basis points to 30.3% compared to the 2016 period. Higher markdowns, which were primarily for promotional activities, a greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, and sales of lower margin products comprising a higher proportion of consumables sales, each reduced the gross profit rate. These factors were partially offset by higher initial markups on inventory purchases and an improved rate of inventory shrinkage.

~~SG&A Expense.~~ SG&A expense was 22.3% as a percentage of net sales in the 2017 period compared to 21.9% in the 2016 period, an increase of 43 basis points. The 2017 period results reflect increased retail labor expenses, primarily as a result of our investment in store manager compensation, and increased occupancy costs, each of which increased at a rate greater than the increase in net sales. Partially offsetting these increased expenses were reduced advertising costs as well as lower utilities and lower waste management costs primarily resulting from our recycling efforts. We incurred charges associated with hurricanes and other natural disasters as well as costs associated with the acquisition of store locations in both the 2017 and 2016 periods. See the Executive Overview and the 13-week period discussion above for more information regarding the hurricanes, other natural disasters and acquisitions of store locations.

~~Other (income) expense. Other (income) expense in the 2017 period reflects expenses associated with the issuance and refinancing of long-term debt during the first quarter of 2017.~~

~~Income Taxes.~~ ~~The effective income tax rate for the 2017 period was 36.8% compared to 36.1% for the 2016 period which represents a net increase of 0.7~~0.1 percentage points. The tax rate for the ~~2017~~2021 period was ~~higher~~lower than ~~for~~ the ~~2016~~comparable 2020 period primarily due to ~~the~~ ~~recognition~~a greater impact of ~~a tax benefit of approximately $10.9 million in the 2016 period associated with stock based compensation that did not reoccur to the same extent in the 2017 period~~.

~~Accounting Standards~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued comprehensive new accounting standards related to the recognition of revenue, which specified an effective date for annual reporting periods beginning after December 15, 2016, with early adoption not permitted. In August 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, with earlier adoption permitted only for annual reporting periods beginning after December 15, 2016. The new guidance allows companies to use either a full retrospective or a modified retrospective approach in the adoption of this guidance. We have formed a project team to assess and implement the standard by compiling a list of the applicable revenue streams, evaluating relevant contracts and comparing our current accounting policies to the new standard. As a result of the efforts of this project team, we have identified customer incentives and gross versus net considerations as the areas in which we would most likely be affected by the new guidance. We are continuing to assess all the impacts of the new standard and the design of internal control over financial reporting, but based upon the terms of our agreements and an evaluation of the materiality of the

transactions related to customer incentives and gross versus net considerations, we do not expect the adoption to have a material effect on our consolidated results of operations, financial position or cash flows. We currently expect to complete this work in 2017 and to adopt this guidance on February 3, 2018 using the modified retrospective approach.

In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. We are currently assessing the impact that adoption of this guidance will have on our consolidated financial statements. Specifically, we have formed a project team that is developing test plans for our lease accounting system, we are identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with our lease accounting software vendor, among other activities. We anticipate a material impact to our consolidated financial statements due to our significant number of lease contracts.

In October 2016, the FASB issued amendments to existing guidance related to accounting for intra-entity transfers of assets other than inventory. These amendments require an entity to recognize the income tax consequences of such transfers when the transfer occurs and affects our historical accounting for intra-entity transfers of certain intangible assets. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted subject to certain guidelines. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are assessing the impact that adoption of this guidance will have on our consolidated financial statements, and currently expect such adoption would result in an increase in deferred income tax liabilities andpermanent differences resulting from a decrease in ~~retained earnings of approximately $32 million~~pre-tax income for the 2021 period compared to ~~$36 million under existing tax legislation.~~the 2020 period.

Liquidity and Capital Resources

~~We have an~~At July 30, 2021, we had a $1.25 billion unsecured revolving credit agreement ~~that provides for total loans and commitments equal to $1.425 billion~~ (the ~~“Facilities”~~“Revolving Facility”), ~~and we have outstanding $2.4~~$4.0 billion aggregate principal amount of senior ~~notes. We have~~notes, and a commercial paper program that may provide borrowing availability in the form of commercial paper notes (“CP Notes”) of up to $1.0 billion. At ~~November 3, 2017,~~July 30, 2021, we had total consolidated outstanding ~~debt (including the current portion~~long-term obligations of ~~long-term obligations) of approximately $3.1~~$4.2 billion, ~~which includes balances under the Facilities, commercial paper and senior notes, all~~most of which was in the form of senior notes. All of our material borrowing arrangements are described in greater detail below. Our borrowing availability under the Revolving Facility may be effectively limited by our CP Notes as further described below.

We believe our cash flow from operations and existing cash balances, combined with availability under the ~~Facilities,~~Revolving Facility, the ~~commercial paper program~~CP Notes and access to the debt markets, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending, ~~and~~ anticipated dividend payments and share

repurchases for a period that includes the next twelve months as well as the next several years. However, our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the issuance of debt, equity or other securities, the proceeds of which could provide additional liquidity for our operations.

For the remainder of fiscal ~~2017,~~2021, we anticipate potential combined borrowings under the Revolving Facility ~~(defined below)~~ and our ~~commercial paper program~~CP Notes to be a maximum of approximately ~~$600~~$900 million outstanding at any one ~~time, including any anticipated borrowings to fund repurchases of common stock.~~time.

Revolving Credit ~~Facilities~~Facility

On ~~February 22, 2017,~~September 10, 2019, we entered into the ~~Facilities, which consist~~Revolving Facility consisting of ~~a $175.0 million senior unsecured term loan facility (the “Term Facility”) and~~ a $1.25 billion senior unsecured revolving credit facility ~~(the “Revolving Facility”)~~ of which up to $175.0 million is available for the issuance of letters of ~~credit. The Term Facility~~credit and which is scheduled to mature on ~~October 20, 2020, and the Revolving Facility is scheduled to mature on February 22, 2022.~~September 10, 2024.

Borrowings under the ~~Facilities~~Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at our option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of ~~November 3, 2017~~July 30, 2021 was ~~1.10%~~1.015% for LIBOR borrowings and ~~0.10%~~0.015% for base-rate borrowings. We must also pay a facility fee, payable on any used and unused commitment amounts of the ~~Facilities,~~Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of ~~November 3, 2017,~~July 30, 2021, the ~~commitment~~facility fee rate was ~~0.15%~~0.11%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the ~~Facilities~~Revolving Facility are subject to adjustment from time to time based on our long-term senior unsecured debt ratings.

The ~~weighted average all-in interest rate for borrowings under the Facilities was 2.3% as of November 3, 2017.~~

~~The Facilities can be voluntarily prepaid in whole or in part at any time without penalty. There is no required principal amortization under the Facilities. The Facilities contain~~Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, our (including our subsidiaries’) ability to: incur additional liens; sell all or substantially all of our assets; consummate certain fundamental changes or change in our lines of business; and incur additional subsidiary indebtedness. The ~~Facilities~~Revolving Facility also ~~contain~~contains financial covenants that require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of ~~November 3, 2017,~~July 30, 2021, we were in compliance with all such covenants. The ~~Facilities~~Revolving Facility also ~~contain~~contains customary events of default.

As of ~~November 3, 2017, the entire balance of the Term Facility was outstanding, and~~July 30, 2021, under the Revolving Facility, we had no outstanding borrowings, outstanding letters of credit of ~~$9.5~~$2.9 million, and borrowing availability of ~~$1.24~~approximately $1.25 billion that, due to our intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$690.6 million~~$1.05 billion at ~~November 3, 2017.~~July 30, 2021. In addition, as of ~~November 3, 2017~~July 30, 2021 we had outstanding letters of credit of ~~$40.0~~$53.4 million which were issued pursuant to separate agreements.

Commercial Paper

As of November 3, 2017, we had outstanding unsecured commercial paper notes (the “CP Notes”) of $549.9 million classified as long-term obligations on the condensed consolidated balance sheet due to our intent and ability to refinance these obligations as long-term debt. Under this program, weWe may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of our other unsecured and unsubordinated indebtedness. We intend to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of ~~November 3, 2017, the~~July 30, 2021, our condensed consolidated balance sheet reflected outstanding unsecured CP Notes of $18.4 million, which had a weighted average ~~borrowing~~interest rate of ~~1.4%~~0.15%. CP Notes totaling $181.0 million were held by a wholly-owned subsidiary and are therefore not reflected on the condensed consolidated balance sheet.

Senior Notes

OnIn April ~~11,~~2013 we issued $900.0 million aggregate principal amount of 3.25% senior notes due 2023 (the “2023 Senior Notes”) at a discount of $2.4 million, which are scheduled to mature on April 15, 2023. In October 2015 we issued $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”) at a discount of $0.8 million, which are scheduled to mature on November 1, 2025. In April 2017 we issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”)~~, net of~~ at a discount of $0.4 million, which are scheduled to mature on April 15, 2027. ~~The net proceeds from the offering of the 2027 Senior Notes were used to repay all~~In April 2018 we issued $500.0 ~~million of our outstanding 4.125% senior notes due 2017 and for general corporate purposes. In addition, we have $400.0~~ million aggregate principal amount of ~~1.875%~~4.125% senior notes due ~~2018~~2028 (the ~~“2018~~“2028 Senior Notes”)~~, net of~~ at a discount of ~~less than $0.1~~$0.5 million, which are scheduled to mature on May 1, 2028. In April 2020 we issued $1.0 billion aggregate principal amount of 3.5% senior notes due 2030 (the “2030 Senior Notes”) at a discount of $0.7 million, which are scheduled to mature on April ~~15, 2018; $900.0~~3, 2030, and $500.0 million aggregate principal amount of ~~3.25%~~4.125% senior notes due ~~2023~~2050 (the ~~“2023~~“2050 Senior Notes”)~~, net of~~ at a discount of ~~$1.4~~$5.0 million,

which are scheduled to mature on April 15, 2023; and $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”), net of discount of $0.6 million, which are scheduled to mature on November 1, 2025.3, 2050. Collectively, ~~the 2018 Senior Notes,~~ the 2023 Senior Notes, 2025 Senior Notes, 2027 Senior Notes, 2028 Senior Notes, 2030 Senior Notes and ~~2027~~2050 Senior Notes comprise the “Senior Notes”, each of which were issued pursuant to an indenture as supplemented and amended by supplemental indentures relating to each series of Senior Notes (as so supplemented and amended, the “Senior Indenture”). Interest on the ~~2018 Senior Notes, the~~ 2023 Senior Notes and the 2027 Senior Notes is payable in cash on April 15 and October 15 of each year. Interest on the 2025 and 2028 Senior Notes is payable in cash on May 1 and November 1 of each year. ~~We expect to refinance~~Interest on the ~~2018~~2030 and 2050 Senior Notes is payable in cash on ~~or prior to their maturity utilizing proceeds from the issuance~~April 3 and October 3 of ~~additional senior notes, revolver borrowings or the issuance of commercial paper.~~each year.

We may redeem some or all of the Senior Notes at any time at redemption prices set forth in the Senior Indenture. Upon the occurrence of a change of control triggering event, which is defined in the Senior Indenture, each holder of our Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a

purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The Senior Indenture contains covenants limiting, among other things, our ability (subject to certain exceptions) to consolidate, merge, or sell or otherwise dispose of all or substantially all of our assets; and our ability and the ability of our subsidiaries to incur or guarantee indebtedness secured by liens on any shares of voting stock of significant subsidiaries.

The Senior Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on our Senior Notes to become or to be declared due and payable, as applicable.

Current Financial Condition / Recent Developments

Our inventory balance represented approximately ~~53%~~52% of our total assets exclusive of operating lease assets, goodwill and other intangible assets as of ~~November 3, 2017.~~July 30, 2021. 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.

As described in Note 67 to the unaudited condensed consolidated financial statements, we are involved in a number of legal actions and claims, some of which could potentially result in material cash payments. Adverse developments in those actions could materially and adversely affect our liquidity. We also have certain income tax-related contingencies as disclosed in Note 3 to the unaudited condensed consolidated financial statements. Future negative developments could have a material adverse effect on our liquidity.

Our senior unsecured debt is rated “Baa2,” by Moody’s with a stable outlook and “BBB” by Standard & Poor’s with a stable outlook, and our commercial paper program is rated “P-2” by Moody’s and “A-2” by Standard and ~~Poor’s.~~Poor’s, respectively. Our current credit ratings, as well as future rating agency actions, could (i) impact our ability to finance our operations on satisfactory terms; (ii) affect our financing costs; and (iii) affect our insurance premiums and collateral requirements necessary for our self-insured programs. There can be no assurance that we will maintain or improve our current credit ratings.

Unless otherwise noted, all references to the ~~“2017 period”~~2021 and ~~the “2016 period”~~2020 periods in the discussion of ~~“Cash~~cash flows from operating, ~~activities,” “Cash flows from~~ investing ~~activities,”~~ and ~~“Cash flows from~~ financing ~~activities”~~activities below refer to the ~~39-week~~26-week periods ended ~~November 3, 2017~~July 30, 2021 and ~~October 28, 2016,~~July 31, 2020, respectively.

Cash flows from operating activities. Cash flows from operating activities were ~~$1.14~~$1.32 billion in the ~~2017~~2021 period, which represents ~~an $18.5 million increase~~a $1.59 billion decrease compared to the ~~2016~~2020 period. Net income decreased $123.3 million in the 2021 period compared to the 2020 period. Changes in merchandise inventories resulted in a ~~$340.1~~$80.0 million decrease in the ~~2017~~2021 period as compared to ~~a decrease~~an increase of ~~$405.5~~$284.0 million in the ~~2016 period.~~2020 period as further discussed below. Changes in accounts payable resulted in a ~~$384.1~~$245.4 million decrease in the 2021 period compared to a $560.9 million increase in the ~~2017 period compared to a $439.3 million increase in the 2016~~2020 period, due primarily to the timing of receipts and ~~payments which was partially impacted by certain changes~~payments. Changes in ~~payment terms.~~accrued expenses and other liabilities resulted in a $25.5 million decrease in the 2021 period compared to an $273.2 million increase in the 2020 period, due in part to the timing of regular and discretionary incentive compensation accruals and payments. Changes in income taxes in the ~~2017~~2021 period compared to the ~~2016~~2020 period are primarily ~~reflect increased cash tax payments from higher fourth quarter income (including the 53rd week) in the 2016 fiscal year, a reduced cash benefit for stock based compensation and~~due to the timing of payments for income ~~recognition for tax purposes.~~taxes.

On an ongoing basis, we closely monitor and manage our inventory balances, and they may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. ~~Merchandise~~Inventory levels in the 2020

period were lower than we had experienced in prior recent years and is reflective of changes in consumer behavior and, to a lesser extent, supply chain disruption caused by the onset of the COVID-19 pandemic. In addition, we strategically accelerated certain inventory purchases during the 2021 period, particularly in select non-consumable categories, in anticipation of the supply chain constraints discussed above. Total merchandise inventories increased ~~10%~~by 1% in the ~~2017~~2021 period and ~~13%~~decreased by 6% in the ~~2016 period. In the 2017~~2020 period, ~~compared to the 2016 period,~~with changes ~~in inventory balances~~ in our four inventory categories ~~were~~ as follows: ~~the~~ consumables ~~category~~ increased by ~~18%~~1% compared to a ~~16% increase; the~~1% decrease; seasonal ~~category was essentially unchanged~~decreased 1% compared to a ~~10% increase; the~~12% decrease; home products ~~category~~ increased by 3%14% compared to a ~~23% increase;~~13% decrease; and apparel decreased by 8%15% compared to a 5%24% decrease.

Cash flows from investing activities. Significant components of property and equipment purchases in the ~~2017~~2021 period included the following approximate amounts: ~~$178~~$248 million for improvements, upgrades, remodels and relocations of existing stores; ~~$150 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $134~~$126 million for distribution and transportation-related capital expenditures; $125 million related to store facilities, primarily for leasehold improvements, fixtures and ~~$21~~equipment in new stores; and $19 million for information

systems upgrades and technology-related projects. The timing of new, remodeled and relocated store openings along with other factors may affect the relationship between such openings and the related property and equipment purchases in any given period. During the ~~2017~~2021 period, we opened ~~1,044~~530 new stores and remodeled or relocated ~~719~~1,078 stores.

Significant components of property and equipment purchases in the ~~2016~~2020 period included the following approximate amounts: ~~$136 million for distribution and transportation-related capital expenditures; $116~~$162 million for improvements, upgrades, remodels and relocations of existing stores; ~~$92~~$138 million related to ~~new leased stores,~~store facilities, primarily for leasehold improvements, fixtures and ~~equipment; $38~~equipment in new stores; $95 million for ~~stores purchased or built by us~~distribution and ~~$18~~transportation-related capital expenditures; and $26 million for information systems upgrades and technology-related projects. During the ~~2016~~2020 period, we opened ~~768~~500 new stores and remodeled or relocated ~~861~~1,016 stores.

Capital expenditures for ~~2017~~2021 are currently projected to be in the range of ~~$700 million~~$1.1 billion to ~~$750 million.~~$1.2 billion. We anticipate funding ~~2017~~2021 capital requirements with a combination of some or all of the following: existing cash balances, cash flows from operations, availability under our Revolving Facility ~~and~~and/or the issuance of additional CP Notes. We plan to continue to invest in store growth through the development of new stores and the remodel or relocation of existing stores. Capital expenditures in ~~2017~~2021 are anticipated to support our store growth ~~(including store locations acquired)~~ as well as our remodel and relocation initiatives, ~~which include~~including capital outlays for leasehold improvements, fixtures and equipment; the construction of new stores; costs to support and enhance our supply chain initiatives including ~~construction of~~ new and ~~investments in~~ existing distribution center ~~facilities;~~facilities and our private fleet; technology and other strategic initiatives; as well as routine and ongoing capital requirements.

Cash flows from financing activities. ~~As discussed above,~~In the 2020 period, net proceeds from the issuance of the ~~2027~~2030 Senior Notes ~~in the 2017 period were $599.6 million. In the 2017 period, we redeemed the 2017~~and 2050 Senior Notes ~~for $500.0 million and made a principal payment on the Term Facility of $250.0 million. We had a net increase in~~totaled $1.5 billion. Net commercial paper borrowings increased by $18.4 million in the ~~2017~~2021 period ~~of $59.4~~and decreased by $425.2 million ~~and~~in the 2020 period. There were no borrowings or repayments under the Revolving ~~Facility. Net repayments under the Revolving~~ Facility during the ~~2016~~2021 period, and such borrowings and repayments in the 2020 period were ~~$251.0 million. During~~$300.0 million each. Also during the ~~2017~~2021 and ~~2016~~2020 periods, we repurchased ~~4.0~~8.3 million and ~~8.2~~3.6 million shares of our common stock at a total cost of ~~$298.7 million~~$1.7 billion and ~~$679.4 million,~~$0.7 billion, respectively, and paid cash dividends of ~~$212.9~~$198.1 million and ~~$212.2~~$180.3 million, respectively.

Share Repurchase Program

~~At November 3, 2017,~~As of July 30, 2021 our common stock repurchase program had a total remaining authorization of approximately ~~$634.6 million. Under~~$0.98 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 ~~authorization, purchases may be made in the open market~~Securities Exchange Act of 1934, as amended, or in privately negotiated ~~transactions from time to time subject to~~transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under our debt agreements and other ~~conditions.~~factors. The ~~authorization~~repurchase program has no expiration date and may be ~~increased~~modified or terminated from time to time at the discretion of our Board of Directors. For more ~~information~~ about our share repurchase program, see Note 89 to the condensed consolidated financial statements contained in Part I, Item 1 of this report and Part II, Item 2 of this report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended ~~February 3, 2017.~~January 29, 2021.

~~ITEM 4.CONTROLS AND PROCEDURES.~~

ITEM 4.

~~(a)Disclosure Controls and Procedures~~. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.CONTROLS AND PROCEDURES.

(a)Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

~~(b)Changes in Internal Control Over Financial Reporting~~. There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the quarter ended November 3, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(b)Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the quarter ended July 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2324

PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

~~ITEM 1.LEGAL PROCEEDINGS.~~

The information contained in Note 67 to the unaudited condensed consolidated financial statements under the heading “Legal proceedings” contained in Part I, Item 1 of this report is incorporated herein by this reference.

ITEM 1A.

RISK FACTORS.

~~ITEM 1A.RISK FACTORS.~~

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended ~~February 3, 2017.~~January 29, 2021.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

The following table contains information regarding purchases of our common stock made during the quarter ended ~~November 3, 2017~~July 30, 2021 by or on behalf of Dollar General or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

Issuer Purchases of Equity Securities


				Total Number	Approximate
				of Shares	Dollar Value
				Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans	Under the Plans
Period	Purchased	per Share		or Programs(a)	or Programs(a)
05/01/21-05/31/21	122,212	$	204.56	122,212	$	1,653,963,000
06/01/21-06/30/21	2,408,180	$	209.18	2,408,180	$	1,150,216,000
07/01/21-07/30/21	779,258	$	219.50	779,258	$	979,167,000
Total	3,309,650	$	211.44	3,309,650	$	979,167,000

Total Number

Approximate

of Shares

Dollar Value

Purchased

of Shares that May

Total Number

Average

as Part of Publicly

Yet Be Purchased

of Shares

Price Paid

Announced Plans or

Under the Plans

Period

Purchased

per Share

Programs(a)

or Programs(a)

08/05/17-08/31/17

—

$
—

—

$
769,593,000

09/01/17-09/30/17

1,582,189

$
76.48

1,582,189

$
648,593,000

10/01/17-11/03/17

171,710

$
81.53

171,710

$
634,594,000

Total

1,753,899

$
76.97

1,753,899

$
634,594,000

(a)

~~(a)~~

~~A $500 million share repurchase program was publicly announced on~~On September 5, 2012, ~~and increases in~~ the ~~authorization under such~~Company announced a program ~~were announced~~permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on March ~~25, 2013 ($500 million increase), December 5, 2013 ($1.0~~17, 2021 to increase the repurchase authorization by $2.0 billion, ~~increase), March 12, 2015 ($1.0 billion increase), December 3, 2015 ($1.0 billion increase) and August 25, 2016 ($1.0 billion increase).~~bringing the cumulative total value of authorized share repurchases under the program since its inception to $12.0 billion. Under the authorization, ~~purchases~~repurchases may be made from time to time in ~~the~~ open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Exchange Act, or in privately negotiated ~~transactions from time to time subject to~~transactions. The timing, manner and number of shares repurchased will depend on a variety of factors, including price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other ~~conditions.~~factors. This repurchase authorization has no expiration date.

ITEM 6.

EXHIBITS.

~~ITEM 6.EXHIBITS.~~

See the Exhibit Index to this report immediately before the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.

2425

CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We include “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act, throughout this report, particularly under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2, and “Note 6.7. Commitments and Contingencies” included in Part I, Item 1, among others. You can identify these statements because they are not limited to historical fact or they use words such as “may,” “will,” “can,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “project,” “predict,” “plan,” “estimate,” ~~“objective,~~“outlook,” “future,” “aim,” “goal,” ~~“opportunity,~~“seek,” “strive,” “intend,” ~~“could,~~“improve,” ~~“can,~~“position,” ~~“would,~~“opportunities,” ~~“committed,~~“ongoing,” “likely, ~~to,~~” “scheduled, ~~to,” “predict,” “seek,~~” “potential,~~” “strive,~~” “subject to,” “focused on,” ~~“continue,~~“long-term,” “uncertain,” or ~~“will result in,~~“continue,” and similar expressions that concern our ~~strategy,~~strategies, plans, initiatives, intentions, outlook or beliefs about future occurrences or results. For example, forward-looking statements include all statements relating to, among others, our estimated and projected expenditures, cash flows, results of operations, financial condition and liquidity; our plans and objectives for, and expectations regarding, future operations, economic and competitive market conditions, growth or initiatives, including but not limited to the number of planned store openings, remodels and relocations, store formats or concepts, progress of strategic (including our non-consumables and digital initiatives, DG Fresh, Fast Track, and pOpshelf), merchandising, ~~initiatives including customer segmentation~~distribution and ~~in-stock~~transportation efficiencies, and ~~shrink management,~~margin enhancing initiatives, trends in sales of consumable and non-consumable products, ~~results of the investment in our personnel~~customer traffic and ~~the levels~~basket size, and level of future costs and expenses; expectations regarding inflationary and labor pressures and supply chain challenges; potential future stock repurchases and cash dividends; anticipated borrowing under ~~certain~~the Revolving Facility and our commercial paper program; potential impact of ~~our credit facilities;~~ the COVID-19 pandemic; potential impact of legal or regulatory changes or governmental assistance or stimulus programs and our responses thereto, including the potential ~~impact~~increase of ~~pending~~federal, state and/or local minimum wage rates , as well as changes to SNAP benefits, unemployment benefits and child tax ~~reform legislation,~~credits; and our responses thereto; efforts to improve distribution and transportation efficiencies; the anticipated completion date of conversion of the recently acquired store sites to the Dollar General banner along with timing, financial and store count expectations; and the expected outcome or effect of pending or threatened legal disputes, litigation or ~~audits are forward-looking statements.~~audits.

Forward-looking statements are subject to risks, uncertainties and ~~uncertainties~~other factors that may change at any time soand may cause our actual results ~~may~~to differ materially from those that we expected. We derive many of these statements from our operating budgets and forecasts as of the date of this document, which are based on many detailed assumptions that we believe are reasonable. However, it is very difficult to predict the effect of known factors on future results, and we cannot anticipate all factors that could affect ~~our actual results.~~future results that may be important to you. Important factors that could cause actual results to differ materially from the expectations expressed in or implied by our forward-looking statements include, ~~without limitation:~~but are not limited to:

●

risks related to the COVID-19 pandemic, including but not limited to, the effects on our supply chain, distribution network, store and distribution center growth, store and distribution center closures, transportation and distribution costs, SG&A expenses, share repurchase activity, and cybersecurity risk profile, as well as the effects on domestic and foreign economies, the global supply chain, labor availability and customers’ spending patterns;

~~economic conditions and other~~ ●

economic factors, including but not limited to employment levels; inflation; pandemics; higher fuel, energy, healthcare and housing costs, interest rates, consumer debt levels, and tax rates; tax law changes that negatively affect credits and refunds; lack of available credit; decreases in, or elimination of, government stimulus payments and government subsidies such as unemployment and food/nutrition assistance programs; commodity rates; transportation, lease and insurance costs; wage rates (including the heightened possibility of increased federal, state and/or local minimum wage rates); foreign exchange rate fluctuations; measures or events that create barriers to or increase the costs of international trade (including increased import duties or tariffs); and changes in laws and regulations and their effect on ~~employment levels, consumer demand,~~as applicable, customer ~~traffic, customer~~spending and disposable income, ~~credit availability~~our ability to execute our strategies and ~~spending patterns, inflation, commodity prices, fuel prices, interest rates, exchange rate fluctuations and the~~initiatives, our cost of ~~goods;~~

goods sold, our SG&A expenses (including real estate costs), and our sales and profitability;

●

failure to ~~successfully execute~~achieve or sustain our strategies and initiatives, including those relating to merchandising, ~~marketing,~~ real estate and new store development, store formats and concepts, digital, shrink, sourcing, ~~shrink,~~ private brand, ~~distribution and transportation,~~inventory management, supply chain, store operations, ~~store formats, budgeting and~~ expense reduction, technology, our Fresh initiative and ~~technology;~~

our Fast Track initiative;

●

~~failure to open, relocate and remodel stores profitably and on schedule, as well as failure of our new store base to achieve sales and operating levels consistent with our expectations;~~

~~effective response to~~ competitive pressures and changes in the competitive environment and the geographic and product markets where we operate, including, but not limited to, pricing, ~~consolidation~~promotional activity, expanded availability of mobile, web-based and ~~omnichannel shopping;~~

other digital technologies, and alliances or other business combinations;

●

failure to timely and cost-effectively execute our real estate projects or to anticipate or successfully address the challenges imposed by our expansion, including into new states, markets or urban areas;

●

levels of inventory shrinkage;

●

failure to successfully manage inventory balances;

●

failure to maintain the security of our business, customer, employee or vendor information or to comply with privacy laws;

~~disruptions, unanticipated~~●

damage or ~~unusual expenses~~interruption to our information systems as a result of external factors, staffing shortages or ~~operational failures~~challenges in maintaining or updating our ~~supply chain including, but not limited~~existing technology or developing or implementing new technology;

●

a significant disruption to ~~a decrease in transportation~~our distribution network, the capacity ~~for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates~~of our distribution centers or ~~driver wages), work stoppages or other labor disruptions that could impede~~ the timely receipt of ~~merchandise,~~inventory, or delays in constructing, opening or ~~opening~~staffing new distribution centers;

●

risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;

●

natural disasters, unusual weather conditions (whether or not caused by climate change), pandemic outbreaks or other health crises, political or civil unrest, acts of violence or terrorism, and disruptive global political events;

~~risks~~●

product liability, product recall or other product safety or labeling claims;

●

incurrence of material uninsured losses, excessive insurance costs or accident costs;

●

failure to attract, develop and ~~challenges~~retain qualified employees while controlling labor costs (including the heightened possibility of increased federal, state and/or local minimum wage rates) and other labor issues;

●

loss of key personnel or inability to hire additional qualified personnel;

●

risks associated with our private brands, including, but not limited to, our level of success in ~~gaining and maintaining broad market acceptance~~improving their gross profit rate;

●

seasonality of our ~~private brands;~~

business;

●

~~unfavorable publicity or consumer perception of our products, including, but not limited to, related product liability;~~

the impact of changes in or noncompliance with governmental ~~laws~~regulations and ~~regulations~~requirements (including, but not limited to, ~~environmental compliance,~~those dealing with the sale of products, including without limitation, product ~~safety,~~and food safety, marketing or labeling; information security and ~~privacy, and~~privacy; labor and ~~employment laws,~~employment; employee wages and benefits (including the heightened possibility of increased federal, state and/or local minimum wage rates); health and safety; imports and customs; and environmental compliance, as well as tax laws (including those related to the ~~current pending U.S.~~corporate tax ~~reform legislation)~~rate), the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting our tax rate) and developments in or outcomes of private actions, class actions, multi-district litigation, arbitrations, derivative actions, administrative proceedings, regulatory actions or other litigation;

●

~~incurrence~~new accounting guidance or changes in the interpretation or application of ~~material uninsured losses, excessive insurance costs or accident costs;~~

existing guidance;

●

~~natural disasters, unusual weather conditions, pandemic outbreaks, terrorist acts and geo-political events;~~

~~failure to maintain the security of information that we hold, whether as a result of cybersecurity attacks or otherwise;~~

~~damage or interruption to our information systems or failure of technology initiatives to deliver desired or timely results;~~

ability to attract, train and retain qualified employees, while controlling labor costs (including effects of potential federal or state regulatory changes related to overtime exemptions, if implemented) and other labor issues;

~~our loss of key personnel, inability to hire additional qualified personnel or disruption of executive management as a result of retirements or transitions;~~

~~seasonality of our business;~~

deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or ~~a lowering of~~changes in our credit ~~ratings;~~

profile;

●

~~new accounting guidance, or changes in the interpretation or application of existing guidance, such as changes to guidance related to leases, revenue recognition and intra-company transfers;~~

factors disclosed under “Risk Factors” in Part I, Item 1A of our Form 10-K for the fiscal year ended ~~February 3, 2017;~~January 29, 2021; and

●

factors disclosed elsewhere in this document (including, without limitation, in conjunction with the forward-looking statements themselves) and other factors.

All forward-looking statements are qualified in their entirety by these and other cautionary statements that we make from time to time in our other Securities and Exchange Commission filings and public communications. You should evaluate forward-looking statements in the context of these risks, uncertainties and ~~uncertainties~~other factors and are cautioned to not place undue reliance on such forward-looking statements. These factors may not contain all of the material factors that are important to you. We cannot assure you that we will realize the results or developments we anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements in this report are made only as of the date hereof. We undertake no obligation, and specifically disclaim any duty, to ~~publicly~~ update or revise any forward-looking statement as a result of new information, future events or circumstances, or otherwise, except as otherwise required by law.

You should also be aware that while we do, from time to time, communicate with securities analysts and others, it is against our policy to disclose to them any material, nonpublic information or other confidential commercial information. Accordingly, shareholders should not assume that we agree with any statement or report issued by any securities analyst regardless of the content of the statement or report. Furthermore, we have a policy against confirming projections, forecasts or opinions issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

EXHIBIT INDEX


3.1		Amended and Restated Charter of Dollar General Corporation (effective May 28, 2021) (incorporated by reference to Exhibit 3.1 to Dollar General Corporation’s Current Report on Form 8-K dated May 26, 2021, filed with the Securities and Exchange Commission (the “SEC”) on June 1, 2021 (file no. 001-11421))

3.2		Amended and Restated Bylaws of Dollar General Corporation (effective May 28, 2021) (incorporated by reference to Exhibit 3.2 to Dollar General Corporation’s Current Report on Form 8-K dated May 26, 2021, filed with the SEC on June 1, 2021 (file no. 001-11421))

10.1		~~Summary~~Form of ~~Non-Employee Director Compensation (effective February 3, 2018)~~Restricted Stock Unit Award Agreement (approved May 25, 2021) for May 2021 awards to non-employee directors of Dollar General Corporation pursuant to the Dollar General Corporation Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Dollar General Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2021, filed with the SEC on May 27, 2021 (file no. 001-11421))

10.2		Dollar General Corporation 2021 Stock Incentive Plan (incorporated by reference to Appendix A to Dollar General Corporation’s 2021 Definitive Proxy Statement, filed with the SEC on April 1, 2021 (file no. 001-11421))

10.3		Form of Stock Option Award Agreement (approved ~~December 5, 2017)~~August 24, 2021) for awards beginning ~~December 2017~~August 24, 2021 to certain newly hired and promoted employees of Dollar General Corporation pursuant to the Dollar General Corporation ~~Amended and Restated 2007~~2021 Stock Incentive Plan

10.4		Employment Agreement, effective June 3, 2021, between Dollar General Corporation and Todd J. Vasos (incorporated by reference to Exhibit 99.2 to Dollar General Corporation’s Current Report on Form 8-K dated May 26, 2021, filed with the SEC on June 1, 2021 (file no. 001-11421))

15		Letter re unaudited interim financial information

31		Certifications of CEO and CFO under Exchange Act Rule 13a-14(a)

32		Certifications of CEO and CFO under 18 U.S.C. 1350

~~101.INS~~101		~~XBRL Instance Document~~Interactive data files for Dollar General Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2021, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (unaudited); (iii) the Condensed Consolidated Statements of Comprehensive Income (unaudited); (iv) the Condensed Consolidated Statements of Shareholders’ Equity (unaudited); (v) the Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Condensed Consolidated Financial Statements (unaudited)

~~101.SCH~~104		The cover page from Dollar General Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2021 (formatted in Inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~and contained in Exhibit 101)

2728

SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, both on behalf of the Registrant and in his capacity as principal financial officer of the Registrant.


		DOLLAR GENERAL CORPORATION


Date:	~~December 7, 2017~~August 26, 2021	By:	/s/ John W. Garratt
			John W. Garratt
			Executive Vice President & Chief Financial Officer

2829


	November 3,		February 3,
	2017		2017
	(Unaudited)		(see Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	226,192	$	187,915
Merchandise inventories		3,597,195		3,258,785
Income taxes receivable		99,678		11,050
Prepaid expenses and other current assets		230,269		220,021
Total current assets		4,153,334		3,677,771
Net property and equipment		2,654,936		2,434,456
Goodwill		4,338,589		4,338,589
Other intangible assets, net		1,200,481		1,200,659
Other assets, net		27,416		20,823
Total assets	$	12,374,756	$	11,672,298
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term obligations	$	401,532	$	500,950
Accounts payable		1,978,032		1,557,596
Accrued expenses and other		553,596		500,866
Income taxes payable		4,646		63,393
Total current liabilities		2,937,806		2,622,805
Long-term obligations		2,719,568		2,710,576
Deferred income taxes		690,795		652,841
Other liabilities		282,432		279,782
Commitments and contingencies
Shareholders’ equity:
Preferred stock		—		—
Common stock		237,598		240,811
Additional paid-in capital		3,176,406		3,154,606
Retained earnings		2,334,534		2,015,867
Accumulated other comprehensive loss		(4,383)		(4,990)
Total shareholders’ equity		5,744,155		5,406,294
Total liabilities and shareholders' equity	$	12,374,756	$	11,672,298


	For the 13 weeks ended				For the 39 weeks ended
	November 3,		October 28,		November 3,		October 28,
	2017		2016		2017		2016
Net sales	$	5,903,606	$	5,320,029	$	17,341,536	$	15,977,352
Cost of goods sold		4,137,150		3,732,519		12,085,575		11,095,461
Gross profit		1,766,456		1,587,510		5,255,961		4,881,891
Selling, general and administrative expenses		1,349,025		1,194,519		3,871,589		3,499,060
Operating profit		417,431		392,991		1,384,372		1,382,831
Interest expense		23,995		23,877		72,747		72,310
Other (income) expense		—		—		3,502		—
Income before income taxes		393,436		369,114		1,308,123		1,310,521
Income tax expense		140,903		133,799		481,318		473,564
Net income	$	252,533	$	235,315	$	826,805	$	836,957
Earnings per share:
Basic	$	0.93	$	0.84	$	3.02	$	2.96
Diluted	$	0.93	$	0.84	$	3.02	$	2.95
Weighted average shares outstanding:
Basic		272,319		280,441		273,567		283,152
Diluted		272,881		281,283		274,076		284,126

Dividends per share	$	0.26	$	0.25	$	0.78	$	0.75


				Total Number	Approximate
				of Shares	Dollar Value
				Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans or	Under the Plans
Period	Purchased	per Share		Programs(a)	or Programs(a)
08/05/17-08/31/17	—	$	—	—	$	769,593,000
09/01/17-09/30/17	1,582,189	$	76.48	1,582,189	$	648,593,000
10/01/17-11/03/17	171,710	$	81.53	171,710	$	634,594,000
Total	1,753,899	$	76.97	1,753,899	$	634,594,000