DG - Earnings call transcript Q2 2020 | Dollar General Corporation

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Operator

Good morning. My name is Robert and I will be your conference operator today. At this time, I would like to welcome everyone to Dollar General Second Quarter 2020 Earnings Conference Call. Today is Thursday, August 27, 2020. All lines have been placed on mute to prevent any background noise. recorded. being is call This Instructions for available this this are replay to the company’s the in issued of earnings call listening press morning. release

to President would the you Corporate may I to conference. Mr. Lau, over Donny your Now, Strategy. Mr. Lau, Investor of like Vice begin Relations and conference turn

Donny Lau

good everyone. you, Thank morning Rob and

Owen, and John Garratt, On the are today COO; me Todd Vasos, CFO. our call with our CEO; Jeff our

Events. investor.dollargeneral.com today issued be on under can News at & Our earnings release our found website

you comments such Reform plans, today’s business our statements impact about about defined caution not including, forward-looking customer. me Litigation our Let and future strategy, Securities in that but future beliefs on limited Act as the include initiatives, guidance our the as or to economy, Private matters COVID-XX’s goals, beliefs XXXX of statements about

identified our could, and actual in Form limited goal XX-K of differ statements from cause this as Forward-looking plan, to, Factors expressions. projections. XX-Q call. continue, long-term, XXXX made our comments on issued on this Risk look they statements or are historical Form may, in that earnings materially risks ahead, filed in could the this but filed can, These committed words XX, that intend, These release to, focus, similar to, can our to include, our expectations factors confident, estimate, morning would, will, identified and assume, believe, and XXXX are results not those use subject and fact morning March under be limited to are expect, are outlook, such uncertainties seek not to statements and should, opportunity, because or guidance, anticipate,

in Dollar obligation statements, unduly today’s this rely call only by disclaims required discussed revise on to any should General speak law. any of which information or not unless You forward-looking as update date.

this morning’s measures prepared one remarks, for been have Please necessary. follow-up in Events. earnings accordance is investor.dollargeneral.com to Reconciliations under and as I & on reference up open comparable also most GAAP posted that limit will measures will News which to financial are derived mentioned questions. the we We not end in our certain your one included questions question, GAAP. with if release, the of call At the your

the Now, my Todd. over pleasure to is it to turn call

Todd Vasos

Thank you, joining Donny Throughout the our I and safety, our customers, their convenient exceptional our our everyone team over this for start and and like by be has this employee call. welcome operating customer past remained team’s we efforts to as affordable, to several everyday I other. challenging environment. each associates while communities our essentials. would period, and of on close-to-home providing dynamic access more steadfast serve focus to to and months navigate work to not continue in its proud our thanking could

served General For has over it evident. through customers But our convenience. of a has Dollar never more XX unique and combination years, value been

difficult household times. to these to essential the within customers we supporting network Just XX,XXX X expansive now or committed of is, us positioned than And than our on uniquely our depend believe We XX% nearly ever customers miles how role continue remain solution the part of for more everyday their being as our through of needs. more are U.S. during population. our

commitment associates. and our price, importantly, household out our essentials committed ongoing our – to box low our access, everyday flexible Our supply our chain, digital essential capabilities, for items, broad of in format, convenient talented assortment and and small quick growing providing most everyday

disruption. running actions some keeping Let me now of highlight while have to operations with and further taken we protect employees customers, the our minimal our

federal, the we company based by government safety state across protocols with and last implemented discussed onset agencies. quickly on on numerous quarter’s we recommendations of COVID-XX, As and the proactively local call

government other and protocols and CDC are policies adapting that monitor guidelines to and guideline continue our regarding evolves. as COVID-XX We

the bringing incremental we during of today’s appreciation employee announced to QX. bonuses million release, invested total As the million $XX investment our approximately about in end $XX in quarter through in appreciation bonuses

Additionally, million recognizing Overall, incentives business financial $XX to in to additional continuity of the of ensure efforts. have for second need the half actions invest employees their up us customers these expect when time we the further most, to year. a at extraordinary helped our in while our our

on challenging its equality While other social country has justice. including a racial deep of simultaneously COVID-XX, of our navigating and societal matters times the of entered period values, reflection

respecting at others. Dollar mission and of the serving Our is differences General our include dignity values core And others.

We including Foundation these racial we equality to across we evident efforts, further racial and justice pledge General our these have advance inclusion recently and support justice social education. the promote social diversity Dollar values our announced are combined To are to in do, all and Literacy expanded and committed the team million with $X ensuring working to and communities.

recent on and as many most efforts which Others our evolve and quarter, this highlights ESG expand Serving published Additionally, first in the front. the move during future. into that the report report, of published will it our We we XXXX we expect

Beyond strength, continued to our these initiatives, customers that several including operating the end to pleased better General Dollar we initiatives. of as non-consumable efforts, our Fresh position growth. of continue needs we announce are positioned from value-created the meet remain strategic long-term and DG initiatives Pickup, and we of our and acceleration for a priorities DG focused and evolving on advancing To

increasing remodels XXXX. expectation and relocations also in are our for We

detail discuss each more these later call. in will in We the updates of

to April performance, we pandemic of excess on product note our total, the increase in consumable categories trends of bottom the our quarter consumer continued trends some end are QX And as and second as highlighted business now discussed second call, and we quarter earnings experienced the of in growth the More well on delivered the specifically related we both the quarter, a our non-consumable QX. in sales businesses. in and to three experienced was of through comp the that our we XX. growth non-consumable continued once pleased QX in lines significant percentage May month again Turning our through in by QX. These top extraordinary to for combined

of In comp in in monthly July. May, and XX.X% XX.X% in XX.X% our cadence, increased sales terms June

do These results net this we sales social to we Overall, disclose typically an in sales, size basket – increased in contact. of offset believe XX.X%. XX.X% to in particularly growth sales comp as quarter monthly customer second comp limit billion environment. include by trips traffic a decline significant helpful we effort not customers it’s growth in consolidated average While by believe partially $X.X driven

to double-digit increases in Syndicated including share units ending strong highly During X, exhibit strength, XX, the and market measured consumable quarter, continued and our by over XX XXXX. both the trends, periods dollars July XX-week as Data XX,

increase customers this XXXX the in to meaningful broadened Importantly, our data underscoring quarter appeal of our suggest QX proposition. new compared convenience value another and

incremental through focused new We current customers and several the acceleration on noted spend customers of I retaining these key of the which initiatives are very earlier.

We Collectively, pursuing to delivered while as significant are which sustainable results increase balance quarter again second value. $X.XX, pleased margin long-term we to we that the particularly further growth, the an of diluted operating we view of and enable right creating meaningful, are shareholder once EPS that contributed strategies prior year. these validation over expansion, XX%

an place, attractive the With a of have well-positioned in one will I call we in to retail we serve broader economic the in operate consumers and even now are initiatives with and sectors turn to John. that, believe plans even most of challenging to set continue in We we the environment. over

John Garratt

Thank and morning good you, Todd everyone.

comparisons through take a otherwise, all the Now, through you all me that refer quarter diluted Unless let to details. earnings note financial of per share. Todd highlights and is some I year-over-year are few taking its references important EPS you of to specifically

results $XX quarter pre-tax to In as significant legal related recorded please in earnings impact addition, discussed exclude that expenses XXXX note QX the today’s in million release. a adjusted

a by increased appreciation This of were in and gross costs, points Todd or higher bonus reduction was basis sales As as of XXX a factors I basis by basis including Gross non-consumable volume compared in increase inventory increase as attributable start the markdowns sales, with will percentage These percentage offset was to driven was quarter, sales. XXX discussed which and coming quarter distribution expense. on incur were purchases, SG&A impact which a decision transportation of of in employee percentage markups QX sales, an the a from primarily our COVID-XX. and profit, XXX significant decrease partially of increased profit as impacted categories sales by already of a the of in a XXXX increase proportion sales to greater XX.X%, XX.X% points. second points was SG&A. initial adjusted to a positively

of benefits, increase offset sales in related labor, taxes we COVID-XX, to incentive Although and occupancy offset were amortization expenses. more charitable depreciation the as items a the and lower partially utilities, incremental percentage that these employee include costs by quarter Expenses and were compensation These costs, sales. significant giving increased retail than by costs in incurred and licenses. were

As legal certain $XX for matters. of recorded reflecting I of expenses estimate mentioned, million QX settlement in also the we XXXX our

was the profit. XXXX statement, for billion, down income QX the Moving of compared or an XX.X% operating operating profit adjusted $X quarter second increase XX.X% to

operating quarter we partially measures made was XXX QX higher by million to profit. primarily and sales, Operating additional The sales through adjusted increase response was and $XX a eligible million offset approximately $XX or approximately XXXX in impacted to that benefit in appreciation higher customers the to the protect basis As incremental XXX was positively of XX%, employees. bonuses an for taken frontline second compared of basis profit including investments of profit further points percentage from our operating COVID-XX points employees pandemic, sales. by in

and tax in was quarter XX.X% last XX.X% second rate the for year. effective to quarter Our the compares

$X.XX, EPS. increase compared for XXXX the to an which QX or XX% quarter Todd Finally, second earlier, noted adjusted as was represents of XX% EPS

high to work billion operating lower of partners levels our inventory for us inventories store levels of or now the demand overall with improve times, which were and basis. $X.X Year-to-date provide in billion, through employees cash to from X% financial with and Total $X.X remodels customers’ totaling sheet Turning strategic This first during initiatives. performance were teams relocations our billion of new $XXX challenging flexibility these continue our cash continuing further end strong increase planned we our half to at balance per long-term. and the for down million our by second a primarily as our the Merchandise related combined essentially invest chain flat through expenditures remains supply increase significant operations spending flow the quarter, included to vendor and support capital investments driven stores, to in-stock while products. and strong $X.X flow, on XXX%. generated closely an was QX, and to the

measures the on took Moving we our the capital of to bolster structure, liquidity coupled flow in to continue extremely have a we as liquidity position further the cash to liquidity with and earlier ample our in strong result quarter. year

the of As of quarter our credit billion billion equivalents result, facility. cash finished $X.X cash and and a un-drawn $X we revolving availability with under

measures QX. As temporarily the onset one of COVID-XX, to liquidity suspended during of at we repurchases preserve share the

evaluate our to business result resumed as this the share of continue and repurchases quarter. We conditions we evaluation, And liquidity. second a in

million incremental million we the of quarterly the X.X share of common billion announcement have $XXX approximately $X.X we outstanding $X.XX authorization, today’s a and authorization paid of program. remaining repurchased With $XX repurchase dividend of During our million. total an cost shares under common share at a of quarter, repurchase stock per for

unchanged. remain Our serve and allocation well continue capital priorities to us

growth our Our first is including and new priority return high initiatives. in store investing strategic opportunities, expansion

of remain debt to through to grade payments, shareholders investment rating returning adjusted quarterly all anticipated a maintaining Xx significant and share repurchases dividend to also credit approximately committed managing and current EBITDA. ratio our We cash leverage to while

the operate for significant Moving its we of our behavior including severity and impact our the financial continue to regarding time COVDI-XX update the an duration economy, on and of consumer uncertainty in on to business. a outlook pandemic, fiscal XXXX,

guidance our growth share for As XXXX stock repurchase are long-term a repurchases, providing opportunity we With and this EPS to or to fiscal our now reflecting of $X.X strong business. we expect about the time. liquidity common billion sales confidence position not regards result, for our approximately this year at

open As real projects X,XXX for remodels Todd are total. stores, our in stores stores, representing noted and XXXX. relocate earlier, Overall, remodel XXX relocations X,XXX we X,XXX we in expect to estate increasing new and expectations now

continue a are to increasing for billion accelerate spending in range $X.X our our we support we drive and Finally, to business $X to as initiatives and XXXX of expectations billion in invest capital future key to growth. core

some year me our additional Let now it context relates provide as to outlook. full

associated approximately remain recognize end there of trends That what timeframe. to by said, environment. comp still of sales exists we expected moderate have we sales, additional we I as NCI regards which in to and August. the cautious to Since expense Fresh continue margin speculate if during in our we to comp see and this so, Ultimately, we to degree our duration through Given the the strategic but time, continued growth elevated initiatives, unusual government continue our improve XX, conditions to QX increased operating to well-positioned will sales that DG our of broader situation, scale or deliver believe elaborate whether the uncertainty positive operating very through have over the to both would expect be in thus to with on for we will the XXXX. trends XX% benefit. move and our far back positive to particularly deteriorate. are same-store as gross experience concerning even the business margin benefits year stimulus sales economic outlook significant balance outpace will as particular, margin if we the accretive the can’t be In With half, and anticipate August to they operating sales

initiatives in we the pressure these rates in However, accelerate rollouts. as back their particularly our SG&A will investment half, further

and expect the second in including of up result as resulted safety the very are which investments Todd execution make exceptional we measures. quarter half team’s as in a we to investments well proud of additional as of in service, COVID-XX, to in million employee closing, which results. $XX another bonuses, In appreciation mentioned, Finally, additional

be We for remain and capital, delivering investing business continue of manage in in As the disciplined with the financial confident strong always, how to while we we expenses goal our consistent strategically I free shareholder and long-term. healthy profitable strong long-term to value. turn priorities to flow Jeff. returns, and over model new that, the growth, same-store our ongoing will call sales store drive financial performance, cash With

Jeff Owen

John. you, Thank

update take me few four priorities. next operating to the our minutes Let you on

Our priority a against driving first we outstanding keeping customer executing did sales portfolio growth at job of of center profitable is do. the an all quarter operating The growth. while this initiatives, the team

a expansion our our program, merchandising Let be Starting door efforts. continues few recent of me with impactful cooler which initiative. our most highlight to

now be During the doors an on-shelf cooler to our across in XX,XXX expect of added the year capacity than doors XX,XXX even wider install store more opportunities XXXX. of more than XX,XXX majority total, first doors to doors half, creating high additional we cooler our target cooler In this selection. will compared in base. we drive coolers Notably, these to higher deliver availability product and previous

to further our remains pursue a proposition. as priority opportunities we now brands, enhance private which value to Turning

brand. with made including great our repositioning efforts, the the we During progress quarter, re-launch Products Office re-branding our of recent and

expansion to Looking we customer several even of ahead, seek our of the as the plans continued well existing higher category as include adoption. and brands awareness product drive as lines re-branding greater additional

continues in for our X,XXX especially by is which offering, approximately to home. X,XXX at available customers than Better-For-You to more to with is important This as consumed expand plans stores end. offering our year now to be Moving stores, more food

record convenient on long relationship. stores end of Finally, FedEx a drop-off in now further more locations. update initial communities. to quick of our expect now pickup package rural to track X,XXX our service the X,XXX complete advancing than is available rollout QX our and by We over This serving

remains us. Beyond these a sales gross for key initiatives, enhancing margin driving focus area

for gross DG brand margin and important to foreign margin addition remains efforts, gross associated private In our with the benefits sourcing NCI, us. opportunity an Fresh

product with once to the supply working again global ensure a our phenomenal availability. During partners team did the quarter, job

while to our origin. further of Looking diversifying we our foreign continue to increase sourcing countries see penetration, opportunities ahead,

stem chain additional next to move of and us year traditional accelerate we facility through We ahead. anticipate we purchase Kentucky. the expansion also recently of Walton, end, of as further enabling this pursue supply efficiencies continue private drive shipping early reduction To our begin miles our center this in distribution to fleet. XXth We will efficiencies the announced

with Finally, as build to surveillance. continue on remains an opportunity our electronic shrink we article success

items we tagged of XX% execution. year, higher than Over increased leveraging to technology even the on and to in-store of levels more by number the we drive past focus continue have

Our second priority is capturing growth opportunities.

model low business. estate risk return to real be high proven our strength a of continues Our core

XXX half, DGTP remodeled the count XX During cooler we higher stores, first XXX or including opened the formats stores, in and relocated new XXX DGP stores.

We than XXX. also XXX stores, total added produce more to which in more stores, the carry than produce bringing number of

this pipeline estate XXX added the while the to of very estate in expanded real execute we assortment such high return as real real estate am of noted, a in I X,XXX total communities of we as John despite robust. our to to additional As continued projects an projects investments, ability Overall, high COVID-XX. now result deploy expect in an delivering offering capital year remains team’s – volumes XXXX. And proud complexities product these

a leverage priority to operating reinforce third is position Our our low operator. and cost as

We clear governs zero-based spending, of decisions. at as to This we center do customer to our approach, reinforcing disciplined cost to the spending Save have internally control which process mindset. budgeting all keeps and approach while a defined control the branded our Serve,

Our discuss our of Track, on more with which building Todd success will initiatives operational detail. in Fast consist

survey our of at heightened serve results, all-time our associates our this able are evidenced period result highs. which we are customers during demand efforts overall of to by a As better as seeing to-date, recent store satisfaction customer

to generated process across Beyond serve, savings significant also business. enhancing has ability our this the

to operator. seeking controlling business a growth are keep move cost principles be always while expenses the low to simple, capture Our quickly to opportunities underlying but and

invest fiscal XXXX, employees Our with In support eligible invest believe during we our million bonuses for further we in demonstrate and priority competitive our as now continued advantage. fourth their to $XXX for efforts exceptional in appreciation are they difficult frontline is for to provide them expect people these up to appreciation to total, operating a times.

our a as and as well employee bonuses training, store prior investment XXXX these compensation reminder, and in of training benefits $XX million wages. manager As investments in and follow nearly continued

record, applicant positive Importantly, continue continued record talent. well as opportunity and and internal in We company develop and staffing these the manager levels advantage flows to over as competitive pipeline and including store turnover, of investments a half strong to store a the a our career year. results base, purpose-driven across yield low the growing believe retaining robust currency and with greatest unique is our a first remains start attracting promotion

meeting Others executing provide this a continue once years and amazed month to well annual company. ahead. again was held truly a the call transition how the development and priorities In Serving We strength also our earlier continued back This to people from to operating was culture. turn with testament will I strong a than in to that, meeting to ability our of we in summary, foundation we event, more I are And position leadership a continued of by can for our to X,XXX which the leaders continue growth seamlessly over provide from team’s Todd. embraced resulting our virtual

Todd Vasos

of Jeff. us initiatives, progress advancing I team the key growth. very am the for you, believe sustainable Thank positions better proud strategic has long-term our made we which in

NCI, margin NCI the X,XXX of be and The initiative, with product are and categories. pleased through highlights. to in we Let non-consumable categories. me consist of our our recent seeing reminder, take some sales expanded strong or at offering QX you product the Starting new performance available most approximately the continue of a as key end in very a non-consumable we and across was NCI offering NCI stores with

performance is a this in as an offering in as stores sales increase gross to the stores. these NCI rate compared non-consumable without incremental margin in total comp contributing to sales meaningful X% improvement In fact, well

NCI and meaningful store continue to from products broader select the and the margin chain. benefits planograms contributions sales resulting We in across base, also incorporating realize throughout positive

and dedicated offering learnings stores more the the full As into this meaningful non-consumable assortment this more our now ahead. of plans disruption into provides NCI initiative to the than performance X,XXX version less to as aggressively the of is products, light excited end more approximately in incorporated a very be result We as the about continue light stores. to include as I by resulting and the move important and for margin initiative approach our XXXX initiative. ability incorporating scale by of a to believe our sales version will to strong further NCI we rollout to-date, XXX of additional a streamlined NCI The and driver learnings leverage the our very already space stores accelerating a opportunities and with move forward – we to success then this am and

is Turning refrigerated which and distribution now to goods. frozen Fresh, a strategic self DG shift multi-phase to of

cost paid objective by we frozen distributors gross As seeing. the to with of and be is reduce to a on pleased third-party savings product reminder, are primary items and DG continue the to margin the Fresh our we very product thereby markup enhancing refrigerated cost removing

In fact, benefit on the scale higher margin transformational which gross seeing this expect to DG from markups as Fresh grow continues are to noted we initial be the initiative. earlier this continue we benefit and inventory we John to largest contributor to purchases,

goal important Fresh DG is in these increase to categories. sales Another of

In excuse and end in X We overall including from more of Fresh. more private with the national higher this distributing items, are than success in-stock brands front are both pleased XX,XXX the XX DG facilities driven – at seeing select introduction Fresh of by being by and we new additional serviced levels stores we June. than to on total, DG stores X were me, from the self

stores by year’s Given our in expectation capture execution XX by now facilities end benefits stores approximately expect this year. end. compares to from our of to-date, Fresh XX,XXX of approximately at strong the from success and we previous XX,XXX to This DG least

our an we that safe, assets familiar store shopping of convenient, combined our believe even our have footprint, our where lives. building specifically many personalized of provide customers ecosystem to important and a distinct are more even consist with frictionless and all become seeking convenient result in a with digital competitive experience, tailored advantage. their COVID-XX. initiative digital a which regard, more our in to of And digital strategy Turning customers aspects Today, of are unique as experiences

our During aggressive of at stores the expansion buy end plans as the pickup move QX, ahead. the more for compared in than to Pickup, X,XXX rollout XX to online, quarter, store the with of DG we stores more in we about offering even accelerated

now In expect into this our fact, of to introduce we all the offering essentially of by QX. end stores

DG feature GO! to include look further checkout our addition with as shopping this DG providing to an In Pickup, plans contactless self-checkout experience. combine the of we expansion mobile even more convenient and

Fast Moving improving increasing productivity now to enhancing Track, stores, goals and where convenience availability. our labor in include our customer on-shelf further

more to pleased packaging. continue around of productivity be We labor a we result our optimization even as with seeing efforts the rolltainer and investments are shelf-ready

The later a including enhance we can distance of further the than efficiencies second stores to for differentiate added broader is more as in while also landscape. we of proposition. in limit focused we our of stores rest Overall, strategic initiatives action, to the taking while approximately what the associates. discount may this Fast seek to available interactions, and controlling Dollar consist for acceleration of represents at on year store Track for plans control self our are face-to-face the our flexibility General XX further and XXX which who checkout our customers of end greater rollout convenience compared is driving the to checkout, QX component currently Self retail look

mode, lies customers constantly groundwork we our what also the growth initiatives we for ahead for in retailer evaluating mature and are future our laying as are business. a As

our our are growth, sustainable pursuing We the through continue right In to closing, the for to believe position midway year. drive we strategies are shareholders. value while creating we excited about long-term

disciplined testament team. to approach results half are strong first the our extraordinary execution Our of and a

of the very for for lines each the now to proud employees those fulfilling that, And our We like serving tireless of we our dedication operator, thanks XXX,XXX would With especially mission open people, want their of I of questions. company the frontlines. others. to approximately on our my across are sincere serving offer to

Operator

question Morgan comes Our with Instructions] first with Gutman from proceed your [Operator Please you. Thank Simeon question. Stanley.

Simeon Gutman

about Good timing more morning. parse and the the is store, effect your bringing which versus you of anyway which My can Thanks. you stimulus. thinking first to question through customers is mentioned trade-down

I And of factors? so don’t both sort how know through those you

Todd Vasos

Sure, customers yes. talk quarter. each our every to and obviously We

data are So, from pretty but that continued real data can we into QX just we we of getting about saw have clip credit good here that in to a got in at and have QX. card a first up we QX good that, see trade through we the just course, talked also and our and that down period as

focused work, X squarely would to servicing got now we have right cooler to months the saw as we expansions are able are as customers those been a hopefully during we and a getting very a NCI those to that are additional non-consumable but So, in. hopefully reminiscent though fruitful coming you tell starting This very the see is that move watch really over months one little the on retain down and record we big stuff nice our playbook And financial speaks through and back continue I recession Recession of last XX store we be done we the this that work information evolve, versus customers trade to to bit what and we Great have we are to DG ones, we initiatives proprietary last years track for very, pretty more our obviously, what good COVID saw a X Fresh customer. have our obviously, our of the over post-COVID, to and through like was to we recession. the being more And our time, during that continue is even that custom turn to it today. and customer this where into our XX years, inside the look

will that see move we as of continue to are continue very a to great able we that down and deal that So, we we are optimistic them trade optimistic as keep to will forward. be we

Simeon Gutman

of mix quarter? can about it, to can evolve the then you related third the talk discretionary product quarter how and into you And saw during if the you

Jeff Owen

Sure.

to we it doing April, in and beginning Then And pandemic. very saw previous the consumables discretionary, seasonal. continued stock significant As and it’s that with shift strong. up in pretty we in the into call, through the like stimulus phenomenally, we the way people play saw started QX money the as categories continued toys at all mentioned, home of sheltered-in-place, remain

it’s well coming think our business was to this. discretionary doing important I note, into very

to is non-consumable as with have changing And helped We think make products I have what really Stimulus the and patterns variety sheltered-in-place, done a of in really made really people certainly we business. as NCI. growth. us to we think part it of I done the goods, than this has greater this with had helped aspirational more capture and of nine straight ever the it but were shopping quarters relevant testament where relevant additional rotation the what store have well

Simeon Gutman

Thanks.

Operator

Please with next Our Matthew your question. with proceed JPMorgan. from question is Boss

Matthew Boss

Great, thanks nice quarter. and congrats on a

Todd Vasos

Thank you.

Matthew Boss

quarter Maybe expansion and margin non-consumables back think first half about and third about think markdowns, As of to quarter? drivers side, the about outsized the year? we which in gross of drove the we the best or on the margin think second as the IMU how

Jeff Owen

of the will about talking the drivers and I Thanks, start Matt. QX question. may balance Good the that help maybe inform of year. by

are idea. was basis QX giving initiatives are XXX And how QX, we with of pleased gross specific in The and really expansion. not and I are an think the by NCI saying DG margin expansion fifth you particular like gives marks consecutive I will margin phenomenal points gross start but We guidance Fresh contributing. our performance, year-over-year on in it that of quarter

markups benefit look higher drivers continue to DG we a in was QX, top you that’s primarily the to that one was If and driven we initial the grow number expect by scale. Fresh drivers, and at three as

the more as getting The doing third business beauty mix third was mix activity. second We very but of initial stimulus saw to one mix. sorry mentioned, with course am is driver promotional well the markups. mix non-consumable of within non-consumable within was saw meaningful as mix benefit a the the the with and NCI was I then believe health consumables. also higher was that like to our shopping higher categories lower I I and big And as a and behavior favorable rather we one playing contributor changes one said, good I the of well of that that that

for We it buck tools have been our a more in more with necessary. put targeted this bang the environment, to get and quarters now, the wasn’t activity in we as have for with more talking about been few have promotional we place

was So, key three that drivers.

wouldn’t team expect juice. kind ahead – into of look shift quarter. very got some Fresh at obviously, to But NCI the we The leverage. it opportunities so benefit expect you initiatives pretty have from job we look and extra as to other have a significant gave that growing I we As see we DG extra That place, every category benefit and did great lot shift from a a management. in non-consumables, some you a of on

near-term volume; we that but rate pressure chain there in place; is keeping three, put in is the phenomenal efficiencies, one, some We doing the additional pressure, bonuses have then is actions in and have sourcing with that place. the transportation more some foreign carrier costs: a with from distribution private penetration, team two, there job up the with supply opportunity have brands mitigating they

watch where and will then but now. good we thing the last very priced are is So about we we always price, feel

over to I we And in the growth what over a margin long-term, lot but investments commenting well long-term of expansion on So, have and specifically the not gross gross to drive general, levers. QX, making margin the continued think in about we this positioned and right are good feel drive we have very expansion. very just done

Matthew Boss

so then share think metrics from and consolidation of this new the here, to unit out that the this current market laterally retailers up? space white year. a stores seems you how to and on seeing tying follow-up store the your cited saturation opportunity brick-and-mortar are and then new long-term the growth from projects with opportunity productivity this And or real guys the what of crisis that be opening great. Todd, you just for or to of about Maybe best given That’s acceleration expansion estate

Todd Vasos

settings, our many we living type believe a and of that to is our in very would continue got the butter, in store, continued into improvements different still very I consumers or bread obviously, States. vertical great place making there Continental the all from which of as – pleased of pipeline And recent rule, actually with and And broad-based into in opportunities of all General some XX,XXX carefully. the would relevant about to way we the work to some you way our our as Dollar it And with the we’ve quarter and to we seen, amount COVID box. concerned, opportunity DGX but ‘XX, you tell that well. done a continue Matt, that’s United Yes, are tell ready every lot we’ve to question. each we a box, the a make out are across I ‘XX that more we of talk done continues have and the watch activity as with our I’m And to yet far that into displacement so expand lot work we not we that a of that

feel we We retain to good build good ability to and we So continue are. customers. attract about where stores, and those about that feel

Matthew Boss

luck. Great. of Best

Todd Vasos

you. Thank

Operator

Short your with is Our Barclays. with Please next Karen question. question from proceed

Karen Short

thanks Hi, taking my for question.

things on. to Just a couple of elaborate

NCI, first of to So X% that clarify. within I just the want all,

had was and how then time question. separate is, those about how those I August? And then interpreting another Is So, then little are comping I guess that how bit stores you also what I are wondering And trended into that’s a am currently looking that talk I XX%. could over statement? stores

Todd Vasos

Yes.

bulk we time a which that margin same stores. more think outsized is not And is chain learnings the we the the great because that is as best lot line. top and well, seeing NCI blurred the we’re line, of our your course, of I chain the that of then close the the great of rest the in into great an of And envelope that get as piece. of pretty we from reason the the the the back moving because best go. only but NCI Karen, benefit are will thing NCI there. being the we’re And are is taking So growing that lines we’re getting at And more in benefit

that that to in So and And without we doing it the very in believe of light the we that’s we’re be bullish, stores light like the reason continue unlock that and we will version the all inside for that disruption. movement really these that as into we expanding why NCI version you give what maybe the move to see store we and year see, that XXX and all that items more remodels. do next extra

Karen Short

seems massive in And the in all – of the a that what Up being acceleration at I that year-end a obviously, Pick terms stores Buy you Store, Online, XX were Okay. XQ. then pretty from is by like at mean, at, a

looks with in wondering of online, what So in comps any you the what the on the like those then online the and I’m could the is if basket could give the store? talk actually stores buy maybe color have currently pickup terms to impact buy for that you specifically stores, at

Todd Vasos

of that broad-based so line, here. data. we got to very consumer we this because the at seeing that our we’ve seeing, early in Sure. over thousand any when actually seen is So a see enjoying stores store, we’ve what But rating of expanded where so XX-yard up in is tell you even the additional like in a app the it’s seeing field, to couple she’s on journey, buying we’re to our basket soon the of the high. again, now to the customer we’re say imagine, roll is the large is But would we’re very of what size experience, Sure. you little chain, we to out to have to we’re in test which to draw pick acceleration, the that it bit of size. start we’ve seen on the the normally increasing conclusions. What up or then basket own we’re can that go anecdotes a I order, early we’re football couple would right? above all, in Well, – the that ways But and again, first items early saw comes we her inside stores, and

early to right experience into to really backside to pipes drive heavy what say, the we is just move make it. into market then And on, we’ll we water are So make this now customer also is like of really to – what we into but see running QX, sure year awareness like start to right. to quarter next but we through some the we the everything working, and start sure it as

benefit digitally a is alley and earlier. this well to Lastly, Dollar Dollar that we continues customer trade more we younger, right grow learn up this savvy talked with about a down that little as that trade be believe very will for seen down about her I skewed that big as Because a believe she customer will little General. families. And General be with we’ve

Karen Short

very much. Great. Thanks

Todd Vasos

Sure.

Operator

Sandler. Peter with from your Keith is question question. next Please Piper with Our proceed

Peter Keith

meaningful I any was comment saw just could everyone. two? rural the geography if urban on exposure the if the Great versus between quarter. store differences wondering the Thanks, Hi. you of you with base

Todd Vasos

more Todd great store is even across is experienced, This Yes. see was to setting again. our what which rural we performance base. city our store of and Actually, pretty base

once being overall was very, similar that. we’ve much performance done So including saying of of again, our and very the more a urban sales both those sides DGX and/or very with work around stores. lot margin our stores, settings, city in that, type around But of we were done with in pleased work

great to see. was it So

Peter Keith

perhaps, XX% years put to you out it the might kind of EPS back range then your growth but to couple ask, Okay, guidance, it’s want And to a on to want you like helpful. long-term of been XX% are I since How are in do of wrong time be that and it circle anything, all conservative? Because bit that initiatives point, at looks that range number achieve you that this seems today? conjunction a annually. if have about a working you and that thinking

John Garratt

But predictions. is any excited on specific or what will going are specifically fundamentals you Great to tell about I I’m the give extremely we XXXX business. comment the question. of you not

extremely are We well positioned.

ourselves look when look And look our there are have you when line momentum in runway top the we at of and initiatives on opportunity seen that growth performance levers margin, as when the with the EPS we strategic the levers you long the have, gross years, the look that performance we bottom drive all these comps. line the at the see the clicking the meaningfully been new seeing from you reinvest best after our type that, We substantial XX%-plus the long was as term, we initiatives, over accelerating in continue we’ve allows really you all flow we’ve the to and to growers to at and sales at we going the have units. cash obviously, with It’s generate, the unit what us initiatives. producing, initiatives and that cash announced and we these all

box than really for it believe what believe believe we’ve extremely in. really we’re we fill-in trip coming has relevant a now we’re to customers ever, providing more the So with the and been positioned We initiatives. fuller made doing that well

relevant stick look extent more put to very as the we we look customers we’ve than coming that about excited very well the to possible, as back, keep So think and initiatives make positioned attracted to future. the in baskets these new with ever, we’re these we and place larger we’ve

Peter Keith

much, Good luck. very Okay. John. Thanks

John Garratt

Thank you.

Operator

question. Kelly Our with next Please Capital. with question BMO proceed your is Bania from

Kelly Bania

was Hi, you some of out pressures, bit called accelerate half. Thanks the quantify, questions. help taking of as little your just for I good SG&A back morning. our a hoping you could in initiatives maybe you

was that COVID-related the in $XX think I costs. from million separate

second us terms you are in there? little of dollars can half a can if give maybe the that you just thinking in you just So in color,

John Garratt

of did as initiatives was going lot toward What We and as didn’t was we That’s around capital capital, gave initiatives, is the new we kind of guidance do can amount. dollar where real you a exact that divulge estate. accelerating well these new the – accelerating so extrapolate.

were expense look to of money investments. as more acceleration opposed an as already the it going spend would we On at additional I to side,

we kind could in are doing the what terms proportionality of so think these. And you of advancing about of

mentioned So are stores additional XXX we the doing. NCI Todd

– we to of We fresh end be are XX,XXX at stores. be going going XX,XXX are the to stores of instead year more we serving serving the as

to going XXX Pickup the projects. DG scaling are across QX be We and more adding in chain

projects look really just it of expenses. terms all at pulling we return focused at more really would proportionately forward. I forward, again, those expenses in additional where these things do on that And high not we’re So aimed are pulling benefit

associated costs is the we is start-up focused are initial what really cost forward. with that. that’s there of with pressure So front-end outpace and some on But pulling more that benefits the the of far and benefit that

Kelly Bania

very quite that’s margins, on quick going magnitude, of just than which in helpful. one another And incredible. DG well, then is really obviously, Okay, mix, it that from benefit like an larger Fresh gross order sounds is the margin

how you about, maybe look little picture? you versus have supply bigger today, more you talk could talk gave on So as what chain if curious just at third-parties, stores, you more some bit but about metrics opportunity it to at bring in-house your is a was much just there just

Todd Vasos

continue to opportunities. As operator, look always we be low a are we always looking at cost to

other ensuring that goods DCs. DG in Fresh, for still by looking like is the our down may we as opportunity main our goods self goal our leaving distributed our the room our essentially possible. Fresh, traditional of But of greater end at. moving there the efficient business. that out But dry some in year to areas even And DCs fully of DG other non-consumables some unlocks also more network and working coming that be is still next Fresh we’re be on look road While of side are into perishable will

things So of candy like water. and think

make up the a goods. we Some of of those inside sense. for areas type that other lot of into room move DCs areas a that other to makes our things fresh can And facilities loosen our will of of lot

with first roll squarely So we you the can. right at dynamic through very prouder to can’t of I think, to we and on. high customer high put at half, especially I very executed They we’re all level COVID on operators execution team, would everything and now. highest And a focused stores a we’re of ensure include at at best our that imagine, But looking especially our it, level the way that a the we out going servicing the ensuring Fresh level. to very can be more as are have be

in move more So Fresh, as is with forward continue but distribution. I opportunity for we more couldn’t be happy always DG room there to

Kelly Bania

you. Thank

Operator

Lasser Our your from next question. Please UBS. question with is with proceed Michael

Michael Lasser

current Todd, a the ask make you major any ‘XX, comp see big why my the Thanks that. environment you initially question. differences? And you when Good after taking morning. reason And ‘XX, years from question the even I set growth the is do lot sales spike recession to in. analogy a ‘XX, saw of after in the ‘XX, healthy for then you a really saw for

to after comp use parallel, ahead that years So growth recently? some that the really in you you growth wouldn’t expect even the similar you have seen have big anniversaried of

Todd Vasos

I start to up We then great it time lot and there. really make a we remember, Michael. to it That’s to ‘XX, question, to make to work that all I right ‘XX very other box a the did merchant of sure the and consumer. And to frame relevant at ‘XX, want in back was the

XXXX think where were right, today. seeing to from XXXX from of were relevant X,XXX and to even also is SKUs, note, important to pretty that We XX,XXX sit of amount I more in, to that a it’s to refine the growing box we the same continue today. box, doubled the also example, SKUs an at XX,XXX time, amount we much going So But trade we we SKUs. as

her because more real DG would she been and business. side non-consumable than of have Fresh, her even probably that of thing a we make had showing opportunity But long some stickier our the in is the great hunt because that don’t NCI ‘XX/XX today we’ve that opinion, of here versus of comps because we of outside treasure amount the sales digital will, expect to really initiatives important see much my because then got a in of the for now. Now, time, just of the on initiatives same initiatives,

that able very So keep consumer, higher I bullish being probably a to on rate. am at

will into if we I’d We those have long are are knows consumers just to how the get COVID. over as probably see haul. we who far we what, say many of

wait are the brand keep we we and gotten to possible as as have customers to to until backside know going before or can. we will we get So many do to how of continue we we the received everything then many to exactly COVID, into have

Michael Lasser

Hopefully, we the will get other to side soon.

Todd Vasos

with I am you.

Michael Lasser

data, question you from customers? are discretionary And – speaking it, budget. core at has look those those seeing historically credit area the my buy the of the follow-up doesn’t more in really in growth customer as is It discretionary on the non-consumable, from have coming your customers, goods, because those the goods is growth say. new these those of customers, necessarily you in funds read categories of new the new should tight DG more card excess that or should coming in the And to non-discretionary way discretionary a I so the lived we

Todd Vasos

our had non-consumable have it our I was stimulus a with more now buy that again, you non-consumables. tell you as the to some attract Yes, customers would But pleased that’s that showing I of customers’ we believe were lot of ability because her new well, but very moving. tell initiatives we to core driver. also I And that related. do got to of would with different something our ability

of continue Now through the pretty see posted can of to and has of numbers sides – you as force the the some wane, QX tell our we QX, a period about into both the stimulus by know, full equation. started all on robust but we to as customer that that we’ve just

her sees. liking bit has is a money of she She in So, little what pocket. she

other our spending but because And I well. goes income she are we lot little really is which bit what doing disposable as more. done, and she is again, a is think likes has bit little we is work she not a amount seeing I our helping. sees trade of plus, it But at that, really probably she to, down, a with think buying And products. core good customer She of the there things. a more have home

Michael Lasser

you Thank good much luck. and very

Todd Vasos

Sure.

Operator

with Our question. next proceed RBC Ciccarelli Markets. Scot question Capital Please your with comes from

Scot Ciccarelli

Good morning, guys.

really being rather now, strong overall right obviously, transactions. than So the trends quarter, were through ticket but sales by driven remains strong

the So of how have that about and should Thanks. customers concept we levels? transaction gaining lower overall market new you versus the think share referenced

Todd Vasos

to anecdote. dramatically for question. you down, up, Yes, single so traffic see thank give will strive down. the and the we digits, was and was you Yes, for but It not that, obviously, down like little we our that a all low And time. I

Now in saying that be that. able the having our trade that we’ve to money core do the got, customer shop of well to fuller – a and any between offset down

much So we Dollar she’s her And have. consolidating trips, yet, you we base may as customer is places, consolidating. just but see from like see in we other what as General the she not at

so and elsewhere. continue shop, in, a have she that doesn’t feel And go when fuller to to she so compelled she’s and we offer more to do more can her

wants really also her our may that that’s will continue think to I a what So and we surprise but needs, are products that And be products show from you and seeing she delight. brand.

Scot Ciccarelli

discretionary get outpace consumables you should really years, about surge shop you’ve a in reverse arms are sales Todd, we time and fuller ten the saw us of think of our kind Again, I think lot in had then? this seen of discretionary that to that plus around So quarter. you trying not always a that function first is

So maybe maybe it’s it’s drove figure shop, else? the out something to that and fuller I guess trying what I’m just

Todd Vasos

tell side take are anybody seeing that the and business wasn’t We what don’t you, One, the the would No, and we are she It I when in I of repeat can I it down. likes seeing trade that data. a to you card very non-consumable look trade And couple the healthy. was our very or was outpaced sees. believe she our that opinion equation. want It of at healthy. down, credit see discretionary fully just it we in it’s consumable by – things.

times once, that So she and during only this have pandemic has multiple COVID we shopping outbreak not is shopped us she seen. us

us and tells likes she it what So coming back. she’s she sees, that

likes So that think possibly shopping what she we have she But business. now the sees that is and benefit core And that there helping And buying from was she drive some our I of the non-consumable work done. consumer sees. propel elsewhere. also product of Dollar all she General

to looks backside continuing customer equation, we that the But as work as get the the of that existing because of the sides meaning our as working pandemic customer. are new bullish on the So I well am both what to we’ve like very of all ensure done. we we’re

Scot Ciccarelli

guys. a Thanks Great. lot,

Todd Vasos

you. Thank

Operator

comes with last question from your question. with Our proceed Rupesh Parikh Please Oppenheimer.

Rupesh Parikh

for Good taking my Thanks morning. question.

some at if So look the look crisis, you for of the is how of out at COVID thinking Todd, as DG? I that so out, permanent your is benefits – to guess start coming about this you team

Todd Vasos

seen like Well, new later. hoping But we than that the saying are we down taking people, imagine, it customer. one that, day sooner winds just at pandemic a have time, most as that in you can we’re

initiatives, on well working believe all, Jeff. But is John strategic that’s a keep and us seeing we So very first to about you and as to continue enable heard on well from to paramount that. And to which opportunity One because, to prior accelerate myself fronts. as real initiatives her our we’re is also, few both of we’re excited that were these work other COVID.

well we this, but knew consumer of But being the the and was to created customer goods initiatives. XX we ago of well, what around and products looking right, were shopping not convenient months out that experience. offering looking efforts that that also forefront months always we to was very the the have we of And front our create working and through more knew and are COVID are coming, XX both our is because for in they Now a that many for on things. digital of we know frictionless this, other NCI these

real up there see advantage well. believe of We So – because that real talked asked will be we some opportunities that there take estate we see as of opportunities estate. will this, about there. opened we opportunities Karen real

coming there hope customers of. down still focused really pandemic are a soon. we in is where is servicing now take squarely lot advantage this So where of again because can we that because she areas we’re know those winds we But right on needs of raging that us

Rupesh Parikh

just question, follow-up one supply And the Great. chain. on

So, you out called so one like of the your stocks from curious you supply where the out categories growth really competitors home, with just of just stellar chain, especially quarter? where had some challenges are in during third during quarter, guys

Jeff Owen

Hey, Rupesh, is Jeff. thank you. This

teams said we all, of this of early. First our have out before, this but in are front very

supply and also our team, of merchant vendor with think relationships testament a the the to collaboration we and So the I it’s have operators, partners. chain our great

what can seeing creative have is team very obviously for we has product the on work in finding I get So but you shelf still been the And that to the steady progress. solutions tell we’re to do, customer.

we new You we before. have carried heard up us have this, never SKUs stood during items say before

but have we looked initiatives have chain supply the look that in the the of that distribution in still the products forward, out as with the forward chain look allowed we are we place and have the to team. we in many incredibly as And have progress and suffering some pleased of get us center supply of so and the nimble. we constraints, see sizes fast. is pack at from real And We we different

ready – us be that them. will is to when distribute to we customer when that ready for So, inventory for the

we the are with So pleased progress.

Rupesh Parikh

you. thank Great,

Operator

This concludes Dollar General Corporation’s conference call.

we You may lines disconnect your this time and participation. thank your you at for

Dollar General (DG) 27 Aug 202020 Q2 Earnings call transcript