DG - Earnings call transcript Q3 2020 | Dollar General Corporation

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Operator

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Dollar General's Third Quarter 2020 Earnings Call. Today is Thursday, December 3, 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 Mr. Lau, over Donny Now, Strategy. Mr. Lau, Investor of like Vice begin. Relations and conference turn

Donny Lau

you, Thank and morning good Rob everyone.

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

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

to comments statements risks are include not limited XXXX Private but not today’s limited statements strategy, from me but and including to as identified to differ projections, to actual our Act historical that statements expectations economy, materially to statements facts. subject the cause results that could Let that to real outlook, our our caution and release opportunities, beliefs guidance, including earnings our in in forward-looking These those Securities uncertainties morning in filed March Form XX-K of other call. this XXXX Factors defined XXXX Form on the our future or you our morning, plans, under limited our customer not XX-Q are goals, XXXX about future and Reform this estate and expectations Litigation investments, in and this on such made priorities, Risk XX, filed impact in as our our on about business that beliefs issued COVID-XX’s comments not and the matters, initiatives, limited are about including but

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

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

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

Todd Vasos

be everyone our like thanking and Thank helping the tireless months in to by continued mission several the the and members team in their others their uncertainty most. our environment, by pandemic. our impacted our efforts. you, our past them communities been close commitment of work Despite welcome affordable, at our when time not need home start fulfilling of Donny essentials customers to convenient, over providing unwavering proud their access to to customers have call. associates by COVID-XX joining more in to everyday for and significant a could operating I'd I serving

the As employees priority. and top and health always, of our continues to our customer safety be

safety We and are our evolves. continue closely and other COVID-XX and adapting to as governmental guidance evaluating that regarding monitor guidelines CDC protocols

a and To time, located within essential America's through U.S. our committed that to for update to I'm and And of same are plans. part continue these needs and XX,XXX remain we excited meet five operating position we on share the customers the initiatives strategic during General strength, unique At our value as our one recent retailers, of remain our more we sustainable growth. advancing well-positioned priorities expansive difficult of an long-term of stores focused on times. convenience, of than to we of and XX% we of continue supporting As being to of network the solution customers, evolving including position of some combination approximately our our miles the believe end more further from population. Dollar

continue estate our we total release, real and in as projects store we expect execute strengthen you XXXX. plan saw future foundation growth. pace we to new accelerate to for as In remodels X,XXX the lay further of openings to next First, our year in and

previously record while We quarter, store on their track initial our announced, concept, results. proven we are locations store further newest during still building innovation. early, by introduced the recently opened format and our our encouraged of pOpshelf, we As first two

core one better representing is respecting our Finally, differences core with others. and commitment diversity dignity express fourth of on along values and our our operating of value recently we inclusion, to priority and our and Building intent. this the to updated capture

some again once categories. our represents results August quarter. performance the comp sustained consumable quarter non-consumable which basket well moderation periods size low growth growth will the sales year-over-year of increased non-consumable this XX.X% of sales driven detail business. net followed Overall Of significant teens to average to $X.X third mid delivered third range in in from sales the as excess moved billion top a double we increase to tenth modest The in by XX.X%. with include the by digits social of pleased best once We're through growth driven product each highly we From note, our shopping traffic, that highlighted our to trips These in consolidate the partially by a business, to in an measured QX as and dollars. share lines. again later sales data, syndicated again units combined these in our Once believe double-digit consumable for in call. increased increases offset the and first, for limit let's discuss product more these momentum updates sales on in we categories quarter effort comp customer market as this quarter. quarter quarter speaks the multi-cadence on customers contact. by and exceptional comp of by continue both bottom sales We in strong perspective, was decline the quarter, But in the particularly for both results by three growth recap our consecutive of a

appeal compared broadened of increase the income new and skew in our These and of diverse, suggested value further younger, proposition. QX data [ph] this customers customers as our XXXX. ethnically new convenience Importantly, quarter to underscoring higher more

and retain them to hard We are targeted are with new also marketing working rights more key our of continued encouraged execution of by the and customers repurchase initiatives.

which are EPS prior validate we turn through long-term reflect and results create further of QX Collectively, combination navigate most our to shareholder we We well-positioned even margin further that quarter meaningful the and With than fronts operate initiatives, the and we with of year. John. right and and our the are retail now operating contributed our increase call third expansion, disciplined convenience over to that, value. of to one $X.XX, stronger significant we emerge over of before. sectors XX% strong with We belief our in successfully attractive enhanced an to many environment strategies execution and unique pursuing believe pleased current in diluted particularly the how across value delivered are the I'll

John Garratt

good morning And Todd. you, everyone. Thank

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

As a proportion and a of as start Todd of sales a non-consumables third meaningful in incur decision employee from increase to inventory with of profit, sales, positively a higher shrink driven sales, points. on the decrease percentage sales. year-over-year transportation initial and profit as discussed percentage reduction primarily a impact which a points increase quarter, reduction by and in greater of increased of increased offset quarter our XX.X% appreciation of gross coming markdowns including were basis consecutive attributable distribution COVID-XX. of purchases, was percentage were sixth impacted was which factors SG&A markups represents was the partially increase in expense. expansion. our of Gross categories, in to These in This volume costs, percentage was sales the and as basis gross XXX XX.X%, as XX margin rate an of a a sales by bonus will I already sales, quarter by

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

quarter compared the quarter million third statement, Moving the down third to the XX.X% income operating $XXX in $XXX million increased XXXX. of to for profit

XXX for we further million COVID-XX, pandemic, incremental primarily to expenses, by percentage was profit for bonuses an operating As offset sales, appreciation front-line impacted approximately appreciation third including profit in to $XX and employees. from to X.X%, we The the including approximately million our in higher $XX Operating bonuses related frontline approximately million of additional response have of and points. made in positively sales. of about basis increase Year-to-date customers measures in million through benefit by a quarter invested protect our investments that taken was employees. was the $XX third partially in sales eligible $XXX COVID-XX quarter, the higher employees

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

Todd as quarter for third noted EPS Finally, XX.X% to increased the earlier, $X.XX.

and term, the strong $XXX prior unprecedented we billion to increase the per an customers the improving pleased and generated basis. the now to an normal financial X.X% to with our a the for end finished overall products, remodels initiatives. inventory of with inventories Total were and demand from cash Year-to-date to Turning and provide year. we cash remained our stocks investments to good further long balance levels. and our store quarter were relocations, and included $X.X of increase flow, which QX the continued $X.X on these XX.X% of totaling quarters spending to for and cash the in-stock support we during and certain position first quarter, than million billion Merchandise our billion, higher expenditures our high decrease us flexibility compared at related significant flow strategic of to make continuing and three overall of a planned are invest over and billion cash increase progress capital sheet an times, through million equivalents, employees new and $X.X $XXX remained with XXX.X%. of stores our QX, of while out third $X operations while

the of authorization remaining common total million. common repurchased quarter $X.XX cost for $XXX of a end was stock share During $XX at repurchase our dividend paid billion. shares of share we outstanding per the of million and the QX $X.X At X.X a quarterly million

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

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

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

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

not to such to or As persist. XXXX our real guidance result this our we fiscal release unlikely are we the a providing time issuing share from uncertainties earnings are projects, stated With to what August regards the XX, extent for unchanged and sales on guidance EPS remains capital estate XXXX. repurchases, for year spending and QX outlook in resume at

Let me in quarter. now the we fourth provide some as to what expect context

and trends And Given sales far QX sales and move further impact December situation, business. increasing in comp related with CARES approximately the of under comp sales on to the concerning our including external unusual end we through factors of the increased particularly government said, still QX. this past we environment, sales demand consumables I our payments outlook, during significant the expiration are we X, exists of uncertainty their cautious That our XX% encouraged timeframe, as ongoing in benefits the From the our enhanced reflecting remain duration stimulus the positive sales Act. on accelerated will elaborate potential crisis unemployment while business. in our thus health trends

are factors, a the of as considerations specific Beyond these relates number it fourth there to quarter. more macro

Like greater higher transportation First, driver tight in distribution transportation retailers, costs the at shortages other of we a anticipate due a a market demand higher to carriers. seeing for of as our third-party services costs effect and QX. result carrier is and business

investments rates these process opening In enable QX. of even or of mind gross the going that in drive pressure please efficiencies contribute investments continue dry points initiatives, expanding we will to across margin most both on centers from operating the in number will associated perspective, these we and Also and in support building, DG represents and XX With scale expect the distribution DG networks. to gross of in year our our challenging to greater Fresh And quarter growth, fourth in future us gross margin to our we operating are margin further strategic over margin time, addition, as a accretive a QX in keep the lap forward will NCI benefit improvement margin regards with following to to continues of pace be they the Fresh to to basis expense, outpace anticipate positively XXXX. XXXX. rate while

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

exceptional year safety team's in health measures. are of results. and closing, in additional appreciation employee resulting In to including appreciation result approximately as bonuses up Finally, the of million in continued the includes execution approximately to fourth as million in we $XX another and of well expect bringing make COVID-XX our in a $XXX million investments bonuses, to proud full our as service recent investment quarter announcement we award to $XX in very investments additional bonuses, which quarter

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

Jeff Owen

John. Thank you,

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

priority QX team is growth portfolio against The operating job first profitable initiatives. Our fantastic did sales once a a driving growth. of again executing in

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

product in first availability capacity the an coolers, we of majority than we to on-shelf year, across cooler be added deliver additional total, base. quarters, approximately drive cooler XX,XXX and In expect creating XX,XXX this wider to our doors install our three During higher more store opportunities even doors which higher the selection. will

including of this with select drive look the repositioning, as the and we're well the these of and now remain fronts, pleased to new we the excited introduction We're six the a two brands, customer very to brands, category successful brands which overall expansion we're private so greater continued continued of Turning priority awareness seeing even new as of rebranding, through adoption lines. product introduction far and year momentum about across across portfolio. progress product and lines rebranding the as

relationship. update Finally, on a FedEx quick our

in this provide we leverage receiving from is which with quarter completed is pickup explore our initial to pleased our real stores. customers package and unique locations. this drop-off more footprint for We're our convenient convenient and XXXX continue than innovative further to opportunities we in of the our more reception very nearby the customer solutions During offering estate service, even rollout now available customers to and

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

with The an during supply ensure associated product our Fresh, benefits addition efforts, DG for In availability. working our opportunity again the to margin brand NCI, to quarter margin gross great us. sourcing and foreign remains with private job a the team gross did important once partners

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

supply Fresh the a continued beginning We of additional to opening pursue Walton, in dry facilities, miles our to purchase early of further stem center, including year. the also our expansion should recent chain of private fleet, continue future and next efficiencies, Kentucky the distribution which reduction contribute DG

additional opportunities shrink article also on in Nebraska. to margin, ground we efficiencies greater ever up combination gross surveillance. team in executing on will and is move recently us in success first build addition, ahead. anticipate dry enabling to further completed including our facility continue with construction early as we In even electronic be drive We we XXXX our to Fresh The distribution center began Blair, this DG as enhance against improvements

is growth priority second opportunities. Our capturing

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

as real a expand As ability enhance previously estate to the to footprint of more we best-in-class and significant announced, thousandth our our customers. celebrated team, serve recently store. is opening testament This our with fantastic continue milestone of even the XX work a we our to

us real cannibalization evaluating reminder, payback performance years new and focus Of note, period. many to for performance, that These estate actual strong metrics have sales average include to store see continue model the on a we X metrics served these productivity, estate well As our real across returns, metrics. opportunities. new in continues

to stores, than higher the For XXXX XXXX, quarters DGP new DGTP stores. we remodel or remodel relocate XXX remain Through more on XXXX relocated account, XXXX stores. cool XX XXX three including first open XXXX track stores, and stores, stores, we and we opened formats in the new

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

plan Todd store XXXX projects we in noted, relocations. including remodels, real to and XXXX total, As estate XXXX stores, for new execute XXXX fiscal XXX

produce approximately unit remodels be the our DGP in new will store to capacity format XXX Additionally, XX% our with we XX% formats. of openings we expect Notably, or plan remainder be primarily traditional in and add about higher and in of remodels new coolers. openings of our approximately stores. DGTP to The the

robust also approximately pipeline opportunities Our discuss new our ahead. Todd include detail, the having by plans today. pOpshelf estate about real excited will Overall, more stores XXXX, growth two significant from locations concept, we in extremely up the XX and which are remains end of in our fiscal

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

saved mindset. decisions. while our at established we've a all clear as internally to and years, budgeting based of zero center the disciplined control to process the cost approach control spending, the approach, do, Over keeps reinforcing our serve, customer defined to spending which This governs branded we

We success will Todd build detail Fast which later. continue with in discuss on Track our to more

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

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

but business in do heart three priorities, the foundational at truly people Dollar is fourth operating at everything operating foundational and is our is have we We our anchored of priority. This them priority to General.

Our and in through empowerment, priority fourth development, operating investing is diverse inclusion. teams our

As in core values more continue updated aligns language beliefs people. our make the we fully investments this to of and expresses with and more our the development Todd closely noted,

manager a by as store continued these our believe healthy yield we pipeline. robust promotion internal applicant across store and levels, Importantly, continue positive flows, investments low record to evidenced record staffing results base, turnover,

retailer, growing new advancement. to also career a opportunities we create As and continue jobs for

In than we fact, our offer and current innovate growing attracting and and company the advantage with on of unique develop our a opportunity XX,XXX managers remains career internal continue promotes, driven development more our believe teams. talent. to store opportunities currency we and are purpose to start competitive retaining and the We greatest is a a can in

continued years deeply of continue Dollar General. to embedded drive executing priorities foundation will which strong campaign together over I a at position so In of Giving we summary, employees that, can truly organization by again our variety We recently people. With culture from back a across of growth that compassion I to a turn the operating the important where and embodies in our are others from Community for Todd. call the our raise This the completed generosity humbled is also causes. well serving funds ahead. and Annual once event to strength come provide the was we

Todd Vasos

progress team our in made great Thank the I'm has of strategic proud advancing you, initiatives. Jeff. the

a end. offering was end QX stores Starting the Let key prior the NCI of in with delivered NCI strong The than our X,XXX given and to our stores new including now the again product light margin NCI, pleased of at as in the offering non-consumable to-date, in This quarter. stores than once more X,XXX recent expand strong we initiative of NCI stores or stores to expanded non-consumable in me offering X,XXX We're more XXX execution especially XXXX by consists at our available a performance version. approximately end highlights. and of our sales and the some to take through compares year most the our expectation of expect NCI you categories. reminder, with

We the from also a the of base. stores, NCI assortment, continue pleased to our products with vast And majority select incorporates and are benefit more throughout NCI performance but which incorporating of through we broader store a streamlined planograms the light approach.

excited engage in affordable, primarily builds about fun, two also recent first are and and further on by differentiated targeted refreshed we to with the customers non-consumable a of opening through; hunt categories. our treasure first, continually offering the locations, of delivered earlier, noted experience, pOpshelf introduction NCI. pOpshelf As and product learnings our merchandise, which success aims

items to a and XX% visual, $X design in at Second, highly displays fun experience; of a with offering including differentiated easy shopping store priced create exceptional impactful approximately experience, value and or of less. our third, our

goal pOpshelf core unlocking expertise, while of income stores General's going proud standing by team incredible the digital welcoming shopping tailored We're forward, specifically initial communities, of customers delivers be located the merchandise in insights, concept. us, forward. suburban capabilities the operational the to and has end and we occasion, this we pOpshelf higher of in customer our as many Importantly, behind And customer, is additional initially a growth potentially approximately look with now it excellence, estate innovation, Dollar move work including up primarily and incremental targets XXXX. XX opportunities forward different additional of to strengths, done of will real work a to all

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

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

higher purchases. Fresh markups to contributor gross be realizing inventory initial DG on margin from the are we fact, to largest continues In benefit,

transformational grow we initiative. expect scale continue as to to this this benefit we Importantly,

and seeing than we included and DG of were We're not higher categories. Another XX driven to we offering And on self rollout in important both additional levels, more in future. introduction distributing national overall goal increase this our in-stock continue more DG the serviced QX. than in the by from of items, even more Fresh Fresh. In to a potential pleased provide in success end these including DG stores already front, expanding path is with being could produce select and by private are is brands sales to Fresh XX,XXX produce DG facilities the plan the stores of believe to to we forward stores plans, our eight Fresh while total, initial at

We facilities expect our to capture are benefits from rollout XX,XXX and chain of year, on XX to XXXX. this across initiative stores in this well more from track end initial the than by complete in the

we at up pleased experience. quarter convenient pick store our Next, to DG familiar, during point environment offering QX, In for footprint contactless more with our ecosystem and an experiences, a our provides to I'm we customers to that of where more consists and safe, convenient, XX,XXX than combined compared our of shopping initiative, expanded where the tailored the advantage. distinct stores digital end provide building believe stores specifically, those buy seeking our X,XXX experience. digital a frictionless, convenient even digital access Pickup, with to continue note in the More a assets competitive nearly specifically personalized our an more strategy online providing customer seek another customers unique to

new experiences, in-store believe tools our feature proposition. in include we grow drive stores, that available DG basket DG make further our are of select well addition traffic, By and our enhancing self-checkout, to to In includes offer further to we digital as GO! expansion in positioned convenience we this Pickup, and plans and convenience more existing checkout, size even greater channel look customers. leading to

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

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

of Track checkout customers flexible for with which also second convenient and The provides store associates. our while component driving another greater Fast solution efficiencies self-checkout, is

as further than customer are we to early, the stores, our still including approximately the accelerated plans at pleased on of quarter, forward. can adoption well actions, and focused with of we differentiate results, to as And from initiatives rest retail we of control, we the XXX what while discount customers move General the our self-checkout landscape. the rates, from of stores to compared taking as QX, more controlling we key while and for the the employees. positive remain During with XXX including continued distance end both Overall, initial Dollar rollout feedback expansion further execution

a and are very well our results our performance we which retailer that opportunities are through XXXX, going the and also customers quarters pursuing forward. growth of three in team's the proud of and us we initiatives of demonstrate mature future additional a value unique changing our continues positions to capture groundwork combination first further the strategies and convenience to believe the right with for resonate in As we to rapidly continue are retail closing, growth In mode, laying landscape.

employees are our mission dedication work our others. fulfilling that open midst busy thanks lines in a I season, serving of we XXX,XXX to more want questions. we'd each of With like the As for for hard sincere to across holiday to company their now offer extended and the my the operator, of and to than

Operator

our you. question Thank Thank from first Matthew JP [Operator Instructions] line you and Boss with comes the Morgan. of

Matthew Boss

congrats nice another quarter. and Great, on

Todd Vasos

Thank you, Matt.

Matthew Boss

momentum market seeing think do the that about you what following believe company today? are clear the that seeing all you takes is is taking clearly you share, this What obviously the you're acquisition? new the any customer multiyear categories kind vaccine and from cylinders so from a of in hitting thinking company Just today. DG on versus pandemic Todd, after

Todd Vasos

that always we right. focused than through to amount initiatives our we we feel customer for Dollar post-pandemic, around sooner you, very and concept, and comes initiatives to are And including format and of will DG a I we're at innings that the pOpshelf. look we're what initiatives ballgame whitespace well, because discretionary those including that first But place, Thank benefit in assets, fair the the in we later. we stores serve some post-pandemic look that a hope Fresh, still a that's we we Fast us we the on there's encouraged two response like of early forward, General, And cooler have Matt, been. the that that that our continue we think Track, digital great at early pOpshelf from on, out feel of again, on let's encouraged that believe here question, there that have including also and as has believe long-term, continue that as we're because on

side SKUs and right we into so from seen we very and of appropriate the to acquisition more of even say, a We're much, is about that those that's customer, move and platform customer encourages what seen diverse digital pleased that younger, retain that in means midst some early amount suffice to one new equation, adjacent customer, we're I'm is now, doing new gives it more our keep away different us that, don't the we with the ethnically and we everything I is exactly. that happy customers customers of want that and the but to toward really acquisition give talk I a XXXX. core believe we're said very of opportunity more little customer to through social happy our we've to a the other as few to launched really And to but too while the we've come. that On us say we're that pandemic, media, bit little her with actually speak savvy, as little little won't QX, to a the response end a the differently. of

Matthew Boss

On if I at the two [ph] for relative plus last then basis shown third levels. and quarters, second up maybe points you've and margin, XXX John. expansion multiyear a in follow gross quarter Great, look historical to

maybe in So could elaborate that do or factors tailwind? outpacing you expect point the mentioned you've see just fourth the these the you actually should we and gross headwinds is expansion, quarter margin on that moderation

John Garratt

Great question, Matt.

the drivers of this as look maybe pleased saying expansion, seen you ahead. the talking and by we're expansion First, margin I'll this help inform quarter. by I'll start mentioned, quarters six with quarter can about we've that we consecutive start with very XXX year-over-year gross as

like are the biggest I important we and saw quarter. and to the impactful this note to drivers initiatives think it's DG contributing NCI really Fresh that three

much with we've sell for of promotional and markdowns, have take be First, talking activity to well, now, on less quarters as been have we're clearance through as lower as strong to about activity number more necessary. non-consumables, targeted and promotional didn't a our the more continue markdowns, we just

DG at look you that higher when Fresh. primarily driven was markups, Secondly, by initial

the cost a that Again, only as key mixed there continue same there's to shift the Obviously, benefit. then scale. and but we in And We non-consumables. driver that takeout been was I third, that, see part substantial that grows the wallet, from the the very we've learnings spreading really non-con that as with quarters box ourselves and the positioned well done to say of with of what we consecutive by of impact evidenced NCI comps. XX would

we have we that shrink, to were sales. lower to percent addition as which a In did of pleased see

distribution was and higher that costs. Now transportation partly offsetting

in to most the basis challenging it's when the those QX. gross over somewhat moderate mix think enhanced to QX, which consider expansion but to the year, specific we important points carrier anticipate levels. that QX ahead, but, and also given in that, alluded in you it heightened consider non-consumables, to first it's look expect QX margin as higher lapping transportation shift the Also, continue costs as But ahead, you I look as of with was note we factors think DC mentioned, guidance by market is the we the startups. say, of and QX, not lap as we're the it tight then I in and of XX time, certainly So likely into to And uncertainty distribution it's as environment. from providing hard we're to QX,

are there gross margin term uncertainties time. and while to So, headwinds, and believe some margin operating some near there's over our increase opportunities to continue we

initiatives see and scale. continue will as to they DG and Fresh grow like benefit as a growing NCI We I those mentioned, from only

we see great we don't that penetration, to category price, investments always right to there brand invest the and penetration, We talked in private chain efficiencies, right appropriate, to now. needed, reserve levers while where the continue spot management, we're in price need opportunities And about; make foreign on supply sourcing currently a any and shrink. see in where the

over have levers and gross believe making long-term. we're improve the margins to right to the So the and investments operating continue margins

Matthew Boss

again the performance. congrats on Great color,

John Garratt

you. Thank

Operator

Karen from is question questions. of Please the Barclays. proceed your Next with line Short with

Karen Short

to Thinking concerned I much to and of about Hi, hate relates very thanks it as compares. me well. is congratulations I think as and that's from XXXX, the but focus on what tough kind everyone

lot offered wanted I you in provide understand can't ask about freight respect appreciate I are thinking how I couple framework kind great. then to million a expenses? Maybe about I the predict those context bonuses, specifically, while of them there And a But, are but because to sales, once definitely there's in I outlined, a would any wages color, of will you you've and would questions. year-over-year? puts think a about to of COVID of you And that thinking these you of takes? bonuses, unknowns, is taking with be ask but you got also way how you probably $XX And into million away? on so both do $XXX around in XXXX how have little

Todd Vasos

Karen, Yes, I'll chime John have here. as me then start in and well let

can customers on she initiatives do what as is able our we look we and been really has ensuring retain squarely She to store and that than key new shop do being the to our possibly that consumer. controlling And a execute many we're in with a about can a that again, the these out of to ever means inside at key our what XXXX, nice through with control. again level, have really much the we As we also as talked backdrop we is, initiatives, past. of can fuller new focused high

in As crystal XXXX, and have you ball. to your the think start about a we labor wages, again, to point, side don't

through the, part hints, some year and the think, from fast right don't vaccine got we know the that given. first. we like going CDC by We've away obviously, is I do just the Right. government. this take what in But are look what's the is going our to thing be the to employees one exactly, or will how of to first pandemic So

reward to we exactly early our customers bonuses And safe, we'll frontline is QX care continue think then for the additional do this so, going to through will of was we'll taking happen too what's need tell do and point. workers at vaccine to to that. to widely I keep But it again, them pay a in we this available. pandemic, that, if continue watch until And to

John Garratt

controlling what feel are have next, virtually to we line we're accelerating the we're the top we like. great again, impact add the about, increased that really with continue pleased mentioned, uncertain contribute the scale fluid the it's Todd's you on those seeing strategic which the control that, and this all bottom is And our But can I'll the to think point, what only Yes, pandemic, what could of I on we initiatives, and as what economy and say to will thing those. as have environment, given and sales looked line. them in challenging nature that to consumer focused an impact the to

intend make And that think those indicated whatever trip than new we care back, relevant as trading that keep what us I bigger. fuller coming doing the we're done more positions focused so fill take in to them we've to to, they've box customers, as baskets keeping Todd well they as and to can those in also of providing well. And those ever, alluded to, customers as, on

can on controlling focused control. what So we

of you economy. terms a the tell great performs the well in fundamentals of the about puts we and the the that model model, all business, of cycles business feel takes having strength initiatives and I'll In of the

remains to seen. you In of things mentioned, terms of mentioned you specific be a couple freight, and it

part freight right volume. heightened the and capacity now is the a think big I constraint of

efforts. from to remains non-consumables benefit mix seen, non-consumables. to scale continue this best year that that seasons we from it's productivity we is be straying and other something time ongoing And hopefully the holiday the at usually QX ideas the now of to certainly with would margins, we is continue optimization We of shift as the our lot peak. the it all we fleet, its efforts that's base, I the load is So then as that about volume normalize after go rest time. around continuing additional around have gross NCI, to the mile reduction, that over DC mitigating that diversify over fantastic scaling certainly then to our and business gotten feel carrier is expand efforts And in terms private of of a and two And to that further into quarters pointed something stem thing, last to have in the the import chain. that

that and piece remains but to get you somewhat. So mix business, of that about seen to great moderate time be we that imagine kind feel continue can if that would shift would the over of

just feel so, considerations the some but fundamentals fantastic business. think And the about I of of year, that's the for next

Karen Short

that today, more, that acceleration patterns the I and quarter anything is you other saw to any there then accelerating any there in versus pattern with point you of or point could XQ? to urban out consumables into stores, on ask Okay, just also then if the could than rural performance the one quarter, but in

Jeff Owen

this Karen, Jeff. is Hi

store is the about urban the model across stores. of nice versus base, terms the well our did perform to we rural In thing rural our consistency specifically our see stores really rural and urban, but outperformed

continue with real pleased that is program, U.S. network. the within our be with new the fact XX% we're performance development remodel store pleased of program, of miles that and five So our and to our store population

footprint So that well. to us unique continues serve

the so quarter, pleased of of for great improvements John you about that mentioned as inventory in our in did in piece. side. remarks and We've we're mention made our tell sales ready earlier in prepared the said You I the and to team's fourth can position sales We holiday. the we're the trends the terms set around terms in-stock ability

certainly So quarter. fourth that customer of parts to the ready are remaining the we about serve and excited

Karen Short

Great, thank you.

Operator

Simeon is of question with Gutman proceed from your Stanley. the questions. with Please Next Morgan line

Simeon Gutman

some lens of top bit around little of store you've past, drivers, maybe Hi, everyone, good to unanswerable sales question, new your along the ask morning. like lines deliberate the been the fairly XXXX, want around A sales bottoms of line, up, in let and through me, initiatives. remodel, I Karen's the

way? all of don't thinking you Can you think normally think, And stimulus, about not of I I top year? on recession of, about think for next if a you any plan share this this still these we then a Are that's I part or your how is some know in and talked XX of thoughts about uplift on inflation. items? sales

Todd Vasos

number by the sales and giving lot the tell way assuming well Yes, here not means. long-term that any intact. look any yet a at for algorithms of we know But early, 'XX, you guidance still are as would we're again, I you

is Our strong. algorithm still new very store

going that And remodel also of seeing we're accelerated very frankly, are our performance. sign those value year, should our show saw, an stores same the think our great new remodels. very, performance, value program store out consumers you next next at is pace. to and And seeing I more that with we're you opening be As our we're a store accelerating tremendous coming pleased quite year that tremendous

or driving here, We're the And may line, up many happens We now, and and right years what set but strategic this stimulus see over serve to us Stimulus, top and I'll what our we think not come. are guess initiatives. that that keep there. well not we that want well the tailwind to served years, see. that control controlling us the have any until fundamentals top we for a So, wait don't can we'll see is for and sure us come many on is through big would I they to are saying What and are it. and all line our I'm on many retailers, be come, betting including of around we'll drivers intact. but what well does to have initiative may watch long-term

Simeon Gutman

markups. to Thanks, It's related Todd. the call in release higher the up, the out it's margin. My initial follow second

that’s expect question. there? momentum I your guess, in think said Because And can I that into or was out the in wanted so Todd from DG fourth Fresh. if that about how presume we last there And that's talk is about rate year's my comments trying of, some think next I sequential you ask, year? I should its and think alone you think initially I building? we ‘XX. prepared change the ratably to to it ramps quarter step called item it that Is

John Garratt

have you're accretive about talking time, primary to we've exactly the that the and a I that initial And been for to about will that Yes, to now. point, is that over grow It's driver right, business. already benefit think the way is you quarters this. think gotten number operating linearly, how efficiencies of not quite amazing get you the you as quickly more and the of of but this DCs, serve economies as up gotten only from stores we've and as stores, add scale, more markup of team, you but existing has at efficient your been running it

you both benefits. So get

gross expansion further in carrying as And to competing is cost stores that the we've private our see and thing better we're scales, up the opens sales continues there. substantial about talked This then, and adding before grow, mentioned, the opportunity distribution, certain self thing We from And and stores. to to But already us brands those seeing other it term margin grow. benefit improve label. then We're That's as of precluded both we terms to is So longer in-stocks, expect that unlock to unlock, sales already we benefit. served other as then produce SKUs more the had by in better the the grow that agreements in to now takeout. assortment. new benefit. free it we which we're that of

gift that of but the terms both cost sales. it's giving, think and in of margin, keeps terms we in so, on also And

Simeon Gutman

and fourth Okay, of a thanks good quarter. rest have John,

John Garratt

Thank you.

Todd Vasos

Thank you.

Operator

line with Our UBS. next Lasser with proceed questions. Please Michael the question your is of from

Michael Lasser

Good morning. my taking for Thanks question.

a Dollar So XX.X% General comp, year-to-date. reported

much of behind due share that other to market like maybe analysis share If gains? some factors or much then you had to wallet put due guess and it, how how gains to is XX.X

Todd Vasos

share trends of rapid that on And that different continues some some but share we've have of due I the be to and in continued donor share to is share there. of from as emerging you consolidation taking side of disciplines But a we've many that cases, happy largest come that evidence some Yes, multitude obviously, seen. seen new too that with discretionary probably of to we're out the we're some gains get well. gains going would tell into really the we're the rate at a probably recently. that to are Drug that we've reasons equation not competitive Those happened the much that that's from Michael areas, that in has seen.

with move gains we're in seeing those that capitalize our the And as around that to initiatives 'XX and positioned well and believe XXXX. customers keep NCI we've already there gotten share into pOpshelf, we're now that so in I couple we

Michael Lasser

potentials initial thoughts a and consumable to and a it, environment there is, consumer presumably, your on, is use in price going follow-up a expansion disproportionate you in retail, and margin share market price, all overall? Got the amount given expectations around as that have then slower softer increase in is good the promotional the setback my picking question your environment in which or for of setback environment your

Todd Vasos

lower ensure consumer. that we always we, into General price Well, importantly, always those to that keep service footsteps and the coming the reserve right more we Dollar to we say

will pretty right to important that been the be price tame But here, now. the and this that activity it's positioning we has been activity, we to watch But, retail the lever. As I've it ever pull to quarters for we to price seems years to best. think don't have very to on as as everyday same Michael, whatever XX price, right evidence best any note, sit in and also though, now, priced the a environment competitive The we see do or in need promotional I many across ensure right. about the we're do been continue we is the now we've

So position needs got as to and strength, in very of shape already and it good in we've is lowered where XXXX. be, from into it price, a we are move

Michael Lasser

much Thank good and holiday. very you have a

Todd Vasos

Sure.

Operator

your The with Lejuez of with is Citi. questions. question Paul next Please line from the proceed

Paul Lejuez

the talk are might earlier new that customers if you in could retention any some you guys. that there you’ve acquired the thanks, of can and have, to curious true lower metrics to ago? year that And about I'm share? second, Thanks. of Hi, the that gross if curious across just about those then you and you themselves non-consumables, back margins your talk if both markdowns, could within comments each going was businesses a relative consumables and year about if just

Jeff Owen

Jeff. Sure, this is

retention First about. metrics on the new asked you customer

pleased we As the strategy QX. retention at stated, real Todd of earlier we're that did our the with tailwind launch of the

do you, first, on So are if I or little we measure efforts, to, that got everything if we our General pivot well we need a so to. at that things we Dollar accelerate and need very to monitoring can here but tell we of we focused very early, it's the we is, one can

when you place. from only to customers, about not relates think and about or put the that desire what When what pleased XXXX call many acquiring as initially I it right can can. as it's that, thinking think also retention is we're so ago new it as retain so, started to that we new And you tell to the and that to with customer from that. our six months seeing we're strategy we we try then time do in We

we'll I'll to with pleased now, pass I a date about very future question. digital to be it's more assured bit measuring but approach Rest that that, then and So the talk it And are able a we early. then the John, taking. surgical we're on little think that right at margin

John Garratt

a recently markdowns, markdowns lower team driver clearance and The the lower on the better both. seen And, activity. sales tools profitability reduction as We've clear strength what of put a we more to on gives very the But quarters. been needle biggest very the there, been required in is it and of have has go processes in that and and Yes, for the of of with got strength number and really of activity the what non-consumables, those promotional really we that's true sophisticated the the traffic sell-through been bang has so place after amount the targeted of the buck, talking moves then for gotten growing throughout. and goods. percent about to a incrementality really

non-consumables. So really and both it consumables is

Paul Lejuez

guys. of luck. Best Thanks,

John Garratt

Thank you.

Operator

comes proceed Our from next line Please Rupesh of with with Parikh your question the Oppenheimer. questions.

Rupesh Parikh

my question. Good morning. taking Thanks for

color launch back terms that go to curious pandemic, any concept of pOpshelf concept. in real is you decision new estate now can I'm I the opportunities maybe So the triggered to just the the there? by right provide of or want more launch to just during more

Todd Vasos

you the of concept any really clock pandemic as that time magnitude, it. about you as begun months that. this ago, that or tell to so of I imagine, we any back that COVID, work the Probably would really was the or started Sure, before launch know, And could had about long along the launched this plan you process. all XX

to very launch we were So track much times. initial on right our

we're very, expectations. some of concept some positive was us. may first With strong been real in concept, did initial grab pretty on some up that we're for a real exceeding we've of by that's pandemic, good of a and real Now, in the the stores business anticipate that in. at estate estate there estate from seen end longer seen we both sales didn't XXXX, but the from to anticipate abundance and we've the real be that very what obviously, that's consolidation we the point, least And why also been that two very opportunity discretionary the this this this be our out of real perspective, at the able available retailers, XX no open has to that bullish either would

General on cylinders and on are far, be. will continue refine here that’s But do it's best hitting initiative we it So high rest again, early. to new this a again, the concept it we we make level execute what so can at all and the best at assured, but to -- Dollar do

Rupesh Parikh

performance season can Great, what follow-up of I versus be the by expectations? you thus your the Any seeing question. you. in-house in guys you due share just quarterly far Maybe category. trends consumables thank in holiday one are driven to terms accelerated, thoughts know,

the that forwarded think November a you any if represent almost curious demand November, performances from…? Just

Todd Vasos

Sure.

in what it's that, I for I like A but December of to the think big. in about retail to obviously little totality. I don't early a month is QX of to have back pretty to selling going is mention really where of look very lot some last to November those to numbers came will. when nicely, But start you numbers saw our thing started traffic in our look the in traffic at was, QX. we rebound numbers saw we great that talk

so, business, was discretionary And that side was consumable a that equation shopping, only sign out non-consumable of that us side great but the the as the consumer not for the of well.

and inventory holiday holiday. around it of for QX We season on for going thing part to We bought to alluded good really and we other what best inventory seen his are And very The positions and was knew Jeff leaned comments we've Dollar we've holiday. by our in earlier; be in early General. a many more from up inventory in in close the the years in holiday been mainly. market sell-through what- we are than encouraged went from of some

lot a to selling but go. encouraged, left So of

Rupesh Parikh

Great, you all thank for the color.

Todd Vasos

Sure.

Operator

to conclude you today. us teleconference. who's joined today's everyone This will Thank

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

Dollar General (DG) 3 Dec 202020 Q3 Earnings call transcript