Earnings call transcript Q2 2023

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Operator

Good morning. My name is Robert, and I will be your conference operator today. At this time, I'd like to welcome everyone to Dollar General's Second Quarter 2023 Earnings Conference Call. Today is Thursday, August 31, 2023. All lines have been placed on mute to prevent any background noise. recorded. being is call This Instructions for available this the are replay to the company's the in issued of earnings call listening press morning. release

your Vice like conference begin Kevin, your I'd turn host, now to Mr. Now you may Kevin of President to Walker, conference. Investor Relations. over the

Kevin Walker

you, Thank good everyone. morning, and

are On today our and Jeff the call with Kelly CEO; Owen, me Dilts, CFO. our

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

risk in include uncertainties Let about cause but Securities report are the in future could statements me that factors earnings initiatives, this not These from statements results and defined subject those you opportunities, statements materially on March filed Form identified comments caution about are this risks XXXX, our XX, to, in under and statements differ or and priorities, expectations made in actual These and issued strategy, any our call. Private are periodic that XXXX to comments Reform as forward-looking limited our projections. expectations that later of XX-K today's filed to guidance, factors Act plans, to are release our on Litigation goals, other fact. and limited the matters beliefs XXXX as that not include, such financial morning, historical

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

follow-up we questions necessary. one for questions. your your our if to At up the related Please one end will open remarks, call the of and limit question,

the turn to pleasure over call my is to it Jeff. Now

Jeffery Owen

everyone to welcome and Kevin, joining our you, call. Thank

is in a the August Florida. of as to I support, on quarter, address teams community two when providing in Jacksonville, Saturday. of times tragic Right customers senseless families matters family It and one the We counseling member Jacksonville and the friends hate-filled of to ever. as extend focused more violence lost our in greater our their resources community. to last sympathies are we active well the discuss ones. store we than tragedy loved XX, event and and to DG deepest want Before we On our now, their and to

We can local and are who with difficult team we best are and we organization evaluating during the in empathy how this the with and community support courage. stand across time, Jacksonville our leading

We communities are customers support quick law local appreciative of associates, continued across in enforcement's protecting every Jacksonville, and their our response day country. and this in

made begin we'll better serve we actions progress to I'd that, in you. significant an update quarter, several our execution improve the taken have advancing We give call. with Thank like And the second today's on goals. now to you customers. and important

results. our financial While pleased satisfied we progress, with we are with are overall not our

also to how quickly. in coming I So do how plan to more pursuit would there months even we through walk more these in we goals the you to like get plan and of

towards stores, rightsizing We levels. in even centers with are working experience continuing and providing lower an and our shopping our distribution improve to our execution prices and improved customers inventory

and our challenges serve that levels, the to Within has all our customers. we on-time service from our an factor to benefited before in-stock positioning supply levels has rates been supply pleased important saw and better overall have returned chain distribution chain, This also note our stores delivery we to in centers last our our are our capacity year. improvement levels began cost

investment we as retail accelerated during As a the had quarter. in our we of announced, that result second previously progress, incremental labor and

assist teams of hours focused in and and also greatest initially through could on to strategically where also need set in While deployed they opportunity the most. the investment store was a were of that needed the we the stores in labor across based high-performing allocated stores additional areas each hours district base,

early, overall standards. satisfaction the on positive we these impact of investments, impact including store with pleased and the customer labor are While

Finally, we that I with most to highlight we targeted also to on more want as make even second the customers items matter solutions. key reductions to price our the pricing provide completed actions in them affordable quarter

have We strong great response pricing pleased composition our proposition. classes other items. trade, both with value have and of the size when in basket These strong the basket competitors terms been and to relative position we about feel customer of our and these one includes solidified of actions further

that recap of net XXXX. to our billion billion all to X.X% I Net QX sales QX increased compared of line in $X.X With some to $X.X sales in mind, top want results.

unit Importantly, share we the market improvements to which consumable sales both well highly non-consumable quarter actions was share in believe accelerating as growth, I as testament of a the earlier. highlighted of is by all and and mentioned product growth

same-store us our constrained, of said, a sales that QX. customers believe With which to financially feel they core in slight decrease to continue in tell contributed X.X% we

it was driven during decrease essentially quarter, period. improve traffic did impact average was inflation. primarily of was an which customer the The ticket, the by each traffic in While negative increase by in offset sequentially

From before declining and a June in monthly July. positive cadence perspective, in May and same-store sales growth was strongest

from This We has sales primarily by increases more the ticket have average August XXXX. as seen this comp with the lap trend into through been the half continue month. lower first decline price of significant negative we driven

customer we While saw not the second further are resonating encouraged sales, which market with our support and with customers. belief gains improvements quarter, overall actions the in satisfied comp the traffic our are are by during share that we we

sales particularly duration of buying However, we year, for for in need. in continued pressure more expect line customer the on sales discretionary focuses as our the this

evolved we XXXX. not are of to how we the want about where rest With shrink thinking be, sales we them and have

want even to better into Our improved increased as execution is holiday satisfaction, season customers progress this into well XXXX and we and we driving customer serve our as head to the beyond. accelerate

operating, which focused on return more of have which result, from to to we and and have lowering position to a collectively quickly sales the serve. to As plans strength important changes are accustomed driving our cost are made some additional we

primarily expanding our non-consumable are in of products. our strategically we markdowns, position First, the accelerating inventory rightsizing promotional by

to supports cash While approximately of believe of it our well chain back result operating reduce damages in in inventory. accelerate as priority believe half and drive as rightsizing more we We we will supply this that of position operating including low-cost of operator excess profit the traffic an enhancing quickly headwind $XX and will and number the million our year, this store expect shrink, efficiencies in as and flow. it a a improvement areas, also

million. improvements to investment progress of the planned through this to support retail have additional incremental our will position. continue this like begin the in increasing year from in next million our to approximately back approximately year allow us an of returns we on stronger We half to the date are $XXX that and we driving and acceleration labor $XXX investment even in-store and seen investment this Next, year believe

Finally, million store support tool plan other with base also to as in areas to improved stores stores, up our an inventory such and strong centers distribution growing better to $XX and XX,XXX forecasting invest our of on nearly we investments proposition unique strong Collectively, our our to lowering and position deliver our our convenience restore serve. customers. execution further value us will the to strengthen while we quickly and believe and these actions for allows more that cost demand

with strategy. support Forward actions our these align Importantly, and all of DG

the others of for unchanged. managing term this mission is long are business and serving We our

for the position to clear most the and retail operational force We returning customers, value the communities to for Our we of is focus a the expect and and our this and be as for strong. sectors customers attractive delivering vision is expect in ourselves. of our that one convenience we And in future and of model excellence we resilient operate on will associates, opportunity shareholders. seek relentlessly

a initiatives will to more which growth, We detail of multitude shortly. strategic have future drive in discuss I

Now I'd Kelly. the turn to to over call like

Kelly Dilts

want us Dollar impacted. Thank to morning, tragedy General again over and those are remain and of thoughts say you, good with all that Jeff, all Jacksonville of at I the heartbroken our everyone.

note refer take earnings sales references and to we the all start Now year. noted of years Jeff fiscal with share comparisons diluted corresponding through details. gross so are already I'll per important some to let Unless financial all the you EPS to refer profit. me year-over-year, specifically all otherwise, discussed

and percentage QX, consumables XX.X%, points. of XXX decreased primarily lower sales to shrink, This attributable markups damages as of costs. a greater decreased markdowns category. and by was inventory basis a LIFO decrease as partially a gross and from in were increases transportation decrease the of proportion was provision coming profit offset For a as well sales These

by a our and increase rent. of percentage sales retail points. in basis million an compensation. a labor, incentive and $XX approximately as This well was targeted driven partially as as was XXX These were labor offset investment amortization increase depreciation of including SG&A by of utilities, decrease XX%,

to second Moving XX.X% Operating million. $XXX profit down quarter for the statement. income the decreased

Interest a $XX rates. As operating points. million X.X%, profit was QX of expense higher interest second basis $XX sales, average and percentage year's quarter, increased compares in XXX decrease driven to that to million and higher by last borrowings a in of

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

decreased the for XX.X% EPS Finally, to quarter $X.XX.

$X.X a per the than in a Turning now store the on first basis X.X% increase end and quarter, lower billion our on quarter. on cash balance is Merchandise at XX.X% inventories store of which flow. increase sheet of were to an our of notably per basis, the

last still year. is growth has significantly elevated, pace peak inventory from its moderated While the

year. As quarter, progress have of inventory the demand. towards we last we goal our rates growth adjusted customer We of by as the discussed we evolving made inventory on focus to our sharpened end reducing

to And the non-consumable of primarily with the able by half the accelerate products expanding strategic will progress actions markdowns, year. we be back our mentioned, Jeff promotional in on

to markdowns the approximately will of operating the in an additional and costs $XX million in incremental year. headwind these expect result of half profit associated back We

of customers, given the current better we to to is we centers and this distribution is growth our right environment in continue quality decision stores, also support our good believe Although plans. the believe inventory shape, the

expenditures the QX, next, included business strategic new first million, Total planned generated $XXX and related in were first, a finally, stores, Year-to-date, the and of to flows XX%. of $XXX million and from for and spending relocations; half our initiatives. investments following: transportation distribution remodels capital our through cash decrease projects; the operations

$X.XX for a total payment quarter, quarterly a share of outstanding common $XXX dividend of the During per paid million. we

we did planned, not As shares quarter. this repurchase

continue for to priorities well allocation today. us Our us and years capital served guide many to have

is store such growth investing Our our strategic as initiatives. priority expansion existing return high in store base and business, new including as our as first well organic opportunities our

returning dividend order rating. over to share EBITDAR all targeting maintain adjusted Xx to appropriate, while quarterly committed to to in a debt approximately remain a when we shareholders of investment-grade time Next, current leverage ratio and repurchases, through cash our payment and,

our update outlook on for 'XX. fiscal an to Moving financial

to seen We as to date the what reflect have for for year softer of are the updating trends our sales sales half anticipate now back the expectations well the year. as we we

addition, In last We to million the shrink shrink approximately has additional now quarter's call. expect since continued worsen. environment of headwind $XXX

for targeted our we actions. include the stores. working and tools and position, is throughout this technology pressure a of our While through to remainder processes, levels reduce multiple and the to recognize and refining retail, these improving leveraging expect this continue we actively inventory our refreshing additional in are challenge These reducing year execution

continues a the negative Net As to to X.X% now year expectation due following year's XXrd actions lapping anticipated guidance. to and investments our XXXX. earnings range expect these of are the range of previous sales last and of our X.X% result we sales X.X% of growth earlier, fiscal percentage per to compared growth Jeff an include X%. shrink approximately to week. X changes points share updating to impact This in for net outlined sales the and We

of approximately to decline Next, we expect same-store X% This expectation to X%. X% compares range to growth. negative previous growth approximately the of a X% of of sales in our

of year-over-year range $XXX negative EPS $X.XX or to of or previous $X.XX to up XX%. our includes to our X% of almost to decline actions This flat and decline an Finally, we $X.XX EPS. compares investments change. expect of It to of approximately in expected XX% range million a the negative also

as points impact this expense last percentage previous year, percentage week Additionally, higher our interest guidance points a year's for us by of X negative lapping X negatively and incurring our impacting guidance includes updated headwind. of the both total same XXrd of

continues rate approximately EPS effective to assume XX.X%. an Our tax of

to spending and $X.X $X.X Finally, expect of billion capital a billion we repurchase share continue to activity. no range

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

expect the in customers, to stores regards our markdown we not student closely increased While actions half the from due customers, our operating total $XXX restart on monitoring to of additional are updated repayments impact back and contemplate areas the retail up and the centers. we significant the impact in headwind does to and incremental these other labor better that our outlined, guidance loan investments payments. of support profit distribution to investments million of Jeff any of our the year activity, With

In negative positive terms comp while the sales significant price the traffic again we half to as from QX the year, traffic in do we back increases until improve, quarter. expect of expect expect trends of to And fourth XXXX. not lap we the we be

storm In to that assumes benefit investments sales our the we with the addition, the result guidance 'XX, of from greater and grow fourth remainder which, impacts a should lapping actions of throughout as year, our move benefit the winter the will in along overall quarter.

perspective. better quarter we than result, the both third comp EPS sales a be a to quarter and from As expect significantly fourth

for margin gross to Turning XXXX.

last these lower additional efficiencies. with to anticipate benefits of private from this offsetting year's inventory shrink, markdowns Partially increased distribution back the mix year. pressure and half tractor from to in addition pressure distribution and we from expect and our sales plan rates other carrier our capacity challenges, lower inventory center expansion compared also and reduction transportation we markups fleet In associated greater and performance,

realizing expect also DG Network. our DG and Fresh We continue including Media benefits from initiatives, to

SG&A. to Turning

results initiatives plan total the through approximately stores, remaining the positive will as will believe deliver in and positions actions as rollout, growth we hours. This and a better we stronger We million pressure planned make plans impact we labor Overall, our they $XXX million incremental of drive while materially financial and expect $XX continued investment XXXX, us strategic of investments in further updated a additional our execution we investments have experience. customer XXXX our in-store well our for to in their to primarily beyond. in and

are strong expenses as maintaining we and consistent, discipline financial summary, investing the our for in capital ongoing performance and priorities growth, while goal how long-term delivering flow on are confident we sales low-cost in operator with long In our value. laser-focused business profitable our of a to term. model manage strategically strong returns, and same-store store cash new And we drive long-term shareholder financial healthy free the

will that, to the turn call over Jeff. With I back

Jeffery Owen

innovation strategy, Dollar is our associates, DG Forward which opportunity you, position an we execution Kelly. quarter, Last force how introduced be to our Thank position communities growth, empowerment including execution remain customers, for for capturing DG Forward inclusion. is General we priorities, a shareholders. on leveraging and will and strategy, through investing operator a focused low-cost teams operating our we and as driving our growth and opportunities, driving profitable and our diverse reinforcing sales in and development, through

our sharpen key focus will We in four strategic ways.

First, we serve our residents. of communities winning with XX,XXX approximately than stores XX% on Today, in are fewer rural. focused rural

estate to quarter, relocations. real continues core real Our XXX stores, XXX second high-return, as the the and In new a low-risk us including business. XX model estate well completed of we XXX projects, strength remodels serve

remodels add new productivity of plan be XXXX increased ability foot significant cooler fresh execute drive in to compared our estate stores, of store remains larger to our XXX be well opportunity over XX% as nearly total in which real many the continue our X,XXX We count the including in now new With square expect one U.S., and to to our to XX% For our approximately sales XXXX, traditional in will XXX to a DGTP as stores for and store. our regard all provides as relocations of format, projects stores. the which X,XXX in in formats, increase will remodels, per relocations. produce

record enhanced growth and sales. current associated through our DG these serve continue we product where increasing doors frozen cooler building to in categories our on of focus offerings and and multiyear in is locations through Fresh, sales way track One refrigerated is

at and added potential believe total expanding in Fresh that while cooler our supply a During our our to doors serviced QX, than across of we currently to XX,XXX offered more of forward XX,XXX is DG expand end of more produce XX,XXX offering plans store We the time. customers, total in than doors over in more a base, a of to continue plan XXXX. than we with cooler know is we to not internal produce provides more than X,XXX than end the we install X,XXX stores this by chain, path And incremental QX, to areas. this more rural important And offering stores XXXX. by especially stores produce fresh to offering to

Importantly, despite to additional opportunity still have the we savings result date meaningful Fresh, believe this initiative we significant of drive as with returns improvements and ahead. realized we've DG we made have the to years an in a

is we Our second area our reach. as extending DG Forward focus move

customers attracting our are physical unique we extend through substantial differentiated expand while even new reach build by customers and connections to investing ways. existing front new brick-and-mortar also DG where and in to We digital universe porch with our serving to beyond striving digital further the and Starting are deeper formats, extend footprint. reaching initiative, our our

the are this of XX% our year. active growth We we're excited digital last properties, an including users since than monthly time seeing more about in across increase

through partnership now Further, we than with and tremendous available to are stores our seeing which XX,XXX continues drive significant customers. more DoorDash, incremental success is in with transactions

are tailored and we personalized to customers convenient, consists Our seeing higher experience growing our is shopping spend digital our with extending delivering business. provide properties. for for with Overall, across an even a our also more the partners more reach of with pleased we building and specifically growth experience, and return our personalized on an are strategy digital Media ecosystem our profitable with DG a while frictionless ad engagement customers our Network

Dollar Súper Monterrey, our extended this store General first the borders with year time Mi earlier first Next, of beyond for we Mexico. our reach the opening the in

results, exceeding initial that response the to include which continue are be by our sales encouraged and expectations. customer results early very the We significantly

to have goal to similar serving in extending Northern as United proposition to underserved stores is look updated while and up States. XX is the to leverage customer Mexico to end our convenience ahead, of XXXX a brand by our value the our that communities awareness customer in base our core we Looking

extending which shopping format pOpshelf format shopping we is around years The provides through our third way experience nearly reach are This a occasions. our is designed non-consumable guilt-free now stress-free, three old.

opened within pOpshelf at to located QX total bringing locations, we the of quarter, the XXX During stores XX the of end states. number XX new

stores, leveraged next ideal out rolling are actively and continuing these have X.X learnings We refine for month. will assortment version, our to layout begin which we the to and develop our

are the we balanced of end in ahead, this approach expects environment XXX Looking the a of a of pOpshelf taking macroeconomic approximately stores number to to in total opening right stores XXXX. right the new and locations by operate

Importantly, and the believe excited we opportunity. total the term, over to about approximately X,XXX adds we pOpshelf our growth long still opportunities market addressable remain

Finally, our health our through as DG branded are Being. extending we initiative reach Well

healthcare basic X,XXX total a end with nearly customer Our not communities only now QX, was on to plan available are but expand by they rural show the XXXX. product response, at to research underserved offerings, more to which healthcare end have to also assortment, staple goods services. stores of and out in the an of we focus continues and trouble our accessing of continue In X,XXX that rolling we expanded than stores

in of This of continue supplemental expansion ultimately various time, focus benefits items America. healthcare and basic now health Dollar plan further the payment is chain-wide increasing XX,XXX the and third-party end our General we Looking access platform our over in to products with to option to of health a being also to particularly their services goal allow available on year approximately as and available wellness-related but rural stores purchase include to benefit the our health health use customers in by partnership ahead, stores. plans offering of local

progress and in strategic projects team area growth. of We at fuel adding focus chain, customers. And foundation. by incremental efforts are operations to with are three third to the high-return our Arkansas chain, execute growth investing our strengthening add facilities Within the within our and Our levels our have we in operating our construction productivity serve our to best-in-class Colorado, of plan is centers. capacity comprised to and our made on and additional model to increasing capacity distribution These improve XXXX. pace and supply to components IT execution: three efficiency modernizing in significant and of significant enable highest under fuel we our resources Oregon, supply to critical our

Carolina from live served to large-scale SKUs first improving recently feature will the our Ultimately, this Furthermore, X,XXX thousands went center half fully with serve. SKUs per additional team to process we distribution in the able facility foot stores. lowering of square automation our Once inside our this automation to storage of this over facility to allow to ramped, be South replenish to will while stores. deliver the and cost

effectively growth efficiently about to to functionality excited more moving adding forward. facilities are to look We our this more opportunity forward support automated and and

more tractors continue needs. also the at transportation X,XXX of and We tractor which than XX% fleet, private accounted our our of outbound expand to consisted nearly for of QX end

tractor As we a with fleet. private our approximately a third-party costs from reminder, replace of we save one every associated XX% time

have ahead, to end private tractors X,XXX lowering plan and overall been These be we our in fleet an XXXX. costs. than the to efforts our important have continue will of Looking driver transportation by in more

create better associates. customers and a are intensely on experience complexity to Within reducing for stores, in-store focused our we

We out XX,XXX in was at stores rolltainer option, operations the of have simplified self-checkout and by QX. rolling optimizing available which end delivery nearly our

its model, we overhaul for major pilot early, of Finally, model, been enhance and this teams we our our also low-cost of operator. enhancing a to further experience while position first still year, retail XX believe very this nearly as over in-store end-to-end while the the will significantly it's past years. our working launched We transformation the operating full have in recently implement a

this support innovation opportunity in leverage as We this enhanced growth our further months, excited to the but on coming share to fuel more are and years technology will we we the in and have ahead. about

of move The day. display our strength was our Forward hosted enhance than leaders Nashville, Dollar our mission on the of And more Forward year, DG Annual all week in humbled of as Leadership of my X,XXX commitment is of the and by once our our was This again for that is The focus our I recently by people. fourth of The with favorite Meeting. it's inspired we and people area people company our powered our greatest General advantage. we DG people position, to every investing while Serving further growth and are are the of fulfilling people strategic Others our opportunities creating our culture career difference. every for makes and and a do people our a development in amplifying where enjoy work they where meaningful to day can

growth as Our believe no as footprint, development and with strong than with our and commitment purpose, to of is growth and a strong ongoing better ever. start General. robust Dollar there's to And sense develop we career place

Our placement associate by pipeline robust, than at or above more internal position. evidenced sales as promotion the XX% of lead remains rates internal

with XX% growing Additionally, our of store fleet distribution team a their us in or more careers private than either began center.

and We applicant with success continue need staffing levels to we have hiring we are flow. our pleased great and talent the

our they and at that will DG note elevate strategy. experience Dollar experience are our continuing our the committed associates, never customer as to of Forward people the General power often our we We exceed experience for to

with that thank In work small to for and commitment home. are convenience form America value across every call our we and is deserve the serve of backbone closing, we country, and our an of they part communities our essential than and customers XXX,XXX the I to customers towns Dollar General more hard their day. on employees serving focused want our

steps are quickly to our and believe the necessary us sustainable a and the excellence we drive progress accelerate taking long-term return this are to and ahead long making even are about company. of shareholder executing investments taking with actions significant, we opportunities to are hallmark The the value. excited been of and the operational has more growth that we're We

operator, like for that, open With questions. we to would now lines the

Operator

first Our with from comes UBS. Instructions] Michael Lasser question [Operator

Michael Lasser

quick performance the to that, has this your type resume the it $XXX take skepticism What be about that that? General. The on $XXX to not margin market it's lower And much general think pace is these million. is investments, than more from year is this more not it's I is that the right labor have and of been amount, evidence it's enough million million $XXX one how follow-up. previously. to you that much impact operating Dollar the as accustomed going So this would that then than will the to investment taken you've to this provide for you than given that going to perception from to long-term refute be And year been

Jeffery Owen

Michael. you, Jeff. is Thank This

the start with the that. we've front, investments labor On really good feel made. labor about I'll that We

the have I have the strong supply think in time. you chain. invested General, we've keep And what's you inside store. important quite store Dollar in mind is at for to got at and a level, really wages in foundation in when some stability And stability that supply stability the chain, leads to

frankly, some stabilizing, we're seeing the we've store. significant of over that inside And stability we're supply our show up that in quite challenges seeing the which, had last chain so couple years now more

accelerate a one is And we smart single made, in in at dedicated And then labor deployed disposal team plus is what company. of we've be haven't sales quarter our that investment new is, Dollar pleased these that new touch, which with that of been and a continue they tool district The stores seeing teams the and manager plateaued. to deploy where is we've been team the smart with you And every to deployed to combine that there able with district the most. teams our in we've in seen we've need General the second that have what for toolbox. are things they very the a

about see We that. real store feel standards we our good So improving.

is investing certainly the technology system, stability when now of chain, the inventory combine by through inside is optimized a this with when you discussed other inventory, further have with we smart which team, new reducing the to in just And permanent store. making believe investment, out we inventory we now more to which also equals supply announced, markdowns investments going the the that and be we pull stable that

store our manager And from these turnover so also what we're beginning has as to investments well. is benefited been see

we're So guess, share I to to stability, of trying I'm see you. what with is the theme starting

the So confidence investments we've some believe to to today go that that's we've up us as with results inside great and, achieving the making, back we're of accustomed the the XXXX. showing while importantly, faster amount we're store, gives seen the achieved, XXXX that us the through these are which half in get we announcement excellence we're and more not pleased we to much of progress right

Kelly Dilts

just the We we what And QX and General, here investment to do into amount absolutely on forward did Jeff. at and labor always significant test we gets That's is learn. pull color that our right, us Dollar of you bit what give more comfortable do could so a little there. which a

as stores. understanding associated on labor And to -- the that through teams did what was inventory smart point, the work the around went like, paying store we a lot what and with level we that off. of of Jeff's hours the But process, we so of attributing, hours really the the just various labor piece, optimal was

of so get feel And investment. that level did we to like we optimal

some on the inventory would really progress already. side, the good say piece I inventory On we've made

in our decline much QX, were versus a really year-over-year what QX is year-over-year a a on highlight was at want better look I you we're we QX. if inventory basis. basis, But down so on to X.X% X% And actually non-consumable of than

the actually inventory second in reduction done a as quarter there. of for XX% well. a receipts saw So work We lot the good

And out that lot inventory of group, buying work so from what certainly already merchandising about around we inventory. feel had just to and good of good that quality the our getting the and store that's a

specifically be is noted, top probably to as to then But as move many take sales And that the reasons, non-consumable list certainly inventory and driving excited as inventory action go inventory, year. we through the we on next this for accelerated through we are that. of reductions is able the Jeff

So good those the level about really of of we both feel investments.

Michael Lasser

margins Dollar to an stock buying then question mid-single-digit to to is, X% has growth, to My targeted X% and comp unit EPS stable double-digit algorithm X% X% of growing expansion, get the growth. of follow-up back historically, General to

know it is algorithm, different that back XXXX General the pieces that what algorithm So especially if based can realistic by Dollar growth, you on take get you all to now? of that store of

Kelly Dilts

we won't our that we need say, we're the I'd on delivering doing deliver results I focused what customers. Yes. is can But long as everything to and and give 'XX term is for guidance. what usual, say delivering

to So history and investments up pointed the we're the for you results. ability an model 'XX incredible feel good this that those out, of just got, delivering for we making, about and beyond. say set I'd it us

on being low-cost back we And operator. getting to foundation to strengthen profitable And we're and good feel going driving to a focus sales. so about our continue

business that think taking only are model. strengthen that to I actions really going the great we're

You know well. us

existing we've So support these will that as got initiatives that. of new a lot of initiatives as some well

pressures of specifically then our X% we're impact were we a number just stores opportunities margin and the got do XXXX. the of about in the than we and still felt of the seeing basis and And when with quarter XX% same we U.S., all gross to to XX that new open comp investments the the fantastic of we've less around second estate that significant We years. in X% rate, in So even we drive of still IRRs have we where initiatives. actions can think were in we two still the shrink, and with cash ahead returns real think points the paybacks

private to a We've brand opportunities We've about. still And we've think DG chain work And all I talked going some as private testament well. And we've going that's that done. efficiencies. in that's that's got And fleet Network we for to keep that's supply Media Jeff still got got assortment us us. as then even delivering And benefit that resume to back time. initiative got shrink to we're We've middle still innings the lower see you of should more. the well only health Fresh. lower inventory, over contributing, us

driving we just but even a then simplicity and costs, say benefits lower end-to-end I'd really side just going then next efficiencies store see to Save the about operations. our And We're more things, operating that and to we're our those importantly, view in lower we continue little talked cost and serve. Serve up that's initiative, of expect And bit of SG&A taking ramping year. to to our on that around model, to

in near of I'd about And pressures. all do so we're the have that. some we say term, excited

interest from business that historic back some absolutely this share pressure long-term believe we levels and But get profit view of got that our So is to excellent. will expense repurchases. we've is from what of growth operating we and

Operator

from is question next Our Chuck Grom Gordon with Haskett.

Charles Grom

to maybe off little in of years. XX comment, was pandemic, lowest last which your Just outside the build below the bit new came store productivity really a in XX%,

store growth fix hand, over on currently; some compound about but few other hand, past how one obviously you it on picture, impair growth given these you quarters, thinking of allow would issues things degree. are would the bigger a the to volume So to the

over So next any years. store the thoughts growth on few just

Jeffery Owen

This Chuck. Jeff. is Thanks, Yes.

going really Our like we that be And store, I business. with tell larger to, very we our going new our excellence of store new to investments the that we format the real communities. the you, seeing, to only operational but estate we're innovation just I'm And store benefit is have. as only this pleased is well. to to productivity the opportunities to what's strength benefit will the This to returns allowed core the we're pipeline very, especially going announced, us the it am seeing. continues model And return really also with core, cater not we're

then supply since have to about about today ways you still we So of long-term better we've feel which the stability in think chain, go, pricing model we're I you our when feel value talking investments proposition great feel and investments the that we levels, the about the about, what prospects but those to into lead the very profit, And that's at all we with how -- you and our and achieve seeing I'm our to inventory that certainly real store optimizing which model us consistent go forward. operating excellent will all and together estate combine will as lean pleased continue to allow level. about a great real execution think even in we're things our these we estate the stores made, four

Charles Grom

outside detail think and the then more the the looking And more bit little of can a just line X change can see true the in Great. Okay. you the between both gross be provided, our And how bit us quarter that context guide, third at expect and operating fourth the down fourth to would expect Kelly, help half and band up to line up margin and the back so third on much quarter? in the margin shape just in X? we help quarter models. for any you a comps about of the little compression in should I third to the we you guess, the

Kelly Dilts

absolutely, happy No, Yes. to help.

you the the around quickly the to the lower function that is And sales. of pressure think to half of then respond, range So our the sales, a X% higher shrink. taking function back we're associated to damages around range sales the will guide our expected for we drive and really how I'd investments. we're say, of with and the our to lower Net set flow-through they us in about 'XX. up that really first, the own range, markdowns higher have our When customer X%. a their and is give in also it's pretty and year. costs EPS negative honestly, a obviously how actions of We transactions the the little did seeing responds more sales the And situation slower wide a obviously, really of financial revised actions shrink

probably we're couple get that take that a get back make operational to and So of -- to excellence. we it's actions all taking sure just quarters going the to

pressure But we getting traffic did If than comp to we're our sales range. comp your see sequentially we're quarters, What I we What see now decelerated with improve. trends QX, with starting break down lower point, a prepared the starting other more quarter, the is third should the more seeing is in period. by the and little significant that This remarks, talked the to any about of this we lap going than back is bit QX in price particular. half increases we're quarter in year. from, to last pressure

your And comp to and expected to we date. negative in QX, be as expect so do running we're sales to point,

QX that's seeing we are Just inventory in margin actions QX, be as the well pressured also on what to piece our than of with going as more shrink.

QX margin QX gross be And to right that now, And obviously, put so would XX%. EPS. pressure we're on expecting below

also investments the QX and see that of QX, going we're start we've bit little our lapping believe side, Winter a On to around to a tailwind Elliott. our the actions got benefit In we more. Storm

think well would EPS. as we than QX comp QX for stronger see as we'll So

little actions that pull investments, those and inventory touching wiggle of bit sure may And response, the make choose can the then especially we taking. room it if just investments that we we're to to We're give on react of going into a some QX, of makes ourselves customer timing the forward to sense. and the

Operator

from is JP question next Boss with Morgan. Our Matthew

Matthew Boss

macro, any survey you market to from Or by purchase change noted do? micro. change comp tying relative or the you maybe months low-end Jeff, any performance down I work share intentions versus on in customer category? that relative landscape you know the notably August then ago? I in And how assess in guys the would the So as July three to break assess guess, the competitive macro and today first, backdrop

Jeffery Owen

Matt. Thanks,

quarter in about first continues. customer, and challenged, she is On we still and the the that that talked

that than the us headwinds is telling of reduction certainly but accelerating gas the year, And XXXX, of she's less last prices she's are throughout also her tax what the still and customer, Our are SNAP savings they're and as lack refunds. gone. feeling

she certainly, the so And with still inflationary living is pressure.

it the took why challenged. we need, which exactly and help actions I'm we've very quarter. of quite customers is her that. to first customers in are time and certainly, actions, know with pleased the frankly, And the So we But is we in did challenged her our frequently made

feel offer value our to we good there about her her. and to for So ability be also

we of have but of with Certainly, this only our just challenge more, to signs improve execution front be even as when teams we're we typically we've her. just And certainly, with deployed. that to to she love like progress standards General we are seen further the also levels, smart to even going on Dollar think as accelerate we've to announced that's initial opportunity our the better allow in progress, about And what serve she's positioned and I in-stock lean going serve in our the that store us customer. we like earlier, seeing does where said you And going this. of to times us, actions

General to course correct, the we this able to are well actions we've and landscape, we announced as to going quite compete Dollar to today correct. of quite some been And time. the course correct, we about for know where need course competitive has So that how exactly think knows team

with excellence So to it even lightly ability before. accustomed performance we it right were actions we that we the But feel And that to great up faster we're don't to about seeing sales is our that signs want take we're see than to that not achieving the already. we we're pleased going the be. to where our now early return we're show and

looking this of to forward certainly XXXX. back So year half and then into

Matthew Boss

investments structurally how below above then EBIT pre-pandemic, this profile or then, the the how Great. sheet line targeted does with historical year? And with balance XXX that the leverage ability remaining margin your Xx, the for your roughly secondly, double-digit points recapture bottom do Kelly, margin basis back impact algorithm? next margin forecasted And year next half just year impact

Kelly Dilts

Yes.

So I'll the little first break gross it margin and piece down structural start between SG&A. with a and bit

piece that that think current specifically as years. the Media transitory, non-consumables the when DG significant continuation. and NCI private into Network next we couple on efficiencies and supply of about we're shrink more bit think a we and forward on gross maybe automation the Fresh little the we damages over as improvements opportunity of And about as positioned we talk mix with markdowns. really are chain DG well the structural and, and and fleet headwinds margin should provide well so horizon, certainly again, more move with talked We

brands. . We also in some continue to see opportunities private

to serve. is well looking we serve say I'd our we're as side, investment make SG&A management we're an over Jeff But now our model that in embedded the at and And the we as efficiencies sure driving lowering really to store years. looking labor our in the cost to also On the inventory operating baseline. are to of at lower go said, forward, cost couple as next end-to-end

year. help think next our us the I ramping initiative expect and see that cost system. of then that some save-to-serve And will up of out we're that, benefit take to

in So we again, get we to things the like back -- be do but of specifically strategy -- will able speaking profit operating financial near not 'XX headwinds to future, around repurchases that near-term But we have to share the on some side we'll term. to that feel growth. just the

On the -- remind me question? balance again the sheet on

Matthew Boss

Just for what's line your back with to the flow. to priorities about leverage get cash maybe time Xx, best targeted the sheet there balance think above and how

Kelly Dilts

Yes, absolutely.

So our growth I that in making opportunities, high we've and just priorities we in first laid business as the the think still going priority. believe priorities, that investing capital through allocation out, obviously sure we're

for payments remaining available that. cash course, repurchases the share of dividend with any be would Next and then,

to here the model strong believe You're ratio. on now, we target. cash of that, a news significant ratio that back this strength our The time. think will right history good to near continue while, for in is but be are this to working has leverage leverage get above ratio future. probably leverage will we over targeted our with generating that a continue We little the flow, Right and we're us

Operator

Stanley. with from comes Simeon Gutman Morgan question next Our

Simeon Gutman

I wanted first comps ask they're performing. the to around and where

tickets. underlyingly the to attribute it's you if lapping what it is anything could all just it's diagnose okay If does like you some It of or too. stores. how put summarize underperformance, Curious and related you together the to and traffic rank sound merchandising, pricing, some

that? should think about how we So

Jeffery Owen

to as in get we're we more our Yes. would are is when our going I stable, labor comps, What in are look we've the stores. seeing consistent deployed store. at And levels that say our But is be our and and inside in more much there. in-stock opportunities that this the gets improvements help as to the is going certainly to you Jeff. able stores Simeon, more driving chain supply

again dedicated that on made, about team plan feel is that about good off seeing to this one And And track, signs exciting so might really of importantly, helps model stores performance. labor I the track continued quicker because. I the things really underestimate can't a fast. able that we're on get back get that fall we're and, driving store That's back the investment more we've that the

So with that. I'm pleased

it, But starts the as we about my show with is units. experience, think this comp It in will how up.

to improve, our as levels And generally unit gains. quite And so trends and through she's share which come then see but seeing to saying word then gets comps and do of show was that. our see improving, when those customers with you mouth we're there. improve standards you pleased And I traffic, units It traffic -- have more and it as up. -- will that's in-stock our well, and, once frankly, then the seeing will with share out pleased store we start after really our and then unit

traffic this some we're believe So as I like and specifically around price really announced lapping the with starts But just Kelly our we that opportunity significant run announcement increases. the is mentioned, year. those saw promotions, underlying we've when the units, today trends, the we inventory, it what with next NCI then we

new. we've This is This been testing. something stuff isn't

very holiday, really back into this we're offer responded about her she's to the And you values. and these have will think But And half, wait up so year. excited we'll and earlier see. our be customer as the well as move them But pressured. to shown to we

year, of as most we're So and in the the of the forward. stability store we back we as that's year hopefully, next focused metrics go continued look us the one on drive this help and traffic, to will half improving into

Simeon Gutman

to the Fair of and new as And it and a then like, merchandise, are sounds prototypes going in investments enough. a doing couple you're stores well there's sounds the great. It labor some like are follow-up, places. clear

managing is the in to just a bit make Just managed the perform is temporarily point that about Nothing business but thinking consideration the a the leverage leverage slowing from the just do little a properly? practicality stores to standpoint, the SG&A lower. years, about balancing stores so how even about out thinking

Jeffery Owen

in you, and with tell first operational model is do to chain, successful able when have on at And generates returning that. stable a invest to a focused to advantage stores, we're supply we're And I we at the great with. That we tremendous of very great ability take first operating have tremendously the excellence. frankly, be rate And store can a quite profit proposition a I that's pleased to And allows an we're mover the consistency business and we level. to new we're very, and pleased. that. want foremost, very us, back question. opportunity value this with Simeon, continue,

as we and return will we confident excited us. on very achieving, is at we Because recipe is here I'm operational to we to on that we accustomed growth we'll very But and can returns the that Dollar performing. to that we're to have successful so always you and and combine see that progress to for the the are is, that through excellence and and capital, at our accustomed tremendous and and everything to that's And something continue base perform ability thing that nice we we're a and with 'XX levels to return to have, we pipeline important do balancing, that. 'XX continue incredibly General level

also So feel operational and I feel great about the about pipeline, our I to excellence. great return

Operator

question Rupesh Parikh comes from with next Our Oppenheimer.

Rupesh Parikh

investments. $XXX go to what as more you versus permanent? back I curious was the wanted to of I onetime in view nature the commentary million So on

Jeffery Owen

believe going Yes, said we accelerate Rupesh, this before, certainly, these I'll our progress. but are start and Kelly we've to investments --

investments, the around I We're we've make inventory. on it as better. will progress we with our at reducing think as I the, run you the look look when impressed at inventory, It before, test we've this. said made even

So do is we that seeing. that as that you'll forward. don't the we're the as But see we permanent that look labor, you labor, going model to that the inventory certainly I us side, and certainly in about like having and be something embedded think our to on certainly, the is returns think

point I there. the key think that's

efficient long And be the investing are ability in term. more investments to really the other

we we mean, that, forecasting think call to a months, XX pull excited Specifically, throughout P&L. XX play that's the believe, tremendous our to to meaningful opportunity very, we're that efficient. how to believe be And capital $XXX will million working able we more. the as we're more going And inventory, demand have all I even will about or very investing it, over next, about tool in, make ballpark the you out

Rupesh Parikh

then maybe And just follow-up Great. one question.

guidance range the guide. So forward for annual the going is much wider

and Just driving be to your deliver curious just what's range. this within in those confidence able

Kelly Dilts

we right be her excellence, of will and be we But we'll that quarters we're XXXX. taking doing that in a and the feel width customers all be level we're back have actions And all right actions around going We really, how us. and of high piece we'll just just response taking. take. a need Rupesh, going about are we to the this confidence quickly the to to the I getting it couple respond that a operational back range. to actions think is in function after it ready, mean, to sales that the good to primarily, we're to deliver And the

Operator

comes question final from Our with Paul Lejuez Citi.

Paul Lejuez

months transaction around your in in your ticket how how versus was are positive changed And ago? just comp versus thinking in And the are But business were XQ clarification, the just if specifically? what XQ one what XQ? are in three what consumables And XQ Curious, curious XQ? versus you for missed and that then a assumptions I sorry expecting inflation I'm expectations that? I'm just impact And it. you inflation has

Kelly Dilts

Yes.

starting much with we certainly So than last year. inflation, saw less

it QX. half So now, into inflation over the go has of and X.X%. Right the QX to expect we pretty be about we been year as front similar

how sales to what On this QX, it we're than and doing. in reacts the It be comp certainly of customer just be QX. to for that piece better the see we'll could positive expecting we're

Operator

comments. We end the of to like to the Owen question-and-answer Jeff session. turn for would call have reached over now I closing the

Jeffery Owen

half are progress to and gaining good to as drive progress while the goals. had of we're accelerate we actions our foundation look this. Dollar in for that summarize steps growth your taking Thank response our of you key those beyond. been we're share and our like could our solidifying self-inflicted, in the questions, in General. We've taking leave traction year thanks all some I'd recent making our the to cost for the in today, back against investments quarters We're but you to If over with I in of have and interest lower for the and XXXX discussion making challenges and sales serve

and strong tremendously track we to future an and we a do believe bright again. of are doing foundation a say have And incredibly to positioned We we strong well we're what record do. going so

sign and Jacksonville. are that we with again off, I Before our want the of the victims, community hearts to families express their

support other We to during and our difficult time. customers this proud our are of family, each coming we're General Dollar together

you again for morning. Thank joining us this

Operator

This concludes today's conference.

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

Dollar General (DG) 31 Aug 232023 Q2 Earnings call transcript