- Earnings call transcript Q3 2023

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Operator

Good morning. My name is Robert, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General Third Quarter 2023 Earnings Call. Today is Thursday, December 1, 2022, [Operator Instructions]. This call is being recorded. the earnings the morning. press to in are listening company's the release for replay call of available Instructions issued this

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

Kevin Walker

and morning, good you, Thank everyone.

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

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

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

discussed Jeff. turn the for law. my to General unduly call it questions. over on Now this Dollar to not remarks, any will disclaims only any in to date. [Operator is forward-looking rely today's obligation information should by we open or the of as end your You statements, which unless of speak call update up At the required prepared our revise pleasure call Instructions]

Jeffery Owen

to market and share our thanking quarter the our sales. included strong want to The serving welcome begin commitment nonconsumable customers, for and team call. in Thank of by in product performance on X.X% by I and both their and by top increases growth communities other. traffic joining ongoing sales led Kevin, each of you, consumable our and entire highlighted line, was to comp everyone

During sales impacted pressures, higher mix cost higher-than-anticipated margin. the shrink, which of challenges supply and chain, internal inventory quarter, we within damages all experienced gross our and significantly pressures including

will more But bit. these despite in We earnings challenges, strong double-digit growth. diluted pressures delivered cost share, a in on elaborate along increase a same-store we these per sales with

customer. economic continued environment As evolve the we the serving quarter, on the core remain during to needs of focused our

spending, purchased in QX increased we We of number continue are items behaviors in the they indicate to see per believe softer month. quarter. as the including pressure, during items more to and that brands, basket in of customer continued reductions feeling dollar payday than financial discretionary while anticipated was price also at to and to the such shift options, first the affordable point spending private which closer are that Customers shopping also

store challenging States fiscal customers economic United customers including and average. support year. Importantly, growing the for real we stores, population, seeing estate the we In I'm well convenience pleased to our well in competitors customers building we as plans core this $X our continue X,XXX believe $XXX,XXX. in support to This quarter. we We're on to convenience foundation to positioned on new environment. our continue to will underscores good that our we're and U.S. a recap we openings to lay price are with relative some comp of trade. share more XX% a more with results an turn, challenging minutes, in in to delivering position chain collectively offering next environment. strong let are we in a pricing about proposition growth. classes and growth committed XXXX, as growth. as customer on share X future the broad I'll plans financial value and the spectrum located on these of significant during nearly But with to focused strengthen within In excited QX, we plan chain household products feel customers these point, miles with remain foundation, as as an of productive to outperformed sales projects of additional the approximately for performance to the and even up annual our execute our economic me of belief resonates remain for X,XXX the this value along With about third few XX,XXX they other products Further, continue and and we at important growth details plans our incomes our with all first, just be continue update for to supply our increase

sales pleased helped net of increase billion. Our perspective, comp all a to strong comp sales into with I'm well. start From being month to momentum QX continued a building drive saw performance. strong X our note sales cadence that as QX to we of performance sales in off the of September a monthly months And QX, XX.X% $X.X strongest are

as QX would average a more were basket environment, Our economic by average sales comp in an inflation. per were driven transaction expect amount, driven primarily And challenging largely we by down. increase units during

customer to regards mentioned touch I excited to second As have these happened quarter earlier, I contribute see taken supply traffic we to and cost consecutive growth. the were to of increasing pressures on what we the want I actions earlier, address to the chain mentioned With challenges. a

ago, sales pandemic at and pace. robust over days demand a early grow reminder, we a As the X years the since seen have of

of overall in the nonconsumable with pOpshelf. are of products the evolved mix growth significantly shipping our initiative addition, we has In

near-term. plan As our distribution of operational the in to starting year use them this the temporary storage greater while evolved, needs warehouse to grew support back permanent we strategically for designed in solutions We and our growth. of facilities making capacity be half

opening costs as $XX QX permitting. distribution time, experienced what for a such led challenges more These freight with to previously same to in shipping our moving move the earlier supply of to incurred than servicing and goods However, centers delays primarily Costs in additional resulting and constraints from result included expected. inefficiencies chain million came QX, returning factors in from distribution had in At through transportation The additional in associated as within these than we due fees we storage seasonal retention less-than-optimal containers. as external compared unexpected costs higher anticipated. facilities, delays we alignments. stores center costs temporary

with additional half facilities, storage capacity have worked these some has the of already which the begun year, and opening in issues a margin to of resulted hard these the have headwind of this warehouse the move team past back delays in While gross pressures. relieve to

than which by as capacity opening facilities In fact, few between past and will with the of the intermediary our import permanent distribution regional new Georgia rest the X we feet square weeks, points of serve in million and within Texas, distribution X increased more hubs centers.

of flow overall our will is begin hubs Of year. of shipping the well opening followed improve alignment temporary capacity the regional we the scheduled which better by be we of lower improvement ahead, and the we and drive of with are Nebraska, center existing note, facilities, utilization this permanent to positioned by opening as to in end continued new distribution these optimize footprint With combination the distribution our we believe fiscal store centers, within both move as goods.

Overall, total years Colorado in than are months. announced a a ultimately for growing chain and all these previously XX% And of these to testament in online to increase to the growth our more while XXXX, facilities relevance are addition, position in believe centers Dollar challenges capacity have come. this new is result will going General. internal expected demand impacted In our the over growth well the Oregon the support EPS Arkansas, support supply we Collectively, continued next come in we confident of challenges in significant our us contributed to to plans and forward. that to outlook growth distribution in XX

advancing and rest landscape. a we strength, Looking from retail of and from position priorities Dollar to initiatives General the our strategic focused on we ahead, the differentiate distance of operating as continue remain

in We supporting With well for shareholder I continue long-term one the while have that, over most positioned retail. actions in turn a operate strategic as to sectors mode, creation. transformational mature will the success, John. to continued us call growth attractive in value retailer of And our

John Garratt

Thank you, Jeff, and good morning, everyone.

references of with that noted highlights to has you few some and all the to me Now refer specifically year. comparisons per let share the year-over-year, diluted EPS refer take profit. years all to corresponding otherwise, gross of through fiscal beginning you through quarter, we details, note a Jeff taken all important are financial earnings Unless its

greater were occupancy XX.X%, This hurricane-related expenses of decrease beginning percentage a as costs. note, in was shrink distribution Of of a the labor, partially a well. sales as lower This and damages of greater are basis SG&A anticipated, decrease These a the inventory of and product increases including percentage during by markups. incentive we provision QX, of repairs of costs, of percentage significant as For points. we consumable a increases sales, cost were markdowns, was compensation, most partially basis higher LIFO of percentage a million to the cost by a a moderate, approximately of as as profit inventory provision, utilities, by was which and attributable quarter. retail to LIFO a in inflation greater and training were continue that sales well coming offset resulting as and were travel disaster anticipate XX will pressure while sales And LIFO $XXX primarily to believe maintenance category was as decrease that points. expenses from offset decrease was proportion QX gross than XX XX.X%, expenses sales, costs. higher driven

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

percentage decrease was a operating X.X%, of basis profit a of As points. sales, X

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

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

remains continued cost to Similar quarter, rollout end greater the our at while increase seasonal of to increase overall now of categories, non-consumables' goods. of shareholders. and Merchandise impact of higher-value and particularly the flexibility store to third which first to the of strong long-term, seasonal the home us this half sheet billion to initiative, XX.X% returns inventories mix the due per for basis. inflation, receipt primarily the significant a balance the financial investing cash early were an the our reflects provide XX.X% of primarily flow, product a year, and delivering continue Turning and on the in and of products, $X.X the

we of shape, in growth to and we begin believe we good beginning of continue to levels our see is anticipate will inventory inventory lower that the QX. Importantly, quality in

for million of issued an the incur $XXX to during billion balance approximately the We the and million total increase year, QX, over senior $X.X year. full of sheet. $XX interest of Moving expense expect now notes we prior down approximately

flow. Turning decrease flows distribution to and and capital billion, Total generated cash investments spending Year-to-date of the stores, included inventory $X.X higher primarily from transportation and operations relocations, new to business to XX%, a the through purchases. cash billion related in planned through due projects strategic were QX remodels and our expenditures $X.X QX, totaling initiatives.

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

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

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

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

XXXX. range XXXX our and would which update an from of benefit are On updating week, X%, the points we of growth growth growth growth to in approximately to the range expect of year-to-date on QX, remainder of sales percentage X% for approximately sales the which are full in Moving XX%, for upper year for of X expectations result end XXrd performance previous expectation including net and same-store our our our approximately X.X%. fiscal we expectations X% to fiscal financial the an reiterating for sales for estimated toward of we our QX, same-store sales outlook

consumables, course financial consumer evolution and the growing and we Since product Turning like including have to as those related over of update customers many increased chain sales inflation, supply headwind to this gross challenges dynamics year, seen lower-margin margin. We've experienced our spending. an the mix many pressure. last retailers, cost from of face

resolved making consumable assumes spending good headwind of progress we have QX carry to our of constraints, of our delays and expect We this as into be we largely the cost result items. feel grow but of their QX we to financial a to capacity the in shift as more customers will while expect QX, guidance over will storage some toward year. And pressures experienced next are pressures continue by resolving

Finally, total year. challenges, Overall, will what these all headwind shrink inventory we we factors guidance. in we in greater seeing than the while to QX this are EPS half a we and With we of higher financial our confident for guidance. the to from of anticipate headwind this we actions, within than the are margin chain from gross taking previously our mind, be anticipated contemplated are our supply damages all back address are we updating in

approximately benefit in of a of current an deliver X% the XXrd XXXX full expect rate in for now range. X%. points of assumes XX% to for previously year. EPS XX% the range percentage to estimated toward For $X.XX be our tax now outlook approximately previous approximately previous ranges This now week. provided is $X.XX, include full result which of for the compared which We is to to the our end the of $X.X the the the X upper to stated range the our at spending quarter, year would of to growth previously of top Both effective XX.X%. to expectation end from capital billion, XX% fourth And EPS and we expect an EPS

unchanged August for XXXX. QX in the we and we remainder business Overall, are the confident from expectations XX, stated our on despite remain year. Finally, our release challenges, our earnings in the the near-term outlook share repurchases for what of

about going into While year, sales guidance good we plan the the on to share call, pressures. feel XXXX next with momentum moderating QX coupled we cost

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

NCI expect the we our of to benefits remainder including through year. DG reminder, initiatives, and a realizing the As from continue Fresh

fleet, forward continued investments In expect will our internal the drive to addition, rollouts. further supply benefits expansion the additional initiatives we the pressures in significant expect continued as chain going our anticipated regards With we of private near-term. despite in we SG&A, strategic

margin we expense. hours to experience, margin Consistent expect experience. operating aggregate, we to in-stock than benefits drive initiatives our levels continued and primarily associated enhance includes in investments more in the will improvement positively XXXX, these customer continue expect outlook with profit SG&A toward as contribute incremental will continued gross However, offset our to labor overall customer QX QX, to to further the in and

are efficiencies continue program, Finally, Track to we Serve also to Save pursue XXXX, and of and savings through Fast offsetting portion our savings inflation. in seeing a including wage

the XXXX. financial continue while in be consistent, we manage for with behind most we the we enter working delivering how investing to of We're as the of always, As long-term. we and be expenses goal disciplined hard will strong challenges, performance, to address near-term capital believe strategically us which

healthy same-store I to Jeff. Importantly, turn store flow that, confident we free will and growth, sales back With long-term ongoing new call profitable remain and business our priorities to financial strong our value. cash over shareholder in the model drive returns,

Jeffery Owen

Thank you, John.

Let and few next initiatives. update you me the on our strategic priorities minutes to take operating

priority Our driving is first profitable growth. sales operating

We are make portfolio against executing initiatives. continuing progress our of significant to robust

quarter. or With than Let or you of some more over of seeking less, NCI, through at highlights. treasure the value. to which our with in me the the the who available with hunt offering customers take at are was end assortment stores of third initiative, XX,XXX nonconsumable Starting resonate XX% continues $X recent this

categories. from performance the be sales We continue are offering, share margin market nonconsumable seeing our growth NCI with product pleased including to we in and

the entire we initiative throughout complete ongoing the year this to remain to remainder and year-end. the nearly of track by benefits from across rollout ahead, chain on the realize Looking expect

store pOpshelf our to further with NCI. Moving success concept, our learnings and which builds on

vast the value customers at a through store with are a affordable exceptional to by resonate experience continuing As a of and our customers. X-year concept delivered the of along pOpshelf majority to and differentiated we $X the with engage anniversary reminder, refreshed priced opening. treasure pOpshelf XXXth celebrated the to differentiated aims We store, experience first less. And hunt recently fun, in-store continually offering pleased see with items our or merchandise,

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

stand-alone during this bringing by XX Additionally, a with new total us Dollar year-end. would pOpshelf XXX total year, bring stores stand-alone of footprint we of locations triple a market opened of store which track pOpshelf count General nearly store-within-a-store pOpshelf QX, remain nearly the concepts number to We XX. smaller a total the included to on store to

as store number to locations XXX to and our X,XXX locations, pOpshelf plans about real goal excited Looking opening count pOpshelf by XXX bringing include Overall, year, by for XXXX. the stores additional approximately remain ahead, of we we total of next plan of double XXXX. the nearly concept the about the estate end year-end XXXX pOpshelf our approximately

Fresh, DG areas. driving a to refrigerated a these which growth of continued to along self-distribution shift goods strategic, now on and sales Turning frozen focus with multiphase is in

reminder, we As refrigerated be chain we of initial The continue now items, very a product nearly and Fresh we the are the of frozen from DG cost on was pleased XXXX and entire initial and seeing. Fresh our to DG are to rollout facilities. across reduce in delivering with objective XX,XXX completed the XX savings stores to

Another frozen in to of and DG important Fresh goal categories. refrigerated is sales increase

the including strong performance on offerings with our product pleased enhanced and front department. stores this are from We performance perishable in

in included growth to optimize in Fresh, product deliver that record network build sales. to path our by additional produce more approximately wider expect over time. QX. on believe and looking Fresh we Fresh stores our DG potential more associated the continue as offered And that to track doors year. ahead, our X,XXX realize end, at produce DG our XXXX, end and stores the To further offering to next is And produce total a produce add leverage multiyear cooler not rollout, a of scale, in for initial forward end of stores benefits while provides in selection even from X,XXX Going we than of to an stores forward, we in we our X,XXX approximately to expanding XX,XXX than of plan continue

has also expansion DG program. our cooler the Fresh reach Finally, of extended

more on we QX, cooler our store During in we more XXXX. are and doors install added XX,XXX across than XX,XXX doors to cooler track base, than

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

plan offering. to Turning now was of the this as of by stores branded feet compared which DG consists health standard up the on and This The as items to to to we health QX, to of and selling at an total project in expanded available of X,XXX XXX end end our additional focus than approximately expand Wellbeing. update is XX% more X,XXX an than stores offering space our initial of more a more XXXX. initiative, offering, of

to launched their pilot I'm in And clinic wellness the to in mobile wellness-related General General affordable establishing and purchase On-Demand We various a As most QX. on Dollar we basic trusted over to urgent expanded our health preventative next community. with we use offering health launched plan help items recently health number offering, how a with in further to platform partner customers excited a of provided plan to few and to customers stores. a local benefits services closer to a health work test to have local in we we third-party as while connect continue allow Dollar seek of bring supplemental to at announce home, DocGo further payment with by that select partnership small care stores this stores as the customers and health to provide months health recently, a

opportunities supply chain continue benefits In improvements enhance and initiatives in pursue I damage sourcing, gross including addition associated reduction. just margin, discussed, gross margin the sales, to shrink other to the with efficiencies to private global brand and we

opportunities. priority Our growth second capturing is

stores, be has business. the we XXX model years XXX us In Our XX for low-risk real estate completed proven estate many relocations. a a remodels our core continues well including of to and new served strength of projects, XXX quarter, third total high-return, and real

execute total, For we approximately remodels estate real stores, X,XXX approximately in including relocations. plan XXXX, X,XXX now X,XXX projects XXX to and new store

in Dollar XXX stores, earlier, projects I to as ahead, X,XXX banners, General our including United new relocations. Looking in States plan XXXX we X,XXX approximately execute and mentioned the and across pOpshelf remodels X,XXX

productivity be color all stores business, drive to square in estate increased sales will ability will on foot which store Fresh our be additional the our formats, provide well innovate as of our provide approximately relocations increase strength will to our strategy. XX% one count With add to of which and of as larger as opportunity moment significant important a box. real to our stores. traditional DGTP want store to produce continues to continue some many take to XXXX the per Our and be cooler the new remodels, a of nearly regards compared in our in ability I format, to for formats Approximately XX% in our an

store are Dollar open in end internationally, to first addition we plans our our Mexico to goal our expand of to about growth, year. the this pOpshelf by In very excited General and our is and planned fiscal

will these will which Dollar Northern As name located be communities stores, branded Mexico. [MeSuper] the be a General in underserved in reminder, under

openings. XXXX, Mexico a plan as that is we proposition and extend we ahead, States. to similar open up value to to customer These our the have look to Looking planned core in of United X,XXX new be the our XX by end incremental in stores our will to store to customer stores convenience base

XXXX, We for including stores, more head than X,XXX robust. retail small for XX,XXX opportunities our pipeline XX,XXX than approximately and the pOpshelf United more for General real box estate Dollar see we in DGX. approximately States, for total remains into As stores X,XXX

ahead. our the excited opportunities other ability significant retailer, growth existing more our brick-and-mortar stores and are of With about to years than in these we any footprint opportunities capture U.S.

as continue and Next, digital footprint, enhance an for to access is we further leverage and physical technology which important our convenience deploy initiative, to to complement our customers.

Our around app. the customers, for properties, ended We including creating and efforts to this app, number as our look a with monthly million look porch offerings. over we remain QX on to to X.X engagement further our across our active front our expect continue digital mobile grow centered building we digital users as digital enhance

DoorDash Dollar as with with the new look available with to year-to-date partnership General, to an in of customers with and value more the sales Our continues resonate the stores offering in end combined hour offering very both was existing or extend and we of convenience than This of at XX,XXX results. same-day we delivery pleased the less. are QX,

are we excited continued DG our addition, the growth Network. Media of In about

We years, over are and last grow companies meaningfully with foundation seeking especially of are our After the interest the more who participation rural XX% than to this brands, few XX connect CPG million significant U.S. the and unique who from profiles, business. are we to establishing represent our seeing about beginning customers,

digital As the financial for for proposition business. strategy we seeing our frictionless and partners, a convenient, digital tailored consists increasing properties. ecosystem we experience. customers and are our the of across brand net And overall even value building with benefit the expand are we pleased the with an both while shopping growing customers Overall, program the to our more engagement and specifically personalized enhance provide

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

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

customer productivity a current initiative of Our Fast enhancing Track stores Track efficiencies store of XX,XXX including and where flexible results, The our and continue the include end with with greater another convenience. convenient also was at focus provides pleased to rates. our this our our customers QX, increasing strong customer of while Self-checkout stores in goals labor which more we approach, solution, checkout is associates. available for and self-checkout, be adoption example current Fast great in driving is than

our if stores, self-checkout which store the about self-checkout register, further believe teams preferred. excited but time We serving dedicate enhance option utilize lanes, option full enabling staff while choose convenience customers also also are select to We to in all our pilot customers. in to a could even proposition, more provides this

in the customer and We approximately are layout currently pleased early testing XXX associate and are stores response. this with

expand Looking XX,XXX we in our position offering look as we stores to extend of to a leader further total are up track retail. the innovative on ahead, small-box self-checkout our to by to as discount of an end XXXX,

our forward, these Fast which data our emerging of When the our store next hands utilization inventory their believe of for retail Track increasing the consists putting our of and field and management, Moving phase strategies, we with technology leaders. efficiencies digital efforts and leaders includes will teams. of new data-driven tools in reduce combined workload drive greater

of of expansion QX. which than the the through our costs private reduce tractors consisted of to more fleet, at X,XXX continue also end We

we than outbound transportation from in XX% of our for end our plan been account the double reminder, of expect the to fleet private a fleet which tractors the year. we expanding will focused by have more approximately as XXXX, As we of on significantly number XXXX,

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

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

opportunities personal development career As new retailer, for jobs and growing create we and professional to a and advancement. ultimately, continue

placed within. robust sales pipeline store than were employees at who lead the our remains from above evidenced by of position internal Our the associate or XX% promotion more as

private in XX% approximately our fleet us growing their center. addition, distribution team of either careers began In with or a store

and is retain company and are the applicant remains actions with talent. growing advantage confidence that to flow our continues trends to attracting levels. and with believe staffing greatest we unique, our a And Ultimately, further our pleased retaining competitive we currency to opportunity in be develop purpose-driven the are a career validating We turnover right strong, and taking and a attract talent.

the also was And We generosity and people. to inspired a variety Community where funds important our our employees Giving by of came together annual for I once our Campaign, completed of causes. raise compassion recently again

talent our distribution and We centers, continue store organization fleet private across add the to stores, our support at center. in incredible

number and we a talent and that new Dollar progress confident while closing, this As are priorities continue General make meaningful sustainable against long-term we future joins continually I of greatest with strategic reminded team, In have our unique to the initiatives in value. growth, drive and our initiatives, strong strategic creating in our process, strength. the am as people of tremendous plans great shareholder we excited to place our planning operating am are about the I

Finally, as of we every are day the I our we to their am season, employees about that, of our the we want now head our lines customers. for commitment open busy midst approximately weeks our work to XXX,XXX to would like year. into questions. together serve our excited With holiday in operator, as final for the I thank

Operator

Matthew JPMorgan. [Operator from Instructions] with comes Boss Our first question

Matthew Boss

Great.

us? share across consumer sequential then cohort? straight So at first, in you could you looking the think acceleration past on Jeff, elaborate the sustainable how pressure, do is income see same-store maybe sequentially the think driving what of for maybe back in improved What front just has now second I you opportunity And quarter. of the seeing sales? market are traffic periods you

Jeffery Owen

Thanks, Matt.

our mentioned, consecutive nice We grew X.X% to seeing market you comp consumables grow to and pleased as business. share and increase. was also And continuing We with our accelerate again second the in see, very nonconsumable market very are share. sales traffic our for quarter

still continued And is think it core we've to is -- of how And customers done And go. in to think our is and the one in box greatest a really said our economic ability long fuller single is to a health. to shop, customer, it's on in Dollar mentioned, relevance testament is it sales you customers. outperformance about business, as we've her and where that so a see that wants to about When encouraging was we've And the fill employed. our consumables factor to General. the thing make really she's speaks gainfully at to broad that And with serve spectrum box. the think customer our us that, going driven a something I testament always our of you here when it really you our

to and the thing So to saw levels. her. this share is grow all also it's And grew quarter we that, in see we encouraging it's encouraging see with productivity share us income and encouraging

when good think And levels. particularly so income the you see higher that's about to

things the also we our is to expected very that and customers to continue to grow pleased And level. several at we in the course higher retain $XXX,XXX share COVID and saw that here. us we've the ability income quarters, of of customer One been than see we over

these our to core well it, to retain to step back serve not our we you make ability ability multiple set when more just customer points only productive, up income think And So extremely will the our the us again to customers. to and but cohorts. new as and about ability that it future also look

health think step business consumable a our about feel real different a much to good Fresh, a consumable back profitability and you our And initiatives. as is performance think due has profitability I business DG mentioned business the different you Dollar it we're is standpoint the standpoint. to think strategic there. offering, our today, mind, So from about really we around with I the NCI, in made where you about that. keep When as business that thing a General And pleased from business,

XXX higher a to just XXXX, third the gross than in bit points little our it in there. fact, basis In color give was quarter, of margin you is

to of more deliver line. to also XXXX positioned then the serve feel robust to a we also strategic we pipeline again, customers And the environment. think at Dollar testament we've good look multiple estate forward, And we're the And So this feel about well done excited cohorts top projects it's say economic I'd we as in ever initiatives. we're I real and than General. a in that really

I forward. standpoint and our good feel base where serve as our be we look So broad sales we real are position to customer able from to about a

Matthew Boss

That's down gross great. some And then on components. of and maybe, margin John, to just the break

forward what tailwind supply just and more you costs fourth drivers think see this of margin should inning And LIFO the in as transportation is and we inventory contained us markup anticipate Help So warehouse material efficiency headwind now gross today? year, about here? do a quarter? transitory see relative from the to chain do the you going should to these to

John Garratt

QX. question cost the as QX. we previous comes capacity nonetheless, were near-term. this chain start called for some chain do do resolving toward with our out expectations, pressures, a into the more And supply more see previous significant And very And I'll million we over above Sure, we're And believe good progress costs the around as making costs. will Matt. versus supply carry capacity as of our expectations than headwind storage online. we these constraints $XX

QX be However, resolved will do next year. largely in we this expect of

So ahead, to costs in carrier both obviously seeing and chain we as costs, a internal well. supply market We're improving it look bit. be we as anticipate as others down for external quite XXXX

so will the the QX, continue pressure that LIFO look are at And And as continue potential from as year, a seeing cost pace to less tailwind of as pressure, pace we while LIFO. increases going we well. seeing it then we'd expect And We're forward. to that moderate. next

between the chain pressures near-term some certainly, LIFO So between supply cost.

need also and the ahead well see look long-term. mention shift initiatives, where inflation, in we a to and but levers in contribute sales moderating the to margin that you we're as XXXX don't invest. as feel price, future We to the and continue the other very product cost gross the have at the we mentioned, at that And one, feel as beyond, positioned we expanding look mix LIFO. to scale our Jeff sales supply not momentum have, good and we we We we're to over we as continue to chain But and business; the look also particularly shrink damages. around and about, mentioned

Matthew Boss

of Best color. great luck. a That's

John Garratt

to well. You asked about didn't question. as markdowns miss that I want

at last from year, while levels. As levels unusually you look low risk, the pre-pandemic still up markdown below well are markdowns

of mix to result, been consumer If ability And as it's inventory, of you The the driven adjusting about by proactively and has good quality anticipating inventory markdown really has the the a job done the a orders. inflation. growth, shift in demand look the team at good risk. majority the we feel mitigate very

we've And is always, of an this guidance. believe set reflected season. for is appropriate all level our aside, upcoming As we Christmas course, what the in markdown

Operator

Gutman from Our Simeon with Morgan Stanley. comes next question

Simeon Gutman

think follow-up, for I a John, you.

[indiscernible] So were earnings it's yet going grow and going of line and to below with excluding this the you're to be you year, now XXrd doing sort week, in more sales.

I you hinting you -- manages be don't So there's you is see recapture, to recapture. not we If it's inclined towards next just theoretical should guide I'm the in the is maybe year, something do framework I are do think Or flow? coiled that model. recapture clearly up there know there or to let some at? don't manage business that to going but know if you're and [indiscernible] the the reinvest here all

John Garratt

Sure.

of strong. you But to I articulated. mentioned, feel look you March in mind. giving the a just call. certainly you specific We'll bear less with moderating is So But call. it the at by fundamentals reiterating we next the called start as cost share as we I'll be of fundamentals pressures this on coupled the on the week about that the important that again, guidance just as momentum, won't they're X business, that very great sales out, the that's year business, And

over ourselves continue as EPS long-term. growers XX% to We see the

balance fundamentals. with but feel long-term, in we're momentum next come investing always more great feel we the about of very the that the positioned. for will to back business And Now business well the but for year,

Simeon Gutman

by justify maybe consumables pieces, mix. to you fourth little it mix a goes the feel enough gross shrink. you And we're to trouble maybe chain, And build more magnitude. up to the Because entire like doesn't magnitude by driver? Are willing the share item, Okay. to margin. the we're with my quarter supply trying to on getting I having mix, guess, follow-up, sticking

like like in as there well. something markdown seems there's there So

John Garratt

the the same of on you a pressure as order QX, drivers So look the little different. the bit at it's as QX, additional drivers is

look mix what healthy pressures shift expected. did you the difference but still flow-through, key QX the on shift. mix like as mix As bit see the with The goes, we anticipate first of previously big a is, at the pressures. sales. customers We it to is less does go seeing, where we're want as the sales margins face little than We in your consumables the financial and pressure the a customer margin but

we The actions some does we other making did progressed with we it. largely inventory shrink can are resolved while knows that tail we of QX and to storage tail But it. that. a carry it headwind through progress a and team the will to we piece mentioned greater from with to good over how And have damages. do we the capacity QX. but assured, taking is shrink online, that see believe, -- QX, a this as address deal this is as resolving -- capacity be constraints mentioned, then our have into to by And Rest

Obviously, So that's expectations. the big the big LIFO. versus one is our other previous

cost the that spread is you could The continue we moderate. math LIFO, the we increases in LIFO, QX, and product across prior look at As cost called you beginning believe year. as the million QX as to do to you do will $XXX headwind pressure out -- while you

transitory to future, But look And again, nature. of feel reiterate, in. and ahead So I'll positioned drivers. just growing resume over scale key the many the we in gross levers, we as we're we're our margin the the well that's initiatives, the the really with are our pricing these long-term to position

Operator

comes Jefferies. Our Corey from next with Tarlowe question

Corey Tarlowe

Congrats top on momentum the share you've line continued gains that and witnessed.

seeing So up. about a label. side, shift -- see marry a mix maybe in talk Could out would should clear visiting the into to NCI, regard with and maybe actually mind, The parse to better what continue how to you we is you how to as do that customer underpin, in you're of that growth look secondarily, which bit bit consumable help to you little how segment? likely happen traffic you're support shifting see the that in little growth continued more profitability that as I you're investing then that that say, is the And that ahead? in should more private store and bit you behaving with seeing little you're could because in what the customer terms is a it's the

Jeffery Owen

very the start Thank reiterate factor Jeff. important is, again, the And you being that is employed question. for health. your this I'll Corey, customer. I'll her economic with gainfully to a fact

just we just we everyday anybody. when about I to -- teams -- fuel prices our hear What the it's needs customers, to do than feel better pressure she's for energy ends and hard make to meet. and talk our is that so like the And are and feeling of her

in And exactly so much like the pretty behaving times to we expect her would she's this. way

traffic more often. and of what So the to things our needs very drive you I has basket. alluded step and price mentioned our fewer go being customer that business her long price able how And think her our back to the where buying through nonconsumables the consumables think And us she's allowed to initiatives incredibly She's you to well -- coming we're serve to, is, is a affordability. one responding our seeing pleased us to about occasion. point to business, build and got from strategic just we're point, the we're is the used the that profitable more you each that. to before, we've again, as to ability you on us around customer $X when And really and and have our testament into leaning to affordability. to there. as dollar wants And items team consumable help about But a really

about so certainly, nonconsumable, value. $X the its the pleased as less. me, on are that NCI, our as And be you ability XX% with we and think seeing about -- you really to items continue we mentioned, we're excuse think or to provide When what of NCI,

important in thing got it's feel last to the she's other again, to her. treasure really We brand. things thing through on they bit But to our ability they it's to rotate customer need very very product, customer, our that you get brand-focused you continue the of traffic to I And scale. the into as mind hunt, around mean, also good is I'll about say our we're seeing where help to things keep we important be drive our think our ability the ability very to to well. private and and penetration. want. strategy. lean breadth a And what that's that the our when with little about pleased And One real continue so see then consumables,

be and for John a General to brand customer SKU And customer limited of a to As brands, for said Dollar us better. really powerful serve to trade the is out as brand. we've for necessary really, a our a our ability retailer treats able if before, earlier, way mentioned this but

better make does to sure ability the in anybody view. that us our she gives needs. it providing that merchant than team so value retail, probably And my we're with And her the in

we her, all about to and continue consumable business So serve about to for as initiatives the think with us economic step in And cycles. excited back ability many feel really and well strategic and years our done to up to listen it, our continue you go us for wants we've she to and that we're nicely combine you go. really set positioned many, our as profitable more to customer where

Corey Tarlowe

next That's great. new for for then year. And plans thanks out the store laying

expect look stores we expect to you more a talk strong as helps should more that on that that see the think new bit from to to little you're ahead? continued we And continuing about of Could provide as standpoint bit new stores? more predictability stability ROIC ahead. to and so those some a should I color these what relates little it as we really a the returns

Jeffery Owen

continues I'll and the our when think you retailers a to innovation, estate mean this able I'll to customer strength and projects estate new powerful. And incredibly think and customer front, the I'm just needs the And some it to high-return fact at Dollar we to our and today, that challenges model our we're in about serve about about you low-risk through real highlight go. us is just to other X,XXX of real talked with when retail have very, more we're the proud estate going landscape on have the to continues model General be then model, ability XXXX. I fill stores, on around our But the deliver technology, of our of ability huge let format returns. real Corey, ever the very business. your questions go in some John where than excited start Yes, of

see fact, and very that. I'm exceed great to so opening, formas, we through been store format larger incredibly our this about new feel our pleased And really at our ability pleased has pro innovation, continue we're store at to that. performance And And the positive. very,

XX,XXX which larger about per store in know, DGX. the X,XXX about that in and X,XXX to next And thing which those. that openings additional the here large additional on you as feel So pipeline other continuing we've you year think that us our majority is excites for I is our certainly, And foot, for we we is ability as sales footprint. fair have the to share, certainly demonstrated, square the excited. capture the and deliver But great of have. opportunities, think our the we U.S. are XX,XXX future, And DG, but alone, larger format pOpshelf then higher that for

excitement very, very So stepping environment, we estate and pleased being back, to to feel probably here. with in And my grow continue very prudent like I'm the about this ability here. can team's you we're the our in performance hear real

question. for kick John I'll return your So it over to

John Garratt

with comments, seeing. we're echoing pleased -- results just And very the Yes. Jeff's we're

in about of been And And very target terms little in impact always of the XX% great based in as puts outperform the As minimal, the as we the bear of very us has schedule only important us to given he ahead just and forma -- cannibalization, sales, pro shop. of on that mind returns mentioned, we consistent, the not in the we're Again, to sales, after-tax is on ahead the sales. it's a which feel includes puts nature well. XX% again, IRR a that localized it IRRs. above which

X see continue years. less paybacks We to than

year, a on. record investment we're of overall this the with get the doing number of drive we're our comp. continues fantastic we returns and projects it gas really also which but helps a remodels remodels, we to that So be And really well, hit a continue only number not to record on pleased as

Operator

with Lasser is question Our from Michael next UBS.

Michael Lasser

I John, want of frame on get hopefully to X the some gross are reference margin. that factors impacting

to supply of mentioned the interpret used million the And that million which in can ways. $XX are beat, costs of if different you right you and that the expected, So, $XX what go of fourth quarter? above beyond a, ballpark, a in that's does you you chain lot term

that, next you market going I $XXX $XX mean part that abate so confusion. it be, incur and most the for the think from year, LIFO, of a other be LIFO to next $XXX for fourth it, will add this $XXX And the is, quarter. those what the costs away needs of X, million you're the Sorry million meaning would to so is this linear a does to million If because are so to much which or $XXX going it million we that's there's wants that goes year? if X year, million be like forth, so path inflation, know this headwind headwind piece because get year X, $XXX as million numbers X, call so of go LIFO of extraordinary just that's many benefit?

John Garratt

of No. these. tackle No. I'll Michael. Thank you, try and each

still In us. a less, terms of on We give impact the of costs. to It carryover chain a but specific didn't meaningful will number that. be impact supply the

that of, In is full of year. we that time, anticipate even of LIFO, price a a the to though anticipate way we you terms the project in we're we slowdown all price about the spread at the across way impact increases. the of -- number that think in is we The aware and number increases do don't point year

it number. like. in that that to what to And look a you of as we considerable the So QX game to anticipate but ahead next would year, gets remains looks seen, LIFO be reduction

-- anticipate that down at ahead look I look think is our stand out you in chain we size of both going to private year. this mentioned, we the And then because as of convert, And terms you to overall up which next and won't time resolved costs, we going be in don't these be favorable continue the we we will because we double that domestic. XX% onetime year, course, have considerably and costs, supply QX. costs take near-term we're we transportation market every in as to as to we're think will -- fleet, just foreign So

savings as well. So certainly that's significant a driver for us

does. look to certainly think I wait to of And that to a We number some next see go goes. for ahead be there's the we as you We'll so and the to year, have customer, and mentioned. There's mix there safe it's want tailwinds. we'll what assume where headwinds she

we that to see goes. So have where

shrink bit said, all a tail. how but We to it. over we're has a of attack we know that, it As tail to And a does have it.

a the that But So we've to of think the we not year, think all some there's of initiatives. the mention next chain you costs again, LIFO, of there's about, puts other levers as feel to and when you look supply when ahead tailwinds takes. you like talked lot and

Michael Lasser

largest that I'm follows at onetime Because in your overall be the shift the anything would will there The some follow-up factors? trend to pressure we pressure consumables My profitability be is General. because -- the lasting? is as value say take of just profitability you to and pressure some under seen going is Okay. competitive sorry. bit other a Or of Dollar or dynamics? small Or expect this these long under competitor. significant of now This a box decline of Should question to a picky. less that's cost we've convenience not sector that long-lasting permanently event? the

John Garratt

of the are as share. macro flow point we're share We're pre-pandemic feel and you well products, good do were very transitory And investing above items. improves. margin, we structurally, We we terms just certainly the which about more you appropriate. taking following staffing a the I above when about consumables will mention we're in chain, that XX we're X that applicant levels the -- well We see positioned most we QX. appropriately pressure. in despite all see transitory our XXXX of But still positioned pressures the these feel as mentioned. as feel that we We discretionary again, at yes, very as feel trend, at just LIFO, we nonconsumable still there reiterate, just transitory. and very in at look point as QX, pricing our we're you shopping down it's I'll I more wages, of We're we're transitory. basis kind but look this supply that still where see Again, When in toward people as we're market well look levels. we just points growing Yes. is look were economy and versus feel the important business. to at gross feel of terms and we pressures back a in think And

Operator

Lejuez is Our with next question from Paul Citi.

Paul Lejuez

was sales same frame question, that Curious if you impact to quarter impact Maybe the in and/or to impact on saw where the any the others? as in there differential terms If impact? could the versus the cost as there a of about. of sales expect also, well you storage capacity that, And you a in and during there be was talked how you supply chain related sales if And was region performance cost pressure that, particular of your XQ? a much inefficiencies. the region that

Jeffery Owen

temporary the is with pleased I'll delays is did profitability quarter DG, how nice we the I it's tell that the the broad-based. thing from standpoint. we a at pretty saw. But sales like normally strong delay Thanks. unexpected reiterate as storage our performance certainly, of we you, it And again, said before, Yes. facilities, impact were

earlier. excited we're very new well. storage regional excited only mentioned that States, United customer across, hubs that permanent goes also not And consistency extremely our a We're to again, but income also pleased are our serve online. temporary us think, and the now to of our levels the so swath And around going I ability that are the a that to broad facilities I X of serve

they're course, get to take allow will productive catch-up. of and some us we those look also future, to fully As And time online. things to the to

So we again, we're year-over-year I improvement in that pleased in would also mention had stock QX.

team of a she for wants did you it the nice So of some when to think overcoming I together, to where go. customer, deliver kind challenges, the us job bundle all again, of go these

translated consumables market share second increases. that strong consecutive I think into and sequential our our comp, both quarter of strong gains in non-consumables traffic and a

feel bringing And facilities, again, the up plan years into continue this great line top opened us I'll and pleased how as So that's strategic over capacity. us look our mention, just business feel that grow well next you increase by to and we ahead. pleased our serve about our where have to about forward feel XX%. months, on XX X permanent And the is factored allow capacity we something about in the and to will going finally,

Operator

last Rupesh Our with Parikh from be Oppenheimer. question will

Rupesh Parikh

terms going think just provide opportunities how to shrink to that on guys what's color way forward? any QX you back If driving So reduce for lately commentary even your or the shrink. headwind to you what you going in quantify there's of curious higher was see saw about can QX? if the you more in I

John Garratt

Yes.

believe shrink seeing environment. coupled this increased saw in we with later retail inventory to inflationary levels. in mentioned, attributable largely Overall, is know, environment, we QX. Rupesh, higher shrink largely We higher as -- is as the this you So

Now this can have a tail.

into expect over to we say did we QX. So this carry

that out think was I the listed QX. gross that the we drivers, for I bear later the it's of as list instructive in mind, in But think last on was drivers margin QX.

this anticipate times. full that drill called the many probably smallest have the done a out. we've larger larger impact a a we again, you in of of items we if QX, But So was -- it But in QX. quarter

-- as they're at record place still as of these in focus But process against with to increasing this, at execute little If and a tactics address how exception-based it. this from knows amount shrink low we EAS take we putting tail you we're like to reporting, levels, think We're good actions But technology very hold. We're and a until tame just tagging the low historical very our have were it. I look leveraging rigor the quite to the of we'll on for right perspective, team units. bit recently. have not and levels our

Rupesh Parikh

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

trade-in team So point, this QX, I what well. with is just expect you that in is Or the you're trade-in, QX into say to in still you'd a your in continue to it and see below I believe typically recession? -- know trade that would see consistent as it on you seeing, what At downturn?

Jeffery Owen

share all we're see to customers as very to growing income in Rupesh, said I across pleased that levels. we're earlier, be Yes. able

the to. our when respond customer as retain the our fact new again, that encouraging. to the expected her box pleased that's you, we to that to her tremendous think to back So and I I the core certainly during go would of And really, continue And to tell levels. relevance we things looking what our at behaving way certainly, And listen and it, that customers is were also, of are our one continue brand customer we to you about is ability introduced be of we with the higher-than-expected COVID, for.

serve about there. We as what real well you to And think sit brackets. we step the I continue I brand, Dollar doing would good about we many, to and General, here we've income to an very positioned growth seeing across been them. all feel good that. and today, the for we're real we're that back say think think feel we're I we about and if And do So many all-weather continue this seeing years,

we that to did wants And continue a really shop appeal go customer to positioned initiatives to forward a for customers. we and and that quarter. to greater so that. well-rounded to continue and move And go, swath makes continue more of a we our we're do do broad where -- this We'll us also as which on deliver the strategic will

Operator

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

Jeffery Owen

Well, General. questions interest thank X points. wanted in continued for all with I you just your and up the wrap Dollar to

day. on our headed. we unanticipated the value again issues share, for to up into have even convenience some keep future address these initiatives well value; an next positioned excited strategic had our expect of strong sets hope for we with I robust is great and we challenges believe we more taken continued runway to long near-term QX portfolio a the we've to as second, the we're move combined our about improvement proposition us be believe during environment And confident market you within and and thank couldn't chain very customers year; want while of where where we and we listening, supply through are more in a First, and third, quarter, growth. are actions you in growing especially focused I

Operator

This concludes conference. today's

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

Dollar General (DG) 1 Dec 222023 Q3 Earnings call transcript