Dollar General Corporation - library.corporate-ir.netlibrary.corporate-ir.net/library/11/112/112150/items/145613/Dollar... · Dollar General Corporation Serving Others SunTrust Robinson

Dollar General Corporation

Serving Others

SunTrust Robinson Humphrey 34th Annual Institutional Conference

April 11, 2005

Forward-Looking Information and Non-GAAP Disclosures

Certain comments made during this presentation may contain forward-looking information. The words “believe,”“anticipate,” “project,” “plan,” “expect,” “estimate,” “scheduled,” “objective,” “forecast,” “goal,” “intend,” “will likely result,” or “will continue,” and similar expressions, generally identify forward-looking statements.

The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected by, or implied in, the forward-looking statements. A number of factors may result in actual results differing from such forward-looking information, including but not limited to those described in our Annual Report on Form 10-K.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date. The Company disclaims any obligation to publicly update or revise any forward-looking statements made today to reflect events or circumstances occurring after today’s date or to reflect the occurrence of unanticipated events.

We may discuss certain financial information not derived in accordance with GAAP, such as 2003 net income and diluted earnings per share, excluding the impact of a $10 million non-deductible penalty payable to the Securities and Exchange Commission recorded in the fourth quarter of fiscal 2003 . This information should not be considered a substitute for any measure derived in accordance with GAAP. The slides used here today, and reproduced on our website at www.dollargeneral.com, show the reconciliations of this information to the most comparable GAAP measures. Management believes these non-GAAP calculations more clearly reflect the year over year comparisons.

Year EndedJanuary 30,

2004

Net Income and Earnings Per ShareNet income in accordance with GAAP 299,002$

Non-deductible penalty 10,000 Net income, excluding non-deductible penalty 309,002$

Weighted average diluted shares outstanding 337,636 Diluted earnings per share, excluding

non-deductible penalty 0.92$

Operating Profit MarginOperating profit in accordance with GAAP 508,026$

Non-deductible penalty 10,000 Operating profit, excluding non-deductible penalty 518,026$

Operating profit, excluding non-deductible penalty, % to sales 7.5%

DOLLAR GENERAL CORPORATION AND SUBSIDIARIESReconciliation of Non-GAAP Disclosures(In thousands, except per share amounts)

FY 2004 – Sales

• Sales increased 11.5 % to $7.7 billion in FY 2004 versus $6.9 billion in FY 2003• Same store sales increased 3.2%

• Sales by category• Highly consumables, +14.7%• Seasonal, +9.3%• Basic clothing, + 6.8%• Home products, + 2.2%

FY 2004 –Gross Profit

• Gross profit of 29.5% in FY 2004 was up from 29.4% in FY 2003(+) Higher purchase markup

(-) Pressures from higher consumables sales mix

(-) Higher fuel costs

FY 2004 – S,G, & A

• FY 2004 SG&A was $1.7 billion, or 22.3% of sales versus $1.5 billion, or 21.8% of sales in FY 2003

(-) Store occupancy costs (rental and utilities expense)

(-) Debit card fees (-) Professional fees for EZstore and SOX(-) Costs of taking physical inventories

FY 2004 Interest Expense

• Interest expense was $28.8 million in FY 2004 versus $35.6 million in FY 2003– Interest capitalized on construction

– Amended revolving credit facility in June 2004, reducing debt cost amortization

FY 2004 Income Taxes

• FY 2004 income tax rate was 35.6% versus 37.3%in FY 2003– FY 2004 impacted by favorable state tax

adjustments primarily in Q2 2004

– FY 2003 impacted by $10 million non-deductible penalty

FY 2004 – Net Income & EPS

• Net Income increased 15% to $344.2 million; excluding the penalty in 2003, net income increased 11% (from $310.5 million)

• EPS increased 17% to $1.04 in FY 2004 from $0.89 in FY 2003; excluding the penalty in FY 2003, EPS increased 13% (from $0.92).

• Repurchased 11 million shares of DG common stock for $209.3 million.

2004 Accomplishments-Store openings

• Opened 722 new stores, resulting in 10% square footage growth

2004 Accomplishments - Coolers

• Coolers in 94% of all stores at January 28, 2005

• Accepted EBT in 86% of all stores

2004 Accomplishments – In-stock

• In-stock levels in mid-90% range

• Auto-replenishment in 100% of stores by end of Q1 2004

• EZstore in 350 stores at January 28, 2005

2004 Accomplishments – Distribution

• Completed South Boston, VA expansion

• Substantially completed Ardmore, OK expansion

• Substantially completed new DC in Jonesville, SC

2004 Accomplishments – People

• 60% of store managers have successfully completed training.

• 52% of new district managers were internal promotions.

• Store manager and district manager turnover improved.

Catering to the Low-Income Customer

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%9.5%

10.0%

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05%

Une

mpl

oym

ent

No H.S. Diploma

All workers

Bachelor’s Degree

U.S. Unemployment January 2000-January 2005

Source: US Bureau of Labor Statistics

Retail Gasoline Prices (2002-2005)

$1.00$1.10$1.20$1.30$1.40$1.50$1.60$1.70$1.80$1.90$2.00$2.10$2.20$2.30

2/1/

023/

1/02

4/1/

025/

1/02

6/1/

027/

1/02

8/1/

029/

1/02

10/1

/02

11/1

/02

12/1

/02

1/1/

032/

1/03

3/1/

034/

1/03

5/1/

036/

1/03

7/1/

038/

1/03

9/1/

0310

/1/0

311

/1/0

312

/1/0

31/

1/04

2/1/

043/

1/04

4/1/

045/

1/04

6/1/

047/

1/04

8/1/

049/

1/04

10/1

/04

11/1

/04

12/1

/04

1/1/

052/

1/05

3/1/

054/

1/05

Residential Heating Oil Prices (2002-2005)

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

10/1

10/810/1510/2210/29

11/511/1211/1911/26

12/312/1012/1712/2412/31 1/7

1/14

1/21

1/28 2/4

2/11

2/18

2/25 3/4

3/11

2002/03 2003/04 2004/05Residential heating oil prices are

reported for October-March only.

2005 Initiatives – Store Growth

• New store growth– 730 new stores, including at least 30 Dollar

General Markets

Reinventing the Dollar Store

One-Stop Dollar Store

2005 Initiatives – Supply chain

• Supply chain expansion

– Complete Ardmore, OK distribution center expansion

– Complete new Jonesville, SC distribution center

– Select site and begin construction of 9th

distribution center

2005 Initiatives - EZstore

• Top priority – EZstore • EZstore operations improvement project

– $100 million investment over 2 years– Rollout to half of stores by end of the fiscal year

• EZstore impacts – Hiring and training– Labor scheduling– Product presentation– Store paperwork– Product handling

2005 Initiatives- Inventory Management

• Total inventories at FY 2004 year end were up 19%.– Partially driven by initiatives:

• Automatic replenishment,• Perishables food program,• Addition of branded apparel items,

magazines,Hispanic foods– Early receipts of Easter seasonal and spring apparel.

• In 2005, DG will focus on lowering per store inventories.

Creating Opportunities for Convenience

Questions