Dollar General Corporation

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 First Quarter 2020 Earnings Conference Call. Today is Thursday, May 28, 2020. All lines have been placed on mute to prevent any background noise. This call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning. Now I'd like to turn the conference over to Mr. Donnie Lau, Vice President of Investor Relations and Corporate Strategy. Mr. Lau, you may begin.

Thank you, Robert. Good morning, everyone. On the call with me today are Todd Bezos, our CEO, Jeff Owen, our COO, and John Garrett, our CFO. Our earnings release issue today can be found on our website at investor.dollargeneral.com under News and Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our strategy, plans, initiatives, goals, financial guidance, or beliefs about future matters, including but not limited to beliefs about COVID-19's future impact on the economy, our business, and our customer. Forward-looking statements can be identified because they are not limited to statements of historical fact. or use words such as may, will, should, could, would, can, believe, anticipate, expect, assume, intend, outlook, estimate, guidance, plan, opportunity, long-term, look to, committed to, continue, ahead, seek, likely, potential, or go, and similar expressions. THESE STATEMENTS ARE SUBJECT TO RISK AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR EXPECTATIONS AND PROJECTIONS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THOSE IDENTIFIED IN OUR EARNINGS RELEASE ISSUED THIS MORNING, UNDER RISK FACTORS IN OUR 2019 FORUM 10-K FILED ON MARCH 19, 2020, OUR FORUM 10-Q FILED THIS MORNING, AND IN THE COMMENTS THAT ARE MADE ON THIS CALL. YOU SHOULD NOT UNDULY RELY ON FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY AS OF TODAY'S CALL. DOLLAR GENERAL DISCLAIMS ANY OBLIGATION to update or revise any information discussed in this call unless required by law. At the end of our prepared remarks, we will open the call up for your questions. Please limit your questions to one and one follow-up question if necessary. Now, it is my pleasure to turn the call over to Todd.

Thank you, Donnie, and welcome to everyone joining our call. These are certainly unprecedented times for us all, and our hearts go out to the communities and individuals affected by the COVID-19 crisis. On behalf of the Dollar General, I want to express our deepest gratitude to those serving on the front lines and especially to our teammates for their dedicated and efforts in fulfilling our mission of serving others by providing affordable, convenient, and close to home access to essential items at a time when our customers need them most. I'm inspired by the phenomenal work our associates are doing. and could not be more proud of how they've responded to the needs of our communities. In recognition of the essential work performed by our employees, in April, the New York Stock Exchange recognized one of our store managers, Crystal Burrows, during the Gratitude Campaign, where the exchange joined millions of others in honoring the way people on the front lines have responded to the COVID-19 crisis. As one of America's essential retailers, we are committed to being part of the solution during these difficult times and are continuing to support these efforts through our expansive network of more than 16,000 store locations currently located within five miles of more than 75% of the U.S. population. Our convenient small box format providing for quick in and out access and limited crowds, both of which are conducive to social distancing. our broad assortment of everyday household essential items, our ongoing commitment to everyday low prices, our flexible supply chain, our growing digital capabilities, and recent measures taken to further safeguard the well-being of both our team members and customers, and, of course, our talented and committed associates. For more than 80 years, Dollar General has served customers through a unique combination of value and convenience. and we will continue to be there for them in both good and challenging times. Let me now highlight some of the key actions we've taken in response to COVID-19 with two key priorities in mind. First is the health and safety of our employees, customers, and communities we serve. Second is maintaining the continuity of our business and operations. For our employees and customers, we took swift and proactive action to keep them safe while keeping stores open and running with minimal disruption. We closed an hour early to allow greater time for stocking and enhanced cleaning protocols, distributed masks and gloves to all employees, implemented social distancing measures in our stores, distribution centers, and at the store support center, and completed the installation of nearly 40,000 plexiglass barriers at checkout across the entire chain. To further support, Heightened demand, we have hired over 50,000 people since mid-March, nearly double our normal hiring rate. We are happy to welcome these new employees to our team, and our hiring efforts are continuing. We also invested approximately $60 million in employee appreciation bonuses and provided enhanced benefits and resources, including expanded paid leave and greater access to telehealth services. and we contributed to our Employee Assistance Foundation to assist our coworkers during times of need. All these actions have helped ensure the continuity of our business at a time when customers need us most. To support our communities, we dedicated the first hour of each day to seniors and provided a discount for first responders, medical personnel, and National Guard members. and through the Dollar General Literacy Foundation, Save the Children, an organization working to ensure children in rural America continue to learn and have access to nutritious food during nationwide school closures, will receive a $2 million donation. Beyond these actions, we remain focused on advancing our operating priorities and strategic initiatives as we look to further meet the evolving needs of our customers. and better positioned Dollar General to emerge from this crisis even stronger than before. Turning now to our first quarter performance. The quarter was highlighted by extraordinary growth in both top and bottom lines. These results reflect significant changes in shopping patterns, which began in March as consumers reacted to the COVID-19 pandemic. For the month of February, same-store sales increased 5.5%. driven by broad-based performance across many fronts, which we believe speaks to the continued strength and sustained momentum of the underlying business. Beginning in March, we experienced a significant surge in demand and sales as consumers began to stock up, and category mix shifted even more than usual to our consumable category. For the month in total, comp sales increased 34.5%. April sales moderated in comparison to March, but remained elevated as consumers continue to replenish household essentials at a rate greater than normal. During April, we also experienced significant growth in our non-consumable businesses, and our three non-consumable categories delivered a combined comp sales increase in excess of our consumable business. For the month in total, same-store sales increased 21.5%. Overall, first quarter, Net sales increased 27.6% to $8.4 billion, driven by comp sales growth of 21.7%, including significant growth in average basket size and a meaningful increase in customer traffic. Once again this quarter, we increased our market share in highly consumable product sales as measured by syndicated data. Importantly, our data suggests a meaningful increase in new customers, underscoring the broadening appeal of our value and convenience proposition. We're particularly pleased that we delivered a significant operating margin expansion this quarter, which contributed to diluted EPS of $2.56, an increase of 73% over prior year. Collectively, these results reflect our commitment to doing everything we can to support our employees customers and communities during this time and further validates our belief that we are pursuing the right strategies to create meaningful long-term shareholder value. We continue to believe we operate in one of the most attractive sectors in retail and have an established and even stronger bond with existing customers during these unprecedented times. Combined with the actions we've taken to forge new customer relationships, we believe we are well positioned to drive continued growth, even in what's expected to be a challenging economic environment. With that, I'll now turn the call over to John.