Dollar General Corporation

Good morning. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General third quarter 2020 earnings call. Today is Thursday, December 3, 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 this 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 now begin.

Thank you, Rob, and 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 issued 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, including but not limited to our 2021 real estate outlook, are initiatives, goals, priorities, opportunities, investment, guidance, expectations, 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, and other statements that are not limited to historical fact. These statements are subject to risk and uncertainties that could cause actual results to differ materially from our expectations and projections. including, but not limited to, those identified in our earnings release issued this morning, under risk factors in our 2019 Form 10-K filed on March 19, 2020, and in our Form 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 today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. We also may reference certain financial measures that have not been derived in accordance with GAAP. Reconciliations to the most comparable GAAP measures are included in this morning's earnings release, which, as I mentioned, is posted on investor.dollargeneral.com under News and Events. 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's my pleasure to turn the call over to Todd.

Thank you, Donnie, and welcome to everyone joining our call. I'd like to start by thanking our associates for their tireless work over the past several months in helping our customers and communities impacted by the COVID-19 pandemic. Despite continued significant uncertainty in the operating environment, our team members have been unwavering in their commitment to fulfilling our mission of serving others by providing affordable, convenient, and close to home access to everyday essentials. at a time when our customers need them most. I could not be more proud of their efforts. As always, the health and safety of our employees and customer continues to be our top priority. We continue to closely monitor CDC and other governmental guidelines regarding COVID-19 and are evaluating and adapting our safety protocols as that guidance evolves. As one of America's essential retailers, we remain committed to being part of the solution during these difficult times. And we believe we are well positioned to continue supporting our customers through our unique combination of value and convenience, including our expansive network of more than 17,000 stores located within five miles of approximately 75% of the U.S. population. At the same time, we remain focused on advancing our operating priorities and strategic initiatives as we continue to meet the evolving needs of our customers and further position Dollar General for long-term sustainable growth. To that end, and from a position of strength, I'm excited to share an update on some of our more recent plans. First, as you saw in our release, we plan to further accelerate our pace of new store openings and remodels in 2021. In total, we expect to execute 2,900 real estate projects next year as we continue to lay and strengthen the foundation for future growth. As previously announced, we recently introduced our newest store concept, Pop Shelf, further building on our proven track record of store format innovation. We opened our first two locations during the quarter, and while still early, we are encouraged by their initial results. Finally, one of our core values is representing and respecting the dignity and differences of others. Building on this core value, along with our commitment to diversity and inclusion, we recently updated our fourth operating priority to better capture and express our intent. We will discuss each of these updates in more detail later in the call. But first, let's recap some of the results for the third quarter. The quarter was once again highlighted by exceptional growth on both the top and bottom lines. We're particularly pleased that for the quarter, our three non-consumable categories once again delivered a combined sales increase well in excess of our consumable business. Of note, this represents our 10th consecutive quarter of year-over-year comp sales growth in our non-consumable business. which speaks to the strong and sustained momentum in these product categories. From a multi-cadence perspective, comp sales for Q3 periods range from the low double digits to mid-teens, with the best performance in August, followed by modest moderation as we move through the quarter. Overall third quarter net sales increased 17.3% to $8.2 billion, driven by comp sales growth of 12.2%. These results include significant growth in average basket size, partially offset by a decline in customer traffic, as we believe customers continue to consolidate shopping trips in an effort to limit social contact. Once again this quarter, we increased our market share in highly consumable product sales as measured by syndicated data, driven by double-digit increases in both units and dollars. Importantly, our data suggests an increase in new customers this quarter as compared to Q3 of 2019. These new customers skew younger, higher income, and more ethnically diverse, further underscoring the broadening appeal of our value and convenience proposition. We are also encouraged by the repurchase rates of new customers and are working hard to retain them with more targeted marketing and continued execution of our key initiatives. We're particularly pleased with the and how we delivered significant operating margin expansion, which contributed to third quarter diluted EPS of $2.31, an increase of 63 percent over the prior year. Collectively, our Q3 results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to create meaningful long-term shareholder value. We operate in one of the most attractive sectors in retail, and with our unique combination of value and convenience further enhanced through our initiatives, we believe we are well positioned to successfully navigate the current environment and emerge even stronger than before. With that, I'll now turn the call over to John.