Dollar General Corporation

Good morning. My name is Melissa and I will be your conference operator today. At this time I would like to welcome everyone to the Dollar General First Quarter 2021 earnings call. Today is Thursday, May 27, 2021. 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. I'd now like to turn the conference over to Mr. Donnie Lau, Vice President of Invest Relations and Corporate Strategy. Mr. Lau, please begin.

Thank you and good morning everyone. On the call with me today are Todd Vesos, our CEO, Jeff Owen, our COO, and John Garrett, our CFO. Our earnings release issued today can be found on our website at .dollargeneral.com under news and events. Let me caution you that today's comments include forward-looking statements that define the Private Securities Litigation Reform Act of 1995, such as statements about our strategy, plans, initiatives, goals, priorities, opportunities, investments, guidance, expectations, or beliefs about future matters, 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 are not limited to those identified in our earnings release issued this morning, under risk factors in our 2020 Form 10-K filed on March 19, 2021, 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 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. Reconciliation to the most comparable GAAP measures are included in this morning's earnings release, which, as I mentioned, is posted on .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 is my pleasure to turn the call over to Todd.

Thank you, Donnie, and welcome to everyone joining our call. We are pleased with our strong start to fiscal 2021, and I want to thank our associates for their unwavering commitment to supporting our customers, communities, and each other. As a testament to their efforts, our first quarter results exceeded our expectations, reflecting strong underlying performance across the business, which we believe was enhanced by the most recent round of government stimulus payments. The quarter was highlighted by net sales growth of 16 percent in our combined non-consumable categories, a 208 basis point increase in gross margin rate, and double-digit growth in diluted EPS. Despite what continues to be a challenging operating environment, we are increasing our sales and diluted EPS guidance for fiscal 2021 to reflect our strong first quarter performance. John will provide additional details on our outlook during his remarks. As always, the health and safety of our employees and customers continue to be a top priority while meeting the critical needs of the communities we serve. And we believe we are uniquely positioned to continue supporting our customers through our unique combination of value and convenience, including our network of more than 17,000 stores, located within five miles of approximately 75 percent of the U.S. population. Overall, we are executing well against 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. Now let's recap some of the top-line results for the first quarter. As we lapped our most difficult quarterly comp sales comparison of the year, net sales decreased 0.6 percent to $8.4 billion, driven by a comp sales decline of 4.6 percent. Notably, comp sales on a two-year stack basis increased a robust 17.1 percent, which compares to the 15.9 percent two-year stack we delivered last quarter. Our first quarter sales results include a decline in customer traffic, which was partially offset by growth in average basket size. And while customers continue to consolidate trips on average, they continue to spend more with us compared to last year. From a monthly cadence perspective, comp sales increased 5.7 percent in February, despite a headwind from the inclement weather across the country. For the month of March, which represents our most difficult monthly sales comparison of the year, comp sales declined 11.2 percent. Importantly, beginning in mid-March and in line with the timing of stimulus payments, we saw a meaningful acceleration in sales relative to the first two weeks of the month, especially in our non-consumable categories. Comp sales declined 4.3 percent in April, and while -over-year growth in non-consumable sales moderated in comparison to March, they were positive overall, despite a more challenging lap. Overall, each of our three non-consumable categories delivered a comp sales increase for the quarter. Of note, comp sales growth of 11.3 percent in our combined non-consumable categories and 29.8 percent on a comparable two-year stack basis significantly exceeded our expectation and speaks to the continued strength and sustained momentum in these product categories, enhanced by the benefit from the increased share in highly consumable product sales as measured by syndicated data. Importantly, we continue to be encouraged by the retention rates of new customers acquired over the past several quarters and are working hard to drive even higher levels of engagement with more personalized marketing and continued execution of our key initiatives. In addition, we recently published our third annual Serving Others report, which provides context related to our ongoing ESG efforts as well as new and updated performance metrics, and we look forward to continued progress on our journey as we move ahead. Collectively, our first quarter results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to enable sustainable growth while creating meaningful long-term shareholder value. We operate in one of the most attractive sectors in retail and believe we are well positioned to continue advancing our goal of further differentiating and distancing Dollar General from the rest of the discount retail landscape. As a mature retailer in growth mode, we are also laying the groundwork for future initiatives, which we believe will unlock even more growth opportunities as we move forward. In short, I feel very good about the underlying business and we are excited about the opportunities that lie ahead. With that, I'll now turn the call over to John.