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 the Dollar General second quarter 2021 earnings call. Today is Thursday, August 26th, 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. Now I'd like to turn the conference over to your host, Mr. Donnie Lau. Vice President of Investor Relations and Corporate Strategy. Mr. Lau, you may begin your conference.

Thank you, 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, 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. These factors include, 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 to today's date. Dollar General disclaims any obligations to update or revise any information discussed in this call unless required by law. We also will reference certain non-GAAP financial measures. 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 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 second quarter results and continue to be grateful to our associates for their dedication to fulfilling our mission of serving others. Despite what remains a challenging operating environment, including additional uncertainties brought on by the Delta variant and pressures on the global supply chain, our teams continue to successfully adapt and deliver for our customers. Because of their efforts, during the quarter, we saw an improvement in customer traffic as compared to Q1, and once again, increased our market share in highly consumable product sales as measured by syndicated data. Looking ahead, we remain focused on controlling the things we can control and believe we are well positioned to navigate the current inflationary environment and global supply chain challenges. As always, the health and safety of our employees and customers is our primary focus while meeting the needs of the communities we serve. And with more than 17,500 stores, Located within five miles of about 75% of the US population, we believe we are well positioned to continue supporting our customers through our unique combination of value and convenience. To that end, we recently hired our first chief medical officer. Going forward, our plans include further expansion of our health offering with the goal of increasing access to affordable healthcare products and services, particularly in rural America. Overall, we remain focused on 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. Turning now to our second quarter performance, as we continue to lap difficult quarterly sales comparisons from the prior year, net sales decreased 0.4% to $8.7 billion, followed by a 24.4% increase in Q2 of 2020. Comp sales declined 4.7% compared to the prior year period, which translates into a robust 14.1% increase on a two year stack basis. Our Q2 sales results include a year over year decline in customer traffic, which was partially offset by the growth in average basket size. From a monthly cadence perspective, comp sales were lowest in May, with July being our strongest month of performance. And I'm pleased to report that Q3 is off to a great start. Importantly, we continue to be very pleased with the retention rates of new customers acquired in 2020, underscoring the broadened appeal of our value and convenience proposition. We believe we will ultimately exit the pandemic with a larger, broader, and more engaged customer base than when we entered it, resulting in an even stronger foundation from which to grow. Overall, our second quarter results reflect strong execution across many fronts as we continue to strengthen our position while further differentiating and distancing Dollar General from the rest of the discount retail landscape. We operate in one of the most attractive sectors in retail, and we believe our unique store footprint, further enhanced through our multi-year initiatives, provides a distinct competitive advantage and positions us well for continued success. As a mature retailer in growth mode, we are also laying the groundwork for future initiatives, which we believe will unlock significant growth opportunities as we move forward. In short, I feel very good about the underlying strength of the business, and we're confident we are pursuing the right strategies to enable balanced and sustainable growth while creating meaningful long-term shareholder value. With that, I'll now turn the call over to John.