Dollar General Corporation

Good morning. My name is Robert, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General fourth quarter 2024 earnings call. Today is Thursday, March 13th, 2025. 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. Kevin Walker, Vice President of Investor Relations. Kevin, you may now begin your conference.

Thank you, and good morning, everyone. On the call with me today are Todd Bezos, our CEO, and Kelly Diltz, 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 financial guidance, long-term growth framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations, or beliefs about future matters, and other statements that are not limited to historical fact. These statements are subject to risks 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 2023 form 10-K filed on March 25, 2024, and any later filed periodic report 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. At the end of our prepared remarks, we will open up the call for your questions. To allow us to address as many questions as possible in the queue, please limit yourself to one question. Now, it is my pleasure to turn the call over to Todd.

Thank you, Kevin, and welcome to everyone joining our call. We are pleased with our performance in the fourth quarter, including solid execution and top line results. As we reflect on the quarter, as well as the full year, it is clear that our back to basics work has yielded positive results. positioning us well as we enter 2025 and look to the future. I want to thank our associates for their ongoing commitment to serving our customers and communities. Their dedication is on display every day in thousands of Dollar General stores and in our distribution centers, private fleet, and store support center as we all work together to fulfill our mission of serving others. On today's call, I will begin by recapping some of the highlights of our Q4 performance, as well as discussing the portfolio optimization actions we recently undertook for both Dollar General and PopShelf. After that, Kelly will share details of our financial performance, as well as our financial guidance for 2025, and we'll conclude with thoughts on our long-term financial framework. And then I will wrap up the call with an update on some of our key initiatives that we believe will be important drivers of our performance in 2025 and beyond. Turning now to the fourth quarter performance, net sales increased 4.5% to $10.3 billion in Q4, compared to net sales of $9.9 billion in last year's fourth quarter. With this solid finish to 2024, I am excited to note that for the first time in the company's history, we delivered fiscal year sales of more than $40 billion. This is a testament to the essential role Dollar General serves as America's neighborhood general store in more than 20,000 communities across the country. We are here for what matters for the customers every day. and the relevance of our value and convenience offering is clear. During the fourth quarter, we continued to grow market share in both dollars and units in highly consumable product sales and also grew market share in non-consumable product sales. Same-store sales increased 1.2% during the quarter and was driven entirely by growth of 2.3%, in average transaction amount. This included relatively even contributions from increases in average unit retail price per item and average items per transaction. This growth was partially offset by decline of 1.1% in customer traffic during the quarter, which was impacted by ongoing financial pressures of our core consumer, as well as lapping the strong traffic increase of 3.7% from Q4 of 2023. The comp sales increase was driven entirely by growth in our consumable category and was partially offset by declines in our seasonal home and apparel categories. From a monthly cadence perspective, all three periods were positive, with comp sales growth in December and January relatively even and both outpacing November. Our customers continue to report that their financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation. Many of our customers report that only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities. As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer. In turn, we know our customers expect value and convenience more than ever. We are committed to providing the value they need and continue to feel very good about our everyday low price position relative to competitors and other classes of trade. With regards to current tariffs that have been announced on products that we sell, we believe we are well positioned to mitigate the impact in 2025. We were able to successfully mitigate the tariff impact in 2018 and 2019, though we did take retail price increases in some instances, along with others across the industry. Given the already stressed financial condition of our core customer, we are closely monitoring these and any other potential economic headwinds, including any changes to government entitlement programs. Importantly, we remain focused on doing everything we can to deliver the value our customers want and need. Before I turn the call over to Kelly, I want to share an update on our work to continue to strengthen our foundation for future growth. As we look to build on the success of our back to basics work, we have undertaken a thorough review of our business to identify opportunities to further strengthen our foundation. With this in mind, we conducted a real estate portfolio optimization review of both our Dollar General and Pop Shelf banners during the fourth quarter. As a result of the review of our Dollar General portfolio, we made the decision to close 96 stores. While this is less than 1% of our overall store base, those stores, many of which are in urban locations, have become increasingly challenging to successfully operate. These stores likely would have been closed in ordinary course of the store's lifecycle when their leases expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward. I also want to discuss the results of our pop shelf portfolio review. After analyzing business performance and revised outlooks for our current portfolio pop shelf locations, we identified 51 store closure candidates based on financial and operational considerations from our test and learn phase. We plan to convert six of these 51 locations to Dollar General stores and close the remaining 45 stores. This will leave 180 stores remaining as part of the pop shelf banner. As a result of these actions, as well as impairment charges primarily associated with PopShelf go-forward stores, our Q4 financial results include a negative impact to operating profit of $232 million or approximately 81 cents in EPS. As we enter 2025, we are optimistic about the PopShelf banner and our opportunity to drive improvements in our sales results. as customers' feedback on the brand and shopping experience continue to be strong. Going forward, we plan to build on the strength to increase sales through a variety of initiatives centered around new brand partnerships and enhanced in-store experience, new and expanded categories, and a new loyalty and digital experience. As an example of these efforts, we recently implemented a new store layout with a heightened focus on toys, party, candy, and the beauty categories. While still early, we have been pleased with the results as we have seen a nice double-digit sales lift across a broad array of our pop shelf stores. In addition to the opportunity to increase sales and ultimately realize further growth in the pop shelf banner, we are also able to leverage learnings from this banner and apply them in our non consumable categories in our dollar general stores to further strengthen that offering for our DG customers. We are looking forward to the opportunity to improve pop shelf results in 2025, and we will continue to evaluate the brand to ensure we are seeing the desired impact of these activities and optimization. In summary, while we never like to close stores before their lease expiration, we believe this portfolio review across both our DG and pop shelf banners has further strengthened the foundation of this business as we position the company for the future. Finally, I want to take a moment to congratulate both Steve Deckert and Tracy Herman on their new leadership roles within the organization. Steve has been a valued strategic leader at Dollar General for many years, and I'm confident he will serve the company well in his new role focused on expansion of the Dollar General footprint, process improvement, and leadership of our corporate strategy. and Tracy's deep experience and connection with our field teams, along with her commitment to operational excellence, execution, and innovation, make her the ideal leader for our store operations team, as we focus on delivering the best in-store experience for our customers and associates. Overall, we are proud of the continued progress we're making and are pleased with how it has positioned us to drive profitable sales growth and capture growth opportunities while creating long-term shareholder value. I will discuss more about our plans and initiatives to drive these results in a few moments. But first, let me turn the call over to Kelly to discuss our Q4 financial results, as well as our 2025 financial guidance and long-term financial goals.