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 First Quarter 2025 Earnings Call. Today is Tuesday, June 3, 2025. All lines have been placed on mute to prevent 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. Kevin Walker, Vice President, Investor Relations. Kevin, you may 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. The 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 2024 form 10 K filed on March 21 2025. 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 the call up 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're pleased with our start of the year, including strong results that exceeded our expectations on both the top and bottom lines. We believe our efforts are resonating with a wide range of customers as they continue to seek value in our more than 20,000 store locations around the country. Our results are a product of the dedication of this team to serving our customers and communities every day. I want to thank each of them for their great work they continue to do in our stores distribution centers private fleet and store support Center to fulfill our mission of serving others. For today's call i'll begin by recapping some of the highlights of our key one performance, as well as sharing some of our updated consumer observations and our current approach to tariffs. After that Kelly will share the details of our financial performance. as well as our updated financial outlook for fiscal 2025. I will then wrap up the call with an update on some of our key growth-driving initiatives. Turning to our first quarter performance, net sales increased 5.3% to $10.4 billion in Q1, compared to net sales of $9.9 billion in last year's first quarter. Contributing to this strong top-line growth We opened 156 new stores during the quarter as we continue to expand the number of communities we serve. We also continue to grow market share in both dollars and units in highly consumable product sales during the quarter. In addition to growing market share in non consumable product sales. Same store sales increased 2.4% during the quarter, driven by growth of 2.7% in average basket, including relatively similar increases in average unit retail price per item and average items per basket. Customer traffic slightly decreased by 0.3% during the quarter, but remains strong on a two-year stack basis as we lapped the 4.3% traffic increase from the prior year's first quarter. We are excited to see broad-based category growth during the quarter with positive comp sales in each of our consumables, seasonal, home, and apparel categories. with both our seasonal and home categories comping at or above 3% during the quarter. We were especially pleased to see our non-consumable product categories resonate with our customers for the Easter and early spring seasons. From a monthly cadence perspective, all three periods were positive, led by April, which benefited from the later Easter compared to the prior year. We believe these top line results are a testament to our improved execution as well as the customers across multiple income bands seeking value. To that end, we continue to feel good about our everyday low price position relative to other competitors and classes of trade. As a reminder, our goal is to be priced within three to four percentage points of mass on average, and we end at Q1 within our targeted range. In addition, we continue to carry at least 2,000 SKUs at or below the increasingly rare $1 price point as we seek to help our customers stretch their dollars. We believe this value offering will become increasingly more important to customers in the months ahead. During our recent customer survey work, 25% of DG customers reported having less income than they did a year ago And nearly 60% of our core customers noted that they felt the need to sacrifice on necessities in the coming year. While our core customer remains financially constrained, we have seen increased trade in activity from both middle and higher income customers. Our data shows that new customers this year are making more trips and spending more with us compared to new customers from last year, while also allocating more of their spend to discretionary categories. We believe these behaviors suggest we are continuing to attract higher income customers who are looking to maximize value while still shopping for items they want and need. To that end, in Q1, we saw the highest percent of trading customers we've had in the last four years. We are pleased to see this growth with a wide range of customers and are excited about our ongoing opportunity to grow share with them. Before I turn the call over to Kelly, I want to provide an update on how we are thinking about the impact of the evolving tariff environment on our business. Our direct imports remain a relatively small percentage of our overall purchases. with most years in the mid to high single-digit range. While our indirect import amount varies, in recent years we estimated amount to be approximately twice that of our direct imports. We have continued to diversify the countries of origin as part of our direct foreign sourcing strategies in recent years. Importantly, we have successfully reduced our China exposure to less than 70% of our direct imports. and we estimate less than 40% of our indirect imports are sourced from China. While we have relatively low exposure, we are working diligently to mitigate the impact of current tariffs on our business as much as possible, using many of the same tactics that we used successfully in 2018 and 2019. These actions include working with our vendor partners to reduce cost on a variety of ways, including negotiating cost concessions, shifting manufacturing to other countries where possible, reengineering products, or finding substitute products. While the tariff landscape remains dynamic and uncertain, we expect tariffs to result in some price increases as a last resort, though we intend to work to minimize them as much as possible. In turn, we believe our customers will continue to seek opportunities to save money, and we remain committed to serving them with the everyday low prices they have come to know and appreciate from Dollar General. Overall, we are proud of our Q1 performance and the tremendous progress we continue to make in the business, including lower year-to-date turnover at all levels within our retail operations, An improved overall supply chain on time and in full rate higher in stock levels and lower inventory levels, all of which has contributed to an improved in store experience for our customers and our associates. Our efforts are you yielding positive results and we believe we are well positioned to succeed in a wide range of economic environments. as we continue enhancing our value and convenience proposition for our customers with a focus on working toward our long-term financial goals and creating long-term shareholder value. With that, I'll now turn the call over to Kelly.