Dollar General Corporation

Good morning. My name is Rob, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Dollar General Second Quarter 2025 Earnings Call. Today is Thursday, August 28, 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 Mr. Kevin Walker, Vice President of Investor Relations. Kevin, you may begin your conference.

Thank you, and good morning, everyone. On the call with me today are Todd Vasos, 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 financial 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 2024 form 10-k filed on march 21st 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. I want to begin by thanking our team for their great work to fulfill our mission of serving others every day in our stores, distribution centers, private fleet, and store support center. These efforts are resonating with our customers as well as driving strong operating and financial performance. To that end, we are pleased to deliver strong second quarter results highlighted by earnings growth that significantly exceeded our internal expectations. For today's call, I'll begin by recapping some of the highlights of our second quarter performance as well as sharing our latest observations on the consumer environment. 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 second quarter performance net sales increased 5.1 percent to 10.7 billion dollars in q2 compared to net sales of 10.2 billion dollars in last year's second quarter This growth was driven by strong performance from new stores and our mature store base. We grew market share in both dollars and units in highly consumable product sales once again during the quarter, in addition to growing market share in non-consumable product sales. Same-store sales increased 2.8% during the quarter, driven by relatively balanced growth of 1.5% in customer traffic and 1.2% in average basket. The basket growth was driven by an increase in both average unit retail price per item and average items per basket. We were excited to see a second consecutive quarter of broad-based category growth with positive comp sales in each of our consumables, seasonal, home, and apparel categories. From a monthly cadence perspective, We saw same store sales growth above 2% in all three periods with our strongest comps in June and July. We believe these strong and balanced top line results are a reflection of the hard work the team has done to improve execution and further enhance the value and convenience proposition for both existing and new customers. To that end, we're pleased to see growth with customers across all income brackets during the quarter. This includes our core customer who increased spending despite worsening sentiment. In addition, we continue to see trade-in growth with middle and higher income customers during the quarter, which we believe is contributing to the nice performance we've seen in our non-consumable categories. Ultimately, customers across all income brackets are coming to Dollar General as they seek value. As America's neighborhood general store in more than 20,000 locations across the country, we recognize and embrace our role in being here for what matters for our customers. This includes providing the items they want and need at prices they can afford. With that in mind, we are committed to delivering everyday low prices that are within three to four percentage points on average of mass retailers. While we are pleased that we continue to operate within the targeted price range, we are also focused on maintaining our substantial offering of more than 2,000 SKUs at or below the $1 price point. We know this price point is important in helping our core customers stretch their dollar, particularly at the end of the month and when budgets are tight. In fact, our $1 Value Valley merchandising set, which is comprised of more than 500 rotating SKUs, was one of our strongest performing areas in the quarter, with same-store sales growth more than twice the rate of the overall company. We believe this holistic approach to offering value will continue to be important for our customers, particularly in the back half of this year. Now I'd like to provide a brief update on how we're thinking about tariffs. With the rates currently in place, we believe we will be able to mitigate the vast majority of the impact on our cost of goods. The proactive approach of our sourcing team, coupled with our relatively low direct import exposure, has positioned us well to serve our customers with a quality assortment at tremendous value. While the landscape remains dynamic, tariffs have begun to result in some price increases and we will continue to work to minimize them as much as possible. Most importantly, we know this further amplifies the need for value within our communities, and we remain committed to serving our customers with the everyday low prices they have come to know and appreciate from Dollar General. Overall, we're proud of our performance during the quarter and the tremendous progress we've made throughout the first half of the year. Our actions are delivering an enhanced shopping experience for our customers and driving strong operating and financial results. We are further strengthening our value and convenient proposition for our customers while making significant progress on our long-term financial goals. Before I turn the call over for our financial update, I want to thank Kelly for her partnership, as well as her leadership of our financial organization over the last few years. We wish her the very best as she prepares and begins her new chapter. I also want to note that we're excited to welcome Donnie Lau back to Dollar General as our next CFO beginning in October. He is highly regarded throughout the organization for his deep understanding of the business, thoughtful strategic leadership, and appreciation for our culture and values. We look forward to his leadership of our financial organization as we seek to drive excellence and create long-term shareholder value. With that, I'd now like to turn the call over to Kelly.