DOLLAR GENERAL CORP Q1 FY2025 earnings call

• Q1 performance: Net sales up 5.3%, same-store sales up 2.4%, 156 new stores opened. Broad-based category growth with positive comp sales in consumables. - Consumer observations: 25% of DG customers had less income than a year ago, nearly 60% core customers felt need to sacrifice necessities, but trade-in activity from middle/higher-income customers increased. - Tariff impact: Direct imports are a small percentage, China exposure reduced, working to mitigate tariff impacts. - Financials: Gross margin up due to lower shrink, SG&A increased, operating profit up, EPS up. - Growth initiatives: Real estate projects including new store openings, Project Renovate and Elevate remodels, digital initiatives with DoorDash partnership and DG Media Network, non-consumable growth strategy with brand partnerships and treasure hunt experience.

Net sales increased 5.3% to $10.4 billion in Q1 compared to $9.9 billion in the prior year's first quarter. Same-store sales grew 2.4%, driven by a 2.7% increase in average basket. Gross profit as a percentage of sales was 31%, an increase of 78 basis points, primarily due to lower shrink and higher inventory markups. SG&A was 25.4% of sales, an increase of 77 basis points. Operating profit increased 5.5% to $576 million. EPS for the quarter was $1.78, up 7.9%. Merchandise inventories decreased by $344 million or 5% compared to the prior year.

• Net sales growth expected to be approximately 3.7% to 4.7% for 2025. - Same-store sales growth expected to be approximately 1.5% to 2.5% for 2025. - EPS expected in the range of $5.20 to $5.80 for 2025. - Capital spending in the range of $1.3 billion to $1.4 billion, including 575 new store openings in the US, up to 15 in Mexico, etc. - SG&A in Q2 pressured by higher incentive compensation expense.

• Tariff landscape remains dynamic and uncertain, potentially leading to price increases. - Macro-economic factors could impact consumer spending, affecting top line. - Competitive landscape could pose challenges to market share and pricing.

Q: Congrats on the quarter, sense of confidence in sustaining comp momentum and what was surprising on top line?

A: Confidence from Back to Basics work, store standards, service, reduced turnover, shrink progress, supply chain on-time and in-full, SKU reduction, discretionary comp.

Q: Thoughts on traffic progression, markdowns?

A: Traffic turned positive in May, trade-in continuing, Project Elevate and Renovate driving comp in mature stores, markdowns due to promotional activity but offset by shrink improvement.

Q: Extent of tweaking marketing for trade-in, pack size architecture?

A: DoorDash and delivery attracting new customers, media network reaching diverse customers, continue to focus on smaller pack sizes as customer needs them.

Q: Damages, progress?

A: Damages relatively in line, slight improvement, expected flat to slightly favorable for full year, work ongoing on inventory management, remodels to mitigate damages.

Q: Q2 comps, clearance activity?

A: Q2 comps solid, clearance activity tame, balanced between consumables and non-consumables.

Q: Competition, new communities?

A: Competitive landscape normal, well positioned on price, new communities in heartland with more white space, reducing cannibalization from existing stores