Dollar General 2003 Annual Report Download - page 12

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Accounting Periods. The following text contains references to years 2004, 2003, 2002, and 2001, which represent fiscal years end-
ing or ended January 28, 2005, January 30, 2004, January 31, 2003, and February 1, 2002, respectively, each of which will be or was
a 52-week accounting period. This discussion and analysis should be read with, and is qualified in its entirety by, the Consolidated
Financial Statements and the notes thereto.
Executive Overview. In 2003, the Company hired a new Chief Executive Officer, a new President and Chief Operating Officer and
a new Executive Vice President of Store Operations. During the year, the Company focused on the following seven operating ini-
tiatives:
•The opening of 673 new stores;
•The continued implementation of the "seven habits" store retailing program which was designed to improve
store level execution of certain key processes. This program was recently redefined as a result of the change in senior
management in the store operations area;
•The addition of coolers (which allow the Company’s stores to carry perishable products) in 1,078 stores,
bringing the total number of stores with coolers to 2,445 at January 30, 2004;
•The rollout of automatic inventory replenishment to 2,473 stores, bringing the total number of stores on
automatic replenishment to 2,648 at January 30, 2004;
•Testing the acceptance of debit cards in five states, credit cards in four states and electronic benefit transfers ("EBT") in
four states;
•A multi-faceted program focused on shrink which included the development and implementation of a comprehensive
shrink reduction action plan; and
•The selection of a location for its eighth distribution center and the resulting announcement of plans to build that facility
in Union County, South Carolina.
In 2004, the Company will focus its efforts on accomplishing the following operating initiatives:
•Opening 675 new Dollar General stores and 20 new Dollar General Market stores;
•Expanding stores into three additional states: Arizona, New Mexico, and Wisconsin;
•Expanding its distribution centers in Ardmore, Oklahoma and South Boston, Virginia and beginning construction of the
new distribution center in South Carolina;
•Implementing a merchandising data warehouse;
•Maintaining an acceptable in-stock level on all core items as well as for its 100 fastest moving items;
•A store work-flow project being undertaken with the assistance of McKinsey and Company;
•A continued focus on shrink reduction efforts, particularly at "high shrink" stores;
•The addition of coolers in approximately 2,850 existing stores and the installation of coolers in virtually all new stores;
•Improving the merchandising productivity of its stores that have more than 8,000 square feet of selling space;
•The potential expansion of its debit and credit card and EBT test;
•Increasing its emphasis on opportunistic inventory purchases; and
•The stabilization, or reduction of, its retail management turnover rate.
The Company can provide no assurance that it will be successful in executing these initiatives nor can the Company guarantee that
the successful implementation of these initiatives will result in superior financial performance.
In addition to undertaking the operating initiatives described above, the Company also intends to monitor and/or analyze the sta-
tus of certain other issues. Those issues are likely to include:
•The status of the Company’s rating agency debt ratings;
•The analysis of the appropriate level of share repurchases for 2004 (in 2003 the Company spent $29.7 million
repurchasing approximately 1.5 million shares, and may consider increasing its share repurchases in 2004);
•The impact on the Company, if any, from recent legislation affecting the number of hours that truck drivers can operate
their trucks;
•The progress of the wage and hour collective action litigation in the state of Alabama discussed more fully in Note 7 to the
Consolidated Financial Statements;
M D & A
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