Dollar General 2005 Annual Report Download - page 5

For Dollar General, 2005
proved to be a year of significant
accomplishments in positioning
the Company to meet its long-term
objectives. While it was a difficult
year for the Company in some
respects, we remain on target with
regard to our strategic plan.
In 2005, we saw the organiza-
tion grow and become stronger
and more competitive. We added
management expertise, drawing
both from inside and outside the
Company. We experienced the ini-
tial successes of our EZstore efforts
and Project Gold Standard and
learned how to make these projects
even more effective. In March
2006, we celebrated the opening
of our 8,000th store, strengthening
our claim as the leader in our sector
and the operator of more stores
than any other retailer in the US.
Some of our other accomplish-
ments for the year (a 53-week
fiscal year) include:
•We added $921 million of new
revenue, growing net sales by 12
percent to $8.6 billion, while same-
store sales increased 2.0 percent.
•We produced $350 million of net
income,or 4.1 percent of net
sales. Earnings per share were
$1.08, up 3.8 percent over 2004.
•We generated $251 million in
free cash flow.* We increased
our per share dividend by over
nine percent and paid cash
dividends to shareholders of
$56 million, or 17.5 cents per
share. We repurchased approxi-
mately 15 million shares of our
outstanding common stock.
•Standard and Poor’s raised the
Company’s credit rating to
investment grade.
•We opened 734 new stores,
including 29 new Dollar General
Markets.By fiscal year-end, we
operated 7,929 stores in 31
states,including 44 Dollar
General Markets.
•We opened our eighth distribu-
tion center in South Carolina in
June 2005 and began construc-
tion on our ninth distribution
center in Marion, Indiana.
•By fiscal year-end, 3,825 stores
were operating as EZstores, using
our newly engineered processes to
run more effectively and efficiently.
We saw our efforts during
2003 and 2004 begin to pay off
nicely during the first three quarters
of 2005. Illustrating that success:
through three quarters, the Company
posted same-store sales growth of
3.4 percent, which compared very
favorably with our competitors.
However, in the fourth quarter, our
everyday low price model did not
perform well against the height-
ened holiday promotional activity
of other retailers. Same-store sales
dropped by 1.6 percent in the
fourth quarter.
I believe that the poor per-
formance in the fourth quarter
was a short-term misstep resulting
from a number of factors rather
than a sign of long-term weakness
in our basic operating model. First,
we believe the external economic
environment, particularly higher
fuel costs, unemployment and
consumer debt, negatively impact-
ed our consumers, forcing trip
consolidation and deferred discre-
tionary spending. We know the
period was difficult for all retailers
serving the lower income customer,
and the intensified promotional
Fellow Shareholder:
Left to right: Beryl J. Buley, division president of merchandising, marketing and
supply chain; Challis M. Lowe, executive vice president of human resources;
Kathleen R. Guion, division president of store operations and store development;
David A. Perdue, chairman and CEO; Susan S. Lanigan, executive vice
president and general counsel; David M. Tehle, executive vice president and CFO.
* Please see “Non-GAAP disclosures” contained
in Management’s Discussion and Analysis of
Financial Condition and Results of Operations
on page 29.