Dollar General 2007 Annual Report Download - page 29

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SG&A expenses in 2007 over 2006 of 21 bps; an excess of 2007 incentive
compensation resulting from meeting certain financial targets over 2006 discretionary
bonuses of 18 bps; the impact of hurricane-related insurance proceeds received in
2006 of 14 bps; an accrued loss relating to the restructuring of certain distribution
center leases as a result of the Merger of 13 bps; and other SG&A relating to or
resulting from the Merger.
• Other items affecting our 2007 results of operations, relating to or resulting from the
Merger, as more fully described below, include transaction and related costs of
$102.6 million and a significant increase in interest expense.
• As a result, we incurred a net loss for the 2007 combined periods of $12.8 million
compared to net income for 2006 of $137.9 million. Cash flow from operating
activities increased to $441.6 million in 2007 from $405.4 million in 2006.
• We opened 365 new stores, closed 400 stores (including 275 remaining from Project
Alpha) and relocated or remodeled 300 stores. As of February 1, 2008, we operated
8,194 stores.
• We also reduced total inventories by $143.7 million, or 10.0%.
We made significant progress on our merchandising and operating initiatives in 2007,
including clearing our stores of packaway inventories and closing our low-performing stores,
giving us a strong foundation for further enhancements in 2008. These changes also contributed
to a decrease in employee turnover and a dramatic improvement in the overall appearance of our
stores. We moved forward with our pricing and private label initiatives and enhanced our
merchandising analysis tools giving us a better platform for decision-making. We accomplished
these goals while making a significant transition in the financial structure of the Company.
2008 Priorities. In 2008, under the leadership of our new CEO, we plan to continue to
deliver value to our customers through our ability to deliver highly competitive prices in a
convenient shopping format. Our stores provide our customers with a compelling shopping
experience, low everyday prices on name brand and other quality items in a convenient, easy-to-
shop format. We plan to continue to improve on this value/convenience model by implementing
merchandising and operational improvements.
We are focused on further improving financial performance through:
• Productive sales growth, including emphasis on increasing shopper frequency, size of
basket and productivity per square foot.
• Improving our gross margins through: decreasing inventory shrink, refining our
pricing strategy, optimizing our merchandise offering, expanding and improving our
private label offering and improving and expanding our foreign sourcing;