Dollar General 2007 Annual Report Download - page 8

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See “Our Competitive Strengths” and “Competition” below for additional information
regarding our competitive situation.
Our Competitive Strengths
Market Leader in an Attractive Sector with a Growing Customer Base. We are the
largest discount retailer in the U.S. by number of stores, with 8,222 stores in 35 states as of
February 29, 2008. We are the largest player in the U.S. small box deep discount segment, with
sales in excess of 1.4 times that of our nearest competitor in 2007. We believe we are well
positioned to further increase our market share as we continue to execute our business strategy
and implement our operational initiatives. Our target customers are those seeking value and
convenience. According to Nielsen Media Research as of mid-2007, approximately 64% of
households shopped at least once at a discount store (up from 59% in 2001).
Consistent Sales Growth and Strong Cash Flow Generation. For 18 consecutive years,
we have experienced positive annual same store sales growth. Approximately two-thirds of our
net sales come from the sale of consumable products, which are less susceptible to economic
pressures (such as increased fuel costs and unemployment), with the remaining one-third
comprised mainly of seasonal, basic clothing and home products which are subject to little trend
or fashion risk. We have a low cost operating model with attractive operating margins, low
capital expenditures and low working capital needs, resulting in generation of significant cash
flow from operations (before interest).
Differentiated Value Proposition. Our ability to deliver highly competitive everyday low
prices in a convenient location and shopping format provides our customers with a compelling
shopping experience and distinguishes us from other discount retailers, as well as convenience
and drugstore retailers.
Compelling Unit Economics. The traditional Dollar General store size, design and
location requires an initial investment of approximately $250,000 including inventory. The low
initial investment and maintenance capital expenditures, when combined with strong average
unit volumes, provide for a quick recovery of store start-up costs. The ability of our stores to
generate strong cash flows with minimal investment results in a short payback period.
Efficient Supply Chain. We believe our distribution network is an integral component of
our efforts to reduce transportation expenses and effectively support our growth. In recent years,
we have made significant investments in technological improvements and upgrades which have
increased our efficiency and capacity to support our merchandising and operations initiatives as
well as future store growth.
Experienced and Motivated Management Team. In January 2008, we hired Richard
Dreiling, who has 38 years of retail experience, to serve as our Chief Executive Officer. Over
the past two years we strengthened our management team with the hiring of David Beré, our
President and Chief Operating Officer. We also replaced a majority of our senior merchandising
and real estate teams. In connection with the Merger, we entered into agreements with certain