Dollar General 2008 Annual Report Download - page 18

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Because our business is seasonal to a certain extent, with the highest volume of net
sales during the fourth quarter, adverse events during the fourth quarter could materially
affect our financial statements as a whole.
We generally recognize our highest volume of net sales during the Christmas selling
season, which occurs in the fourth quarter of our fiscal year. In anticipation of this holiday, we
purchase substantial amounts of seasonal inventory and hire many temporary employees. A
seasonal merchandise inventory imbalance could result if our net sales during the Christmas
selling season were to fall below either seasonal norms or expectations. If our fourth quarter
results were substantially below expectations, our financial performance and operating results
could be adversely affected by unanticipated markdowns, especially in seasonal merchandise.
Lower than anticipated sales in the Christmas selling season would also negatively affect our
ability to absorb the increased seasonal labor costs.
We face intense competition that could limit our growth opportunities and adversely
impact our financial performance.
The retail business is highly competitive. We operate in the discount retail merchandise
business, which is competitive with respect to price, store location, merchandise quality,
assortment and presentation, in-stock consistency, and customer service. This competitive
environment subjects us to the risk of adverse impact to our financial performance because of the
lower prices, and thus the lower margins, required to maintain our competitive position. Also,
companies operating in the discount retail merchandise sector (due to customer demographics
and other factors) may have limited ability to increase prices in response to increased costs
(including, but not limited to, vendor price increases). This limitation may adversely affect our
margins and financial performance. We compete for customers, employees, store sites, products
and services and in other important aspects of our business with many other local, regional and
national retailers. We compete with retailers operating discount, mass merchandise, grocery,
drug, convenience, variety and other specialty stores. Certain of our competitors have greater
financial, distribution, marketing and other resources than we do. These other competitors
compete in a variety of ways, including aggressive promotional activities, merchandise selection
and availability, services offered to customers, location, store hours, in-store amenities and price.
If we fail to respond effectively to competitive pressures and changes in the retail markets, it
could adversely affect our financial performance. See “Business—Our Industry, —Competitive
Strengths, and —Competition” for additional discussion of our competitive situation.
Competition for customers has intensified in recent years as larger competitors have
moved into, or increased their presence in, our geographic markets. We remain vulnerable to the
marketing power and high level of consumer recognition of these larger competitors and to the
risk that these competitors or others could venture into the “dollar store” industry in a significant
way. Generally, we expect an increase in competition.