Dollar General 2008 Annual Report Download - page 4

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PART I
ITEM 1. BUSINESS
General
We are the largest discount retailer in the United States by number of stores, with 8,414
stores located in 35 states, primarily in the southern, southwestern, midwestern and eastern
United States, as of February 27, 2009. We serve a broad customer base and offer a focused
assortment of everyday items, including basic consumable merchandise and other home, apparel
and seasonal products. A majority of our products are priced at $10 or less and approximately
25% of our products are priced at $1 or less.
We offer a compelling value proposition for our customers based on convenient store
locations, easy in and out shopping and quality name brand and private brand merchandise at
highly competitive everyday low prices. We believe our combination of value and convenience
distinguishes us from other discount, convenience and drugstore retailers, who typically focus on
either value or convenience. Our business model is focused on strong and sustainable sales
growth, attractive margins, and limited maintenance capital expenditure and working capital
needs, which, in combination, result in significant cash flow from operations (before interest).
We were founded in 1939 as J.L. Turner and Son, Wholesale. We opened our first dollar
store in 1955, when we were incorporated as a Kentucky corporation under the name J.L. Turner
& Son, Inc. We changed our name to Dollar General Corporation in 1968 and reincorporated as
a Tennessee corporation in 1998. In 2007, we entered into a merger transaction with an entity
controlled by investment funds affiliated with Kohlberg Kravis Roberts & Co., L.P. (“KKR” or
“Sponsor”), as discussed in more detail under “Our 2007 Merger” below.
We have increased our total number of stores from 6,700 on January 30, 2004, to 8,362
on January 30, 2009, a 4.5% compounded annual growth rate (“CAGR”). Over the same period,
we grew our net sales from $6.9 billion to $10.5 billion (8.8% CAGR), driven by growth in
number of stores as well as same store sales growth. We slowed new store growth in 2007 and
2008 and closed approximately 400 stores in 2007 to improve our profitability and to enable us
to focus on improving the performance of existing stores. In 2008, we opened 207 new stores,
closed 39 stores, and relocated or remodeled 404 existing stores. Net sales in 2008 were driven
primarily by a same-store sales increase of 9.0%. See our Consolidated Financial Statements for
net sales and net income (loss) for each of our last three fiscal years and total assets for each of
our last two fiscal years. We intend to accelerate our new store growth in 2009 with plans to
open approximately 450 new stores and to remodel or relocate approximately 400 stores.
Our 2007 Merger
On July 6, 2007, we completed a merger (the “Merger”), and, as a result, we are a
subsidiary of Buck Holdings, L.P. (“Parent”), a Delaware limited partnership controlled by
investment funds affiliated with KKR. KKR, GS Capital Partners VI Fund, L.P. and affiliated
funds (affiliates of Goldman, Sachs & Co.), Citi Private Equity, Wellington Management