Dollar General 2008 Annual Report Download - page 8

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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 8,414 stores in 35 states as of
February 27, 2009. We are the largest player in the U.S. small box deep discount segment based
on sales. 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, recent trip consolidation has
caused decreased total outlet trips per shopper by approximately 2.5%. At the same time the
“dollar store” channel grew trips per shopper by approximately 2.5%, faster than any other retail
channel and the only channel other than warehouse clubs that increased trips per shopper.
Consistent Sales Growth and Strong Cash Flow Generation. For 19 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 from
convenience and drugstore retailers.
Compelling Unit Economics. The traditional Dollar General store size, design and
location requires an initial investment for fixtures, equipment, signage and inventory of
approximately $230,000. 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 successful stores to generate strong cash flows with minimal investment often
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 and
new store growth.
Experienced Management Team. In January 2008, we hired Richard Dreiling, who has
39 years of retail experience, to serve as our Chief Executive Officer. Over the past several
years we strengthened our management team with the hiring of David Beré, our President and
Chief Strategy Officer, and Todd Vasos, our Executive Vice President, Division President and
Chief Merchandising Officer. We also replaced a majority of our senior merchandising and real
estate teams.