Dollar General 2010 Annual Report Download - page 3

Richard W. Dreiling
Chairman and Chief Executive Ocer
April 5, 2011
To Our Fellow Shareholders,
Customers, and Employees
Dollar General delivered a record-setting year in fiscal 2010.
We are very pleased with our financial performance as well
as our continued progress toward building for the future.
In a period of persistent high unemployment and economic
challenges for the average family, Dollar General’s commitment
to meeting the needs of modern consumers is steadfast and
our focus on convenience and value is stronger than ever. We
believe Dollar General has redefined small-box retailing.
Our successful business model is based on meeting the
everyday needs of a broad base of customers and helping
them make the most of their spending dollars by oering a
wide selection of quality items at value prices in conveniently
located easy-to-shop stores. It is by adhering to this strategy
that Dollar General produced record financial results in fiscal
2010, including record sales, gross profit, operating profit,
operating cash flows and net income.
Financial highlights of 2010 include the following:
Net sales increased by 10.5% to $13.0
billion, or $201 per square foot.
Same-store sales grew 4.9% on top of an outstanding
9.5% in 2009 and 9.0% in 2008, marking our 21st
consecutive year of same-store sales growth.
Gross profit increased by 13.2%, achieving
a record gross profit rate of 32.0%.
Operating profit reached $1.3 billion, or 9.8% of
sales, demonstrating our success at balancing
sales, gross profit and SG&A leverage.
We repurchased $115 million of our 10.625% senior notes
in the open market, reducing our total outstanding
long-term obligations to $3.3 billion, which will further
reduce our interest expense in 2010 and future years.
In 2010, Dollar General reported net income of
$628 million, or 4.8% of sales, and generated
$825 million of cash from operating activities.
Our customers responded with enthusiasm to strong
improvements in our merchandise and our stores in 2010.
We successfully expanded our oerings of both nationally
advertised brands and our own proprietary brands in
consumables. We made some exciting progress in our
non-consumables as well, and we are pursuing additional
opportunities to improve.
We are very excited about Dollar General’s growth
opportunities. In 2010, we opened 600 new customer-centric
stores across our 35-state market area and remodeled or
relocated an additional 504 stores, further expanding the
presence of the new Dollar General. We ended the year with
9,372 neighborhood stores, with significant opportunities
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remaining for growth across the United States. In 2011, we
plan to open 625 new stores and remodel or relocate 550
stores. We have plans to expand into three new states –
Connecticut, New Hampshire and Nevada.
We expect our aggressive in-stock improvement initiative
in our stores to drive future sales as well as improve the
customer’s overall shopping experience. Likewise, the
expansion of health and beauty products and frozen and
refrigerated food items, with an emphasis on the $1 price
point, will reinforce Dollar General’s leadership role in our
segment. We are revisiting our Dollar General Market concept
as a potential growth opportunity.
While we anticipate continued economic uncertainties and
possibly higher inflation in 2011, we see opportunities not only
to drive sales, but also to further expand our gross profit rate
through direct sourcing, further expansion of our proprietary
brands and refinements in our non-consumables strategy to
better address our customers’ needs.
In 2010, we formed a consolidated procurement team,
responsible for non-merchandise purchases, and we began
implementing a new store workforce management system.
These investments will develop significantly over the next
several years, enabling us to control costs and manage our
business more eciently.
Importantly, Dollar General is a strong company because of
its 86,000 employees and their enduring commitment to
our mission of “Serving Others” including our shareholders,
customers, fellow employees and the many communities
we serve. We have a great foundation for growth that we
built together as a team. Our successful track record over
the past three years gives me confidence that our team can
successfully execute our 2011 plans and deliver continued
long-term sustainable growth.
We are looking forward to another rewarding year in 2011 and
to updating you on our continued success.
Sincerely,