Dollar General 2011 Annual Report Download - page 103

10-K
10-minute drive, of our stores. Our close proximity to customers drives customer loyalty and trip
frequency and makes us an attractive alternative to large discount and other large-box retail and
grocery stores which are often located farther away. Our low cost economic model enables us to
serve many areas with fewer than 1,500 households.
•Time-Saving Shopping Experience. We also provide customers with a highly convenient shopping
experience. Our stores’ smaller size allows us to locate parking near the front entrance. Our
product offering includes most necessities, such as basic packaged and refrigerated food and
dairy products, cleaning supplies, paper products, and health and beauty care items, as well as
greeting cards, party supplies, apparel, housewares, hardware and automotive supplies, among
others. Our typical store opens at 8:00 a.m. and closes at 9:00 p.m. or 10:00 p.m., seven days per
week. Our convenient hours and broad merchandise offering allow our customers to fulfill their
routine shopping requirements and minimize their need to shop elsewhere.
•Everyday Low Prices on Quality Merchandise. Our research indicates that we offer a price
advantage over most food and drug retailers and that our prices are highly competitive with even
the largest discount retailers. Our ability to offer everyday low prices on quality merchandise is
supported by our low-cost operating structure and our strategy to maintain a limited number of
stock keeping units (‘‘SKUs’’) per category, which we believe helps us maintain strong
purchasing power. Most items are priced below $10, with approximately 25% at $1 or less. We
offer quality nationally advertised brands at these everyday low prices in addition to offering our
own comparable quality private brands at value prices.
Attractive Store Economics. The traditional Dollar General store size, design and location requires
minimal initial capital investment and low maintenance expenditures. Our typical locations involve a
modest, no-frills building, which helps keep our rental and other fixed overhead costs relatively low.
Our leased stores generally deliver positive cash flow in their first year of operations, typically resulting
in pay back of capital in less than two years. Our stringent market analysis, real estate site selection
and new store approval processes as well as our new store marketing programs help us optimize
financial returns and minimize the risks of opening unprofitable stores.
Our lean store staffing model and centralized management of utilities, maintenance and supplies
procurement contribute to our relatively low operating costs and efficient store operations. Recent
additions and upgrades to technology in our stores, including high-speed data transmission, inventory
control, workforce management and task management systems are enabling us to manage our store
operations even more effectively.
Substantial Growth Opportunities. We believe we have the long-term potential in the U.S. to more
than double our existing store base while maintaining strong returns on capital. We have identified
significant opportunities to add new stores in both existing and new markets. In addition, we have
opportunities within our existing store base to relocate or remodel to better serve our customers. See
‘‘Our Growth Strategy’’ for additional details.
Our Growth Strategy
We believe we have the right strategy and execution capabilities to capitalize on the considerable
growth opportunities afforded by our business model. We believe we continue to have significant
opportunities to drive profitable growth through increasing same-store sales, expanding our operating
profit rate and growing our store base.
Increasing Same-Store Sales. We believe the combination of our necessity-driven product mix and
our attractive value proposition, including a well-balanced merchandising approach, provides a strong
basis for increased sales. Our average sales per square foot increased to $213 in 2011 (including a $4
contribution from the 53rd week) from $201 in 2010 and $195 in 2009. We believe we will continue to
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