Dollar General 2012 Annual Report Download - page 83

10-K
other upgrades, resulting in an improved in-store experience for our customers. We believe we will
continue to have opportunities for additional remodels and relocations beyond 2013.
Expanding Operating Profit Rate. Another key component of our growth strategy is improving our
operating profit rate through enhanced gross profit and expense reduction initiatives.
We remain committed to an everyday low price (‘‘EDLP’’) strategy that our customers can depend
on. To strengthen our adherence to this strategy and still protect gross profit, we utilize various pricing
and merchandising options, including zone pricing, markdown optimization strategies and changes to
our product selection, such as alternate national brands and the expansion of our private brands, which
generally have higher gross profit rates. In addition, we maintain an ongoing focus on reducing
transportation and distribution costs as well as minimizing inventory shrinkage and damages. Over the
long term, we believe there are additional opportunities to reduce product costs, including further
expansion of our private brands, additional shrink reduction, benefits from expansion of foreign
sourcing and incremental distribution and transportation efficiencies. We also plan to continue to
introduce new non-consumable products. The addition of tobacco products and the further expansion
of coolers are expected to modestly pressure our operating profit rate in 2013.
As part of our ongoing effort to improve our cost structure and enhance efficiencies throughout
the organization, in 2012, we simplified many of our store processes and achieved significant
incremental benefits from our store workforce management program, implemented in 2011. We expect
to achieve further efficiencies in 2013 and to realize additional cost savings from our centralized
procurement initiative.
Growing Our Store Base. After slowing our growth rate in 2007 and 2008 to focus on significantly
improving the sales and profitability of our stores, we accelerated our expansion in 2009 and have
grown our retail square footage by approximately 7% annually since that time. In 2012, we made our
initial entrance into California and Massachusetts, and in 2011 we entered Connecticut, New
Hampshire and Nevada, our first new states since 2006. We have confidence in our real estate
disciplines and in our ability to identify, open and operate successful new stores. In 2013, we plan to
again increase our square footage by approximately 7% as we further expand in our core markets and
newer states and continue to evaluate our long-term opportunities to best serve the needs of customers
in new markets and more densely populated metropolitan areas.
Our Merchandise
We offer a focused assortment of everyday necessities, which drive frequent customer visits, and
key items in a broad range of general merchandise categories. Our product assortment provides the
opportunity for our customers to address most of their basic shopping needs with one trip. We sell high
quality national brands from leading manufacturers such as Procter & Gamble, PepsiCo, Coca-Cola,
Nestle, General Mills, Unilever, Kimberly Clark, Kellogg’s and Nabisco, which are typically found at
higher retail prices elsewhere. Additionally, our private brand consumables offer even greater value
with options to purchase value items and national brand equivalent products at substantial discounts to
the national brand.
Our stores generally offer approximately 10,000 total SKUs per store; however, the number of
SKUs in a given store can vary based upon the store’s size, geographic location, merchandising
initiatives, seasonality, and other factors. Most of our products are priced at $10 or less, with
approximately 25% at $1 or less. We separate our merchandise into four categories: 1) consumables;
2) seasonal; 3) home products; and 4) apparel.
Consumables is our largest category and includes paper and cleaning products (such as paper
towels, bath tissue, paper dinnerware, trash and storage bags, laundry and other home cleaning
supplies); packaged food (such as cereals, canned soups and vegetables, condiments, spices, sugar and
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