Dollar General 2014 Annual Report Download - page 78

10-K
increase our store productivity in 2015 through continued improvements in store space utilization,
pricing and markdown optimization and additional merchandising initiatives, such as furthering the
successful launch of our DG Digital Coupons program, which allows our customers to access digital
coupons via the internet, smartphones and similar devices.
Our new store expansion strategy also is a critical element of our priority to drive productive sales
growth. We have confidence in our real estate disciplines and in our ability to identify, open and
operate successful new stores. In 2014, we opened 700 new stores and increased our selling square
footage by over 6%. We invest significant time and energy into analyzing new store opportunities. Our
site selection technology affirms our confidence in our ability to accelerate the expansion of our store
base in 2016. In 2015, we plan to open 730 new stores and increase our square footage by 6% as we
continue to expand in our core markets as well as newer states. We also plan to continue to remodel
stores to update our appearance and relocate stores to increase square footage, where needed, improve
visibility and accessibility or to obtain more attractive lease terms.
Enhance Our Gross Profit Rate. Another key component of our growth strategy is enhancing our
gross profit rate.
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 maximize gross profit, we utilize various
pricing and merchandising options, including limited zone pricing, markdown optimization strategies
and changes to our product selection, such as alternate national brands and private brands, which
generally have higher gross profit rates. A successful first full year of offering tobacco products and our
continued expansion of perishable food items contributed significantly to increases in sales and gross
profit dollars during 2014, although, as expected, at a lower gross profit rate as a percentage of sales.
Importantly, we believe these categories are instrumental to attaining our goals of driving more
frequent shopping trips, higher average ticket, and attracting new customers. We believe our initiatives
to improve inventory shrinkage are having an impact, with our inventory shrinkage rate as a percent to
sales leveling off in 2014 compared to 2013. In addition, we maintain an ongoing focus on reducing
transportation and distribution costs as well as efforts to minimize inventory damages.
Over the long term, we will continue our efforts to reduce product costs through shrink reduction,
further expansion of our private brands, foreign sourcing, the use of online procurement auctions and
incremental distribution and transportation efficiencies. We also plan to continue to refine our product
selection to meet our customers’ needs in our home, apparel and seasonal categories, which generally
have higher gross profit rates than consumables.
Leverage Process Improvements and Information Technology to Reduce Costs. As part of our ongoing
efforts to improve our cost structure and enhance efficiencies throughout the organization, in 2014 we
made further progress in simplifying our store processes. This progress contributed to a reduction in
store labor as a percentage of sales. In addition, we realized cost savings from our centralized
procurement initiative and other expense reduction efforts. In 2015, we expect to achieve further
savings from our mining for cost reduction initiatives and will remain focused on controlling those
expenses that are within our control. Factors primarily related to our cash incentive compensation plan
caused certain expenses in 2014 to be higher than in 2013, as explained in further detail in
Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in
Part II, Item 7 of this report.
Strengthen and Expand Our Culture of Serving Others. The mission of ‘‘Serving Others’’ has been
key to the culture of Dollar General for many years and we recognize the importance of this mission to
our long-term success. For customers this means helping them ‘‘Save time. Save money. Every day!’’ by
providing clean, well-stocked stores with quality products at low prices. For employees, this means
creating an environment that attracts and retains key employees throughout the organization. For the
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