Dollar General 2014 Annual Report Download - page 81
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10-K
Distribution and Transportation
Our stores are currently supported by twelve distribution centers located strategically throughout
our geographic footprint. We have also broken ground on our 13th distribution center in San Antonio,
Texas which we expect to be operational by the end of 2015. We lease additional temporary warehouse
space as necessary to support our distribution needs. Over the past few years we have made significant
investments in facilities, technological improvements and upgrades, and we continue to improve work
processes, all of which increase our efficiency and ability to support our merchandising and operations
initiatives as well as our new store growth. We continually analyze and rebalance the network to ensure
that it remains efficient and provides the service our stores require. See ‘‘—Properties’’ for additional
information pertaining to our distribution centers.
Most of our merchandise flows through our distribution centers and is delivered to our stores by
third-party trucking firms, utilizing our trailers. During 2014, the entire trucking industry experienced
driver capacity issues and these shortages affected our transportation costs. Further, our agreements
with trucking firms are based on estimated costs of diesel fuel, with the difference in estimated and
current market fuel costs passed through to us. In late 2014, we began to see a decline in global oil
prices which had a corresponding effect on the price of diesel fuel. The costs of diesel fuel are
significantly influenced by international, political and economic circumstances. If fuel price increases
were to occur for any reason, including fuel supply shortages or unusual price volatility, the resulting
higher fuel prices could materially increase our transportation costs.
Seasonality
Our business is seasonal to a certain extent. Generally, our highest sales volume occurs in the
fourth quarter, which includes the Christmas selling season, and the lowest occurs in the first quarter.
In addition, our quarterly results can be affected by the timing of certain holidays, the timing of new
store openings and store closings, the amount of sales contributed by new and existing stores, as well as
financial transactions such as stock repurchases. We typically purchase substantial amounts of inventory
in the third quarter and incur higher shipping and payroll costs in anticipation of increased sales
activity during the fourth quarter. In addition, we carry merchandise during our fourth quarter that we
do not carry during the rest of the year, such as gift sets, holiday decorations, certain baking items, and
a broader assortment of toys and candy.
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