Dollar General 2015 Annual Report Download - page 102

Download and view the complete annual report

Please find page 102 of the 2015 Dollar General annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 168

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168

10-K
prior year, and include stores that have been remodeled, expanded or relocated. The remainder of the
increase in sales in 2015 was attributable to new stores, partially offset by sales from closed stores. The
increase in sales reflects increased customer traffic and average transaction amounts. Increases in sales
of consumables slightly outpaced our non-consumables, with sales of candy and snacks, perishables,
tobacco products, and food contributing the majority of the increase in sales of consumables.
The net sales increase in 2014 reflects a same-store sales increase of 2.8% compared to 2013. For
2014, there were 11,052 same-stores which accounted for sales of $17.82 billion. The remainder of the
increase in sales in 2014 was attributable to new stores, partially offset by sales from closed stores. The
increase in sales reflects increased customer traffic and average transaction amounts resulting from the
refinement of the Company’s merchandise offerings, including a full year’s sales of tobacco products,
the expansion of perishables, and enhanced utilization of store square footage. Increases in sales of
consumables outpaced our non-consumables, with sales of tobacco products, perishables, and candy and
snacks contributing the majority of the increase in sales of consumables.
Of our four major merchandise categories, the consumables category, which generally has a lower
gross profit rate than the other three categories, has grown most significantly over the past several
years. Because of the impact of sales mix on gross profit, we continually review our merchandise mix
and strive to adjust it when appropriate.
Gross Profit. The gross profit rate as a percentage of sales was 31.0% in 2015 compared to 30.7%
in 2014. Gross profit increased by 8.7% in 2015, and as a percentage of sales, increased by 27 basis
points. The gross profit rate increase in 2015 as compared to 2014 primarily reflects lower
transportation costs and an improved rate of inventory shrinkage, partially offset by increased
markdowns. We recorded a LIFO benefit of $2.3 million in 2015 compared to a LIFO provision of
$4.2 million in 2014.
The gross profit rate as a percentage of sales was 30.7% in 2014 compared to 31.1% in 2013.
Gross profit increased by 6.7% in 2014, and as a percentage of sales, decreased by 36 basis points. The
most significant factor affecting the gross profit rate was an increase in markdowns, primarily due to
increased promotions driven by competitive pressures. In addition, we experienced a continued trend of
consumables comprising a larger portion of our net sales, primarily as the result of increased sales of
lower margin consumables including tobacco products and expanded perishables offerings. These
factors were partially offset by higher initial inventory markups. We recorded a LIFO provision of
$4.2 million in 2014 compared to a LIFO benefit of $11.0 million in 2013.
SG&A. SG&A was 21.4% as a percentage of sales in 2015 compared to 21.3% in 2014, an
increase of 10 basis points. The 2015 results reflect increases in incentive compensation expenses,
repairs and maintenance expenses, occupancy costs, and fees associated with an increase in debit card
transactions. Partially offsetting these items was a higher volume of cash back transactions resulting in
increased convenience fees collected from customers. The 2014 results reflect expenses of $14.3 million,
or 8 basis points as a percentage of sales, related to an acquisition that was not completed.
SG&A expense was 21.3% as a percentage of sales in 2014 compared to 21.1% in 2013, an increase
of 19 basis points. The 2014 results reflect a significant increase in incentive compensation expense, as
our 2013 financial performance did not satisfy certain performance requirements under our cash incentive
compensation program. The 2014 results also reflect increases in rent and utilities. Partially offsetting
these increased costs were retail labor expense, which increased at a rate lower than our increase in sales,
the introduction of convenience fees charged to customers for cash back on debit card transactions, and a
reduction in workers’ compensation and general liability expenses. The 2014 period included expenses of
$14.3 million relating to an acquisition that was not completed, while the 2013 results include expenses of
$8.5 million for a legal settlement of a previously decertified collective action.
28