Dollar General 2005 Annual Report Download - page 20

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Accounting Periods. The following text contains refer-
ences to years 2006, 2005, 2004 and 2003, which represent
fiscal years ending or ended February 2, 2007, February 3,
2006, January 28, 2005, and January 30, 2004, respectively.
Fiscal year 2006 will be, and each of 2004 and 2003 was,
a 52-week accounting period, while fiscal 2005 was a
53-week accounting period, which affects the comparabili-
ty of certain amounts in the Consolidated Financial
Statements and financial ratios between 2005 and the
other fiscal years reflected herein.The Company’s fiscal
year ends on the Friday closest to January 31. This discus-
sion and analysis should be read with, and is qualified in
its entirety by, the Consolidated Financial Statements and
the notes thereto. It also should be read in conjunction
with the Forward-Looking Statements/Risk Factors disclo-
sure set forth above.
Purpose of Discussion. We intend for this discussion to
provide the reader with information that will assist in
understanding our Company and the critical economic
factors that affect our Company. In addition, we hope to
help the reader understand our financial statements, the
changes in certain key items in those financial statements
from year to year, and the primary factors that accounted
for those changes,as well as how certain accounting
principles affect our financial statements.
Executive Overview
Dollar General Corporation (“Dollar General” or the
“Company”) is the largest dollar store discount retailer of
consumable basics in the United States, with over 8,000
stores.We are committed to serving the needs of low-,
middle- and fixed-income customers. However, the
Company sells quality private label and national brand
products that appeal to a wide range of customers. Our
merchandise is priced at competitive everyday low prices
that do not change frequently as a result of promotional
activity. We believe many of our customers shop at Dollar
General because they trust us to consistently stock quality
merchandise at low prices. We also believe convenience,
or the ability to complete a shopping trip in a limited
amount of time, is critical to many of our customers and is
a key factor that differentiates us from large-box retailers.
We operate in the highly competitive retail industry.
We face strong sales competition from other retailers that
sell general merchandise and food. Because of Dollar
General’s low-price strategy, we must strive to keep our
operating costs as low as possible. This effort affects all
expenses, but is particularly critical as we compete for
retail site locations and for qualified talent to manage and
operate our stores. The fact that many of our stores are
located in towns that many retailers may find too small to
support their business model, however, has allowed Dollar
General to continue to increase its store count faster than
most retailers.
Management of the Company continues to focus on
making good investment decisions for the long-term
growth and profitability of the Company. In order to better
support sales efforts in our stores and to enable the
Company to continue its rapid growth, the Company has
attempted to strengthen the senior leadership team over
the last several years. In 2005, changes were made to the
organization structure in order to increase synergies
between store operations and new store development
and among merchandising, marketing and the supply
chain. Executives were added to support our efforts in
human resources, real estate, store operations, supply
chain and the Dollar General Market concept. Going
forward, the Company expects these new leaders to
have a positive impact on the overall performance and
profitability of the Company.
Along with other retail companies,we are impacted
by a number of factors including, but not limited to: cost
of product, consumer debt levels, economic conditions,
customer preferences, unemployment, labor costs,
inflation, fuel prices, weather patterns, insurance costs
and accident costs.
Key Items in Fiscal 2005. Despite a difficult economic
environment for our customers in 2005, the Company
successfully implemented many of the important operat-
ing initiatives outlined in last year’s Form 10-K, while also
increasing sales and earnings per share. The following
are some of the more significant accomplishments during
the year:
• Total sales increased by 12.0 percent, including sales
during the 53rd week, and same-store sales increased
by 2.0 percent;
• We opened 734 new stores, including 29 Dollar
General Market stores;
• We implemented “EZstore”, the Company’s initiative
designed to improve inventory flow from distribution
centers to consumers as well as improve other areas
of store operations, including labor scheduling, hiring
and training and product presentation, in 3,825 stores
as of year-end;
• We completed construction of and opened the
Company’s eighth DC in South Carolina and began
construction of a ninth DC in Indiana to increase over-