Dollar General 2006 Annual Report Download - page 5

acquisitions or dispositions of assets, capital expenditures, modifications of debt, leasing
activities, compensatory changes, dividend increases, investments and share repurchases.
Overall Business Strategy
Our mission is “Serving Others.” To carry out this mission, we have developed a business
strategy of providing our customers with a focused assortment of fairly priced, consumable
merchandise in a convenient, small-store format.
Our Customers. We serve the basic consumable needs of customers primarily in the low-
and middle-income brackets and those on fixed incomes. According to AC Nielsen’ s 2006
Homescan® data, in 2006 approximately 41% of our customers had gross income of less than
$30,000 per year and approximately 24% had gross income of less than $20,000 per year. Our
merchandising and operating strategies are primarily designed to meet the need for basic
consumable products of consumers in these lower income groups.
Our Stores. The traditional Dollar General store has, on average, approximately 6,900
square feet of selling space and generally serves customers who live within five miles of the
store. Of our 8,260 stores operating as of March 2, 2007, approximately 4,750 serve
communities with populations of 20,000 or less. We believe that our target customers prefer the
convenience of a small, neighborhood store. We believe that our convenient discount store
format will continue to attract customers and provide us with a competitive advantage.
In 2003, we began testing a Dollar General Market® store concept. Dollar General
Markets are larger than the average Dollar General store and carry, among other items, an
expanded assortment of grocery products and perishable items. At March 2, 2007, our 8,260
total stores included 56 Dollar General Market stores with an average of approximately 17,250
square feet of selling space.
Our Merchandise. We are committed to offering a focused assortment of quality,
consumable merchandise in a number of core categories, such as health and beauty aids,
packaged food and refrigerated products, home cleaning supplies, housewares, stationery,
seasonal goods, basic clothing and domestics. This focused merchandise assortment allows
customers to shop at Dollar General stores for their everyday household needs. In 2006, the
average customer purchase was $9.31.
Our Prices. We distribute quality, consumable merchandise at everyday low prices. Our
strategy of a low-cost operating structure and a focused assortment of merchandise allows us to
offer quality merchandise at competitive prices. As part of this strategy, we emphasize even-
dollar prices on many of our items. In the typical Dollar General store, the majority of the
products are priced at $10 or less, with approximately 30% of the products priced at $1 or less.
Our Cost Controls. We emphasize aggressive management of our overhead cost
structure. Additionally, we seek to locate stores in neighborhoods where rental and operating
costs are relatively low. We attempt to control operating costs by implementing new technology
where feasible. Examples of this strategy in recent years include the implementation of
“EZstore”, our initiative designed to improve inventory flow from distribution centers (“DCs”)
to consumers; other improvements to our supply chain and warehousing systems; an automatic
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