Dollar General 2006 Annual Report Download - page 7

Growth Strategy
We have experienced a rapid rate of expansion in recent years, increasing our number of
stores from 5,540 as of February 1, 2002, to 8,260 as of March 2, 2007. In addition to growth
from new store openings, we recorded same-store sales increases of 3.3% and 2.0% in 2006 and
2005, respectively. Same-store sales calculations for 2005 and prior include only those stores
that were open both at the end of that period and at the beginning of the preceding fiscal year,
based on the comparable calendar weeks in the prior year. As further described below in Part II,
Item 7, 2006 was a 52-week accounting period while 2005 was a 53-week accounting period.
Accordingly, the same store sales percentages discussed above exclude sales from the 53rd week
in 2005 as there was no comparable week in 2006 or 2004. We will continue to seek to grow our
business and believe that this future growth will come from a combination of new store
openings, remodeled and relocated stores, infrastructure investments and merchandising
initiatives, each as discussed more fully below.
New Store Growth. We believe that our convenient, small-store format is adaptable to
small towns and neighborhoods throughout the country. The majority of our stores are located in
these small towns (which we define as communities with populations of 20,000 or less). In
2006, approximately half of our new stores were opened in small towns while the remainder
were opened either in rural or in more densely populated areas. We expect a similar mix of new
store openings between small towns and other areas in 2007. New store openings in 2007 will
include our existing market area as well as certain other geographic areas where management
believes we have the potential to expand our store base. As part of the strategic initiatives
discussed above, we plan to decrease the number of new store openings and increase the number
of remodeled or relocated stores in 2007. Opening or remodeling/relocating stores in our existing
market area allows us to take advantage of brand awareness and to maximize our operating
efficiencies.
In 2006, 2005 and 2004, we opened 537, 734 and 722 new stores, and remodeled or
relocated 64, 82 and 80 stores, respectively. In 2007, we plan to open approximately 300 new
Dollar General stores and plan to remodel or relocate an additional 300 stores.
Infrastructure Investments. Our distribution network is an integral component of our
efforts to reduce transportation expenses and effectively support our growth. In recent years, we
have made significant investments in our distribution network. As of March 2, 2007, we operated
nine DCs, one of which opened during 2006. In recent years, we have expanded our DCs in
South Boston, Virginia, and Ardmore, Oklahoma, by completing the conversion of these DCs
from single to dual sortation systems, which enables them to serve more stores.
We also have invested in technological improvements and upgrades in recent years. In
2006, new systems for assortment planning, merchandise allocations and drop ship receiving
were installed. We implemented improvements to our transportation, sales audit, loss prevention
and planogram systems. In addition, we completed store system enhancements for promotions
and coupons. In 2005, we installed new systems for store operating statements, store labor
scheduling, supplier communications and transportation and claims management. In addition, we
enhanced our store systems to allow us to sell Dollar General gift cards. In 2004, we added a
merchandising data warehouse, completed the rollout of credit/debit and electronic benefit
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