Dollar General 2009 Annual Report Download - page 40

defining and improving our store standards with a goal of developing a consistent look and feel across
all stores. We are targeting both new and existing customers with our improved advertising circulars,
and over the past two years we have opportunistically extended our store hours for our customers’
convenience. Finally, we believe we have significant potential to grow sales through new store growth in
both existing and new markets. We opened 500 new stores in fiscal 2009 and plan to open
approximately 600 new stores in fiscal 2010.
Our second priority is to increase gross profit through category management, shrink reduction,
distribution efficiencies, an improved pricing model, the expansion of private brand offerings and
increased foreign sourcing. We made good progress through each of these initiatives in 2008 and 2009,
reporting our highest gross profit rate in the last 25 years in 2009. Under new leadership, our
merchandising team has been successful in our efforts to upgrade our merchandise selection to better
serve our customers, while managing our everyday low price strategy. We constantly review our pricing
strategy and work diligently to minimize vendor cost increases. Merchandise cost increases subsided in
2009 after a challenging year in 2008. We are focused on sales of private brand consumables, which
generally have higher gross profit rates than national brands, while we continue to offer a wide variety
of national brands to ensure an optimal mix of product offerings for our customers. Inventory shrink
declined again in 2009 as we further implemented exception-based shrink detection tools and improved
employee training. Higher sales volumes and lower average fuel costs, as well as our continued efforts
to increase efficiencies, contributed to our ability to leverage transportation and distribution costs in
2009.
Our third priority is leveraging process improvements and information technology to reduce costs.
We are committed as an organization to extract costs that do not affect the customer experience.
Examples of cost reduction initiatives in 2009 include the reduction of workers’ compensation expense
through a focus on safety, the improvement of energy management in the stores through forward
purchase contracts as well as the installation of energy management systems and increased preventive
maintenance, and the reduction of waste management costs through recycling of cardboard. In addition,
our real estate team has had success in negotiating lease renewals which will benefit us in 2010 and
forward. We plan to further our efforts on these and other cost reduction initiatives in 2010. However,
on March 23, 2010, the President signed into law comprehensive healthcare reform legislation. This
legislation is not expected to have a material effect on our consolidated financial statements in fiscal
2010, but its future impact on our financial statements remains uncertain. With regard to information
technology, we are focusing our resources on improving systems to create greater efficiencies in retail
store operations and merchandising.
Our fourth priority is to strengthen and expand Dollar General’s culture of serving others. For
customers this means helping them ‘‘Save time. Save money. Every day!’’ by providing clean,
well-stocked stores with quality products at low prices. For employees, this means creating an
environment that attracts and retains key employees throughout the organization. For the public, this
means giving back to our store communities. For shareholders, this means meeting their expectations of
an efficiently and profitably run organization that operates with compassion and integrity.
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