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SunTrust Robinson Humphrey April 7, 2003. Dollar General Corporation Don Shaffer President and Chief Operating Officer. Forward-Looking Information.
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SunTrust Robinson HumphreyApril 7, 2003 Dollar General Corporation Don Shaffer President and Chief Operating Officer A customer-driven distributor of consumable basics
Forward-Looking Information Our comments today will contain historical and forward-looking information. The forward-looking information includes, but is not limited to, information regarding the 2003 Company outlook, including without limitation, annual sales and earnings guidance, growth targets, capital expenditures and key goals. The words “believe,” “anticipate,” “plan,” “project,” “expect,” “estimate,” “objective,” “forecast,” “ goal,” “intend,” “will likely result,” or “will continue” and similar expressions generally identify forward-looking statements. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company believes the assumptions underlying these forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected by or implied in the forward-looking statements. A number of factors may result in actual results differing from such forward-looking information, including, but not limited to the factors set out in our most recent Annual Report on Form 10K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The Company disclaims any obligation to publicly update or revise any forward-looking statements contained herein to reflect events or circumstances occurring after the date of this presentation or to reflect the occurrence of unanticipated events. In this presentation we refer to certain non-GAAP financial information, specifically net income, earnings per share and S,G&A expenses, excluding restatement-related items. We have made these disclosures in an effort to clarify, for our investors, our normalized operating results on a comparable basis. The compensation committee of our board of directors may use this information for compensation purposes to ensure that no person is inappropriately penalized or rewarded as a result of unusual items affecting our financial statements. Management also may use this information to better understand the underlying ongoing operations of the company. A reconciliation to GAAP is included in this presentation as well as on the accompanying slides, which can be found on our website at www.dollargeneral.com A customer-driven distributor of consumable basics
Our Strategy A customer-driven distributor of consumable basics A customer-driven distributor of consumable basics
Our Niche Small store convenience and everyday low price A customer-driven distributor of consumable basics
Our Customer • Primarily low and fixed income customers; attracting more affluent customers • 76% female; increasing male shoppers • 66% Caucasian, 27% African-American ; 7% Hispanic A customer-driven distributor of consumable basics
2002 Key Accomplishments • Opened 622 stores • Completed rollout of new registers and VSAT • Converted Fulton DC to dual sortation • Opened our Florida Import Center in Alachua • Implemented the “Seven Habits of a Highly Effective Dollar General Store” • Reduced excess inventories A customer-driven distributor of consumable basics
2002 Key Accomplishments (Continued) • Completed UPC inventories in all stores • Launched aggressive shrink control program • Installed Arthur merchandising system • Added coolers to 956 stores • Thoroughly tested store auto replenishment system • Opened 18 training centers A customer-driven distributor of consumable basics
As of 1/31/03 A customer-driven distributor of consumable basics
Distribution Center Initiatives • Converted Fulton DC to dual sortation equipment • Opened Florida Import Center at Alachua DC A customer-driven distributor of consumable basics
Perpetual Inventory • Completed item inventories in all stores • Opportunities • For auto replenishment • Proper allocation of seasonal inventory • Improve in-stock position • Increase sales • Increase inventory turnover A customer-driven distributor of consumable basics
The Seven Habits • Ordering • Stocking • Receiving • Presentation • Selling • Staffing • Support A customer-driven distributor of consumable basics
Inventory Shrink Initiatives • 28 person loss prevention team located in high shrink areas • Exception reporting software • Installed 415 closed circuit TV’s in 2002; plan to add 1,000 in 2003 • Installed 1,900 security alarms in 2002; plan to add 1,600 in 2003 • Shrink tip hotline • Shrink committee headed by senior director of internal audit A customer-driven distributor of consumable basics
Arthur Merchandising System • Provides a single source for merchandising data • Sales and receipts loaded daily from POS and warehouse system data • 2003 merchandising plan for sales, receipts, inventory and IMU by week by class • Analysis and planning by groups of similar stores • Ability to cluster stores based on sales trends • 2003 planned by week for 500 classes A customer-driven distributor of consumable basics
Cooler Program • Includes milk, eggs, cheese, sandwich items, frozen foods, ice cream • Inventory managed by vendors • Coolers in 1,367 stores in five states as of January 31 • Plan to add 1,000 stores and four additional states in 2003 • Average ticket with cooler transaction is $13.00 vs $8.50 without cooler transaction • 40% of the increase is non-cooler product • Allows the store to accept federal food stamps (EBT) A customer-driven distributor of consumable basics
Auto Replenishment • Automatic replenishment of 13% of SKUs in all stores – includes cough and cold, vitamins, family core apparel, insecticides • Tested auto replenishment on all core merchandise in select stores for over 3 years • Utilized in 175 stores in two regions since mid-year • Higher in-stocks and lower inventory levels • More even workflow at stores and distribution centers • Currently in over 350 stores; plan to expand to up to 2,500 stores in 2003 A customer-driven distributor of consumable basics
Store Manager Training • Curriculum • Week 1 – Classroom training - 7 Habits • Weeks 2 and 3 – in-store training • Week 4 – Classroom training - Role of the Manager • 23 training centers open • Total of 35 before summer • Currently only new managers; goal is to have all managers attend A customer-driven distributor of consumable basics
2003 Initiatives • Open 650 new stores, remodel or relocate 145, close 50-70 • Continued implementation of the “Seven Habits” • Continued emphasis on shrink reduction • Addition of coolers to 1,000 stores • Implementation of auto replenishment in up to 2,500 stores • Testing of debit, credit and EBT cards • Search for new distribution center site A customer-driven distributor of consumable basics
Financial Review Jim Hagan Executive Vice President and Chief Financial Officer A customer-driven distributor of consumable basics
Q4 Earnings Results and Reconciliation to GAAP A customer-driven distributor of consumable basics
Q4 Statements of Income A customer-driven distributor of consumable basics
Q4 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
Q4 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
Q4 Statements of Income (Dollars in millions except per share amounts) (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
Q4 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
Dollar General Corporation: Dollar General Corporation: FY 2002 Earnings Results and Reconciliation to GAAP A customer-driven distributor of consumable basics
FY 2002 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
FY 2002 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
FY 2002 Statements of Income (Dollars in millions except per share amounts) (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
FY 2002 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
FY 2002 Statements of Income (Dollars in millions except per share amounts) A customer-driven distributor of consumable basics
Balance Sheet Summary ($ in millions) (Dollars in millions) A customer-driven distributor of consumable basics
2003 Financial Guidance • 13% - 15% total sales growth • 4% - 6% same store sales growth • Net income growth of 11%-15%, excluding restatement-related items • 650 new stores, 145 remodels or relocations, 50-70 closings • Planning shrink improvement • No significant lowering of S,G&A to sales rate • Tax rate of 36.4% • Capital expenditures of $165 million A customer-driven distributor of consumable basics
Miscellaneous Topics of Interest • Share repurchase program – 12 million shares authorized through March 2005 • Increased quarterly dividend from $0.032 to $0.035 • David Perdue named as CEO last week • SEC investigation continues A customer-driven distributor of consumable basics
Our Mission Serving Others For Customers…A Better Life For Shareholders…A Superior Return For Employees…Respect and Opportunity A customer-driven distributor of consumable basics