Dollar General Investor Day Notes

Todd Vasos

We check prices every two weeks

“we check prices every two weeks in our top 250 and we check prices across our entire 10,000 SKU portfolio about once a quarter against again all the disciplines you see here of mass grocery and drug. So we know every two weeks exactly where we stand on retail prices on the shelf.”

Being out of stock is about the worst thing you can do to a customer

“we check prices every two weeks in our top 250 and we check prices across our entire 10,000 SKU portfolio about once a quarter against again all the disciplines you see here of mass grocery and drug. So we know every two weeks exactly where we stand on retail prices on the shelf.”

Opening 1000 stores in 2017 with an 18-20% return on investment

“Number two is capturing those growth opportunities. With 13,000 opportunities out there, we opened up 730 stores last year, we’re opening up 900 this year and I’m sure many of you saw we announced yesterday we’re going to open up 1000 stores in 2017. That’s aggressive growth but it’s growth that we can manage and when you look at the returns, I don’t know about you, but I would give my personal investment money to anyone that tells me and show me that I can get an 18% to a 20% return on my money and that’s exactly what this new store profile does for us”

Jim Thorpe

Our core customers continue to live in a recessionary environment

“our core customer continues to live in a recessionary environment and understanding the challenges of our customers and what they face and how it influences their shopping behaviors and attitudes allows Dollar General to serve them better than anyone else. ”

Our customers have some tailwinds, but the headwinds outweigh the tailwinds

“Now it’s true our customers are benefiting from some economic tailwinds. There’s been some minimum-wage increases but that only helps customers who have a minimum-wage job but it could also cost jobs too. Unemployment is coming down. Last month we added 242,000 jobs to the economy but our customers they may be saving a few dollars at the pump with lower gas prices but what you’ll see is these savings really haven’t shown up in their spending. And that’s because we believe our customers face much stronger headwinds in this economy than tailwinds”

Inflation is simply outpacing wage growth

“And one of the biggest challenges that our customers are facing is that inflation is simply outpacing total wages ”

Our customers simply haven’t received the benefit of the economic recovery

“There were no cost of living increases this year and that particularly hurts our SNAP and Social Security recipients especially hard. And healthcare costs and rents continue to rise which also impacts our customers more than higher income households. This has resulted in the majority of Americans living on the bubble of economic uncertainty. 60% of Americans don’t have a savings safety net of $1000 and 20% don’t have a savings account at all. So as you will see, our customers simply haven’t received the benefit of the economic recovery. ”

Households earning less that 52k have seen negative wage growth since the recession

“households earning less than $52,000 have experienced negative wage growth. Now these are our core customers and only households in the top fifth quintile have seen any real income growth since the recession and most of that’s being driven by the top 5% of earners. So you can see that our core customers who were financially strapped before the recession are even worse off today. ”

Our customers need us now more than ever

“our customers need us now more than ever and our everyday low prices that will help them stretch their shrinking budget”

Dollar General 3Q15 Earnings Call Notes

Todd J. Vasos

Because our consumer is cash strapped, she tends to shop closer to the holiday

“As we see it, our core consumer, because she is always very cash strapped. She does shop closer to the event, so whether it would be 4th of July during the summer, whether it would be Halloween in the fall, or even holiday time around Christmas, she tends to shop heavier in the days leading into those holidays. Now she is always been that way, but we’ve seen it get a little bit closer to the holiday each and every year now for the last two years.”

What does it mean to change to zero-based budgeting

“There’s a couple of key changes when you move to zero-based budgeting, and I’ll say we’ve had great process rigor in discipline in place here. Thus your switch to zero-based budgeting it really is a fundamental process change where you’re doing a bottoms-up budget making trade-offs and forcing prioritization versus building a budget off of a prior year base. It’s also a cost management change focused on dual ownership where you have department — traditional department budget owners as well as horizontal cost category experts who help drive, increase scrutiny and resource allocation. And then also really driving the ownership mindset where we’re putting our best resources against the best uses to the ones that Todd mentioned of what touches the customer and what’s aligned with our strategic priorities, while also mitigating against risk and making sure we’re putting our money where we have the biggest returns. That’s what I would say are the key differences, and we’re well into that process of implementing that.”

People tend to leave a job for two reasons: supervisor and workload

“The two things that are most — most, very important aspects of turnover and the reason that people leave. Number one, the relationship with their supervisor, and number two, workload.”

The quarter showed a very tame pricing environment

“the quarter really showed a very tame pricing environment to be very honest with you. No significant promotional activity above last year and I’m happy to say that our price competitiveness is exactly the same as it has been to get all channels at trade.”

Still plenty of room for 6-7% sqft growth

“we don’t see anything structurally that gets in a way of a 6% to 7% square footage growth rate as we go out into the outer years. In saying that those opportunities are a nice fine balance of urban, suburban if you will and our rural locations, and that’s the great thing about how we’ve set this up is that, as we continue to open stores in the outer years it will continue to be a fine balance between those two and there is still tons of opportunities in both urban areas and our metro suburban areas.”

We haven’t seen much inflation, have seen deflation in some categories

“Like most retailers we haven’t see a lot of inflation. And as you indicated in some key commodity areas like fluid, milk, some coffees et cetera, we’ve seen some deflation. Those are big categories for us. So sure that is a headwind for us in some of our food categories where that deflation has slowed our top line or out the door retail a little bit. But the great thing about Dollar General and how we look at the business is any time we can offer the consumer a lower price, its best for her and it gives her more money to spend elsewhere and hopefully in our stores.”

Our customer does seem to be spending this gas price savings differently than expected

“to your point, she seems to be spending this — in this savings and gas prices a little differently. I think you almost look at it as; she’s sort of spending on deferred maintenance for her household. So and/or whether it be the automobile they just — they didn’t quite fix because they didn’t have the money or the refrigerator that they’ve been putting off buying for the last few years, it looks like she’s spending money on that right now. ”

We feel good about November, but our consumer, as usual is under pressure

“our November sales were right on our original plan or original forecast. So we feel very strong about November. And when you look at the overall comment, it is the environment that our consumer is in. Our consumer is always under pressure. I mean, she lives that way, but she’s so resilient and she figures it out. But she needs us to help her figure it out, and that’s what we’re here to do. She is facing a lot of headwinds especially in rents. I mean, rents are up tremendously over the past few years. Our core consumer — our core, core consumer nearly 50% of her take home pay is going to rent today versus just a few short years ago 37%. So you can see the headwind that she’s gotten and quite frankly not a lot of wage growth for her. ”

John W. Garratt

Wage pressures are on the rise, but we are doing a good job managing them

“we continue to watch as wage pressures in some areas are on the rise, but I have to tell you that our operating team in hiring our ROE employees have done a fabulous job. And we are competitive where we need to be competitive and we’ve seen virtually no difference today than we have in the past year.”

Andrew Sohn Notes: BBY, PVH, SDRL, DG

Consumer demand for technology products growing

“Our first observation is that overall consumer demand for technology products and services including appliances and mobile phones is growing. This growth is driven by technology and product innovation and by micro factors such as population growth, the housing recovery and healthy living trends that are driving momentum in our appliance, home theater, connected homes and health and wearables business, which, we believe, will remain positive catalyst in quarters to come.” –Best Buy (BBY)

Customer service from brick and mortar stores might still be relevant

 

“the investments that we’ve made in our Renew Blue strategy to offer advice, service and convenience at competitive prices are paying off. This is evidenced by the market share gains we have achieved in the NPD-tracked categories, our growth in appliances and mobile phones and the overall positive domestic comps and expanded operating income rate that we have delivered both last year and year-to-date this year.”-Best Buy (BBY)

 

Efforts to work upstream

 

“In some cases, we actually work very much upstream, including in terms of product design and the choice of feature functionalities, and then this co-designing, the customer experience and in the marketing. In some cases, it’s more about the merchandising and the marketing. So there’s a whole range, but it’s – in general, what I would highlight is that it is – it happens earlier on. It’s more strategic, it’s more integrated and it’s working.”-Best Buy (BBY)

 

Online and mobile part of a general selling process

 

“we report online sales and it’s an important part of our business, but we believe that online and mobile are a much bigger part of the business than just the online sales, because it’s really front door to the store. This is where we all notice. This is where the customers start the research.”-Best Buy (BBY)

 

Greater use of online research has decreased store traffic in addition to online purchases

 

“Because when the customer gets to the store, she has done a lot of research and she’s much more educated than maybe a few years ago. And so it’s maybe that in some cases we see fewer trips to the store, because so much time has been spent before the store. And so the focus in the store is on the customer experience.”-Best Buy (BBY)

 

Affordable luxury prevails in China

 

“We’ve seen how the luxury market has been hit from the sales point of view. We haven’t experienced anything like that. I think our brands are – both Calvin and Tommy are very well positioned in that market as premium brands, affordable luxury.” -Phillips-Van Heusen (PVH)

 

Added boost fourth quarter form early Chinese New Year

 

“we are going to benefit in the fourth quarter like everyone else from early Chinese New Year, which really impacts a lot of the Asia markets. It’s about two weeks to three weeks earlier this year and you’ll get – you get two things happening; you’ll get earlier actual retail sales in the stores that we are operating, but also because of the early Chinese New Year, wholesale shipments are falling into January out of February.” -Phillips-Van Heusen (PVH)

 

Currency impact is minimal

 

“Well, the Chinese currency impact has been relatively small. It’s about a 3% reduction. So, I mean, that is what – at this point, what that might portend as the world – as you extrapolate that and if there’s more pressure on the Chinese currency, clearly that might make an opportunity for fall 2016 and beyond. But right now, at this point, with the pressure you’re seeing on labor rates offset by some currency benefit, it’s very marginal, just on that particular front.” -Phillips-Van Heusen (PVH)

 

Europe looking good, but need to address growing concerns over costs

 

“we’re actually seeing positive sales trends in Europe. We believe that economy is coming back and that consumer is re-engaging. The challenge we are facing in Europe for 2016 will be cost increases that are double-digit cost increases, and how much of that is reasonable in one or two seasons to pass on to the consumer. That’s the biggest challenge we’re facing in Europe.” -Phillips-Van Heusen (PVH)

 

European performance driven my stifled US tourism

 

“I think a lot more Europeans are staying home. And by staying home, I mean, I think they’re vacationing this summer within Continental Europe and UK where their euros are buying more, where if they come to the United States, forgetting everything else, their hotel and food, just from a currency point of view, is up 20% to 25%.”-Phillips-Van Heusen (PVH)

 

 

 

Amazon a great partner

 

“Our Calvin Klein Underwear business in particular is by far the largest selling underwear on the Amazon site, as you would expect giving them that product category. So they’re a great partner. We really manage that very closely from – making sure it’s brand enhancing. We just don’t want goods on the site. We want the brand experience on the site. And they’ve been very good at getting us that.” -Phillips-Van Heusen (PVH)

 

Commodities down again, drilling can’t get a break

 

“Following the recovery in oil prices during the first quarter, commodity prices have again moved lower and are now approaching the lows we show in the beginning of 2015. This continued low commodity prices environment’s reductions in oil companies spending plans and an increased over supply of drilling units, continues to have a negative impact on utilization and pricing.” -Seadrill (SDRL)

 

Hardships will continue for a while

 

“Subsequently dayrates remain at or below breakeven levels for both the floater and jack-up markets. We believe this challenging market will continue through 2016 and the visibility for 2017 and beyond is depended upon commodity prices stability, oil companies realizing the benefits of the capital spending rationalization programs and continued fleet attrition.” -Seadrill (SDRL)

 

No growth till 2018

 

“In light of the likely continued cold scrapping, stacking and new build delays, they remain at the high likelihood that there will be limited or no growth in the marketed fleet between now and 2018.” -Seadrill (SDRL)

 

“Haven’t reached the bottom yet, not M&A and distressed assets right now”

 

“Well, there will be M&As and there will be distressed assets and what have you. I don’t see it come right now, it will come and, I think, well we will talk again in the quarter, and nothing will happen now in the quarter.” -Seadrill (SDRL)

 

Macroeconomic headwinds subsided

 

“What we saw was once we got through the month of June and into July, the weather patterns normalized, the heat returned and those torrential rains in Texas and Oklahoma and other areas subsided. And we saw a return to a little bit of a normal pattern where our consumable and non-consumable businesses both did very well as we moved into the weeks of July to the end of July.” -Dollar General (DG)

 

 

Customers need to see stability before confidence to spend goes back up

 

“I think it’s way too early to have seen and we really haven’t seen any indication that the consumer is spending anything more because she has additional wage money in her pocket. But again, our core consumer is a little different in that before she starts to spend, she really needs to have confidence and see a sustained ability that income will continue to come her way. So, she is a little bit slower on pulling the trigger on spending a little bit more money.” -Dollar General (DG)

 

Back-to-school looking good

 

“Now the great thing here at Dollar General that we’ve seen is that where school has already started, our back-to-school comps are hitting and/or exceeding our expectation.” -Dollar General (DG)

 

 

 

 

Dollar General 2Q15 Earnings Call Notes

Same store sales strong in may weak in June, but stronger in July

“Same-store sales started out strong in May with June being weaker and sales strengthening in July. It is my belief that this was reflective of the weak overall U.S. retail sales report for June and mirrors what you have heard from some other retailers. Sales per square foot reached a record $225.”

Relatively new CEO

“Thank you, John. As I approach the conclusion of my first 100 days as CEO, I am as excited as ever about the opportunities ahead of us at Dollar General. I feel great about the team that we have in place, and I am confident that Jeff and Jim will play an important role in Dollar General’s long-term success. The team is energized and excited as we look to help our consumers save time, save money every day.”

As weather normalized, sales rebounded from June

“When we looked at our sales, it really did mirror, I think, what the nation saw at retail out there. What we saw was once we got through the month of June and into July, the weather patterns normalized, the heat returned and those torrential rains in Texas and Oklahoma and other areas subsided. And we saw a return to a little bit of a normal pattern where our consumable and non-consumable businesses both did very well as we moved into the weeks of July to the end of July. So, that’s what gives us confidence in our guidance for the full year in sales because we’ve seen that our sales have rebounded from that dip in June.”

Haven’t seen consumer spending more with higher wages

“we really haven’t seen any indication that the consumer is spending anything more because she has additional wage money in her pocket. But again, our core consumer is a little different in that before she starts to spend, she really needs to have confidence and see a sustained ability that income will continue to come her way.”

The calendar shift of labor day is making some anxious but back to school has been good where not affected by it

“the calendar shift has caused a little angst probably out there with the consumer, only from the standpoint that Labor Day has been pushed back a week, as you know. And most states with schools, they sort of key off of that Labor Day date. So in a lot of cases what we’ve seen is that the back-to-school has been pushed back in the calendar a little bit.

Now the great thing here at Dollar General that we’ve seen is that where school has already started, our back-to-school comps are hitting and/or exceeding our expectation. So we feel very good about that”

Going to open 900 locations next year

“We’re going to open 730 new units this year and we’re targeting about 900 new units next year and we continue to see these new units perform at about 85% the comp base. And we continue to see them, as I said, deliver great returns”

Competitive environment is rational

“I have to say that the environment is still very rational. And when we look out, we don’t see anything that’s structurally – where that changes.”

Currently have 12k stores going on 13k

“When you look out across our store base and the beauty of Dollar General is we got over 12,000 stores and working our way to 13,000 stores. And as you can imagine, in some areas, we’ve got better standards than others, and we’re always working to make sure that we better our standards”

Dollar General 1Q15 Earnings Call Notes

New CEO incoming

” Last week we had very exciting news announcing that Todd Vasos would be the next CEO of Dollar General. Todd will be an excellent CEO and I believe a great future lies ahead for Dollar General under his leadership.”

West coast port drag not too bad

“In the first quarter the negative financial impact from the West Coast port slow down was not as great as we anticipated. Due to the diligent work across both our supply chain and merchandizing teams, we successfully mitigated the expected drag to sales and gross margin we had projected at the time of the fourth quarter call.”

Low gas prices are good but our core customer is still struggling

“while this is encouraging news, our core customers are still struggling to stretch their household budget. Historically, our core customer is often a first to feel the negative effects when the economy weakens, and she lags a benefiting from improvements in the economy.”

We’ll have expansion but comps will get tougher

“we’re fairly confident that we will have expansion for the year but as we continue to move throughout the year, the compares get a little tougher to last year and that rate of growth with gross margin will subside somewhat as we continue to move but we feel pretty confident that we will have expansion as we move through the rest of the year.”

retail environment pretty rational

“he macro environment out there in retail, it’s always very competitive but I think the best way to still characterize it is it’s been rational across all channels of trade, mass grocery and drug.”

Our customer has to have prolonged confidence

“I think the way to look at it is that she also has to feel confident over a longer period of time and I think as we continue to move through the year and if everything stays where it’s at or gets a little bit better her confidence level is going to build and her spending will probably build with that because again, she doesn’t have a lot of disposable income.”

hallmark of a great retailer is driving productivity at the store level

“as it relates to the wages, we’re continuing to monitor that, we monitor everything out there at retail and wages are no different. But keep in mind, we still have a lot of flexibility and the real hallmark of a great retailer is the ability to drive productivity at store level and we will continue to do that”

Dollar General 4Q14 Earnings Call Notes

West coast ports will take months to clear

“As we mentioned, we’re closely monitoring the residual effect of the West Coast port slowdown and the impact on our seasonal merchandise receipts. The good news is that a tentative agreement has been reached, but it will take months to clear the backlog. Right now, based on the current status of shipments and the uncertainties surrounding the situation, we anticipate a possible drag to earnings of about $0.01 to $0.02 per diluted share in the first quarter and we’ll continue to monitor the impact to the timing of receipts and any potential sales and markdown risks as we work through the backlog.”

Could have 13k locations

“We still see over 13,000 opportunities for Dollar Stores in the continental United States. As we committed, we’re going to accelerate our store growth in 2016.”

CFO retiring

“Just briefly, obviously, retirement is a personal decision. I’m at the age where most people start to think seriously about it. This gives me a rare opportunity to spend lots of valuable time with my two teenage sons as they finish their last years of high school, and now I’ll be able to make all of their events, which is something most fathers don’t get to do.”

7500 sqft box is our sweet spot

right now, the best format we have when you mentioned competitors like Aldi, is our 7,500 square foot box. Yeah, there’s some – Aldi has some more consumables in it. But, you’ve got to remember, we’re a convenient shop. We’re not a destination shop. And I think that 7,500 box, when you look at that producing $223 a foot, you look at where it has come from, we believe that is the best piece we’ve got.”

No plans to raise wages

‘ we’re going to continue to monitor the landscape and we’ll assess or make any adjustments that we need to make. But, right now, in terms of what we’re paying our people, we feel pretty comfortable that we’re there.’

Dollar General 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Consumer still cautious

“Our second quarter same-store sales began very strong, with a year-over-year increase in May of more 3.5%. However, this growth moderated as we moved through June and July, given the competitive environment in a consumer who although resilient in the face of economic uncertainty, remains cautious with their spending. ”

low and middle end is continuing to struggle

“You’ve heard other retailers say this, low and middle end consumers are continuing to struggle. They have changed their buying habits. Data now suggests that out of necessity, many folks have reduced their overall consumption and absolute unit growth across Nielsen measured channel data supports this. While our customer always finds a way to work through difficult time, she is struggling to overcome the sustained nature of the headwind she is facing.”

11k stores

“At the end of the second quarter we had 11,535 stores with 85.2 million square feet of selling space in 40 States”

Back to school has been strong

“I would like throw out back to school for us, we are having a very good back to school right now. Our back to school categories, we’re up 4.5% right now. In fact this week which is the first of two really intense weeks, we are actually up over 7% in the categories that are related to back to school. And I relate that to the fact that the environment has cooled down and everyday low price has a lot more value right now.”

Rural/urban stores tend to work out to the same margin

“Our rural stores tend to do very well. They operate at a lower volume rate than the urban stores and they tend to have a lower expense structure than the urban stores. Both stores tend to carry about the same margin in all honesty.”

Back half will be competitive but not irrational

“as we move through the back half of the year, I think the competitive environment will be heightened, but I don’t think it’s going to irrational.”

The consumer is focused on events

” think the activity in the consumer is more focused around certain specific events. And I think Labor Day and we are prepared for a pretty intense Labor Day but then we think things will probably settle down for a period of time. We are ready to go for Black Friday. We’ve got our Christmas plan in place and I see no deviation from what we have laid out.’

Concerns about dockworkers strike

“The other thing I’d like to throw out there, I’m sure you guys are aware there’s an import strike scare out there. And we made a conscious decision to bring some of our holiday merchandise in a little sooner.”

Dollar General 1Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“It’s my belief that the best way to judge the health of a retailer for this quarter is based on the strength of his core business. For us, that would be our consumable business, and we delivered a strong same-store sales improvement in this category. However, our non-consumable or discretionary categories were soft during the quarter as sales of seasonal merchandise and apparel were impacted by the weather.”

“Although our consumable categories did pick up nicely in April, we did not see a similar recovery in our discretionary categories.”

“At the end of the first quarter, we had 10,662 stores in 40 states, well on our way to our next milestone of 11,000 stores.”

“as we look at tobacco purchases, we are seeing about 1/3 with tobacco only, and the remaining 2/3 are tobacco plus one or more items.”

“the non-consumable side of the business is going to need just a little bit of help from the economy, I believe…I had anticipated that the non-consumable side would accelerate at a faster pace as we move through April. And we didn’t see that, albeit we are seeing it improve as we are moving through May and June, but still not at the rate that I thought it would at this stage of the game.”

“much like a lot of the other major retailers out there, we have been looking down the road on this for 6 or 7 months. And our inventory on the non-consumable side is very healthy. It’s not like we have an issue there that’s going to sneak up on us.”

“there’s a lot more people who have an income under $50,000 a year than those that have an income of over $100,000. And…I actually feel better about the environment that our customer is in. We went through the Memorial Day weekend without a big spike in gasoline prices. I think that’s a very positive thing for us.”

“I would tell you, the warmer market that haven’t been impacted by the weather, our discretionary sales, particularly spring and summer, are just fine”

“Mark, there’s no doubt that store manager turnover and shrink, there is a direct correlation…And there’s also a direct correlation to store standards and customer service.”

“There is no evidence at this time that there’s a change with the trade-down customer or the trade-in customer…[when we did a survey] there was no indication from the higher demographic that if the economy got significantly better, that they were going to trade out of the channel…right now, the fastest-growing customer segment we still have is that customer that’s around $50,000 to $70,000 a year, which is above the income of our core customer.”

Dollar General 4Q12 Conference Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$DG 4Q12 Earnings Call

[on how Q1 is looking so far] “no doubt that there’s $18 billion worth of tax refund that are still working their way into the system. There’s, what is it, $180 billion in payroll tax adjustments that are out there. And Meredith, those don’t just affect Dollar General or the dollar channel, that affects all of retailing in general. We’re up against our stiffest quarter of the year last year in terms of sales comp. And my chief merchant was reminding me just this morning that last week (sic) [year] the temperatures in United States were about 70 degrees, and this year they’re about 38. So you had that significant weather factor we’re dealing with. We are incredibly confident that as we move through the year and our merchandising initiatives get put in place and we come up against softer comps, that we’re going to see our results begin to accelerate as we move through the year.”

“we added another [accounting] department for tobacco. And obviously, it’s going to be a low-margin department because tobacco is a low margin and then that’ll get into the consumable overall margin.”

“I think the competitive environment right now is reasonable. It’s competitive, but it’s not irrational.”

“I think the increase in debit really more reflects just the change in society, I think, and how they deal with cash. I don’t know necessarily if we’re attracting a different customer or our customers are moving up. I think it’s just a social change that’s taking place.”

“But when you’re in retailing, there’s nothing more than unit share growth, that is the most important thing. And our unit share growth continues to be in the high single digit.”