What changed in this filing

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Item 1. Business

2022-03-18 compared with 2021-03-19 · 43 added, 38 removed, 138 unchanged (37% of the section changed)

13 unchanged sentences

COVID-19 Pandemic

Throughout 2020, the COVID-19 (coronavirus) pandemic resulted in widespread and continuing impacts on the global economy and has affected our business, as well as our customers, suppliers, and other business partners.

In early March 2020, we began seeing heightened demand from customers, particularly for consumable products such as paper, food, and cleaning products.

Shortly thereafter, we also saw a significant increase in demand for many non-consumable products, including home, seasonal and apparel, resulting in a significant overall mix shift into non-consumable categories.

We have also seen a shift in customer behavior toward trip consolidation, as customers are shopping our stores less frequently than in the same period in 2019, but purchased a larger average basket amount.

To address the increased demand, we increased our hiring of new store associates and worked with suppliers to incorporate new items in stores to meet the essential needs of customers while addressing certain product shortages and vendor allocation limitations.

We incurred significant incremental expenses related to the pandemic, including appreciation bonuses for retail, distribution and transportation employees, as well as for health and safety measures.

We expect to continue to be affected, although the extent and duration is unknown, by the COVID-19 pandemic and its effects on the economy in a variety of ways, potentially including changing consumer demand (whether higher or lower) overall and in certain product categories, supply chain interruptions, increased distribution and transportation costs, and increased costs in an effort to maintain safe work and shopping environments.

Throughout 2020 and 2021, the COVID-19 (coronavirus) pandemic resulted in widespread and continuing impacts on the global economy and affected our business, as well as our customers, suppliers, and other business partners.

In March 2020, we began seeing heightened demand from customers, particularly for consumable products such as paper, food and cleaning products.

Shortly thereafter, we also saw a significant increase in demand for many non-consumable products, resulting in a significant overall sales mix shift into non-consumable categories in 2020.

Overall, the mix of consumables to non-consumables sales in 2021 remained relatively consistent with 2020.

Since 2020, we also have seen a shift in consumer shopping behavior towards trip consolidation, along with an increase in average transaction amounts.

In 2020, we incurred significant expense related to the pandemic, including appreciation bonuses for retail, distribution and transportation employees and health and safety measures.

Although some of these expenses continued in 2021, they were not as significant as in 2020.

We expect to continue to be affected, although the extent and duration are unknown, by the COVID-19 pandemic and its effects on the economy (including governmental response thereto), including its impact on the global supply chain and increased product, distribution, transportation and other costs.

Our Business Model

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1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing our position as a low-cost operator, and 4) investing in our diverse teams through development, empowerment and inclusion .

For more information on these operating priorities, see the “Executive

Overview” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

In 2020, we achieved our 31st consecutive year of positive same-store sales growth.

We believe that this growth, which has taken place in a variety of economic conditions, is a result of our compelling value and convenience proposition, although no assurances can be given that we will continue to achieve positive same-store sales growth in any given year and we currently believe it is unlikely that we will achieve positive same-store sales growth in 2021 as a result of the unusually high sales results we experienced in 2020.

For more information on these operating priorities, see the “Executive Overview” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of this report.

From 1990 through 2020, we achieved 31 consecutive years of positive same-store sales growth.

As a result of the unusually high sales results we experienced in 2020, we did not achieve positive same-store sales growth in 2021.

Notwithstanding the unusual circumstances of 2020 and 2021, we believe that this consistent growth over many years, which has taken place in a variety of economic conditions, is a result of our compelling value and convenience proposition, although no assurances can be given that we will achieve positive same-store sales growth in any given year.

Compelling Value and Convenience Proposition.

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We strive to provide customers with a highly convenient, easy to navigate shopping experience.

Our small-box stores make it easier to get in and out quickly.

Our small-box stores make it easier to get in and out quickly, and our digital tools and offerings help drive even greater convenience and additional access points.

Our product offering includes most necessities, such as basic packaged and refrigerated or frozen food and dairy products, cleaning supplies, paper products, health and beauty care items, greeting cards and other stationery items, basic apparel, housewares, hardware and automotive supplies, among others.

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Substantial Growth Opportunities.

We believe we have substantial long-term growth potential in the U.S., and we have identified significant opportunities to add new stores in both existing and new markets.

We believe we have substantial long-term growth potential in the U.S., and we have identified significant opportunities to add new stores in both existing and new markets, which include our new pOpshelf concept.

In addition, we have opportunities to relocate or remodel locations within our existing store base to better serve our customers.

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Consumables is our largest merchandise category and includes paper and cleaning products (such as paper towels, bath tissue, paper dinnerware, trash and storage bags, disinfectants, and laundry);

packaged food (such as cereals, canned soups and vegetables, condiments, spices, sugar and flour);

packaged food (such as

cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar and flour);

perishables (such as milk, eggs, bread, refrigerated and frozen food, beer and wine);

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Our stores generally feature a low-cost, no frills building with limited maintenance capital, low operating costs, and a focused merchandise offering within a broad range of categories, allowing us to deliver low retail prices while generating strong cash flows and capital investment returns.

Our stores average approximately 7,400 square feet of selling space, and approximately 75% of our stores are located in towns of 20,000 or fewer people.

Our stores currently average approximately 7,400 square feet of selling space, and approximately 75% of our stores are located in towns of 20,000 or fewer people.

Beginning in 2021, our primary new store format averages approximately 8,500 square feet of selling space.

We generally have had good success in locating suitable store sites in the past, and we believe that there is ample opportunity for new store growth in existing and new markets.

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Depending on their financial situation and geographic proximity, customers’ reliance on Dollar General varies from fill-in shopping, to making periodic trips to stock up on household items, to making weekly or more frequent trips to meet most essential needs.

We generally locate our stores and plan our merchandise selections to best serve the needs of our core customers, the low and fixed income households often underserved by other retailers, and we are focused on helping them make the most of their

spending dollars.

At the same time, however, Dollar General shoppers from a wide range of income brackets and life stages appreciate our quality merchandise as well as our attractive value and convenience proposition.

We generally locate our stores and plan our merchandise selections to best serve the needs of our core customers, the low and fixed income households often underserved by other retailers (including grocers), and we are focused on helping them make the most of their spending dollars.

At the same time, however, Dollar General shoppers from a wide range of income

brackets and life stages appreciate our quality merchandise as well as our attractive value and convenience proposition.

Our Suppliers

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Despite our broad offering, we maintain only a limited number of items per category, allowing us to keep our average costs low.

Our three largest suppliers accounted for approximately 9%, 8%, and 8%, respectively, of our purchases in 2020.

Our two largest suppliers accounted for approximately 9% and 8%, respectively, of our purchases in 2021.

Our private brands come from a wide variety of suppliers.

We directly imported approximately 6% of our purchases at cost in 2021.

In 2020, COVID-19 caused disruptions in our supply chain, making it more difficult to obtain certain products in sufficient quantities to meet customer demand and increasing distribution and transportation costs.

We anticipate these COVID-19 effects to persist to some degree through at least the first half of 2021, although the ultimate extent and duration of the COVID-19 pandemic and its effects are unknown.

Prior to 2020, we have generally been able to obtain sufficient quantities of core merchandise and in cases where one or more of our current sources of supply became unavailable, we generally have been able to obtain alternative sources.

Alternative sources could increase our merchandise costs and supply chain lead time and expenses, result in a temporary reduction in store inventory levels, reduce our selection, or reduce the quality of our merchandise, and an inability to obtain alternative sources could adversely affect our sales.

In 2020 and 2021, COVID-19 and its impacts caused disruptions in our supply chain, at times making it more difficult to obtain certain products in sufficient quantities to meet customer demand and increasing distribution and transportation costs.

We anticipate these COVID-19 effects to persist to some degree, although the ultimate extent and duration of the COVID-19 pandemic and its effects are unknown.

Prior to 2020, we had generally been able to obtain sufficient quantities of core merchandise and in cases where one or more of our current sources of supply became unavailable, we generally had been able to obtain alternative sources.

In situations where it becomes necessary to secure alternative sources, we may experience increased merchandise costs and supply chain lead time and expenses, a temporary reduction in store inventory levels, and reduced product selection or quality.

An inability to obtain alternative sources could adversely affect our sales.

Distribution and Transportation

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In addition, our quarterly results can be affected by the timing of certain holidays, new store openings, remodels, relocations and store closings.

Consumer behavior driven by the COVID-19 pandemic has resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.

Consumer behavior driven by the COVID-19 pandemic and its accompanying impacts has resulted in a departure from seasonal norms we have experienced in recent years and may continue to disrupt the historical quarterly cadence of our results of operations for an unknown period of time.

Our Competition

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Our direct competitors include Family Dollar, Dollar Tree, Big Lots, 99 Cents Only and various local, independent operators, as well as Walmart, Target, Kroger, Aldi, Walgreens, CVS, and Rite Aid, among others.

Certain of our competitors have greater financial, distribution, marketing and other resources than we do and may be able to secure better arrangements from suppliers than we

Competition is intense and we believe it will continue to be so, with certain competitors reducing their store locations while others move into or increase their presence in our geographic and product markets and increase the availability of mobile, web-based and other digital technology to facilitate a more convenient and competitive customer online and in-store shopping experience.

Certain of our competitors have greater financial, distribution,

marketing and other resources than we do and may be able to secure better arrangements from suppliers than we can.

We believe that we differentiate ourselves from other forms of retailing by offering consistently low prices in a convenient, small-store format.

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Our Intellectual Property

We own marks that are registered with the United States Patent and Trademark Office and are protected under applicable intellectual property laws, including, without limitation, Dollar General®, DG®, Clover Valley®, and trueliving® along with variations and formatives of these trademarks.

We own marks that are registered with the United States Patent and Trademark Office and are protected under applicable intellectual property laws, including, without limitation, Dollar General®, DG®, Clover Valley®, trueliving®, and p Opshelf® along with variations and formatives of these trademarks.

We attempt to obtain registration of our trademarks whenever practicable and to pursue vigorously any infringement of those marks.

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Building on our core value of respecting the dignity and differences of others, our goal is to create a work environment where each employee is encouraged and empowered to bring their unique perspective and voice to work each day.

Based on a talent philosophy of “Attract, Develop, and Retain”, whether an individual works in a store, a distribution center, our store support center or our international sourcing offices, over the last 80+ years, we have helped millions of individuals start and progress in their careers, providing employees with numerous opportunities to gain new skills and develop their talents, supported by our award-winning training and development programs.

We seek to provide market competitive compensation and benefits packages that attract talent to the organization and then retain and incent them for performance.

Based on a talent philosophy of “Attract, Develop, and Retain”, whether an individual works in a store, a distribution center, our store support center or our international offices, over the last 80+ years, we have helped millions of individuals start and progress in their careers, providing employees with numerous opportunities to gain new skills and develop their talents, supported by our award-winning training and development programs.

We seek to provide market competitive compensation and benefits packages that attract talent to the organization and then retain and incent employees for performance.

Although eligibility for and the level of benefits vary depending on the employee’s full-time or part-time status, compensation level, date of hire, and/or length of service, the broad range of benefits we provide or make available may include:

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healthy lifestyle and disease management programs;

a broad range of discounts for products and services;

education assistance benefits;

parental leave;

adoption assistance;

and service award recognition.

service award recognition;

and a broad range of discounts for other products and services.

To help measure the success of our overall employee compensation and benefits programs, we monitor employee applicant flow and staffing levels across the organization, as well as employee turnover, particularly at the store manager level.

As a testament to our employee development efforts, in February 2021 we were inducted into Training magazine’s Hall of Fame, following two consecutive years as the magazine’s top training and development program and rounding out 10 consecutive years among its Top 100 list.

In 2020, we estimate we invested nearly three million training hours in our employees to promote their education and development.

In 2021, we estimate we invested over three million training hours in our employees to promote their education and development.

Our internal promotion rate helps us measure the success of our development programs.

As of February 26, 2021, we employed approximately 158,000 full-time and part-time employees, including divisional and regional

managers, district managers, store managers, other store personnel and distribution center and administrative personnel.

As of February 25, 2022, we employed approximately 163,000 full-time and part-time employees, including divisional and regional managers, district managers, store managers, other store personnel, and distribution center, fleet and administrative personnel.

As of the end of 2021, approximately 76% of store managers and thousands of additional employees, including several members of our senior leadership, have been promoted from within our organization.

To ensure we are creating an environment where our employees feel respected, safe, empowered, and motivated, we regularly monitor retention and engagement levels across the organization through a variety of means, working to understand what is important to our workforce and how we can best continue to meet their evolving needs.

To ensure we are creating an environment where our employees feel respected, safe, empowered, and motivated, we regularly monitor retention and engagement levels across the organization through a variety of means, working to understand what is important to our employees and how we can best continue to meet their evolving needs.

Compliance with Governmental Regulations

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Although we routinely incur significant costs in complying with the laws and regulations applicable to the Company, and we can make no guarantees that future such costs will not be material, to date, compliance with these laws, rules and regulations has not had a material adverse effect on our capital expenditures, earnings or competitive position.

Many of our entry-level store employees are paid at rates in line with the applicable minimum wage, and consequently, in certain situations, increases to such wage rates have increased our labor costs.

If federal, state and/or local minimum wage rates were to increase significantly and/or rapidly, compliance with such increases could adversely affect our earnings.

Additionally, if significant changes in the corporate tax rate occur in the future, such change could adversely affect our overall effective tax rate and earnings.

Many of our entry-level store employees are paid at rates in line with the applicable state minimum wage, and consequently, in certain situations, increases to such wage rates have increased our labor costs.

If federal, state and/or local minimum wage rates/salary levels were to increase significantly and/or rapidly, compliance with such increases could adversely affect our earnings.

Additionally, if significant changes in the federal, state or foreign corporate tax rates occur in the future, such change could adversely affect our overall effective tax rate and earnings.

See “Risk Factors” in Part I, Item 1A for additional information regarding government regulations that could impact our business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business