Dollar General (DG) 26 Aug 212021 Q2 Earnings call transcript

Good morning. My name is Robert, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General Second Quarter 2021 Earnings Call. Today is Thursday, August 26th, 2021. All lines have been placed on mute to prevent any background noise. recorded. being is call This Instructions for available this the are replay to the Company's the in issued of earnings call listening press morning. release

your Vice like conference Lau, & you I'd turn your host, Mr. to Mr. conference. begin Now, Corporate Strategy. Donny of President to Lau, may Investor Relations over the

morning and Thank good you, everyone.

On with are today Owen, me, the Jeff Garratt, and COO, John Todd our call our Vasos, CFO. our CEO,

Events. dollargeneral.com, be can found our under today News issued investor. and release Earnings Our website on at

that you comments Such Reform plans, today's from These materially XX-K, facts. Risk but statements, not in about guidance, defined March uncertainties that XXXX, morning, issued to caution future and factors beliefs forward-looking subject our XXth, filed limited this me expectations Litigation are Let statements could are our expectations, to comments strategy, cause in results Securities in include, XXXX projections. that about are investments, limited matters and this Form Act those as in to identified call. include our initiatives, priorities, our on These release are the to as opportunities, and actual differ historical Private made or that the on goals, other risks XXXX. of earnings Factors and statements statements under

call disclaims this unduly obligations in to forward-looking should as revise required statements General information on date. rely discussed Dollar any You of update not which by speak today's only any law. or unless

questions remarks, limit the open end News for call the mentioned, measures. one question one morning's on will investor. under release, we follow-up GAAP are your and this measures your non-GAAP necessary. the posted questions. also if earnings We Events. of comparable will I our as included up At certain Reconciliations dollargeneral.com to most financial the prepared reference which Please in to is and

the pleasure Now, to it Todd. turn call to my over is

everyone Thank our call. to you, Donny. joining And welcome

continue challenging our to the by be Despite fulfilling operating including dedication supply results the brought associates the their saw market in product with serving environment, teams by and to and compared our our we on a grateful We successfully sales and to deliver continue our second-quarter are consumable an uncertainties mission remains Because during pressures customer global efforts our to once for for adapt additional pleased others. to Variant again, of their of measured quarter, traffic customers. Delta highly improvement our what share chain, as and on as syndicated data. QX, in increased

current believe the ahead, are things Looking well-positioned we controlling and to supply control, we challenges. navigate and remain focused global we can on chain the inflationary environment

of is As miles of our are primary always, and to about five customers Officer. value of XX% XX,XXX the To of of we believe meeting communities stores we Medical we than and located the safety we that Chief supporting the continue within U.S. convenience. and our serve. while And our well-positioned our employees recently needs customers through population, our more with health first focus, combination hired the end, unique

health our meet on long-term further as offering, the and and priorities operating and access in of our affordable Overall, position products our to with initiatives, growth. healthcare America. include for continue of focused particularly customers evolving remain Dollar plans of forward, rural expansion we we strategic goal our sustainable to needs Going further increasing services, the General

Quarter performance. to now our Second Turning

a of in stack a robust on sales declined period, year, from decreased continue difficult increase comparisons a XX.X% which X.X% the compared billion, XXXX. XX.X% the net to translates increase to quarterly QX $X.X we followed basis. two-year to sales Comp lap by prior-year sales X.X% As prior into

Comp basket size. sales a was to were offset in And cadence perspective, great partially which decline by May, of pleased month being is the traffic, a a include that performance. to the results growth report in year-over-year I'm our sales QX lowest customer off with average July QX monthly Our strongest in From start.

customers Importantly, appeal with foundation most value to acquired convenience position, distinct retail, XXXX, it, store stronger of the we in an Overall, new we in larger, results further with retention than multiyear initiatives, the be we a customer competitive operate and from the proposition. continue second-quarter more ultimately of from believe a our positions and enhanced resulting success. as further differentiating we underscoring sectors provides grow. us advantage broader, continue the reflect our which rates one the strong broadening of and very footprint, Dollar will We base of landscape. to pleased believe execution in pandemic entered across engaged even to we exit rest and continued the well in our and General We distancing while many through unique for attractive retail fronts, strengthen discount our our when

we we which initiatives, will significant also short, the we're we're groundwork opportunities creating the while and call In mode, pursuing the very the feel we are right confident forward. I'll the of over mature growth about for a strategies business, meaningful shareholder good long-term now strength sustainable turn in growth underlying balanced As to laying John. growth believe move value. as I With and to enable that, unlock retailer future

and you, Todd, good Thank morning everyone.

few a you comparisons to all let references Todd take and refer fiscal the to through are year-over-year, the of all me some share, years diluted note corresponding you financial that through has highlights year. Quarter, otherwise, EPS refer we Unless all details. per taken noted its earnings specifically of Now to important

start sales, with discussed already Todd I gross will profit. As

in XXXX, As XX% significant combined our a a including in impacted by positively sales, net non-consumables sales QX profit increase categories. in of growth was gross reminder,

LIFO sales decrease the higher were provision, percentage XX.X%, and a basis an as gross to XXXX, that significant categories, QX, basis costs. increase from most profit XXX to sales. were of damages. The attributable QX XX For reduction in points increase proportion These greater XXXX increase a percentage consumable higher decrease increase and inventory This were a an of a QX, was of inventory the a but of factors markups as percentage transportation of XX.X%, XXXX. driven was as a greater was primarily a expenses offset points, SG&A, increased sales of basis XX sales, retail and of was which compared to compared of costs occupancy percentage by by sales, shrink as and partially in points. of an store labor coming

the quarter income XX.X% down the for statement, $XXX.X million. profit decreased Moving to operating second

basis decrease comparison on a with we're As percentage sales, on operating basis. XXX of points. while the unusual margin rate, pleased pressure of improvement was a X-year in X.X%, our difficult our a prior-year the very And profit created operating and profitability

XX.X% Our was in second effective year. tax and compares the XX.X%, quarter rate to quarter last for the

over the QX XX.X% EPS XX.X% EPS Finally, XXXX quarter adjusted decreased compared for two-year a annual XX.X% $X.XX, to or which second to reflects period. rate of growth a compound

balance XX.X% the now of XX% to returns inventories on basis. financial term shareholders. increase and second a the Turning long investing while an were flexibility provide quarter, end continue flow, delivering the cash which our significant of sheet and at for billion remains to overall per-store and strong the us to $X.X Merchandise

extremely sales non-consumable purchases categories lead during of certain in longer levels low by Similar unusually inventory we quarter, anticipation select that quarter. driven strategically times. pulled in in the particularly which volumes inventory cycle in to continue QX, we strong QX of were XXXX, As forward

$X.X the As inventory and to billion. and season, spending a the back pleased and of for the QX, our for to goods to result, we generated through quarter position related totaling back-to-school half our remaining projects, and with in Total other operations stores, continue significant were with distribution closely capital our relocations, the we seasonal from new and and Year-to-date $XXX strategic our suppliers planned strong remodels, transportation initiatives. in million, cash teams were year. of flow investments expenditures shopping delivery included work ensure

$XXX shares the cost for end of quarter, X.X million $XX was authorization a million. quarterly At per of remaining million. common share the $X.XX we stock a common During at outstanding and paid repurchase total of our dividend million share of the $XXX QX, repurchased

to priorities allocation and service well capital unchanged. remain continue Our

first Our return initiative. including in and our growth store strategic high priority opportunities, expansion investing is new

share We our investment-grade of managing about dividend current quarterly through three to ratio also leverage to to times adjusted in a remain cash anticipated and to committed all maintaining returning while shareholders rating EBITDA. credit payments, excess repurchases debt

outlook and our pressure Despite continued strong reflects an our Fiscal business. EPS pandemic, economic on we our impact its including cost additional first-half the and and uncertainty, to in are financial operate update updating the behavior, a inflation, supply consumer our of guidance duration which time we for recovery, and severity full-year on to chain throughout sales XXXX, COVID-XX chain, the Moving continue uncertainty regarding including the of performance. supply global

which a following XX% decline the growth X.X% same-store expect and of the reflects of now EPS $X.XX approximately to a growth in to basis, X-year X.X%, stack For to in XX% adjusted XXXX, EPS XXXX we X.X-X.X, the annual of to on XX% a sales or but of sales net range $XX.XX, which a XX% XX% over period. of growth XX%, to compound compared range the rate approximately to X-year reflects

to tax Our the EPS XX.X%. effective guidance range of an rate XX% assumes in

$X.X from to real billion. our remain stock billion to our XXth, share year to common May Our repurchase projects on we $X.X compared in now we With unchanged expectation approximately for earnings XXXX. of expect what release estate repurchases, stated regards about previous expectations of our this

investments. are our reflect for for to of $X.X higher expectations increasing range costs equipment the and of to billion supply pull-forward a chain we Finally, billion to projects XXXX, in $X.X spending capital select store

our Let me to now outlook. provide it some as relates context additional

cautious unemployment current additional we pandemic In and impact outlook, arising of from benefits. remain the federal continued uncertainties, expected given COVID-XX of sales, end the terms in of XXXX the our the

a keep where compared pressure on please markdowns, favorable provisions gross higher QX rates rate like continued performance results, in prior XXXX, expect sales abnormally sales half continue benefited increase Turning goods levels an to cycle of as to cost prior from our we the markdown due sell-through the increases. gross favorable gross less in we the the higher rates. mix a of cycle we strong to in LIFO margin we low mix the our reduction the result year, year, margin margin, mind, second and benefit Much and will from including a in of to as a in

to and at our as the our higher delays, demand in anticipate effects other to well do expectations. is for We costs compared half retailers, services also business as chain previous cost carriers. of second elevated higher seeing third-party Like port the supply transit

team these continue pressures. despite we're meet transitory navigating customer in our our these challenges, However, was and quarter demand confident strong during the to ability able to

to to strategic expect million regards represents in initiatives, the now basis keep challenging we our perspective, gross XXXX. made year-over-year profit a from includes mind SG&A, year following during points $XX further most please as the of in we that Finally, investments first in their our investments third of QX of in With in XXX rate improvement about quarter lap amount XX incremental $XX half the the incremental year. million This million roll-outs. an

operating our initiatives strong will the we results, team. the we to of However, closing, driven in our strategic and are as initiatives continue to in execution In DG than performance more are profit our from expect to expense. NCI which contribute to and offset will and Second margin Quarter Fresh SG&A margin aggregate, a testament the proud gross of we the entire positively expect by benefits XXXX, associated

while call drive With delivering expenses and value. term. consistent, As of shareholder new we the remain model we priorities in investing Jeff. store how financial strong, that, in for strategically cash I strong to manage with the disciplined continue long profitable ongoing confident business We the be our and and always, over flow, healthy will goal growth, performance to financial same-store free sales turn long-term to returns, capital

John. Thank you,

Let me on and our to next priorities update initiative. minutes strategic few take you operating the

growth. priority to operating sales execution team portfolio continues first Our drive strong robust profitable against The is initiatives. a of growth driving

continue more more performance offering to some in be margin Let sales than we're strong the me you and stores very initiative and take NCI QX, the pleased was available or across through base. with end X,XXX of our our The starting highlights, non-consumables recent we NCI at store of NCI. seeing with our

XXXX stores without sales track to increase on this expand more year-end, stores fact, of light comp this version, of a entire completing nearly total performance stores, of year-end compared to total than by NCI remain XXX stores NCI the over is our XX, we to the rollout across the goal chain to including offering by in offering. In the XXXX. an with improvement NCI and a rate, X% as Overall, meaningful contributing incremental gross in margin in to X.X%

Moving in-store to shelf with by our refreshed of differentiated and delivered items to top engage which vast with at affordable, our offering a differentiated hunt a exceptional treasure newest experience, and earnings $X success store aims experience, concept, further builds fun, customers our on shelf, continually majority NCI. or top merchandise, the through priced value less. and

new to concept. stores we remain locations, top-shelf bringing General results, early, sales the still traditional gross top-shelf expectations a our exceed conversions including And of to XX, number During four the both opened we while eight continue extremely which our our quarter, and of into margin. pleased total Store with for Dollar

initial our Dollar Store-Within-a-Store shop smaller General positive stores, market a incorporates including two into customers. by first we're which We our also results, larger footprint concepts, from recently of Popshelf reaction encouraged and the opened one

as up XX as a Store-Within-a-Store growth. for opportunities as concepts, see total for have growth Overall, year-end, concept. For Popshelf the to this XX up XXXX, excited to additional about very foundation the an we lay future by to remain unique differentiated we significant well we we remain incremental and on of and locations track to continue available

years. DG during of the initial for of to a team are the entire XX was dedication X from a frozen of self-distribution now refrigerated the facilities. very and thank over to our we completed across rollout to milestone This and shift that of a important more to and Fresh, the the hard than I'm quarter, which strategic completed pleased schedule. their the ahead direct the incredible past I stores report rollout -- rollout months chain XX,XXX delivering X.X Turning work Notably, want is now to is execution multi-phased goods. initial about reflection DG them and Fresh of the is

And production we a refrigerated As very savings frozen primary items, to to be on pleased we the our objective are reminder, DG the continue of is costs Fresh with reduce seeing. and

gross from Fresh our DG fact, network optimize benefit benefits markups. we scale. margin the further are expect we largest be we In to continues realizing to to inventory additional contributor as forward, And the and going higher our leverage continue

Another important seeing in-stock these brands. we the are with overall front, both Fresh is of of sales by And introduction this increase DG categories. and success levels additional we on pleased to are in national driven products, goal including the private higher and

further accelerating under in stores And capitalize we product our provides our optimize self-distribution introduced recently as the XX,XXX new DG our initial while produce offering, brand, XX our rollout plans, not continue differentiating to exclusive further we we look about believe our For capabilities. others. product extensive up Fresh time, included offering as was a potential over and example, Armour items to to we assortment, from path to and on while

expansion which our most program, cooler merchandising continues to be initiative. to Moving our impactful

creating year. to be opportunities by higher additional on-shelf all doors and added we and product half, than doors across availability, coolers, cooler first majority XX,XXX the XX,XXX base, wider even our drive high-capacity DG cooler doors selection, Fresh. this on During remain track more store enabled will these delivering in Notably, approximately install of the to

the In opportunities, margin margin we NCI gross DG and supply efficiencies, including global brand sales, shrink. addition in other continue Fresh, private to with associated to gross sourcing, improvements pursue chain enhancing and benefits

Our second priority growth is opportunities. capturing

real XXX Our total we strength In proven continues XX business. Quarter, estate and XXX new completed a be of remodels, including Second estate of to real our XXX model the stores, core high-return, a relocations. low-risk projects,

full track For X stores, open on XXX relocate we XXX year, remodel stores, XXX and the to new X remain stores.

XXX year-end. to X XXX in products now we stores with offering total have a than plans expand by of this more X stores, to addition, In more than

format our new strategy, prototype nearly end including sales as the foot this above establishing base format, per expect total, key larger a we in made for forward. average formats, in store. trend We're changes As stores XXXX nearly square pleased going by as productivity square-foot of year. our average all have to stores our this recently larger development In reminder, traditional especially well the with X,XXX to the sales we to of continue an

America. we particularly our As and enhance value rural look further in proposition, convenience to

is our to and important footprint. complement we to further initiative, technology as access Next, customers. and an our which deploy enhance to leverage continue convenience digital for brick-and-mortar

engagement Our which to grow in our continues centered across mobile properties, building including app, remain around digital efforts our popularity.

the QX active X we with a prior on XX% the In fact, ended users nearly app, monthly increase million over year.

connecting become Importantly, compared which as levels prior-year partners excited very higher our for growth for brand and strategy the our partners. an during relevant consists XX% an about business, our our are of to the we platform as And we're we potential DG with both properties. continued Overall, drive across digital a period. first proposition digital platform experience. number to XXXX, pleased in more of has the further Of of engagement, increased Network, tailored shopping launched note, with frictionless, the our half, we this even campaigns our customers. building ecosystem the personalized on provide the growing we enhance Media we of brand And value look specifically digital are with and convenient, seeing more our increasingly our engagement customers to to customers

position leverage operating reinforce to a low-cost Our operator. third priority our is and as

to clear while a of zero-based to serve, all approach spending, to spending our mindset. customer internally decisions. defined we keeps control the to continues govern cost our budgeting have the This and branded disciplined control which approach, reinforcing do at process as We center safe

stores, and increasing example on-shelf where labor of include, this Our in improving Fast our productivity approach, availability. Track our convenience, enhancing great further initiative is goals a customer

stores. our Fast of our first more of resulting sizes, phase case consisted efficient rolltainers pack The the in optimizing of of Track stocking in

QX was customers and efficiencies this with we of to checkout the our The convenient the driving and including second for Self-checkout satisfaction overall stores adoption another customer in X,XXX end of be continue while solution, our stores in include also at approximately which greater scores flexible and Fast store self-checkout, results, associates. component rates available Track offering. pleased provides with is that higher

plans our look on as stores by retail. the in Our box and focused of consist into position, small the of roll-out introducing a further self-checkout innovative leader an XXXX, our this remain of we year, discount to extend vast majority we end broader as

quickly are a underlying while business expenses but Our capture and principles to the operator. opportunities controlling keep be seeking always move growth simple to to low-cost

investing is development, Our in fourth teams through our diverse and priority operating inclusion. empowerment,

a we the create new As continue communities serve. to retailer, jobs we in growing

sales recently As believe by goal purpose-driven Company and competitive hiring at placed, retaining above the talent. advantage currency associate because XX,XXX lead national remains start attracting employees us. an and the the our pleased event with unique in of up Dollar evidence, know that opportunity a with growing General launched I hiring is Day. to store and We position note our joined a greatest to with the a opportunity to to career were over a we meet their am goal. associates have grow And our they to and XX% develop of additional employees on And track who are internally we or Labor an career

the private and as as also our DG shelf. continued well including teams, to of innovate fleet our We those associated can expansion continued Pop opportunities with we on offer development the Fresh

efforts staffing yield above robust and positive these pipeline, continue internal evidenced, believe promotion to traditional a our levels. results across store base, we as by Importantly,

are our as closing, continue leaders was more every the Company leadership our earlier as than and than would in now head XXXX advance meeting team's questions. incredible excited I of about operating resulting our and our my mission our half by fulfilling held for their talent performance, we and our open of each the In I commitment offer into unwavering of that, strategic significant of to we operator, month, once growth one proud again our dedication very position lines of Overall, across like to Company. of am our pleased year, thanks inspired rich annual sincere priorities development employees we events opportunities the initiatives. we I the serving more With to of This others. to is favorite XXX,XXX people. and experience back a virtual year, for the to also want with this I'm my for We the and ahead.

you. Thank question-and-answer we'll conducting At a time, session. this be

Instructions]. If for you'd questions. to ask moment, poll we [Operators please, like question, One a while

Oppenheimer. Our proceed Please Rupesh question with first comes question. your from Parikh with

morning. Good for taking question. my Thanks

back wanted in of I made Todd, comments to So to the the one you script. go

color You said you QX seeing? terms good or in provide great guys start, are you start is you off more a what of to said. Any can

started good as We that products are got Rupesh, with us. for very our a And little by pocket, Back-to-school half, as anticipated money about domestically. in extra doing QX we go all forward. line as evidenced well is the overseas, to feel happy so we the way guidance out. has we the consumer getting sales of back our we from well as our pretty

half follow-up the then And John anymore takes of line of maybe provide you just if the pressures, just look can distribution you Great. Okay. for then expect into on and gross think back at in freight you you the terms on color about would line to them year? puts the next one gross persist to in margin the and year. the margin And

Yes.

the XX points continued previously costs, to Fresh, in NCI, pressure transitory but some in to points gross half, which higher on initiatives start year-to-date, DG we saying while pleased QX, QX we're to down like gross basis as So basis margin, up by performance be to and others with XXXX, due of do inflation, and very higher we're really than transportation XX over in results, expected. see QX with expect basis we continue up second contributing. primarily believe points terms our the Like I'll XX related margin we

product seeing we top with carriers. our and supply LIFO demand higher And a that, cost Of result in of course, as and transportation increases. the that's challenges mention great sales, some provision on then resulting third-party of with did elevated a we're capacity

we XX% lap that of the QX we course, Some have with pass mix. we challenging inflation others very talked and lapped as of have some a In non-consumable And year-over-year similar sales. about then along. seen

very in non-consumables the low so half, mix have clearance on activity non-consumable is a mix. favorable And fabulously, lap very then a last back doing associated also you while it's And you certainly business profile, still that unusually difficult high had with and that year with sell-through.

it lap. continue a expect while challenging So do to well, to provides we

a near-term inflationary difficult from private ahead, believe need through lap category brands our of the and believe expand a levers again spot you of near-term the benefit great to the look But We efficiencies invest term disposal the in with we're position which and believe our be as pressures, So we transitory. supply we're scale. with between the to chain get still initiatives, all and course, at that right we in in as growing see pressures. for long too, in-sourcing, shrink, over terms price of a continue And don't there. great believe management now to course margins to we

the I business, sure, of ever say are the we fundamentals feel future. good stronger than about near-term but and for pressure the very would So

but hard we and but year, supply happen. demand start next we issue this long when persists, exactly to push through Chinese we how that. Year. of through how end the be the beyond It's least to expect at this year, terms would to said it's This hard through New will of a expect hard to is In a hopefully say long this to to say that where elevated as really say that normalize, we

for you. luck of Great. the year. the of Thank balance Best

question. proceed with your Matthew question next Boss, JPMorgan. from Please with comes Our

that customer today would you you that, Just if the map first behavior for Todd, the to crises, crisis, new acquisition you're speak forward? near-term, that out or how moving you financial behavior this shop again, basket to time traffic think could that you're maybe the if out current of customer today. coming acquisition seeing the out it seeing we versus with General coming seeing of compared Dollar that So customers about and you're customer given

with especially great last with seeing Yeah. retention consumer. new Matt, a that took found really that's quarter, right you of pedal pushed year, we is what very you long you than think that launched to that by consumer, are through we never summer retention that that the as half we what, are back during what I'd crisis. shot, back program second down, When a what saw quite and tell moved we consumer. about we of And the that will, last question. our through if we're we the the pleased seeing I'm rate frankly That now accelerator. foot in say is new double expectation our 'XX, of happy higher financial off and

I So we that this box frankly that of to the relevancy quite attribute today. have

is John at non-consumable or you very, why really really important is looking, go in some XXXX and 'XX indicated, made with broad are a Then relevant, compared take keeping we changes look spectrum box that's enhanced we're more While of the nice out when across base, about now relevant it. coming think back much I that the And that believe side. is mix 'XX, much is this to we timeframe, of discretionary to think more that as piece consumer very and I how that pleased our when you consumer. really a

our as our then I non-consumable a not very at So look business, of a is two-year business only consumable but well. basis. for moment are doing the And how about very, stack looking, units other think some on components

our is needs. very, obviously see and drive consumers that that's XX.X%. strong. with That these she to again units the value existing new that to us real consumers, ability still line top were that very for testament up And Our a

So we we'll continue as that watch forward. go to

when it a a again, comes but when just more she it robust. that you on consumer, she our now, in stack of in little she has we when little Matter numbers. spends seen this a we extra as pocket, core goal, her and our know, is And reminder, XX%, we've very, 'XX, up our saw fact, and less she very see often, Our about number a comes acts long-term especially has two-year is as number. in always traffic that drive traffic consumer, little different extra to money, money --

we some stimulus a often, start is things less, through shopping normalize wane start Matt. may and spending money in believe when here, more extra So believe that pattern probably coming most government this the start system that she'll to likely, to and back normal a little of to we getting

just That's even see pandemic by think you're maybe on as a coming the guess Jeff, we follow-up, I efforts focusing category, share great remaining Maybe your Todd where front, low-hanging most or out market the you color. do about of the fruit where initiative from as here?

team's but really to do the job wants, Thank proud the know, Jeff. knowing they our flexibility a to category wants great way give skills to us as to of customer served. the you, Matt. such is our really, our also operators supply to customers, be chain you ability that be customer our what she of of serve management I'm able talking This a and and lot

DG pleased that roll-out, important gives our the ability And to that that continue And assortment. very with customer. us and broaden to Fresh so for very that category

that there. pleased So gains at very we're seeing the

it our share think strong Of quite that about our our it, in beauty business. very to well. at we've And two-year basis year this continue as quarter. look frankly, seen pleased as to grow well, you the results. ability we grow course And pleased and pleased that also overall at And ability in pleased health to very as very very there on

most be, better our quite wants customer and our always And served. So say teams to be is to as serve it I forward, box can frankly, this we than make to she the goal anybody. relevant would look that way the do the

It's Best great of Owen. luck.

you, Matt. Thank

proceed comes with Our Simeon from Gutman next with Morgan Please question Stanley. question. your

we're early, start the everyone. takes any 'XX, to some and guidance, it's to lapping next long the in picture, I top-line, algorithm not pressures going and of and if the and -- look on to maybe ease into I talking but term takes commit then relation Curious for don't linger be you'll algo, to the think know business? morning year. compares this good also margin how into all algo the when you puts stimulus some year, wanted could but I ask puts on the the get we'll just of but and Hi, into to will next

the said I've get Simeon, fundamentals to XXXX year; by normalized pressures tailwind and the mitigate and things transitory, pandemic I'll mix of the fluid point. said, the guidance as and that's we levels. as in great as at pressure just start normally unusually any these do is feel not duration big point lapping these, going we we well long unusually would that end believe, into the obviously to to at you clearance as some But at high the this. other as and Obviously, more great that going low are specific were these felt we we we non-consumable give our never X% as we've sales the team's this fundamentals, about But these, believe doing these X% don't algorithm before, I'm are as at look activity. depth that on of Again, saying high persist. we the provide normalize, algorithm. as terms this inflationary as better to how of the about job a

We expectations, the to customers brought to are of in been we've stickiness we've larger well the we've in, above baskets. as of even terms with these delighted able on as new what seen hold how

been baskets never the momentum brand and well the forward has think been line we're with to so lot trip, still I levers on and benefit, on mentioned more the And in and really what together the think I would things all our the see coming more this the bigger to fill And growing bottom have come relevant, new to margin, bodes a with help line. to And benefit top hang say the gross from these customers the to really going terms again, doing this disposal, at with with still our and strategic see sales initiatives, fuller as I opportunity we've of and able we initiatives in normalize. initiatives. provide there

to the allows in generates gross past. through then of cash expand see have push believe our done buy which our the rates a margin, and again, to leverage shares. we ourselves again, the us back the tremendous the at what strategic to that you to as initiatives tease we SG&A be in And So these, continue to we again, amount out business a of pressures, impact transitory we position when

real the with piece that the outlook the terms to ever, the as look with as economics we for at believe continue the in formats to point potential level So very very upping to for runway. space XX,XXX and of we our all and continues that future intact, the around when the and to units extend everybody well good for that's well you new I in feel We're estate, other innovate unit business is would algorithm units. good seeing Bonds

will XXXX as the about great the on into go year. the algorithm next we feel comment specifics So of

and is your Thanks Okay. topline into is tax How childcare snap any, then the half second the guide. for credits. much, And factored regarding second half, follow-up the that. if

What say and are I that is I a offsetting. say here moving directionally lot considered there's of would that, pieces all would of seemingly we've

of then then a benefit enhanced Waivers, the the directionally regardless child October did and and have get Thrifty XX% bit puts there bit Plan, have some benefits on with back enhanced do are which benefits, allows You you emergency roll-off Supplemental USDA's income. which puts the offsetting. Food they to with action then then of the of Benefits maximum The but benefits, you and is a Waivers is Tailwind, the folks allows there's but takes that extend when which from unemployment expires a Xst, a of credit, SNAP, that look the Headwind at tax

in and about exactly the what now. the very the all good on as impact would net directionally but feel at looks you to that's what So contemplated pieces, now the we hard guidance, and we it's look know based be, offsetting guidance say it right

it. Appreciate Thanks.

with with question next from Barclays. your question. comes Please Karen Our proceed Short

Hi, thanks guidance just second and half. entire the very I much. [Indiscernible]

for but your guidance the guidance realize we when second despite to what quite things, at in half, top-line second the margin, obviously or guidance you look EBITDA one EBITDA call down the two second margin it implied raised I that you out not but did half. So for so come obviously for sales. higher the for I the still the change raised can't the for year, implied account full the get half, that's guidance but

And a more had I there. picture. big color another then maybe little So

the on saying And the Good sales strong mentioned, about question, you EPS, first good our we I raise X-year by on updated to as this it's in look terms CAGR, when based held at on outlook. Karen. XX% feel of ceiling X-year did a of what CAGR floor half we the I'll We and look a that's EPS you the results. start at the important to guidance raised XX%. the implies But guidance. think lap,

would What we So feel about is pressure that from we tell have increased seen mentioned, we outsized great I seen, the you to performance as relative algorithm. freight.

the here as costs to through. pressures of did being mentioned transportation in extent. We heightened that limiting costs And higher passed largely a did that's costs, -- transportation LIFO some to around saw, terms terms is we our function of a so see up. did We ability take that factor provision, see and lesser we the with product others in of

in how of going we that the we It wait of the guidance normal back bottom-line a year. and the -- that we the we're So would top-line look to again, out. in play of tell that's and great again believe transitory nature to over really the change the But at pleased on the business. very and with terms but feel guidance step about algorithm. as the to really them pressures half and the been fundamentals with never better see the And things indicate driver the you that's be I performance of being the based

And benefits guess not true impact in I business will of the of how challenged? to And think kind that perspective is much struggle is that sure there that. customer that terms feeling the year there's puts helpful. view lower-end DG next these then really and takes But that will with flap. Okay. think I in That's the proportionately. about some general, do that general -- negatively I'm you I the more consumer if as your agree in core all

I retained very the good pandemic that customer her Karen, you, we tell I'll is Yeah. would core that as to customer. well. good we've this one. about remember feel keeping during about next Todd. also continue And this we And into engaged very this year and take about well feel retain,

as as next go ones more and to and are think we Right. we longer-term that healthcare couple play have believe the I then year, into always who fact us, even than all that about front heard and start been to Jeff, in like an when but initiatives newer you've we all of from You we pronounced brand and out both but weather will in we're with that some in who start have serve, before. now, even that it's every you play

And So little new when even times customer. times more good, aren't we've have are a our do consumer well. us when a will for trading got more times good, we little core bit that money pretty so seemingly that that gotten, negative turn we've and when now needs that customer

good vision feel and time, And each that algorithm long to hear X% it. over what term. can we the for but and we about feel not always So that once we our over control. every X% good again, control day. still comps towards We're growing is about And work give yet that XX, prepared to guidance we we the at

Great. Thanks very much.

Sure.

UBS. next proceed comes Our your question Please with Michael from question. the Lasser with

you and of that thanks to and the is lot morning, look X-year feel for do during retailers like XXXX back you consistent worked with experienced rate of of you've off Good largely sales pandemic. of of prior implies the way were heart to doing at the compound annual another what XX%, my year half taking for lot X% the a in the consumable Todd, to some it growth guidance the pandemic, question. a is, the which your excess

normalcy, a at Here. Were are new sustainable home, at less experiencing retailers workers your from time because consumable you've you've of a entered return other face and to that such you'll as drag them worksite and So from a your the [Indiscernible] initiative got working been the sales. customers drag you got perhaps have into whole a further less

that. all at look We

I yeah, X% of to But of about that our if on. feel not. good we you that notion and do that what number type we is is up, where whole I this, focused comp that we control talking she this well a about squarely tell control whether we're will, can That's consumer algorithm, tell lines in that or the rate, based would how say, implied again, what top on you and hit of really on but will. you of what our X% Michael ahead As if you is we you're would is you still

seeing even So I good we with we're that would us guidance year, you, get new tell say rates from and retention gives about the skis will be us feel this consumer, it'll and to that's confidence sales propel want and what the initiatives half that our have we the that of raise but ahead into the don't for from that to better, back it. I 'XX.

your that, fair you My to half basis like level DG for to simplicity was half follow-up NCI, John, pressure - point us XX XXXX, question is these margin quantify is on margin, have the the the gross of other you're it Fresh not XXXX for over costs? sake, the is much gross returned where of environment this elevated of increase because how and initiatives due to assume favorable and expecting from freight still promotions can and a

Yeah.

DG is terms out to and markdowns several the we product the the it same strip that associated initiatives fundamental big you biggest was and drivers, quarters Fresh, calling with NCI. was three and In benefits continue slower NCI. around of, as a lower again, costs driver see for [Indiscernible] we've out it kept huge talking DG like was from freight we costs, drivers, of And noise been when the Fresh. it

margin, so to of NCI the this to not those when out of the freight but with pressures and the of the that, want difficult give benefits. we lapped one, the I continuing to lap biggest a lesser improve would on continues drivers to noise don't you then changed. the much number growth Quarter, strip I and levers a XX% is more what's costs. of They're changed heightened gross grow. our non-consumable So we're see to that's that What say in biggest has product specific associated continuing to extent, been be

the a So that's we as then term, think growing to up out, that longer to on I that the Headwind we look in the that the back we a the half the that number what versus similar but number We and a specific say, one didn't we fundamentals was would are tell Headwinds, called continue be give be over expect freight, lifted -- is, thought. as Headwind that to did year, unchanged, transitory QX, of what drivers. we the although for we it's we previously us you really

Got it. much. Thank you so

Our with question. next Partners. your Guggenheim question comes John proceed from Rheinberger Please with

pharmacists product. Does about think -- How to Maybe that do think rise I biggest magnitude thoughts then type the drug about think opportunity hard. healthcare. curious of you and you opportunity. in get It's or donor want to that always said to, particular, have but I services, of the And you with share an way a about a is opportunity. I'm Do with the you on in to your in to stores. magnitude? start you partner sources independent guys there NCI

for would deserts there all from that, when across food you deserts. the equal then everybody, talked of about today, John, because really example, what They're on in so great have that's focused we're it an with asking whether could and that with background excited to. be many our squarely this want quarters, and my out so in stores, be what pharmacies thanks a front and making this even for will to communities could General, a be these America NCI? but pretty a those there's exam healthcare healthcare want be right? than or that to fishing that we're access hold especially to more consumers Dollar NCI. could deserts be out would by order, those big in example, easily of partnership? inside many so, line caution be for don't those drive to going it as for our in lot U.S..And grocery step that more question, years, this eye but we to but the minutes, Possibly, doctor. think even we're only line store, our We types pick-up benefit back top initiative in or get about over be an see exactly even talked health, of that over we I But of are bottom rural ski's, be really now the could could box but an relevant eyecare America would maybe not you bigger opportunity these an it a mail to and have it next to going here our doesn't all as it the know rule way, whether but at bill-to-order what services deal it delivery, not as I eclipse prescription things, services, journey whether about, a is telemedicine, we and I XX-XX

opportunity some So here. there's we that believe real

just tell pretty can journey beginning. voice. I'm my probably You is excited but of about the it,

eventually the format, the radar Just DG the but again right? over you I ask use rather on in as DG accomplish screen the bigger. doing to box small come a that. version the follow-up XXXX you'd time this another know There's this markets, When about as market the all store think I a to of where getting right that, to

especially, because stores give we continue in X format bought and you be -- population. that years within rural our few already few powerful within that The and that over stores we -- grow if that if stores of of piece, believes towards our we have and it overall we've back and John, bought have we the I it mentioned version DG smaller to combo could of believe well. of that as as though you And piece time market lot No. big cultivated just fact, grown strategy, those mile well. that. a ago, XX% could believe including options, could we'll a healthcare, Walmart pOpshelf we XX smaller more And a the box, Jeff genesis as talk that it a next was over of about a really we I be of got stores don't We the know working that matter be express we've the we even radius because of years. inside already, including

Thank you.

welcome. You're

next Our with BMO Capital. Kelly Bania your with question Please question. proceed comes from

my question. Thanks Hi. Good morning. for taking

in how freight versus domestic how just of much be freight, Just clear, passing of the ocean along to and terms that environment? are current is along passing much not you in or

from coming that majority I would of tell the the Headwind import you of that the equation. is side

seen been last bullish may very positioning, overall good ever. I've in we've you really along, the price of have as to tell that you've in second just that seen out our there, we feel Dollar ever the what there. the have say offset will. our than as with at for far better to if I you most, we here years, that is scale, price doing vendors, with do our and inflationary General size you it's our as remember negotiate happy some But good quarters, been instances. is as we've I'm probably and would many it's nature domestic taken able that, been, us, been over these Then few is market, is But here. it's some tightness manageable as is Headwind yet, some we import positioning, passing that as pretty but what side on it pressures We to as the

skew And in done we the quarters. don't we last to have to also. because we've should if we've that tell to many offer -- the been pass afford two that skews consumer. have XX, with need choose fact, along her, some thousand our skews something know price that drop would the to ill that quarter we that she'll we ability we just pick But lot a and increases. to onto price and XXX very XX So on increases can our else consumer the move also in believe we've I we'll And you, we been price very passing thoughtful on core

And Great. just That's on helpful. a follow you comment wanted very to up made. also

-- puts including takes terms benefits. macro half, about end and some the of the extended the of the and unex of You in talked the the of back unemployment

in employee the when Just you those seeing ended of benefits, the top what environment. and wage are line states some on and both curious, just in also states the those from impact

Yes. when unemployment staffing. we have that. What off, saw I'll What and initial states rolled applicant pickup initially is is, the nice news see in did at enhanced the good we environment, we're employee as, start the seeing that seen within you now, the benefits. with look across we The flow system. What

And then tax it that's so it's the not hard up a negative credit little and because did we to puts rolled see of is see states a it's have a impact and as now the we little we at but all way benefits everything then that's now offsetting. see that and I as unemployment when bit, But a We in benefit the enhanced helpful. so been directionally the takes, said think you did impact we huge discern why off. of we bit mentioned, look child the impact,

you. Thank

comes Michael proceed question. Evercore question ISI. Please your from Montani with with last Our

Thank you. surprised we've in area. seen that some the was to bit ask I Headwind, discretionary of that on from just on. just strength retailers some a given have little two One, other things the

timing little a help you would kind a And of that could then just more the explain was why and to be the Headwind, on was I hoping that off? what's for So traffic. roll bit follow-up then

from retailers Michael, I would Last HeadWind shutdown the year. one-way talked hours, stems I other really we still, year, think limited discretionary about tell either the we robust aisles. number last were that had you,

communities you we I We swing year the serve. pretty remember helping in all much that were think full all out that. last of

our it So the we years discretionary year a initiatives, other other half be and back of move feel because our of matter move tell really the it going our as basis. pOpshelf to that of is initiatives, we robust We more right now Headwind. on. to for platform two-year discretionary we're I I really so in fact, into way, about as basis. because 'XX, proud working business feel that 'XX, basis on of couldn't into and are and wouldn't where characterize it a NCI on out but very you, than the of watch many subside into we would any year-over-year that happier, things we on other was good starts stack come about a and

to stack XQ on and to high X-year been just two-year clarify great. see a wanted that's stack? Okay, traffic, Was traffic for single-digit you And decline trying do trending. then Just the XQ if a XQ. on how

core a what we that two as got as COVID, numbers here. the traffic of haven't see numbers Yeah. tell are saw the her in things starting happens to were, consumer those that and in earlier, states What back back what X, I with much starting COVID I'll wane, is her to to due smaller right? side, as would we states still our shopping continue contracting numbers anticipate place, occur that's we last second. in our levels. you you we the see takes mentioned that months. move starts out we'll more and that you, know to And those see just couple and now income especially but in starting start more. is dynamic in wane. less that to Number And year through we're said some really many traffic we're patterns have sizes I remember explain What I see on, on traffic. starting exactly play still consumer flaring And of have the half that of dynamic a And to to over And we're start around as little rebound. last getting basket obviously others, come to the going have to it's certain year. what the as stimulus and normally is, to seeing not we're you've traffic is consumers

Thank you, and luck. good

At like call closing comments. Todd the end the back this question-and-answer of reached over to for have time, turn Vasos would the We to session. I

continues a all Well, to saying I execute the to team, great of your General. for by thank at in am Quarter. another much questions high and I Dollar this for very you thanks which start interest in proud want how level, resulting

we exciting same-store a today, we sales, over in and of well-positioned proposition. we believe heard number operating profit employee you As have place initiatives strong share time, a to stores, are grow while new market margins, providing and

and overall, the great very you results, about the about and business, Thank I'm good have underlying a I feel optimistic of for listening, hope So day. proud the you. Thank future. year-to-date very you

conference. today's concludes This

participation. your You may we and disconnect thank for time, your you this at lines