Q1 2025 Dollar General Corp Earnings Call
Good morning, My name is Rob and I'll be your conference operator today.
At this time I would like to welcome everyone to the dollar General first quarter 2025 earnings call.
Today's Tuesday June 3rd 2025.
All lines have been placed on mute to prevent background noise.
This call is being recorded construction.
Instructions for listening to the replay of the call are available on the company's earnings press release issued this morning.
Kevin Walker: Now I'd like to turn the conference over to Mr. Kevin Walker, Vice President of Investor Relations. Kevin You May begin your conference.
Speaker Change: Thank you and good morning, everyone on the call with me today are Todd <unk>, our CEO and Kelly Dilts, our CFO our earnings release issued today can be found on our website at Investor <unk> dollar General Dot Com under news and events.
Kevin Walker: Let me caution you that today's comments include forward looking statements as defined in the private Securities Litigation Reform Act of 1995, such as statements about our financial guidance long term growth framework strategy initiatives plans goals priorities opportunities expectations or beliefs about future matters and other statements that are not.
Kevin Walker: Limited to historical fact.
Kevin Walker: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.
Kevin Walker: These factors include but are not limited to those identified in our earnings release issued this morning under risk factors in our 2024 Form 10-K filed on March 21, 2025, and any later filed periodic report and in the comments that are made on this call.
Kevin Walker: You should not unduly rely on forward looking statements, which speak only as of today's date.
Kevin Walker: Dollar general disclaims any obligation to update or revise any information discussed in this call unless required by law at.
Kevin Walker: At the end of our prepared remarks, we will open the call up for your questions to allow us to address as many questions as possible in the queue. Please limit yourself to one question now it is my pleasure to turn the call over to Todd.
Todd: Thank you, Kevin and welcome to everyone joining our call. We're pleased with our started the year, including strong results that exceeded our expectations on both the top and bottom lines.
Kevin Walker: We believe our efforts are resonating with a wide range of customers as they continue to seek value in our more than 20000 store locations around the country.
Kevin Walker: Our results are a product of the dedication of this this team to serving our customers and communities every day.
Kevin Walker: Wanted to thank each of them for their great work. They continue to do in our stores distribution centers private fleet and store support center to fulfill our mission of serving others.
Kevin Walker: For today's call I'll begin by recapping some of the highlights of our Q1 performance as well as sharing some of our updated consumer observations and our current approach to tariffs.
Kevin Walker: After that Kelly will share the details of our financial performance as well as our updated financial outlook for fiscal 2025, I will then wrap up the call with an update on some of our key growth driving initiatives.
Kevin Walker: Turning to our first quarter performance net sales increased five 3% to $10 $4 billion in Q1 compared to net sales of $9 $9 billion in last year's first quarter.
Kevin Walker: Contributing to this strong top line growth, we opened 156 new stores during the quarter as we continued to expand the number of communities we serve.
Kevin Walker: We also continued to grow market share in both dollars and units in highly consumable product sales during the quarter. In addition to growing market share in non consumable product sales.
Kevin Walker: Same store sales increased two 4% during the quarter driven by growth of two 7% and average basket, including relatively similar increases in average unit retail price per item and average items per basket.
Kevin Walker: Customer traffic slightly decreased by <unk>, 3% during the quarter, but remained strong on a two year stack basis, as we lapped the 4.3% traffic increase from the prior year's first quarter.
Kevin Walker: We are excited to see broad based category growth during the quarter with positive comp sales in each of our consumables seasonal home and apparel categories.
Kevin Walker: With both our seasonal and home categories comping at or above 3% during the quarter, we were especially pleased to see our non consumable product categories resonate with our customers for the Easter and early spring seasons.
Kevin Walker: From a monthly cadence perspective, all three periods were positive led by April which benefited from the later Easter compared to the prior year. We believe these topline results are a testament to our improved execution as well as the customers across multiple income bands seeking value.
Kevin Walker: To that end, we continue to feel good about our everyday low price position relative to other competitors and classes of trade as a reminder, our goal is to be priced within three to four percentage points of mass on average and we ended Q1 within our targeted range.
Kevin Walker: In addition, we continued to carry at least 2000 skus at or below the increasingly rare $1 price point as we seek to help our customers stretch their dollars.
Kevin Walker: We believe this value offering will be come increasingly more important to customers in the months ahead.
Kevin Walker: During a recent customer survey work, 25% of DG customers reported having less income than they did a year ago and nearly 60% of our core customers noted that they felt the need to sacrifice on necessities in the coming year.
Kevin Walker: While our core customer remains financially constrained we have seen increased trade in activity from both middle and higher income customers.
Kevin Walker: Our data shows that new customers. This year are making more trips and spending more with us compared to new customers from last year, while also allocating more of their spend to discretionary categories.
Kevin Walker: We believe these behaviors suggests we are continuing to attract higher income customers, who are looking to maximize value while still shopping for items, they want and need.
Kevin Walker: To that end in Q1, we saw the highest percent of trading customers. We've had in the last four years. We are pleased to see this growth with a wide range of customers and are excited about our ongoing opportunity to grow share with them.
Speaker Change: Before I turn the call over to Kelly I wanted to provide an update on how we are thinking about the impact of the evolving tariff environment on our business.
Kevin Walker: Our direct imports remain a relatively small percentage overall overall purchases with most years in the mid to high single digit range, while our indirect import amount varies in recent years, we estimate it.
Kevin Walker: <unk> to be approximately twice that of our direct imports.
Kevin Walker: We have continued to diversify the countries of origin as part of our direct foreign sourcing strategies in recent years importantly, we have successfully reduced our China exposure exposure to less than 70% of our direct imports and we estimate less than 40% of our indirect imports are sourced from China.
Speaker Change: Uh huh.
Kevin Walker: Well, we have relatively low exposure, we are working diligently to mitigate the impact of current tariffs on our business as much as possible using many of the same tactics that we used successfully in 2018 and 2019.
Kevin Walker: These actions include working with our vendor partners to reduce reduce cost on a variety of ways, including negotiating cost concessions shifting manufacturing to other countries, where possible reengineering products or finding substitute products.
Kevin Walker: While the tariff landscape remains dynamic and uncertain, we expect tariffs to result in some price increases as a last resort, though we intend to work to minimize them as much as possible.
Kevin Walker: In turn we believe our customers will continue to seek opportunities to save money and we remain committed to serving them with the everyday low prices. They have come to know and appreciate from dollar general.
Kevin Walker: Overall, we are proud of our Q1 performance and the tremendous progress we continue to make in the business, including lower year to date turnover at all levels within our retail operations and.
Kevin Walker: An improved overall supply chain on time and in full rate.
Kevin Walker: Higher in stock levels and lower inventory levels.
Kevin Walker: All of which has contributed to an improved in store experience for our customers and our associates.
Kevin Walker: Our efforts are you yielding positive results and we believe we are well positioned to succeed in a wide range of economic environments. As we continue enhancing our value and convenience proposition for our customers with a focus on working toward our long term financial goals and creating.
Kelly: Long term shareholder value with that I'll now turn the call over to Kelly.
Kelly: Thank you Todd and good morning, everyone now that Todd has taken you through a few of the topline highlights of the quarter. Let me take you through some of the other important financial details.
Kelly: Unless we specifically note otherwise all comparisons are year over year, all references to EPS refer to diluted earnings per share and all years noted referred to the corresponding fiscal year for Q1 gross profit as a percentage of sales was 31% an increase of 78 base.
Kevin Walker: This point this increase was primarily attributable to lower shrink and higher inventory markups.
Kevin Walker: Our shrink mitigation efforts have continued to drive positive results, including a year over year improvement of 61 basis points in the first quarter with regards to damages. The year every year change was slightly favorable which was relatively in line with our expectations.
Kevin Walker: The gross margin increase was partially offset by increased markdowns, which were primarily driven by promotional activity during the quarter. As we took this opportunity to serve our customers with targeted price markdowns.
Kevin Walker: Turning to SG&A, which was 25, 4% as a percentage of sales an increase of 77 basis points.
Kevin Walker: The primary expenses that were a higher percentage of net sales in the quarter, where retail labor incentive compensation and repairs and maintenance.
Kevin Walker: Moving down the income statement operating profit for the first quarter increased 5.5% to $576 million.
Kevin Walker: As a percentage of sales operating profit was relatively flat at five 5%.
Kevin Walker: Net interest expense for the quarter decreased to $64 $6 million compared to $72 4 million in last year's first quarter.
Kevin Walker: Our effective tax rate for the quarter was 23, 4% and compares to 23, 3% in the first quarter last year.
Kevin Walker: Finally, EPS for the quarter increased seven 9% to $1.78, which exceeded the high end of our internal expectations.
Kevin Walker: Now turning to our balance sheet and cash flow, while we continue to make great progress in strengthening our financial position.
Kevin Walker: Merchandise inventories were $6 $6 billion at the end of Q1, a decrease of $344 million or 5% compared to prior year and a decrease of 7% unapproved store basis. The team continues to do a tremendous job reducing inventory while increasing sales.
Kevin Walker: And improving in stocks, which is having a positive operational impact in both our stores and distribution centers.
Kevin Walker: The business generated cash flows from operations at $847 million during the quarter, an increase of 27, 6% compared to the prior year.
Kevin Walker: This strong performance is a result of our sales results and ongoing inventory management efforts. Additionally, with the continued focus on strengthening our balance sheet.
Kevin Walker: We're able to use cash on hand to repay $500 million of our senior notes in Q1, which was earlier than the November maturity date and ended the quarter with balance sheet cash and $850 million.
Kevin Walker: During the quarter, we returned cash to shareholders through our quarterly dividend at <unk> 59 cents per common share outstanding for a total payment of $130 million.
Kevin Walker: Overall, we are very pleased with our cash and inventory positions and the progress we've made in strengthening our balance sheet. We're proud of our strong performance in Q1 and continue to position the business to deliver value for our associates.
Kevin Walker: Customers and shareholders moving forward.
Kevin Walker: With that in mind I'd like to discuss our updated financial outlook for 2025.
Kevin Walker: We believe our positive first quarter results are a testament to the importance of our value and convenience proposition for our customers, particularly in a time of continued uncertainty and are financially constrained courts and sema.
Kevin Walker: Furthermore, our Q1 performance has positioned us well as we look towards achieving our guidance range for 2025.
Kevin Walker: However, the tariff landscape remains dynamic and uncertain and there is a higher degree of variability and potential outcomes around tariff related impacts, including on consumer spending cost of goods and the supply chain.
Kevin Walker: With this in mind, we're updating our financial guidance for 'twenty 'twenty five to reflect our Q1 outperformance, while considering a heightened level of uncertainty as we move through 2025.
Kevin Walker: The updated guidance assumes current tariff rates remain in place through mid August 2025, when the 90 day pause on the increased tariff rates on the goods from China is set to expire and we have plans in place to address the potential reversion to the tariff rates previously announced on goods from China on April 2nd 2020.
Kevin Walker: Five.
Kevin Walker: Our financial guidance is based upon our best estimates and assumes successful mitigation of a significant portion of the anticipated tariff impact on our gross margin, but also allows for some incremental pressure on consumer spending.
Kevin Walker: We believe this is the prudent approach to setting expectations at this point in the year and we're excited about the potential for our business as we move throughout the year with that in mind, we now expect the following for 2025.
Kevin Walker: Net sales growth of approximately $3 seven to four 7%.
Kevin Walker: Same store sales growth of approximately 1.5% to 2.5% and E. P. S in the range of $5.20 to $5.80.
Kevin Walker: Our E. P. S guidance continues to assume an effective tax rate of approximately 23, 5% and that we will not repurchase shares under our share repurchase program now.
Kevin Walker: Now I want to provide some additional context around our expectations.
Kevin Walker: While we're not providing specific quarterly guidance, we expect SG&A in Q2 to be pressured by a more significant year over year increase in incentive compensation expense than other quarters as we lap the prior year reversal of the incentive compensation accrual I also want to note that for the full year.
Kevin Walker: Year, we now anticipate incentive compensation expense to be a headwind of approximately $180 million to $200 million.
Kevin Walker: As we look to the top line for the remainder of the year, we expect the potential impact of tariffs on our core and trading customers could be more substantial price increases take effect more broadly across retail.
Kevin Walker: Moving to the final portions of our guidance for 2025, we continue to expect capital spending in the range of 1.3 to $1 $4 billion designed to support our ongoing growth.
Kevin Walker: This includes our continued expectations to execute approximately 4885 real estate projects in 2025, including 575, new store openings in the United States up to 15 in Mexico 2000 project renovate Remodels 2200.
Kevin Walker: And and 50 project elevate Remodels and 45 relocations.
Kevin Walker: Importantly, we believe that the tariff impact on our net capex will be minimal.
Kevin Walker: All of this aligns with our capital allocation priorities, which begin with investing in our business, including our existing store base as well as high return growth opportunities such as new store expansion and strategic initiatives.
Kevin Walker: Next we seek to return cash to shareholders through our quarterly dividend payment and overtime and when appropriate share repurchases.
Kevin Walker: Finally, I want to provide a brief update on how we're thinking about and planning to communicate our adjusted debt to adjusted EBITDAR leverage ratio.
Kevin Walker: Going forward, we intend to speak to our target calculation using balance sheet lease liabilities in place of the more general eight times rent multiple that we have communicated historically yeah.
Kevin Walker: Using this approach, which aligns with the calculation more frequently used by credit investors and rating agencies, our leverage target is below three times adjusted debt to adjusted EBITDAR.
Kevin Walker: While our leverage ratio remains above our goal, we are making good progress reducing it closer to our target level and we remain focused on improving our debt metrics in support of our commitment to middle Triple B ratings by S&P and Moody's.
Kevin Walker: In summary, we're pleased with our Q1 results and our performance to begin the year, we continue to make progress against our goals and while we have more work to do we're happy to see our efforts translating into improved financial results. We're excited about the future of this business and we're confident in the long term approach.
Todd: Including our long term financial framework. We believe this business model is strong and that we're well positioned to drive sustainable long term growth on both the top and bottom lines, while creating long term shareholder value with that I'll turn the call back over to Todd. Thank.
Todd: Thank you Kelly I wanted to take the next few minutes to provide updates on three of our most important initiatives across the business as we look to accelerate our progress toward achieving our goals.
Speaker Change: I'll start with our real estate work as we continue to execute a significant number of projects aimed at driving market share growth and new communities as well as in our mature store base as I mentioned earlier, we opened 156, new stores in Q1, primarily using our 8500 square foot formats.
Speaker Change: Notably the cost to build new stores has risen more than 40% since 2019, and these formats average approximately $500000 to open including both capex and inventory to <unk>.
Speaker Change: Fight. This increase we continue to target healthy returns of approximately 17% on average for our portfolio.
Speaker Change: This team is working to further reduce cannibalization this year by focusing on new communities per dollar Jeff.
Speaker Change: In addition, we are increasing the number of operating weeks for new stores compared to prior years by pulling forward more projects even earlier in the year.
Speaker Change: As a result, we expect to open the vast majority of our new stores within the first three quarters of this year.
Speaker Change: We are also pleased with the progress of our remodel projects to begin the year. As a reminder, in addition to our traditional remodel program, which we call project renovate we have introduced a new incremental remodel program called project elevate.
Speaker Change: This initiative is aimed at bolstering performance in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline.
Speaker Change: These projects include physical asset investments as well as merchandising optimization project product adjacency adjustments and category refreshes impacting approximately 80% of the total store.
Speaker Change: In addition, while the cost of a project renovate remodel is approximately half that of a new store.
Speaker Change: Elevate remodel cost significantly less notably we anticipated returns on both of these projects to well exceed the healthy returns generated by our new stores.
Speaker Change: We completed 668 project elevate stores in Q1 <unk>.
Speaker Change: And an additional 559 project renovate remodels during the quarter.
Speaker Change: As we focus on driving greater profitability in our mature store brace base. Our goal is to drive first year annualized comp sales lifts in the range of 6% to 8% for project renovate stores and 3% to 5% for project elevate stores.
Speaker Change: Between these two remodel approaches we expect to touch approximately 20% of our store base annually and to significantly improve the shopping experience within our stores, while elevating the brand and driving greater top and bottom line contributions from our robust mature store base.
Speaker Change: The next area I want to discuss is our digital initiative, which is an important complement to our unique store footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers.
Speaker Change: Our digital capabilities included in engaging mobile app that is popular with our customers as well as our website.
Speaker Change: Our growing delivery options and D G media network.
Speaker Change: Our delivery partnerships with door dash continues to exceed our initial expectations for both <unk> and sales and our Q1 sales through this platform increased more than 50% year over year.
Speaker Change: We continue to seek ways to grow sales through this channel exclusive partnership, including expanding the number of stores in the program to more than 16000 and growing. In addition, we are now processing, both snap and EBT transactions for our delivery orders, which contributed nicely.
Speaker Change: To our sales growth in Q1.
Speaker Change: Moreover, our partnership with door Dash has extended to the launch of our own same day home delivery offering through our D. G D G digital solutions.
Speaker Change: We launched with approximately 400 stores late in 'twenty 'twenty, four and have now expanded the offering to more than 3000 stores as we continue to leverage customers and associates feedback we.
Speaker Change: We believe our expansive real estate footprint unique uniquely positions us to offer a compelling and home delivery option and ultimately become the fastest delivery alternative for customers and our communities further expanding their access to value and convenience that saves them time and money.
Speaker Change: Every day.
Speaker Change: The linchpin of our digital initiative is our D. G media network, which enables a more personalized experience for our unique customer base, while delivering a higher return on AD spend for our partners we.
Speaker Change: We are excited about the potential for the D. G Media network, which grew retail media volume more than 25% in Q1 compared to Q1 of 'twenty 'twenty four.
Speaker Change: Over time, we believe we can leverage this offering to increase market share and drive profitable sales growth, while further evolving our relationship with our customers and driving greater customer loyalty within the digital platform.
Speaker Change: The final initiative I wanted to discuss is our non consumable growth strategy.
Speaker Change: As a reminder, we are focused on four pillars of growth to drive sales in non consumable categories over the next three years. These pillars include brand partnerships.
Speaker Change: Our revamped treasure hunt experience.
Speaker Change: And a reallocation of space within our home category.
Speaker Change: We are already beginning to realize benefits from these efforts and have seen particularly strong sell through in skus associated with our brand partnerships.
Speaker Change: During Q1, we were pleased to deliver positive quarterly same store sales growth in each of our three non consumable categories. This performance was led by our seasonal category and a strong Easter selling season.
Speaker Change: In addition, our pop shelf stores delivered strong same store sales growth during the quarter exceeding our expectations and supporting our optimism in the new store layout, including a greater emphasis on categories, such as toys Party candy and beauty.
Speaker Change: We also continue to leverage learnings from this banner and apply them in our non consumable categories in our dollar general stores to further strengthen that offering for our DG customers.
Speaker Change: We also believe our non consumable sales performance both in dollar general and pump shelf stores has benefited from the expanded trade and shopping we have seen from middle and higher income customers.
Speaker Change: Importantly.
Speaker Change: Our customer feedback sales performance and market share gains give us confidence that our treasure Hunt approach is resonating with customers and that we are well positioned to serve them in these discretionary categories in stores across both banners.
Speaker Change: In closing we are excited about the business.
Speaker Change: And the strong results we delivered in Q1. This team is working hard and is laser focused on continued to improve execution and implement our initiatives while building on our strong foundation.
Speaker Change: We are proud of the progress we've made and we believe we have ample opportunity to continue to enhance the way we serve our customers.
Speaker Change: And looking ahead. We believe this work continues to strengthen our position as we work to achieve our longer term financial goals in the next few years.
Speaker Change: Our team is excited about the opportunity to serve and I want to thank our more than 193000 employees for their ongoing commitment to each other and our customers I am excited about our plans for the remainder of the year and all that we will accomplish together.
Speaker Change: With that operator, we would now like to open the lines for questions.
Speaker Change: Thank you will now be conducting a question and answer session.
Speaker Change: We ask you please limit yourself to one question to allow as many as possible to ask questions.
Speaker Change: If you'd like to ask a question at this time. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please for our first question.
Parikh: Thank you and the first question today is from the line of <unk> Parikh with Oppenheimer. Please proceed with your question.
Speaker Change: Good morning, and thanks for taking my question also congrats on a really nice quarter.
Speaker Change: Two related questions just on the top line. So wanted to get a sense of your team's confidence in being able to sustain that complement them.
Speaker Change: And then during the quarter was there anything that was surprising on the top line that you saw and then just related to that.
Speaker Change: For the full year, the comparable full year implies a moderation at least at the midpoint in comparison fees. So just wanted to get a sense of is that conservatism or just how you got to think about that.
Speaker Change: Our plan for the balance of the year.
Speaker Change: Oh, Thank you repurchase I'll take the first part and then pass it over to Kelly for that second part of the question.
Speaker Change: What gives us a lot of confidence on what we've seen on the top line are a few things, but I I want to highlight though.
Speaker Change: The biggest opportunity that we saw coming into the year and obviously for the past 18 months and that was our back to basics work and all the work that we have done over the last few months to set ourselves up for success as has really benefited us. So if you think about at retail.
Speaker Change: Our store standards are much much better than they've been in in quite a long time and every single quarter that goes by.
Speaker Change: He has to get better and better our service at store as well customer service continues to grow as well and I would tell you that our customers are seeing that we're seeing that in the data that we get back on customer satisfaction scores are rising each and every quarter as well.
Speaker Change: Turnover continues to reduce at store level. That's another initiative that we had that will add to the top line our turnover for the fifth straight quarter at retail has decreased so again, we're very proud of that stat.
Speaker Change: And then obviously shrink plays a part of this we get I'm sure. We could talk about that later, but shrink overall you heard in our prepared remarks feels.
Speaker Change: Like we're on the right track and the reason why we believe it adds to the topline is if it's there for the customer to buy and not being taken then it'll add to that top line very quickly on our supply chain feel really good about our on time pieces not only are we hitting our goal, but we have some.
Speaker Change: Stained hitting that goal now for more than two quarters in a row, which is a trend. So we feel good about that and then in full continues to get better and better our inventory at store level.
Speaker Change: While down in total and same store is up in availability to the consumer and up in a pretty good way. So that just shows that are on time and in full is a is well on track.
Speaker Change: And then you know as.
Speaker Change: As you think about our merchandising pieces and this is the heartbeat of what we do at dollar general.
Speaker Change: SKU reduction has been a big win and the reason being while we've taken out 1000, Skus last year and we're in the process of taking out more this year and you'll see in this.
Speaker Change: Evidenced by that reduction in our in our inventory levels.
Speaker Change: What we have been able to do though is make more room for what matters on the shelf are there.
Speaker Change: To stay in stock on those Skus that term fastest and that adds to our top line and gives us confidence and then then lastly, those discretionary initiatives that I laid out in my prepared remarks have done very very well at retail.
Speaker Change: We were really happy to see our discretionary comp.
Speaker Change: It was his first time, we've seen that in a while and it gives us a lot of confidence. So all these things give us confidence and then lastly trade in continues to to play a part of this we saw it start in Q3 of last year it accelerated in the for now.
Speaker Change: The Q1, nothing that we've seen so far in Q2 would say that that is.
Speaker Change: Slowed down.
Speaker Change: So we believe the trade in is here and we are primed to take advantage of that and retain that customer a long term. So a lot of good things happening here at dollar general it gives us that confidence, but as you know retail is dynamic. So we'll continue to work hard and drive that top line.
Speaker Change: And her passion in regards to your question just around the topline guidance what might be helpful. For me to just go ahead and kind of walk through the P&L and just let you know how we're thinking about the guide as you heard Todd say lots of lots of things to like about the Q1 performance. So I would say that the topline guide really does consider the Q1 outperformance, but it also considers.
Speaker Change: Just the heightened uncertainty as we move through the year and so it allows for some incremental pressure on on that consumer spending on the topline as we think about gross margin. We are just really pleased with where our shrink came in we continue to believe that shrink is going to provide a tailwind throughout 2025 and and so they'll really good.
Speaker Change: That for all the reasons that we just talked about that as we think about tariffs and theres certainly a lot of potential outcomes now we've got plans in place to mitigate certain tariff ranges and I would tell you that would include both lower tariffs.
Speaker Change: That that we are seeing in the current rates, but also up to the reversion of tariffs on China going back to days that were previously announce on on that April 2nd date, you know with with that higher degree I would say as a variability and potential outcomes and especially in regard to the various components that make up margin.
Speaker Change: And the timing of those components and it's why we feel good about giving a full year guide, even though there could be some variability within the quarters and so it does give us a chance to to take whatever situation or reality ends up hitting us as we move through the year and it allows us to act those plan.
Speaker Change: And every year, so that we can land that that full year guide I would tell you on the SG&A side I think it's just important to call out a couple of things really more around timing than anything else them. Most of these you you heard on the last call first that first half is getting a little bit pressure by the number of projects that we're doing so.
Speaker Change: The initial expenses related to the project elevate and project renovate them as you heard us talk about on the last call. We really expect to execute more of those real estate projects in the first half of this year than we did last year and we're trying to complete the vast majority of those real estate projects by the end of Q3. This really helps us Maxim.
Speaker Change: <unk> the number of operating weeks and it benefits not only 2025, but it starts that flywheel turning that that is going to continue to benefit us as we move into 2020 six if we think about second quarter in particular.
Speaker Change: Just want to remind you that you know we did call out that headwind on our incentive compensation of $180 million to $200 million for the full year, but Q2 is going to be the most impacted by that incentive comp headwind and so what you'll see there is really the incremental incentive expense for the SEC.
Speaker Change: <unk> corner versus last year is expected to be almost double what it is for the rest of the quarters and that's really because we're comparing against the 'twenty 'twenty four accrual reversal that occurred in the second quarter and with that we expect EPS to decline on a year over year basis for the second quarter.
Speaker Change: And then finally on SG&A just as we think about the full year. You know we are considering that we will be pressured by this incentive comp for all of the quarters as I said, particularly in Q2, and we still continue to expect wage rate increases at 3.5% to 4% and I will tell you Q1 landed right in there.
Speaker Change: That that range still expecting headwinds around R&M utilities, and depreciation, but as as you heard us put together the financial framework.
Speaker Change: Last quarter, we have a lot of things in place to to start to mitigate some of that.
Speaker Change: Deleverage around simplification, so that we can drive efficiencies and the initiatives we have in place, particularly the remodels and how that that can help and some of the R&M expenses and drive towards those long term goals that that that we laid out. So they are the increased sales guidance and the increase in the <unk>.
Speaker Change: <unk> of our range really as Todd noted reflect the underlying health of the business and just all of the foundational work that's been done and it was great to see it show up in the Q1 results, but it is really early in the year and there is a lot of potential outcomes from a macro perspective. So we just believe that this update is it pre.
Speaker Change: <unk> approach to setting expectations for the remainder of the year.
Speaker Change: Great. Thank you for all the color.
Speaker Change: Our next question is from the line of Matthew Boss with J P. Morgan. Please proceed with your question great.
Speaker Change: Great Thanks, and good morning.
Matthew Boss: So Todd maybe on the components of your comp how do you see traffic progressing through the year and any change in comps in may that you've seen relative to the 2.4 comp in the first quarter or just any change in consumer behavior that you're seeing in this backdrop and then Kelly just within the gross margin can you.
Speaker Change: Speak to higher markdowns that you saw in the first quarter just any change in the competitive landscape that you're seeing or how best to think about Mark downs in the second quarter and in the back half of the year relative to pressure in the first quarter.
Speaker Change: I'll start out Matt and thank you for the question Yeah, you know on the on the top line of two 4% comp in Q1.
Speaker Change: It was a real testament to all the work that this team has done over the over the many quarters, but.
Speaker Change: But I would tell you that what we've what we saw coming into May give you a little bit of color, we're really happy with where.
Speaker Change: Where we ended up may so period, one to Q2.
Speaker Change: As well as our traffic traffic turned positive in the period. One now just wanted to say, we got a lot of a lot of quarter left.
Speaker Change: But it's good to see that that's happened and just as a reminder, I know our prepared remarks at it but Q1 was our toughest lap both on the topline and the traffic traffic was up 4.3 positive last year.
Speaker Change: And just below flat this year at a 0.3 negative.
Speaker Change: So I would anticipate with all the work that we've done and depending on where the consumer falls that will continue to see comp momentum and hopefully traffic momentum as we move through the quarter and into the back half of the year all the work again that we've done.
Speaker Change: And line up with that that thesis.
Speaker Change: Not only from all the work that I laid out in our repurchase question, but also when you think about the trade in we have seen trading come in.
Speaker Change: Are they at a pretty good clip.
Speaker Change: During Q1, and nothing that nothing shows us so far in Q2 that has slowed down and depending on where the macro environment goes it should be very conducive to further trade in possibly as we move forward and then lastly, what we're working on right now as you would imagine from dollar general is well.
Speaker Change: What does that future look like and that is how do we retain this trade and consumer that where we've been blessed.
Speaker Change: Blessed with if you will over the last couple of quarters and how do we can continue to keep them. So that's being worked on as we speak we've got a nice playbook for that but we wanted to make sure. We continue to to work that and then lastly, I wanted to also talk about project elevate and renovate because they are too.
Speaker Change: Good drivers are.
Speaker Change: For that comp in that mature store base.
Speaker Change: And so as Kelly talked about we see those to adding to our topline as we move through this year and the great thing is accelerating them as far as getting done so that most of that work is as I'm pretty.
Speaker Change: Pretty well complete by the end of Q3, so that we can take advantage of that longer term.
Speaker Change: And then the last thing I think that we want to make sure. We concentrate on is our ever growing both our door dash partnership and our delivery partnership with now over 3000 stores as of now up and running on delivery.
Speaker Change: We feel good about that that's jumping up from just a couple of hundred at the end of Q4 of last year. So stay tuned I think theres a lot to like but there's a lot of year left and and we're squarely focused on delivering that yeah and just to your markdown question I would say, it's really in line with our anticipation.
Speaker Change: So the increase on a year every year basis is really due to promotional activity now some of that's going to be related to the store closures that took effect in the first quarter. So a little bit outsized from what we would expect to save for the at the rest of the year I think the good news here is we did get most of that is prime that was covered in and so what you see.
Speaker Change: <unk> ultimately show up in the increase on the gross margin rate. It has a lot to do with the 61 basis points of shrink improvement that we saw so I'm you know from a promotional standpoint, you know, where we're expecting kind of normalized rates to last year. If for some reason something changes in the outlook.
Speaker Change: Obviously, well will change with it and we'll do what's right for the customer.
Speaker Change: It's great color best of luck.
Speaker Change: Yeah.
Speaker Change: Our next question is from the line of Michael Lasser with UBS. Please proceed with your question.
Speaker Change: Good morning. Thank you so much for taking my question to one and installing Shang will either willing we're needing to make further investment.
Speaker Change: In crisis.
Speaker Change: We treat in order.
Speaker Change: The comp momentum will ensure that not yet assured.
Speaker Change: Sure.
Speaker Change: And how do you factor that into the guidance how does the return on these investments compare to the returns that we're now seeing a new story.
Speaker Change: You still appear to be declining from what was 20% now around 17%. Thank you very much.
Speaker Change: Yes, Michael. Thank you. Thank you for the question I would tell you that first of all.
Speaker Change: We're happy with the the.
Speaker Change: Since we've made over the last couple of years on both ours and our store in wage rates in our stores at.
Speaker Change: At this point again, we feel comfortable we don't see a need to to to go outside of where we are today and a lot of that is evidenced by a few things one what are what our employees are telling us.
Speaker Change: Through turnover and through our.
Speaker Change: The.
Speaker Change: The pieces that we put in front of them that allows feedback to come back up to us. So we feel good about that but also what the customer has seen and the customer has seen a lot of good things at store level and as we all know are happy employee then.
Speaker Change: Translates into better store conditions.
Speaker Change: And sustained store conditions, so feel good about those investments what we've done now Michael is quite frankly pivoted from those labor investments to now investing back into the mature store base with project elevate renovate a lot of what we're doing to in.
Speaker Change: Sure that.
Speaker Change: The the physical plant is taken care of as well as getting the freshest merchandising thoughts and execution inside of our stores, So that's where that.
Speaker Change: That has now moved which I think is very prudent and appropriate.
Speaker Change: As it relates to price, we feel very comfortable.
Speaker Change: Prepared remarks, we're right, where we believe we should be on an everyday price basis I've been here quite a while as you know I'm almost 17 years now and I would tell you I feel as good about my everyday price.
Speaker Change: As I always have and we continue to watch that each and every week that goes by not just quarter. So we're very very diligent to ensure that keep in mind too Michael that.
Speaker Change: We're probably one of the only retailers that can say this at this point and that is we continue to invest in that $1 price point and I would call. It in the news.
Speaker Change: More and more it's a.
Speaker Change: It's it's elusive out there if you will as far as trying to have that $1 price point, but we have over 2000 items at or below $1 price inside of our store.
Speaker Change: Which when you when you look at it.
Speaker Change: Equates when you only have about 12000 items.
Speaker Change: Equates to a nice percentage of your total inventory so.
Speaker Change: So we continue to foster that which we believe is the right thing on price for our consumer, especially as she gets closer to the end of the month when that money runs out. So we continue to watch that and I believe the environment overall on a promotional basis is about where it was in Q4. So we don't see that accelerating at this point.
Speaker Change: But we'll continue to watch as we move forward, depending on what tariffs do and where that consumer is and we've always said we reserve the right to be there for her if need be but as Kelly indicated, we'll let you know if something changes and.
Speaker Change: Just around the new store piece, so we still feel really good about the IRR on our new stores in our real estate investments are absolutely the best use of our capital, but as Todd talked about just kind of shifting those investment dollars. We're really excited about doing that with project elevate and project renovate and the long term financial framework that we have.
Speaker Change: Laid out last quarter assumes that we get more sales contributions from those mature stores.
Speaker Change: Which we think will be benefited by these programs and frankly, it's just a great way to leverage our current infrastructure and so we're excited about the increase in these projects.
Speaker Change: Including all of the expanded investment in our mature stores as as we talked about and just think this is a great and allocation of capital and it moves us towards just achieving the mid and longer term goals that we laid out.
Speaker Change: Thank you very much and good luck.
Speaker Change: The next question's from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.
Simeon Gutman: Hey, good morning, everyone. Todd as you think about margins re expanding because your margins are depressed and I think you said six to seven by 2028, how important is getting to the 3% comps in order to get there. It feels like you're back to basics is working and putting less pressure opening less new stores could be.
Speaker Change: Helping not hurting and then separate unrelated can you just tell us Kelly the shrink benefits that you got this quarter.
Speaker Change: Is that run rate cannot get better from here or does that hold does that run rate, we hold that for the rest of the year and you'd get benefits year over year, but you don't step up from the rate that you've gotten to a crude.
Speaker Change: Quarter one thanks.
Speaker Change: Yeah. Thanks for the question and Yeah, we believe that a healthy.
Speaker Change: Traffic and top line is imperative three.
Speaker Change: 3% might be a little strong level, we believe that Oh, you know a sustained.
Speaker Change: Comp over two gets you gets you to where you want to be but we always strive for more and that's why that two to three we felt very good about I'm.
Speaker Change: Talking about in that long term.
Speaker Change: Framework that we put out there, but I would say that overall.
Speaker Change: You know we call it we can and should be able to deliver a longer term on those on those pieces now there theres a lot in front of us over the next few years, but I would tell you. This team is squarely focused you could see the momentum building as we left Q4 of last year.
Speaker Change: You can see it now in these results in Q1.
Speaker Change: And I would tell you that there's nothing in front of us that would say that momentum slows down if anything it starts to pick up steam as we get a project elevate and renovate in that flywheel that Kelly talked about.
Speaker Change: As well as our non consumable initiatives that is a key because I think not only the the 2% to 3% comp, but also the composition of that comp is important and and us moving the needle on our non consumable or discretionary areas is as vital and I would tell you. The team has done a really good.
Speaker Change: Job, there and we feel good about where that's at and then lastly at least for this foreseeable future that trade in helps that as well because that trading customer comes with a little bit more disposable income so she's seeing the value as she starts to.
Speaker Change: Coming to the for the first time or.
Speaker Change: In a lab on a lab spaces back into our stores.
Speaker Change: Yeah and on your shrink question, we were just really pleased with the progress and and it exceeded our expectations. This quarter added benefit of 61 basis points.
Speaker Change: We do expect that to continue as we move through the quarters for the remainder of the year. So excited about that I think there's there are some other things we're excited about as well one thing that we did see is that the stores that didn't have the self checkout are also seeing similar levels of improvement as the stores that did have the self checkout.
Speaker Change: Mobile and that's just really a testament to the operational excellence that's occurring in the stores and that higher control environment is starting to take hold in those stores and then as you know we have we have lots of other actions that we're seeing so you know around inventory reduction and the SKU rationalization as Todd noted the improved retail turnover.
Speaker Change: Please helps the the shrink incentive programs that we have in place just the utilization of the higher shrink plan O grams, and then again kind of just looking at that end to end process to mitigate any shrink that at any point as our exposure in that end to end process. So all of those are going to continue to take flu.
Speaker Change: And as you know it does take a full year to see those benefits show up in the P&L and so shrink improvements should be the gift that just keeps on giving here and you know dollar general where we're not going to stop working on shrink bulgur and they continue to work on shrink as we go forward, but right now we like the <unk>.
Speaker Change: Progress that we're making and we are well on our way to improvements that will allow us to hit that mid and longer term target.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of John <unk> with Guggenheim Partners. Please proceed with your question.
Speaker Change: It's hard to just two related things number one the trade in most of that's been organic I think to date right people finding new is there a thought in tweaking marketing and customer.
Speaker Change: Acquisition.
Speaker Change: To do that the less organically number one and then number two what what's your current thought on pack size architecture in consumables, meaning small pack sizes in this environment is an advantage.
Speaker Change: You want to shift.
Speaker Change: More or less to smaller pack sizes.
John Guggenheim: Thanks, John for the question I would tell you.
John Guggenheim: I think overall your ear assessment is correct on the trade in but I would tell you what we've really seen them really in Q4 and Q1 in particular and everything that we've seen so far in Q2 also puneet.
John Guggenheim: To our door dash in our in our beginning of our delivery.
John Guggenheim: Initiative.
John Guggenheim: As increment incremental.
John Guggenheim: Customers the increments Howdy on door Dash has always been over the top phenomenal, but we're starting to also measure and see the increment tally on our white label or our delivery piece through door dash.
John Guggenheim: And with that I believe those are both attracting new and diverse customer base than what we normally have and then as we continue to grow that our media network points directly to what you're talking about we're able to reach customers outside of our core with our <unk>.
John Guggenheim: Media network as well and that's been growing at a very nice clip you heard in our prepared remarks, 25% increase year over year. We believe that's going to continue to grow and should leverage a lot of those customers and reach those customers that we traditionally do not.
John Guggenheim: Reach and then as it relates to pack size, we've never given up on that smaller pack size matter of fact, even in the face of a lot of opposition through.
John Guggenheim: Through CPG it may be other other folks that talk about a smaller pack size I would tell you it's exactly what the customer needs I would argue needs all the time, but especially where we are right now in her economic cycle.
John Guggenheim: She definitely wants to be able to afford those luxuries and or just name brand products.
John Guggenheim: As is.
John Guggenheim: As evidenced by what she shops, but she needs and at a price point that she can afford and at times that means the ounces could be a little bit smaller than what you would find in traditional grocery or mass or even drug for that matter.
John Guggenheim: But it it really hits home for her because she can balance that with her monthly budget and so more to come we continue to work that are we working hard and I would tell you that our CPG partners over the years have come to realize that.
John Guggenheim: We were right all along.
John Guggenheim: It related to what that customer wants at that pack size she needs, so where the probably the leader there and the architect of that and we will continue to lead there.
John Guggenheim: Thank you.
John Guggenheim: Mhm.
John Guggenheim: The next question is from Atlanta, Seth Sigman with Barclays. Please proceed with your question. Thanks. Good morning, everyone I wanted to focus on damages and that's been one of the lingering issues here for some time it seems like it could be at an inflection now can you talk a bit more about what's changing how you're running the business differently now and remind us of what that opportunity.
John Guggenheim: He actually is I assume that's both a sales and margin opportunity, but just any more thoughts there. Thanks.
John Guggenheim: I can start that and then.
Kelly: Give it to Kelly day add any further color yeah, I would tell you that you.
Speaker Change: As we continue to work all the levers are around shrink in inventory. We will see continued success, we believe in and both shrink and damages and let me explain our real quickly been around retail for for 40 years almost here and.
Kelly: I would tell you that that as as goes inventory levels normally as goes shrink.
Kelly: And as you've seen our inventory levels continue to come down and what I mean by that.
Kelly: Is is that.
Kelly: We are able to control inventory levels and get what the customer wants and needs at the shelf when she needs it.
Kelly: And with that inventory levels come down and then traditionally shrink will also follow that.
Kelly: But also damages now.
Kelly: We don't just rely on that and you heard from Kelly.
Speaker Change: All along our back to basics work and many of you heard me say this over the last 18 months or so and that is we have gone back to really getting back to what we know how to do at store level and that is execute execute execute we've got the game plan we've had the game.
Kelly: For years, we may have just moved off of it a little bit.
Kelly: And so what we've done now is really gone back and instituted what is tried and true around shrink control and damage control normally.
Kelly: Normally shrink starts first and then damages follow and that's why we believe that this is going to occur now again, we're not taking it at face value. There's a lot of work being done right now I won't go into all the detailed around controlling damages. Even further as we move through Q2 and into the back half of the year.
Kelly: And it's really about locking down more and more processes at store level.
Kelly: To be able to.
Kelly: Ensure damages are well.
Kelly: Well in hand, if you will as we move through the back half of the year. So we feel good about the trajectory we feel good about whats ahead, but theres a lot of work, it's retail and and as Kelly indicated shrink is always ongoing work and how I look at the images, it's really just known shrink and we just need to control it the same way.
Kelly: I will tell you for for this quarter, what we were pleased to see that damages were relatively in line with our expectations and while not big enough to call out a I'll say it was a slight improvement at three basis points on a year over year basis, which is the first time that's occurred in a while we are expecting for the full year that damages are flat to slightly.
Kelly: Verbal compared to 2024 as as we.
Kelly: Make that progress you know that the size of the prize here is really what we laid out in our financial framework, which is 40 basis points of improvement as we think about you know the time over the midterm to longer term in and some of those that some of those longer term actions as as we think ahead and really are around.
Kelly: Continued improvement in inventory management, you know, how we buy and how we allocate we have done a lot of work and are continuing to do a lot of work on improvement and optimizing days of supply, which really helps to mitigate damages and the other piece is just the proactive investments that we're making in and project to elevate and renovate them.
Kelly: So that that helps mitigate not only the R&M side that also as coolers go down and we have more damages and so as we get at the stores optimized there we should have fewer damages and of course, we we do have a team that's focused on damages as well. So we feel good about that path to improvement that we are.
Kelly: Identified over over that financial framework and think we'll achieve that is 40 basis points in the mid to longer term.
Kelly: Okay, great. Thank you both.
Speaker Change: Our next question from the line of Scot Ciccarelli with true security.
Speaker Change: To your question.
Speaker Change: Hey, Good morning. This is Josh young on for Scott. So it sounds like quarter to date comps have been solid so far with traffic turning positive, but it does look like you've had some heightened clearance activity lately. So just curious how much of a benefit to sales I think thats right.
Speaker Change: Great.
Tod: No. This is a this is tod I'll answer that no we really havent seen heightened clearance activity, we had some clearance around the stores that we closed.
Tod: But to be honest that debt.
Speaker Change: That really didn't.
Speaker Change: Add to the comp and any any appreciable manner. So I would tell you we feel very good about the construct of that of.
Speaker Change: Of that comp and we feel good about it so what we really feel good about is was well balanced between consumables and non consumables and as we indicated all the work that we're doing in.
Speaker Change: In merchandising around the non consumable categories as well as that trade in starting to come in at a at a heightened level, we believe that that balance.
Speaker Change: It should continue as we move forward, but again a lot of quarter left for Q2, and a lot of back half of the year.
Speaker Change: Everything lines up to show that.
Speaker Change: We're well on our way, there and and markdowns are well well.
Kelly: Well in check, but again, we know that this is a very tight environment for the consumer so we'll be there for her when we need to be but at this point, we see promotional activity clearance activity.
Kelly: At a very tame right.
Speaker Change: Got it that's helpful. Thanks, and if I could just squeeze in a quick follow up so you get positive comps across all categories. This quarter. So just curious how you're thinking about the sustainability of that particularly on the discretionary side as we move.
Speaker Change: Move through 'twenty five here thanks.
Speaker Change: Yeah again.
Speaker Change: All the work that we're doing around the back to basics work in merchandising in particular is really aimed at the.
Kelly: The balance of consumable and non consumable.
Kelly: As you heard me talk about a few moments ago not only the the comp is important but the composition of the comp is important.
Kelly: And we're squarely focused on that.
Kelly: Through through a lot of initiatives that are going on in merchandising in our discretionary areas. Our partnerships that we talked about as well as even pop shelf as we looked in the quarter and we look you know.
Kelly: As we move through Q2 and into the back half of the year, we see we see that continuing.
Kelly: Continuing to do well so it shows that we're on the right track with the right merchandise at the right value, but I think that's the key here is in a tight economic environment that our consumers are facing it's gonna be that fine balance and it always is.
Kelly: Between our value and convenience in that value translates boats, both from and into consumables and non consumables. So squarely focused on both.
Kelly: And we want to be able to move the needle.
Kelly: Squarely on both of those metrics as we move forward.
Speaker Change: Thank you. Our final question is from the line of Cory Carlo with Jefferies. Please proceed with your question.
Cory Carlo: Great Thanks, and good morning.
Cory Carlo: Todd I wanted to ask about your thoughts around the competition.
Speaker Change: Specific competitors, calling out.
Speaker Change: A willingness to lean into price potentially during times of uncertainty to drive market share gains and dollar general's ability to respond to those actions.
Speaker Change: And then the willingness to get perhaps more competitive on price and if so.
Speaker Change: Which categories do you think that you can.
Speaker Change: Good.
Speaker Change: Lean into a little bit more and then secondarily.
Speaker Change: You talked in your prepared remarks about a balance between new communities and cannibalization as you think about building new unit is there anything that's different about these new communities that you are going to be moving into in terms of the demographics.
Speaker Change: Or cost structures. Thank you.
Speaker Change: Thanks for the question I would tell you from a competitive standpoint as I indicated.
Speaker Change: We see the competitive landscape at least right now on a price perspective, both everyday price and promotional.
Speaker Change: Activity to be about the same as it was coming out of Q4 heightened from years, leading out of the pandemic, but definitely more in line with what we saw just prior to the pandemic. So you know when I look at it it really isn't a heightened from what norm normality looked like the pandemic.
Speaker Change: Drove everything to be abnormal in many instances. So I think we're living right now and a pretty normal environment and but you know we've.
Speaker Change: We've got great competitors out there we've been competing with.
Speaker Change: The mass drug and grocery for our full existence of 85, plus years, now and going and I would tell you that.
Speaker Change: I would say in my 17 years here, we're as well positioned today on an everyday price that I've seen.
Speaker Change: And our promotional activity is is well in line for where we thought it would be.
Speaker Change: But we always say because we're usually the leader here is that the consumer needs us to heighten that that activity, we will do so.
Speaker Change: But we just don't see a real need at this point.
Speaker Change: To get to move a lot further into that promotional cadence, but as as we continue to watch the landscape. We know terrorists could play a piece of this will continue to watch it very carefully but to answer your second part of that first question.
Speaker Change: We believe we are well positioned to be able to do that and the reason being is that we're a very large company. We are in the top five with most CPG companies in the United States.
Speaker Change: As far as their volume and their hit parade and with that they are very willing to work with us and our customers to ensure that they continue to move the units that they need to move.
Speaker Change: And that usually translates into better prices for the consumer if if it needs to be and normally CPG levers that are pretty well so more to come we're in a great position to be able to do that as we go forward and then lastly on your second part of the question on a new community.
Speaker Change: These verses existing I would tell you that.
Speaker Change: When we talk about new communities.
Speaker Change: It really is still in our heartland, but where there's more white space than we what we have normally looked at in the last couple of years, we have a strategy in the last couple of years of intentionally cannibalizing ourselves.
Speaker Change: To to ensure we took advantage of of great real estate out there well when you think about that and think about how well penetrated we are in many of these areas. We took advantage of most of those opportunities over the last few years and so this now has led to wear.
Speaker Change: We can go further from our stores in in states that we operate in today in a in a very meaningful manner and understand how to operate in and but yet not cannibalize the store as much. So it's really distance from existing stores that we're working from versus new states or or state.
Speaker Change: So where we're less penetrated in since we're pretty much in every our lower 48 at this point it's.
Speaker Change: It's really about distance from our current locations.
Speaker Change: And in reducing that cannibalization, we think we're in a good position to do that.
Speaker Change: And and off to a good start in Q1.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session.
Speaker Change: It also concludes today's presentation. We thank you for your participation and this will conclude today's teleconference.