Q2 2025 Dollar General Corp Earnings Call

Our general Dot Com under news and events, 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 financial framework strategy initiatives plans goals priorities opportunities X.

Rob (Conference Operator): 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 Corporation second quarter 2025 earnings call. Today is Thursday, August 28, 2025. All lines have been placed on mute to prevent any background noise. This call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning. 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 #2: Today is Thursday, August 28, 2025. All lines have been placed on mute to prevent any background noise. This call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning.

Patients or beliefs about future matters and other statements that are not limited to historical fact these.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. 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.

Speaker #2: 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 #3: Thank you and good morning, everyone. On the call with me today are Todd Vasos, our CEO, and Kelly Dilts, our CFO. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News and Events.

Kevin Walker: Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO, and Kelly Dilts, our CFO. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News and Events. 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 financial framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations, or beliefs about future matters, and other statements that are not limited to historical fact. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Periodic report and in the comments that are made on this call.

Speaker #3: 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 financial framework, strategy, initiatives, plans, goals, priorities, opportunities, expectations, or beliefs about future matters, and other statements that are not limited to historical fact.

Should not unduly rely on forward looking statements, which speak only as of today's date.

Dollar general disclaims any obligation to update or revise any information discussed in this call unless required by law at.

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. Thank.

Speaker #3: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. 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.

Thank you, Kevin and welcome to everyone joining our call.

I want to begin by thanking our team for their great work to fulfill our mission of serving others every day in our stores distribution centers private fleet and store support center. These efforts are resonating with our customers as well as driving strong operating and financial performance.

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

Speaker #3: And in the comments that are made on this call, you should not unduly rely on forward-looking statements, which speak only as of today's date.

To that end, we are pleased to deliver a strong second quarter results highlighted by earnings growth that significantly exceeded our internal expectations.

Speaker #3: Dollar General disclaims any obligation to update or revise any information discussed in this call unless required by law. At the end of our prepared remarks, we will open the call up for your questions.

For today's call I'll begin by recapping some of the highlights of our second quarter performance as well as sharing our latest observations on the consumer environment.

Speaker #3: 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.

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.

Speaker #4: Thank you, Kevin, and welcome to everyone joining our call. I want to begin by thanking our team for their great work to fulfill our mission of serving others every day in our stores, distribution centers, private fleet, and Store Support Center.

Todd Vasos: Thank you, Kevin, and welcome to everyone joining our call. I want to begin by thanking our team for their great work to fulfill our mission of serving others every day in our stores, distribution centers, private fleet, and store support center. These efforts are resonating with our customers as well as driving strong operating and financial performance. To that end, we are pleased to deliver strong second quarter results highlighted by earnings growth that significantly exceeded our internal expectations. For today's call, I'll begin by recapping some of the highlights of our second quarter performance, as well as sharing our latest observations on the consumer environment. 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.

Turning to our second quarter performance net sales increased five 1% to $10 7 billion in Q2 compared to net sales of $10 $2 billion in last year's second quarter. This growth was driven by strong performance from new stores and our mature store base.

Speaker #4: These efforts are resonating with our customers, as well as driving strong operating and financial performance. To that end, we are pleased to deliver strong second quarter results, highlighted by earnings growth that has significantly exceeded our internal expectations.

Speaker #4: For today's call, I'll begin by recapping some of the highlights of our second quarter performance, as well as sharing our latest observations on the consumer environment.

We grew market share in both dollars and units in highly consumable product sales once again during the quarter.

In addition to growing market share in non consumable product sales.

Speaker #4: 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.

Same store sales increased two 8% during the quarter driven by relatively balanced growth of one, 5% and customer traffic and one 2% and average basket.

The basket growth was driven by an increase in both average unit retail price per item and average items per basket.

Speaker #4: Turning to our second-quarter performance, net sales increased 5.1% to $10.7 billion in Q2, compared to net sales of $10.2 billion in last year's second quarter.

Todd Vasos: Turning to our second quarter performance, net sales increased 5.1% to $10.7 billion in Q2, compared to net sales of $10.2 billion in last year's second quarter. This growth was driven by strong performance from new stores and our mature store base. We grew market share in both dollars and units in highly consumable product sales once again during the quarter, in addition to growing market share in non-consumable product sales. Same-store sales increased 2.8% during the quarter, driven by relatively balanced growth of 1.5% in customer traffic and 1.2% in average basket. The basket growth was driven by an increase in both average unit retail price per item and average items per basket. We were excited to see a second consecutive quarter of broad-based category growth with positive comp sales in each of our consumables, seasonal, home, and apparel categories.

Yeah.

We were excited to see a second consecutive quarter of broad based category growth with positive comp sales in each of our consumables seasonal home and apparel categories.

Speaker #4: This growth was driven by strong performance from new stores and our mature store base. We grew market share in both dollars and units in highly consumable product sales once again during the quarter.

From a monthly cadence perspective, we saw same store sales growth above 2% in all three periods with our strongest comps in June and July.

Speaker #4: In addition to growing market share in non-consumable product sales. Same store sales increased 2.8% during the quarter, driven by relatively balanced growth of 1.5% in customer traffic and 1.2% in average basket.

We believe the strong and balanced topline results are a reflection of the hard work. The team has done to improve execution and further enhance the value and convenience proposition for both existing and new customers.

Speaker #4: The basket growth was driven by an increase in both average unit retail price per item and average items per basket. We were excited to see a second consecutive quarter of broad-based category growth, with positive comp sales in each of our consumables, seasonal, home, and apparel categories.

To that end, we're pleased to see growth with customers across all income brackets. During the quarter. This includes our core customer who increased spending despite worsening sentiment.

In addition, we continued to see trade and growth with middle and higher income customers during the quarter, which we believe is contributing to the nice performance. We've seen in our non consumable categories ultimately customers across all income brackets are coming to dollar general as they seek.

Speaker #4: From a monthly cadence perspective, we saw same-store sales growth above 2% in all three periods, with our strongest comps in June and July.

Todd Vasos: From a monthly cadence perspective, we saw same-store sales growth above 2% in all three periods, with our strongest comps in June and July. We believe these strong and balanced top-line results are a reflection of the hard work the team has done to improve execution and further enhance the value and convenience proposition for both existing and new customers. To that end, we're pleased to see growth with customers across all income brackets during the quarter. This includes our core customer who increased spending despite worsening sentiment. In addition, we continue to see trade-in growth with middle and higher-income customers during the quarter, which we believe is contributing to the nice performance we've seen in our non-consumable categories. Ultimately, customers across all income brackets are coming to Dollar General as they seek value.

Value.

Speaker #4: We believe these strong and balanced top-line results are a reflection of the hard work the team has done to improve execution and further enhance the value and convenience proposition for both existing and new customers.

As America's neighborhood General store in more than 20000 locations across the country, we recognize and embrace our role in being here for what matters for our customers. This includes providing the items they want and need at prices they can afford.

Speaker #4: To that end, we're pleased to see growth with customers across all income brackets during the quarter; this includes our core customer, who increased spending despite worsening sentiment.

With that in mind, we are committed to delivering everyday low prices that are within 3% to four percentage points on average of mass retailers.

Speaker #4: In addition, we continue to see trade-in growth with middle and higher-income customers during the quarter, which we believe is contributing to the nice performance we've seen in our non-consumable categories.

While we are pleased that we continue to operate within the target of price range. We are also focused on maintaining our substantial offering of more than 2000, skus at or below the $1 price point.

Speaker #4: Ultimately, customers across all income brackets are coming to Dollar General as they seek value. As America's neighborhood general store in more than 20,000 locations across the country, we recognize and embrace our role in being here for what matters for our customers.

We know this price price points is important in helping our core customers stretch their dollar, particularly at the end of the month and when budgets are tight.

Todd Vasos: As America's neighborhood general store in more than 20,000 locations across the country, we recognize and embrace our role in being here for what matters for our customers. This includes providing the items they want and need at prices they can afford. With that in mind, we are committed to delivering everyday low prices that are within 3% to 4% on average of mass retailers. While we are pleased that we continue to operate within the targeted price range, we are also focused on maintaining our substantial offering of more than 2,000 SKUs at or below the $1 price point. We know this price point is important in helping our core customers stretch their dollar, particularly at the end of the month and when budgets are tight.

In fact, our one dollar value valley merchandising set which is comprised of more than 500 rotating skus was one of our strongest performing areas in the quarter with same store sales growth more than twice the rate of the overall company.

Speaker #4: This includes providing the items they want and need at prices they can afford. With that in mind, we are committed to delivering everyday low prices that are within 3 to 4 percentage points on average of mass retailers.

We believe this holistic approach to offering value will continue to be important for our customers, particularly in the back half of this year.

Speaker #4: While we are pleased that we continue to operate within the targeted price range, we are also focused on maintaining our substantial offering of more than 2,000 SKUs at or below the $1 price point.

Now I'd like to provide a brief update on how we're thinking about tariffs with the rates currently in place. We believe we will be able to mitigate the vast majority of the impact on our cost of goods.

Speaker #4: We know this price point is important in helping our core customers stretch their dollar particularly at the end of the month and when budgets are tight.

The proactive approach of our sourcing team coupled with our relatively low direct import exposure has positioned us well to serve our customers with a quality assortment at tremendous value.

Speaker #4: In fact, our $1 value-value merchandising set which is comprised of more than 500 rotating SKUs was one of our strongest performing areas in the quarter, which same store sales growth more than twice the rate of the overall company.

Todd Vasos: In fact, our $1 Value Valley merchandising set, which is comprised of more than 500 rotating SKUs, was one of our strongest performing areas in the quarter, with same-store sales growth more than twice the rate of the overall company. We believe this holistic approach to offering value will continue to be important for our customers, particularly in the back half of this year. Now, I'd like to provide a brief update on how we're thinking about tariffs. With the rates currently in place, we believe we will be able to mitigate the vast majority of the impact on our cost of goods. The proactive approach of our sourcing team, coupled with our relatively low direct import exposure, has positioned us well to serve our customers with a quality assortment at tremendous value.

While the landscape remains dynamic terrorists have begun to result in some price increases and we will continue to work to minimize them as much as possible.

Speaker #4: We believe this holistic approach to offering value will continue to be important for our customers, particularly in the back half of this year. Now, I'd like to provide a brief update on how we're thinking about tariffs.

Most importantly, we know this further amplifies the need for value within our communities and we remain committed to serving our customers with the everyday low prices. They have come to know and appreciate from dollar general.

Speaker #4: With the rates currently in place, we believe we will be able to mitigate the vast majority of the impact on our cost of goods.

Overall, we're proud of our performance during the quarter and the tremendous progress we've made throughout the first half of the year. Our actions are delivering an enhanced shopping experience for our customers and driving strong operating and financial results.

Speaker #4: The proactive approach of our sourcing team coupled with our relatively low direct import exposure has positioned us well to serve our customers with a quality assortment at tremendous value.

We are further strengthening our value and convenient proposition for our customers, while making significant progress on our long term financial goals.

Speaker #4: While the landscape remains dynamic, tariffs have begun to result in some price increases. And we will continue to work to minimize them as much as possible.

Todd Vasos: While the landscape remains dynamic, tariffs have begun to result in some price increases, and we will continue to work to minimize them as much as possible. Most importantly, we know this further amplifies the need for value within our communities, and we remain committed to serving our customers with the everyday low prices they have come to know and appreciate from Dollar General. Overall, we're proud of our performance during the quarter and the tremendous progress we've made throughout the first half of the year. Our actions are delivering an enhanced shopping experience for our customers and driving strong operating and financial results. We are further strengthening our value and convenience proposition for our customers while making significant progress on our long-term financial goals.

Before I turn the call over for our financial update I want to thank Kelly for her partnership as well as her leadership of our finance organization over the last few years, we wish her the very best as he prepares and begins for new chapter.

Speaker #4: Most importantly, we know this further amplifies the need for value within our communities. And we remain committed to serving our customers with the everyday low prices they have come to know and appreciate from Dollar General.

I also want to note that we're excited to welcome Donny Lau back to dollar general as our next CFO beginning in October.

Speaker #4: Overall, we're proud of our performance during the quarter and the tremendous progress we've made throughout the first half of the year. Our actions are delivering an enhanced shopping experience for our customers and driving strong, operating, and financial results.

He is highly regarded throughout the organization for his deep understanding of the business.

Thoughtful strategic leadership and appreciation for our culture and values we.

Look forward to his leadership of our finance organization as we seek to drive excellence and create long term shareholder value with that I'd now like to turn the call over to Kelly.

Speaker #4: We are further strengthening our value and convenience proposition for our customers while making significant progress on our long-term financial goals. Before I turn the call over for our financial update, I want to thank Kelly for her partnership.

You Todd and good morning, everyone first on a personal note I wanted to express my appreciation to this team our customers and our shareholders. This is a special organization with a unique mission and I'm grateful for the time I've had to serve alongside them.

Todd Vasos: Before I turn the call over for our financial update, I want to thank Kelly for her partnership, as well as her leadership of our financial organization over the last few years. We wish her the very best as she prepares and begins her new chapter. I also want to note that we're excited to welcome Donnie Lau back to Dollar General as our next CFO, beginning in October. He is highly regarded throughout the organization for his deep understanding of the business, thoughtful strategic leadership, and appreciation for our culture and values. We look forward to his leadership of our financial organization as we seek to drive excellence and create long-term shareholder value. With that, I'd now like to turn the call over to Kelly.

Speaker #4: As well as her leadership of our financial organization over the last few years, we wish her the very best as she prepares for and begins her new chapter.

Speaker #4: I also want to note that we’re excited to welcome Donnie Lau back to Dollar General as our next CFO beginning in October. He is highly regarded throughout the organization for his deep understanding of the business, thoughtful strategic leadership, and appreciation for our culture and values.

Now that Todd has taken you through a few of the topline highlights at the quarter. Let me take you through some of the other important financial details.

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 refer to the corresponding fiscal year for.

Speaker #4: We look forward to his leadership of our financial organization as we seek to drive excellence and create long-term shareholder value. With that, I'd now like to turn the call over to Kelly.

For Q2 gross profit as a percentage of sales was 31, 3% an increase of 137 basis points.

Speaker #4: Thank you, Todd, and good morning, everyone. First, on a personal note, I want to express my appreciation to this team, our customers, and our shareholders.

Kelly Dilts: Thank you, Todd, and good morning, everyone. First, on a personal note, I want to express my appreciation to this team, our customers, and our shareholders. This is a special organization with a unique mission, and I'm grateful for the time I've had to serve alongside them. Now that Todd has taken you through a few of the top-line highlights of the quarter, let me take you through some of the other important financial details. 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 refer to the corresponding fiscal year. For Q2, gross profit as a percentage of sales was 31.3%, an increase of 137 basis points. This increase was primarily attributable to lower shrink, higher inventory markups, and lower inventory damages.

This increase was primarily attributable to lower shrink higher inventory markups and lower inventory damages. Our focus on reducing shrink has continued to produce positive results, including a healthy year over year improvement of 108 basis points in the second quarter.

Speaker #4: This is a special organization with a unique mission, and I'm grateful for the time I've had to serve alongside them. Now that Todd has taken you through a few of the top-line highlights of the quarter, let me take you through some of the other important financial details.

Cited to be outperforming the shrink reduction expectations contemplated within our long term financial growth framework in terms of both timing and magnitude.

Speaker #4: 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 refer to the corresponding fiscal year.

Given these results we're optimistic about the potential for shrink reduction to contribute more than 80 basis points towards the operating margin goal of 6% to 7% contemplated within our long term financial framework.

Speaker #4: For Q2, gross profit as a percentage of sales was 31.3%, and increase of 137 basis points. This increase was primarily attributable to lower shrink, higher inventory markups, and lower inventory damages.

In addition, we were pleased to drive a reduction in damages in the second quarter as our efforts in this area have begun to take hold as well the.

Speaker #4: Our focus on reducing shrink has continued to produce positive results, including a healthy year-over-year improvement of 108 basis points in the second quarter. We're excited to be outperforming the shrink reduction expectations contemplated within our long-term financial growth framework, in terms of both timing and magnitude.

Kelly Dilts: Our focus on reducing shrink has continued to produce positive results, including a healthy year-over-year improvement of 108 basis points in the second quarter. We're excited to be outperforming the shrink reduction expectations contemplated within our long-term financial growth framework in terms of both timing and magnitude. Given these results, we're optimistic about the potential for shrink reduction to contribute more than 80 basis points toward the operating margin goal of 6% to 7% contemplated within our long-term financial framework. In addition, we were pleased to drive a reduction in damages in the second quarter, as our efforts in this area have begun to take hold as well. The gross margin increase was partially offset by an increased LIFO provision, as well as increased markdowns and increased distribution cost. Now, let's turn to SG&A, which as a percentage of sales was 25.8%, an increase of 121 basis points.

The gross margin increase was partially offset by increased LIFO provision as well as increased markdowns and increased distribution cost.

Now, let's turn to SG&A, which as a percentage of sales was 25, 8% an increase of 121 basis points.

The primary expenses that were a higher percentage of net sales in the quarter were incentive compensation repairs and maintenance and benefits.

Speaker #4: Given these results, we're optimistic about the potential for shrink reduction to contribute more than 80 basis points toward the operating margin goal of 6% to 7%, contemplated within our long-term financial framework.

Moving down the income statement operating profit for the second quarter increased eight 3% to $595 million as a percentage of sales operating profit increased 16 basis points to five 6%.

Speaker #4: In addition, we were pleased to drive a reduction in damages in the second quarter, as our efforts in this area have begun to take hold as well.

Speaker #4: The gross margin increase was partially offset by an increased LIFO provision as well as increased markdowns and increased distribution cost. Now, let's turn to SG&A.

Net interest expense for the quarter decreased to $57 7 million compared to $68 1 million in last year's second quarter.

Our effective tax rate for the quarter was 23.5% and compares to 22, 3% in the second quarter last year.

Speaker #4: Which, as a percentage of sales, was 25.8%, an increase of 121 basis points. The primary expenses that were a higher percentage of net sales in the quarter were incentive compensation, repairs and maintenance, and benefits.

Finally, EPS for the quarter increased nine 4% to $1 86, which exceeded the high end of our internal expectations.

Kelly Dilts: The primary expenses that were a higher percentage of net sales in the quarter were incentive compensation, repairs and maintenance, and benefits. Moving down the income statement, operating profit for the second quarter increased 8.3% to $595 million. As a percentage of sales, operating profit increased 16 basis points to 5.6%. Net interest expense for the quarter decreased to $57.7 million, compared to $68.1 million in last year's second quarter. Our effective tax rate for the quarter was 23.5% and compares to 22.3% in the second quarter last year. Finally, EPS for the quarter increased 9.4% to $1.86, which exceeded the high end of our internal expectations. Turning now to our balance sheet and cash flow, where we continue to make great progress strengthening our financial position.

Speaker #4: Moving down the income statement, operating profit for the second quarter increased 8.3% to 595,000,000 dollars. As a percentage of sales, operating profit increased 16 basis points to 5.6%.

Turning now to our balance sheet and cash flow, while we continue to make great progress strengthening our financial position.

Merchandise inventories were $6 $6 billion at the end of Q2, a decrease of $391 million or five 6% compared to prior year.

Speaker #4: Net interest expense for the quarter decreased to 57.7 million dollars compared to 68.1 million in last year's second quarter. Our effective tax rate for the quarter was 23.5%.

And a decrease of seven 4% on an average per store basis.

The team continues to do a tremendous job, reducing inventory, while increasing sales and improving in stock levels, which is having positive operational impacts in both stores and distribution centers.

Speaker #4: And compares to 22.3% in the second quarter last year. Finally, EPS for the quarter increased 9.4% to $1.86, which exceeded the high end of our internal expectations.

The business generated cash flows from operations of $1 $8 billion. During the first half of the year, an increase of nine 8% compared to the prior year, our strong top and bottom line results along with our focused inventory management efforts continued to generate significant cash flow.

Speaker #4: Turning now to our balance sheet and cash flow, where we continue to make great progress strengthening our financial position. Merchandise inventories were 6.6 billion dollars at the end of Q2, a decrease of 391 million dollars or 5.6% compared to prior year.

Kelly Dilts: Merchandise inventories were $6.6 billion at the end of Q2, a decrease of $391 million, or 5.6% compared to prior year, and a decrease of 7.4% on an average per store basis. The team continues to do a tremendous job reducing inventory while increasing sales and improving in-stock levels, which is having positive operational impacts in both stores and distribution centers. The business generated cash flows from operations of $1.8 billion during the first half of the year, an increase of 9.8% compared to the prior year. Our strong top and bottom line results, along with our focused inventory management efforts, continue to generate significant cash flow. During the quarter, we returned cash to shareholders through a quarterly dividend of $0.59 per common share outstanding for a total payment of approximately $130 million. Our capital allocation priorities continue to serve us well and remain unchanged.

During the quarter, we returned cash to shareholders through our quarterly dividend of 59 per common share outstanding for a total payment of approximately $130 million.

Speaker #4: And a decrease of 7.4% on an average per store basis. The team continues to do a tremendous job reducing inventory while increasing sales and improving in-stock levels.

Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in our business, including our existing store base as well as high return growth opportunities such as new store expansion Remodels and other strategic initiatives.

Speaker #4: Which is having positive operational impacts in both stores and distribution centers. The business generated cash flows from operations of 1.8 billion dollars during the first half of the year, an increase of 9.8% compared to the prior year.

Next we seek to return cash to shareholders through our quarterly dividend payment and overtime and when appropriate share repurchases and while our leverage ratio remains above our goal, which is below three times adjusted debt to adjusted EBITDAR, we are making great progress towards reaching our target level.

Speaker #4: Our strong top and bottom line results, along with our focused inventory management efforts, continue to generate significant cash flow. During the quarter, we returned cash to shareholders through a quarterly dividend of $0.59 per common share outstanding.

Importantly, we remain focused on improving our debt metrics in support of our commitment to middle Triple B ratings by S&P and Moody's.

Speaker #4: For a total payment of approximately $130 million, our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in our business, including our existing store base, as well as high-return growth opportunities such as new store expansions, remodels, and other strategic initiatives.

Overall, we're very pleased with our operating performance and financial results are strong performance has positioned us to raise our financial outlook for 2025.

Kelly Dilts: Our first priority is investing in our business, including our existing store base, as well as high-return growth opportunities, such as new store expansions, remodels, and other strategic initiatives. Next, we seek to return cash to shareholders through a quarterly dividend payment and over time and when appropriate, share repurchases. While our leverage ratio remains above our goal, which is below three times adjusted debt to adjusted EBITDA, we are making great progress towards reaching our target level. Importantly, we remain focused on improving our debt metrics in support of our commitment to middle BBB credit ratings by S&P and Moody's. Overall, we're very pleased with our operating performance and financial results. Our strong performance has positioned us to raise our financial outlook for 2025.

This update primarily reflects our outperformance in the second quarter and improved outlook for the second half of the year, while considering the potential uncertainty, particularly on consumer behavior as we move through the back half of 2025.

Speaker #4: Next, we seek to return cash to shareholders through a quarterly dividend payment, and over time, when appropriate, share repurchases. While our leverage ratio remains above our goal, which is below three times adjusted debt to adjusted EBITDA, we are making great progress towards reaching our target level.

With that in mind, we now expect the following for 2025 net sales growth of approximately 4.3 to four 8%.

Speaker #4: Importantly, we remain focused on improving our debt metrics in support of our commitment to middle triple-B ratings by S&P and Moody's. Overall, we're very pleased with our operating performance and financial results.

Same store sales growth of approximately 2.1 to two 6% and EPS in the range of $5 80 to $6 30.

Our EPS guidance continues to assume an effective tax rate of approximately 23, 5% and that we will not repurchase shares under our share repurchase program.

Speaker #4: Our strong performance has positioned us to raise our financial outlook for 2025. This update primarily reflects our outperformance in the second quarter and improved outlook for the second half of the year, while considering the potential uncertainty, particularly around consumer behavior, as we move through the back half of 2025.

Kelly Dilts: This update primarily reflects our outperformance in the second quarter and improved outlook for the second half of the year, while considering the potential uncertainty, particularly on consumer behavior, as we move through the back half of 2025. With that in mind, we now expect the following for 2025: net sales growth of approximately 4.3% to 4.8%, same-store sales growth of approximately 2.1% to 2.6%, and EPS in the range of $5.80 to $6.30. Our EPS 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, I want to provide some additional context around our expectations.

Now I want to provide some additional context around our expectations, while we're not providing specific quarterly guidance. The low end of our sales and earnings guidance ranges allow for increasing pressure on consumer spending as we move through the back half of the year with Q4 potentially more impacted than Q3.

Speaker #4: With that in mind, we now expect the following for 2025. Net sales growth of approximately 4.3 to 4.8%. Same store sales growth of approximately 2.1 to 2.6%.

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In addition, we expect shrink to be a continued tailwind throughout the remainder of the year, though to a lesser extent in Q4 as we begin to lap the improvements we made toward the end of last year.

Speaker #4: And EPS in the range of $5.80 to $6.30. Our EPS guidance continues to assume an effective tax rate of approximately 23.5% and that we will not repurchase shares under our share repurchase program.

Turning to SG&A, given our strong performance, we now anticipate incentive compensation expense to be a headwind of approximately $200 million.

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.

Speaker #4: Now I want to provide some additional context around our expectations. While we're not providing specific quarterly guidance, the low end of our sales and earnings guidance ranges allows for increasing pressure on consumer spending as we move through the back half of the year, with Q4 potentially more impacted than Q3.

Kelly Dilts: While we're not providing specific quarterly guidance, the low end of our sales and earnings guidance ranges allow for increasing pressure on consumer spending as we move through the back half of the year, with Q4 potentially more impacted than Q3. In addition, we expect shrink to be a continued tailwind throughout the remainder of the year, though to a lesser extent in Q4 as we begin to lap the improvements we made toward the end of last year. Turning to SG&A, given our strong performance, we now anticipate incentive compensation expense to be a headwind of approximately $200 million. 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.

This includes our continued expectations to execute approximately 4885 real estate projects in 2025, including 575, new store openings in the United States and up to 15 in Mexico 2000 project renovate Remodels 2002.

Speaker #4: In addition, we expect shrink to be a continued tailwind throughout the remainder of the year, though to a lesser extent in Q4 as we begin to lap the improvements we made toward the end of last year.

250 project, elevate Remodels and 45 relocations Phi.

Speaker #4: Turning to SG&A, given our strong performance, we now anticipate incentive compensation expense to be a headwind of approximately $200 million. 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.

Finally, as a result of our strong cash position, we are using cash on hand to redeem $600 million of our senior notes in the third quarter earlier than their April 2027 maturity.

In summary, we're pleased with our Q2 results and we're proud of the work that the team has done to strengthen our operating and financial position.

Speaker #4: This includes our continued expectations to execute approximately 4,885 real estate projects in 2025 including 575 new store openings in the United States and up to 15 in Mexico.

Kelly Dilts: This includes our continued expectations to execute approximately 4,885 real estate projects in 2025, including 575 new store openings in the U.S. and up to 15 in Mexico, 2,000 Project Renovate remodels, 2,250 Project Elevate remodels, and 45 relocations. Finally, as a result of our strong cash position, we are using cash on hand to redeem $600 million of our senior notes in the third quarter, earlier than their April 2027 maturity. In summary, we're pleased with our Q2 results, and we're proud of the work that the team has done to strengthen our operating and financial position. This business model is strong, and we believe Dollar General is 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.

This business model is strong and we believe dollar general is well positioned to drive sustainable long term growth on both the top and bottom lines, while creating long term shareholder value.

Speaker #4: 2,000 project renovate/remodels, 2,250 project elevate/remodels, and 45 relocations. Finally, as a result of our strong cash position, we are using cash on hand to redeem 600 million dollars of our senior notes in the third quarter.

With that I'll turn the call back over to Todd.

Thank you Kelly I'll take the next few minutes to provide updates on three of the most important initiatives across the business as we look to further advance our progress towards achieving our short and long term goals.

I'll start with our real estate work as we continue to focus on driving sales and market share growth by expanding our unique real estate footprint, while also enhancing our mature store base.

Speaker #4: Earlier than their April 2027 maturity. In summary, we're pleased with our Q2 results, and we're proud of the work that the team has done to strengthen our operating and financial position.

We opened 204, new stores in Q2, primarily using our 8500 square foot format and rural markets.

Speaker #4: This business model is strong, and we believe Dollar General is well positioned to drive sustainable, long-term growth on both the top and bottom lines while creating long-term shareholder value.

Dollar general continues to serve as a vital partner, bringing value and convenience to communities across the country through new store growth.

In addition to our U S growth, we opened four new stores in Mexico during the quarter, bringing us to a total of 13.

Speaker #4: With that, I'll turn the call back over to Todd. Thank you, Kelly. I'll take the next few minutes to provide updates on three of the most important initiatives across the business.

Todd Vasos: Thank you, Kelly. I'll take the next few minutes to provide updates on three of the most important initiatives across the business as we look to further advance our progress toward achieving our short and long-term goals. I'll start with our real estate work, as we continue to focus on driving sales and market share growth by expanding our unique real estate footprint while also enhancing our mature store base. We opened 204 new stores in Q2, primarily using our 8,500 square foot format in rural markets. Dollar General continues to serve as a vital partner, bringing value and convenience to communities across the country through new store growth. In addition to our U.S. growth, we opened four new stores in Mexico during the quarter, bringing us to a total of 13.

Our team is doing a wonderful job serving those communities as we continue to test and learn and further develop that potential growth opportunity.

Speaker #4: As we look to further advance our progress toward achieving our short- and long-term goals, I'll start with our real estate work. As we continue to focus on driving sales and market share growth by expanding our unique real estate footprint, while also enhancing our mature store base.

We are also pleased with the progress of our remodel projects as a reminder, in addition to our traditional remodel program, which we call project renovate we have introduced a new incremental remodel program called.

Speaker #4: We opened 204 new stores in Q2, primarily using our 8,500 square foot format in rural markets. Dollar General continues to serve as a vital partner bringing value and convenience to communities across the country through new store growth.

Called project elevate in 2025.

This initiative is designed to drive sales and market share growth in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline.

These projects include physical asset investments as well.

Speaker #4: In addition to our U.S. growth, we opened four new stores in Mexico during the quarter, bringing us to a total of 13. Our team is doing a wonderful job serving those communities as we continue to test and learn and further develop that potential growth opportunity.

As merchandising optimization product adjacency adjustments and category refreshes, all of which impacts approximately 80% of the total store.

Todd Vasos: Our team is doing a wonderful job serving those communities as we continue to test and learn and further develop that potential growth opportunity. We are also pleased with the progress of our remodel projects. 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 in 2025. This initiative is designed to drive sales and market share growth in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. These projects include physical asset investments, as well as merchandising optimization, product adjacency adjustments, and category refreshes, all of which impact approximately 80% of the total store. We completed 729 Project Elevate remodels in Q2 and an additional 592 Project Renovate remodels during the quarter.

We completed 729 project elevate remodels in Q2, and an additional 592 project renovate remodels during the quarter, while still early we expect to reach our goal of delivering first year annualized comp sales lifts in the range of 6% to 8% for project renovate stores and 3% to 5%.

Speaker #4: We are also pleased with the progress of our remodel projects. 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 in 2025.

Speaker #4: This initiative is designed to drive sales and market share growth in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline.

Sent for project elevate stores.

Importantly, we've seen significant improvements in customer satisfaction in these locations upon completion of the Remodels and we believe the improved performance and customer response in these stores paves the way to make project elevate a key component of our real estate strategy in the <unk>.

Speaker #4: These projects include physical asset investments as well as merchandising optimization, product adjacency adjustments, and category refreshes, all of which impact approximately 80% of the total store.

<unk> ahead.

The next area I wanted to discuss is our digital initiatives.

Speaker #4: We completed 729 Project Elevate remodels in Q2 and an additional 592 Project Renovate remodels during the quarter. While still early, we expect to reach our goal of delivering 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.

Which serves as an important complement to our expansive store footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers.

Todd Vasos: While still early, we expect to reach our goal of delivering 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. Importantly, we've seen significant improvements in customer satisfaction in these locations upon completion of the remodels, and we believe the improved performance and customer response in these stores paves the way to make Project Elevate a key component of our real estate strategy in the years ahead. The next area I want to discuss is our digital initiative, which serves as an important complement to our expansive store footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers.

Our digital capabilities, including engaging mobile App and website that continues to be very popular with our customers as well as growing our delivery options and DG media network.

Speaker #4: Importantly, we've seen significant improvements in customer satisfaction in these locations upon completion of the remodels. We believe the improved performance and customer response in these stores paves the way to make Project Elevate a key component of our real estate strategy in the years ahead.

We continue to expand the reach of our delivery options with solutions targeted at both new and existing customers.

Our door gas partnership, which now serves more than 17000 stores continues to drive significant increments ality and sales growth.

Speaker #4: The next area I want to discuss is our digital initiative. Which serves as an important complement to our expansive store footprint as we continue to deploy and leverage technology to further enhance convenience and access for our customers.

To that end, our Q2 sales through this platform increased by more than 60% year over year.

Building on this success, we partnered with door dash to launch our own same day delivery offering through our DG digital solutions late in 2024.

Speaker #4: Our digital capabilities include an engaging mobile app and website that continue to be very popular with our customers, as well as our growing delivery options and DG Media Network.

Todd Vasos: Our digital capabilities include an engaging mobile app and website that continues to be very popular with our customers, as well as growing our delivery options and DG Media Network. We continue to expand the reach of our delivery options with solutions targeted both new and existing customers. Our DoorDash partnership, which now serves more than 17,000 stores, continues to drive significant incrementality and sales growth. To that end, our Q2 sales through this platform increased by more than 60% year over year. Building on this success, we partnered with DoorDash to launch our own same-day delivery offering through our DG digital solutions late in 2024. We have now expanded this offering to nearly 6,000 stores. We are also excited to note that we now expect to offer DG delivery for more than 16,000 stores by year's end, compared to our previous expectation of approximately 10,000 stores.

We have now expanded this offering to nearly 6000 stores.

We are also excited to note that we now expect to offer D. G delivery for more than 16000 stores by year's end.

Speaker #4: We continue to expand the reach of our delivery options with solutions targeted both new and existing customers. Our DoorDash partnership, which now serves more than 17,000 stores, continues to drive significant incrementality and sales growth.

Compared to our previous expectation of approximately 10000 stores.

And most recently, we entered a partnership with Uber eats to further expand the reach of our delivery capabilities as we provide value and convenience to customers on their platform. We have already expanded to approximately 4000 stores with Uber and expect to be an approximately 14000 stores by the end of.

Speaker #4: To that end, our Q2 sales through this platform increased by more than 60% year-over-year. Building on this success, we partnered with DoorDash to launch our own same-day delivery offering through our DG Digital Solutions late in 2024.

Q3.

Collectively more than 75% of the orders through these offerings are delivered in one hour or less.

Speaker #4: We have now expanded this offering to nearly 6,000 stores. We are also excited to note that we now expect to offer DG delivery for more than 16,000 stores by year's end.

Ultimately, we believe this suite of delivery options will introduce new customers to dollar general and drive incremental sales growth. While also further enhancing the value and convenient proposition for our existing customer base.

Speaker #4: Compared to our previous expectation of approximately 10,000 stores, we have most recently entered a partnership with Uber Eats to further expand the reach of our delivery capabilities as we provide value and convenience to customers on their platform.

The linchpin of our digital initiative is our DG media network, which enables a more personalized experience for our unique customer base, while delivering a higher return on AD spend for our partners.

Todd Vasos: Most recently, we entered a partnership with Uber Eats to further expand the reach of our delivery capabilities as we provide value and convenience to customers on their platform. We have already expanded to approximately 4,000 stores with Uber and expect to be in approximately 14,000 stores by the end of Q3. Collectively, more than 75% of the orders through these offerings are delivered in one hour or less. Ultimately, we believe this suite of delivery options will introduce new customers to Dollar General and drive incremental sales growth, while also further enhancing the value and convenience proposition for our existing customer base. The linchpin of our digital initiative is our DG Media Network, which enables a more personalized experience for our unique customer base, while delivering a higher return on ad spend for our partners.

Speaker #4: We have already expanded to approximately 4,000 stores with Uber and expect to be in approximately 14,000 stores by the end of Q3. Collectively, more than 75% of the orders through these offerings are delivered in one hour or less.

We continue to be pleased with the performance of <unk> Media network, which is driving significant year over year growth in retail media volume as partners seek to access our unique customer base.

This initiative is an important component of our strategy to deliver on our long term growth framework and we are excited about its potential.

Speaker #4: Ultimately, we believe this suite of delivery options will introduce new customers to Dollar General and drive incremental sales growth while also further enhancing the value and convenience proposition for our existing customer base.

Overtime, we believe we can leverage our digital initiative 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 #4: The linchpin of our digital initiative is our DG Media Network, which enables a more personalized experience for our unique customer base while delivering a higher return on ad spend for our partners.

The final initiative I wanted to discuss is our non consumables growth strategy.

Speaker #4: We continue to be pleased with the performance of DG Media Network, which is driving significant year-over-year growth in retail and media volume as partners seek to access our unique customer base.

As a reminder, we are focused on a few key growth drivers in our non consumable categories over the next three years. These include brand partnerships.

Todd Vasos: We continue to be pleased with the performance of DG Media Network, which is driving significant year-over-year growth in retail media volume as partners seek to access our unique customer base. This initiative is an important component of our strategy to deliver on our long-term growth framework, and we are excited about its potential. Over time, we believe we can leverage our digital initiative 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. The final initiative I want to discuss is our non-consumables growth strategy. As a reminder, we are focused on a few key growth drivers in our non-consumable categories over the next three years. These include brand partnerships, a revamped treasure hunt experience, and reallocation of space within our home category.

Our revamped treasure hunt experience and reallocation of space within our home category.

Speaker #4: This initiative is an important component of our strategy to deliver on our long-term growth framework, and we are excited about its potential. Over time, we believe we can leverage our digital initiative 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.

During Q2, we were pleased to deliver positive quarterly same store sales growth in each of the three non consumable categories for the second consecutive quarter.

Notably the magnitude of growth was broad based with same store sales increases in each of these categories of at least two 5%.

Our brand partnerships are resonating with customers and.

Speaker #4: The final initiative I want to discuss is our non-consumables growth strategy. As a reminder, we are focused on a few key growth drivers in our non-consumable categories over the next three years. These include brand partnerships, a revamped treasure hunt experience, and reallocation of space within our home category.

And we have been pleased with the strong sell through in many of these sets.

As a result of the success as well as our improved execution, our home products category saw its largest quarterly same store sales increase and more than four years.

In addition, our pop shelf stores delivered another quarter of strong same store sales growth. We continue to be pleased with the performance of the new store layout in this banner, including a greater emphasis on categories, such as toys Party candy and beauty.

Speaker #4: During Q2, we were pleased to deliver positive quarterly same-store sales growth in each of the three non-consumable categories for the second consecutive quarter.

Todd Vasos: During Q2, we were pleased to deliver positive quarterly same-store sales growth in each of the three non-consumable categories for the second consecutive quarter. Notably, the magnitude of growth was broad-based, with same-store sales increases in each of these categories of at least 2.5%. Our brand partnerships are resonating with customers, and we have been pleased with the strong sell-through in many of these sets. As a result of the success, as well as our improved execution, our home products category saw its largest quarterly same-store sales increase in more than four years. In addition, our pOpshelf stores delivered another quarter of strong same-store sales growth. We continue to be pleased with the performance of the new store layout in this banner, including a greater emphasis on categories such as toys, party, candy, and beauty.

Speaker #4: Notably, the magnitude of growth was broad-based, with same-store sales increases in each of these categories of at least 2.5 percent.

The pop shelf banner also continues to produce learnings that we are able to apply to our non consumable categories in our dollar general stores to further strengthen that offering for our DG customers.

Speaker #4: Our brand partnerships are resonating with customers and we have been pleased with the strong sell-through in many of these sets. As a result of this success, as well as our improved execution, our home products category saw its largest quarterly same store sales increase in more than four years.

We believe our non consumable sales performance both in dollar general and pop shelf stores also benefited from improved execution in our stores and supply chain as well as from the expanded trading shopping we've seen for middle and higher income customers.

Speaker #4: In addition, our PopShelf stores delivered another quarter of strong same-store sales growth. We continue to be pleased with the performance of the new store layout in this banner, including a greater emphasis on categories such as toys, party, candy, and beauty.

These results, including strong sales performance and market share gains continued to demonstrate that our treasure Hunt approach is resonating with the customer.

In turn we believe we are well positioned to serve them in these discretionary categories in stores across both banners and ultimately drive further growth in both sales and gross margin.

Speaker #4: The Pop Shelf banner also continues to produce learnings that we are able to apply to our non-consumable categories in our Dollar General stores to further strengthen that offering for our DG customers.

Todd Vasos: The pOpshelf banner also continues to produce learnings that we are able to apply to our non-consumable categories in our Dollar General stores to further strengthen that offering for our DG customers. We believe our non-consumable sales performance, both in Dollar General and pOpshelf stores, also benefited from improved execution in our stores and supply chain, as well as from the expanded trade-in shopping we've seen from middle and higher-income customers. These results, including strong sales performance and market share gains, continue to demonstrate that our treasure hunt approach is resonating with the customer. In turn, we believe we are well-positioned to serve them in these discretionary categories in stores across both banners and ultimately drive further growth in both sales and gross margin. In closing, we're pleased with our second quarter performance.

In closing, we're pleased with our second quarter performance.

Speaker #4: We believe our non-consumable sales performance both in Dollar General and PopShelf stores also benefited from improved execution in our stores and supply chain, as well as from the expanded trade-in shopping we've seen from middle- and higher-income customers.

Operationally, we are improving execution.

Stabilizing our workforce through lower turnover rates advair.

Advancing our key initiatives and enhancing our position for sustainable long term growth.

Financially, we're delivering balanced sales growth.

Speaker #4: These results, including strong sales performance and market share gains, continue to demonstrate that our treasure hunt approach is resonating with the customer. In turn, we believe we are well positioned to serve them in these discretionary categories in stores across both banners and ultimately drive further growth in both sales and gross margin.

Significant margin improvement.

And strong earnings while also strengthening our balance sheet and operating cash flow.

With that said, we have ample opportunity in front of us to drive growth and further improve our operating and financial performance and this team is laser focused on delivering on these goals.

As an essential partner in communities across the country, our customers rely on dollar general in all economic environments.

Speaker #4: In closing, we're pleased with our second-quarter performance. Operationally, we are improving execution, stabilizing our workforce through lower turnover rates, advancing our key initiatives, and enhancing our position for sustainable long-term growth.

Todd Vasos: Operationally, we are improving execution, stabilizing our workforce through lower turnover rates, advancing our key initiatives, and enhancing our position for sustainable long-term growth. Financially, we're delivering balanced sales growth, significant margin improvement, and strong earnings, while also strengthening our balance sheet and operating cash flow. With that said, we have ample opportunity in front of us to drive growth and further improve our operating and financial performance, and this team is laser-focused on delivering on these goals. As an essential partner in communities across the country, our customers rely on Dollar General in all economic environments. Delivering on our mission of serving others continues to guide everything we do, and we are excited about our plans for the back half of 2025 and beyond.

Delivering on our mission of serving others continues to guide everything we do and we are excited about our plans for the back half of 2025 and beyond.

Speaker #4: Financially, we're delivering balanced sales growth, significant margin improvement, and strong earnings, while also strengthening our balance sheet and operating cash flow. With that said, we have ample opportunity in front of us to drive growth and further improve our operating and financial performance.

Lastly, I wanted to thank our more than 195000 employees for their commitment and dedication and Im looking forward to all we can accomplish together in the second half of the year.

With that operator, we would now like to open the lines for questions.

Thank you.

At this time well be conducting a question and answer session.

Speaker #4: And this team is laser-focused on delivering on these goals. As an essential partner in communities across the country, our customers rely on Dollar General in all economic environments.

If you'd like to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #4: Delivering on our mission of serving others continues to guide everything we do, and we are excited about our plans for the back half of 2025 and beyond.

So he may address questions as many participants as possible. We ask you. Please limit yourself to one question.

One moment please for our first question.

Speaker #4: Lastly, I want to thank our more than 195,000 employees for their commitment and dedication. I'm looking forward to all we can accomplish together in the second half of the year.

Todd Vasos: Lastly, I want to thank our more than 195,000 employees for their commitment and dedication, and I'm looking forward to all we can accomplish together in the second half of the year. With that, operator, we would now like to open the lines for questions.

Thank you and our first question is from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning. Thank you so much for taking my question.

Speaker #4: With that, we would now like to open the lines for questions.

Given that you are optimistic that shrink to contribute more than 80 basis points to your long term financial framework.

Speaker #2: Thank you. At this time, I'll be conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Rob (Conference Operator): Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We ask that you please limit yourself to one question so we may address questions for as many participants as possible. One moment, please, for our first question. Thank you. The first question is from the line of Michael Lasser with UBS Investment Bank. Please proceed with your question.

That mean that you expect to be able to realize the 67% operating margin may be a human adds next year.

Speaker #2: You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Or alternatively your.

Our long term range should be recalibrated above 7% or are you seeing anything in the environment that might suggest you'll have to take some of the upside in shrink and other factors and reinvest it back in the business in order to drive the topline. Thank you so much.

Speaker #2: So you may address questions through as many participants as possible. We ask that you please limit yourself to one question. One moment, please, for our first question.

Speaker #2: Thank you. And the first question is from the line of Michael Lasser with UBS. Please proceed with your question.

Yeah. Thank you Michael Great question. So we are definitely optimistic that we could potentially outperform on shrink and get a little bit more than that was 80 basis points over the mid to longer term.

Speaker #5: Good morning. Thank you so much for taking my question. Given that you are optimistic that shrink could contribute more than 80 basis points to your long-term financial framework, does that mean that you expect to be able to realize the 6% to 7% operating margin maybe as soon as next year? Alternatively, should your long-term range be recalibrated above 7%? Or are you seeing anything in the environment that might suggest you'll have to take some of this upside in shrink and other factors and reinvest it back in the business in order to drive the top line?

Michael Lasser: Good morning. Thank you so much for taking my question. Given that you are optimistic that shrink could contribute more than 80 basis points to your long-term financial framework, does that mean that you expect to be able to realize the 6 to 7% operating margin maybe as soon as next year, or alternatively, your long-term range should be recalibrated above 7%, or are you seeing anything in the environment that might suggest you'll have to take some of this upside in shrink and other factors and reinvest it back in the business in order to drive the top line? Thank you so much.

But we're still targeting that long term framework of 6% to 7% on on the operating margin.

This quarter just solidifies. The fact that we felt good about where we are shrink is a big component of that and we've got a lot of strategies and initiatives in place to achieving that long term framework and I think what's important for us is not only getting to that 6% to 7%, but also the sustainability of that operating margin as we go forward.

The next question is from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Speaker #5: Thank you so much.

Hey, good morning, everyone and Kelly good working with you and then eventually congratulations Donnie.

Speaker #6: Yeah, thank you, Michael. Great question. So, we are definitely optimistic that we could potentially outperform on shrink and get a little bit more than those 80 basis points over the mid to longer term.

Kelly Dilts: Yeah, thank you, Michael. Great question. We are definitely optimistic that we could potentially outperform on shrink and get a little bit more than those 80 basis points over the mid to longer term. We're still targeting that long-term framework of 6 to 7% on the operating margin. This quarter just solidifies the fact that we feel good about where we are. Shrink is a big component of that, and we've got a lot of strategies and initiatives in place to achieving that long-term framework. I think what's important for us is not only getting to that 6 to 7%, but also the sustainability of that operating margin as we go forward.

I'm going to ask you to park.

Awesome.

Two part question so first.

If you take the gross margin in the second quarter, and we hold that base.

Speaker #6: But we're still targeting that long-term framework of 6% to 7% on the operating margin. You know, this quarter just solidifies the fact that we feel good about where we are.

Does look like it steps down in Q3, but is there any reason why it should step down more than expected seasonally.

Speaker #6: Shrink is a big component of that and we've got a lot of strategies and initiatives in place to achieving that long-term framework. And I think what's important for us is not only getting to that 6 to 7%, but also the sustainability of that operating margin as we go forward.

Is there anything temporary about the gross margin that's not a good proxy and then <unk>.

Second Todd from when you came back in 2023 thinking.

Thinking about all the execution items can you talk about whats left and what you've gotten done.

Yeah, So I'll I'll answer the gross margin question first.

Speaker #2: The next question is from the line of Samir Gutman with Morgan Stanley. Please proceed with your question.

Rob (Conference Operator): The next question is from the line of Simeon Ari Gutman with Morgan Stanley. Please proceed with your question.

What we're seeing now is obviously just an outperformance on shrink so a 108 basis points. This quarter of the 137 basis points of improvement as we think about cadence for the back half, we're certainly expecting a year over year improvement in both of the quarters, but what I would tell you is we actually have tougher lapse in Q4 on the gross margin front and so.

Speaker #7: Hey, good morning, everyone. And Kelly, it's good working with you, and eventually, congratulations to Donnie. I'm going to ask you a two-part question. You're welcome.

Simeon Ari Gutman: Good morning, everyone. Kelly, good working with you, and congratulations to Donnie. I have a two-part question. First, if you take the gross margin in the second quarter and we hold that base, it does look like it steps down in Q3. Is there any reason why it should step down more than expected seasonally? Is there anything temporal about the gross margin that's not a good proxy? Second, Todd, from when you came back in 2023, thinking about all the execution items, can you talk about what's left and what you've gotten done? Thanks.

Speaker #7: Two-part question. So first, if you take the gross margin in the second quarter and we hold that base, it does look like it steps down in Q3, but is there any reason why it should step down more than expected seasonally?

We would expect maybe a little bit less on on Q4 as far as improvement over a year every year and then you didn't ask about SG&A, but I do want to call out just one thing on the SG&A front, we would expect more pressure in SG&A in the third quarter, and that's really around repairs and maintenance, it's kind of the season for repairs and maintenance is.

Speaker #7: Meaning, is there anything temporal about the gross margin that's not a good proxy? And then, second, Todd, from when you came back in 2023, thinking about all the execution items, can you talk about what's left and what you've gotten done?

As we get into hurricane season, and we're still kind of in that warm weather, but what's the big contributor there is where author wrapping up our project elevate and renovate projects, mostly in the third quarter and so that puts a little bit of pressure on on on Q3.

Speaker #7: Thanks.

Speaker #6: Yeah, so I'll answer the gross margin question first. What we're seeing now is obviously just an outperformance on shrink, so 108 basis points this quarter of the 137 basis points improvement.

Kelly Dilts: Yeah, so I'll answer the gross margin question first. What we're seeing now is obviously just an outperformance on shrink. So 108 basis points this quarter of the 137 basis points improvement. As we think about cadence for the back half, we're certainly expecting a year-over-year improvement in both of the quarters. What I would tell you is we actually have tougher laps in Q4 on the gross margin front, so we would expect maybe a little bit less on Q4 as far as improvement over year-over-year. You didn't ask about SG&A, but I do want to call out just one thing on the SG&A front. We would expect more pressure in SG&A in third quarter, and that's really around repairs and maintenance. It's kind of the season for repairs and maintenance as we get into hurricane season, and we're still kind of in that warm weather.

Speaker #6: As we think about cadence for the back half, we are certainly expecting a year-over-year improvement in both of the quarters. However, what I would tell you is we actually have tougher laps in Q4 on the gross margin front.

And Simeon I am very very pleased with where we are with our back to basics work.

I would tell you that the team has done a really good job from.

Speaker #6: And so we would expect maybe a little bit less in Q4 as far as improvement year-over-year. And then you didn't ask about SG&A, but I do want to call out just one thing on the SG&A front.

Back of house, so our supply chain our merchants.

One of the house, if you will and Thats in our stores and the execution.

It really is paying off you can see it in our top line.

Speaker #6: We would expect more pressure in SG&A in the third quarter, and that's really around repairs and maintenance. It's kind of the season for repairs and maintenance as we get into hurricane season, and we're still kind of in that warm weather. But what's the big contributor there is we're also wrapping up our Project Elevate and Renovate.

Not only a strong two 8%.

Comparable sales.

Number that we posted but as you look at that sales number is very balanced consumables and non consumables contributed very nicely.

Kelly Dilts: What's the big contributor there is we're also wrapping up our Project Elevate and Project Renovate projects mostly in the third quarter, so that puts a little bit of pressure on Q3.

To that that two 8% I would tell you that where retailers. We we always have work to do.

Speaker #6: Projects mostly in the third quarter, and so that puts a little bit of pressure on Q3.

Speaker #4: Yeah, Sami and I are very, very pleased with where we are with our back-to-basics work. I would tell you that the team has done a really good job from back of house, so our supply chain, our merchants, to front of house, if you will, and that's in our stores and the execution.

Todd Vasos: Yeah, and Simeon, I am very, very pleased with where we are with our back-to-basics work. I would tell you that the team has done a really good job from back of house, so our supply chain, our merchants, to front of house, if you will, and that's in our stores and the execution. It really is paying off. You can see it in our top line, not only a strong 2.8% comparable sales number that we posted, but as you look at that sales number, it's very balanced. Consumables and non-consumables contributed very nicely to that 2.8%. I would tell you that, you know, we're retailers. We always have work to do as it relates to a lot of what we've been working on.

As it relates to a lot of what we've been working on it.

Again, if I was to step back and think about it in baseball terms in innings I would say we're in the very late innings of this game.

And then we're really into now sustainability of what we have worked on and I would tell you feel real good about that as well from a couple of standpoints number one.

Speaker #4: It really is paying off. You can see it in our top line. Not only a strong 2.8% comparable sales number that we posted, but as you look at that sales number, it's very balanced.

We have done a really nice job in our turnover rates have come down.

<unk> had some consecutive quarters of those decreases and we continue to be happy with where we're at.

Speaker #4: Consumables and non-consumables contributed very nicely to that 2.8%. I would tell you that we're retailers; we always have work to do. As it relates to a lot of what we've been working on, but again, if I was to step back and think about it in baseball terms and innings, I would say we're in the very late innings of this game.

I'd tell you that our pipeline for <unk>.

Folks coming into the organization.

It is as robust as ever.

And I'm very happy to say that our store manager turnover rates are down again this quarter. So a lot of what we've been working on to make life easier at the store level is starting to really resonate not only with the customer, but our employee base, which is really important.

Todd Vasos: If I was to step back and think about it in baseball terms and innings, I would say we're in the very late innings of this game. We're really into now sustainability of what we have worked on. I would tell you, I feel real good about that as well from a couple of standpoints. Number one, we have done a really nice job and our turnover rates have come down. We've had some consecutive quarters of those decreases, and we continue to be happy with where we're at. I would tell you that our pipeline for folks coming into the organization is as robust as ever. I'm very happy to say that our store manager turnover rates are down again this quarter.

Speaker #4: And then we're really into sustainability. Of what we have worked on. And I would tell you, I feel really good about that as well.

Our next question is from the line of <unk> <unk> with Oppenheimer. Please proceed with your question.

Speaker #4: From a couple of standpoints. Number one, we have done a really nice job with our turnover rates; they have come down. We've had some consecutive quarters of those decreases, and we continue to be happy with where we're at.

Good morning, and thanks for taking my question and also a caller you best of luck.

I'm going to focus my comments on delivery. So as you look at the door Dodge partnership and I guess reversal very early but just any surprises or key learnings to date and then you know as <unk>.

Speaker #4: I would tell you that our pipeline for folks coming into the organization is as robust as ever. And I'm very happy to say that our store manager turnover rates are down again this quarter.

Like how do you think about the Incrementals you're about offering thank you.

Yeah. Thank you.

I can tell you our digital solutions in general just in totality, we're very happy with where we are.

Very early innings again baseball analogy for you very early innings on our digital journey.

Speaker #4: So a lot of what we've been working on to make life easier at the store level is starting to really resonate not only with the customer but with our employee base, which is really important.

Todd Vasos: A lot of what we've been working on to make life easier at the store level is starting to really resonate not only with the customer, but our employee base, which is really important.

But as you know.

Pointed out door dash has been.

Really the start of our digital journey, if you will from a delivery perspective.

Speaker #2: Our next question is from the line of Rupesh Parik with Oppenheimer. Please proceed with your question.

Rob (Conference Operator): Our next question is from the line of Rupesh Dhinoj Parikh with Oppenheimer & Co. Inc. Please proceed with your question.

We're up to 17000 locations.

Speaker #7: Good morning, and thanks for taking my question. And also, Kelly, best of luck. So, I'm going to focus my comments just on delivery.

Simeon Ari Gutman: Good morning, and thanks for taking my question. Also, Kelly, best of luck. I'm going to focus my comments just on delivery. As you look at the DoorDash partnership, and I guess Uber is still very early, are there any surprises or key learnings to date? As you've added Uber, how do you think about the incrementality of that offering? Thank you.

Which is great to see.

And I would tell you that we saw a 60% year over year increase on that platform.

Speaker #7: So, as you look at the DoorDash partnership—and I guess Uber is still very early—but just any surprises or key learnings to date?

And by the way off of a pretty robust number to start with so.

Speaker #7: And then, you know, as you've added Uber, like how do you think about the incrementality of that offering? Thank you.

Very happy with what we're seeing there, but the team isn't slowing down here because again, we're in the early innings, you saw where we just signed a deal with.

Speaker #4: Yeah, Rupesh, thank you. Yeah, I would tell you our digital solutions in general, just in totality, we're very happy with where we are. Very early innings again, baseball analogy for you.

Todd Vasos: Yeah, Rupesh, thank you. I'll tell you, our digital solutions in general, just in totality, we're very happy with where we are. Very early innings, again, baseball analogy for you, very early innings on our digital journey. As you know, and you've pointed out, DoorDash has been really the start of our digital journey, if you will, from a delivery perspective. We're up to 17,000 locations, which is great to see. I would tell you that we saw a 60% year-over-year increase on that platform, and by the way, off of a pretty robust number to start with. Very happy with what we're seeing there. The team isn't slowing down here because, again, we're in the early innings. You saw where we just signed a deal with Uber Eats, and we're happy with what we're seeing very early there in the partnership.

With Uber eats.

And we're happy with what we're seeing very early there in the partnership.

Speaker #4: Very early innings on our digital journey. But, as you know and have pointed out, DoorDash has really been the start of our digital journey.

<unk> 4000 stores up and running and by the end of the third quarter will have 14000 stores is what our goal too.

To have up and running on that platform and that just expands the reach to our to our consumer and then lastly on our delivery piece, our white label program that we stood up again very early days, but we're seeing both incrementally there as well.

Speaker #4: From a delivery perspective, we're up to 17,000 locations, which is great to see. I would tell you that we saw a 60% year-over-year increase on that platform.

Speaker #4: And by the way, off of a pretty robust number to start with, so I'm very happy with what we're seeing there. But the team isn't slowing down here because, again, we're in the early innings.

As larger baskets and these are larger baskets in and some of them are well north of $20 baskets for us.

What 0.2 incremental <unk> and would point to more of a fill up versus a fill in.

Speaker #4: You saw where we just signed a deal with Uber Eats, and we're happy with what we're seeing very early in the partnership. 4,000 stores are up and running.

And with that notion you would feel that.

And we feel that it is a lot of it is incremental to our base the great thing about about the delivery piece.

Todd Vasos: 4,000 stores up and running, and by the end of the third quarter, we'll have 14,000 stores is what our goal to have up and running on that platform. That just expands the reach to our consumer. Lastly, on our delivery piece, our white label program that we stood up, again, very early days, but we're seeing both incrementality there, as well as larger baskets. These are larger baskets, and some of them well north of $20 baskets for us would point to incrementality and would point to more of a fill-up versus a fill-in. With that notion, you would feel that, and we feel that it is a lot of it is incremental to our base.

Speaker #4: And by the end of the third quarter, we'll have 14,000 stores as our goal to have up and running on that platform. That just expands the reach.

Is we're going to have more and more stores up and running we believe and we are great to be able to put out there 16000 by year end now.

Speaker #4: To our consumer. And then lastly, on our delivery piece, our white label program that we stood up. Again, very early days, but we're seeing both incrementality there as well as larger baskets.

Which is an acceleration from where we were and I think thats, a real testament to what we've already seen so far.

To use my terminology, we're going to put the pedal to the metal here, because we see some real opportunity.

Speaker #4: And with that notion, you would feel that—and we feel that a lot of it is incremental to our base. The great thing about our delivery piece is we're going to have more and more stores up and running.

Speaker #4: these larger baskets and some of them well north of $20 baskets for us. Would point to incrementality and would point to more of a fill up versus a fill in.

Ahead, and I would tell you again the platform across all the digital properties. The linchpin of this is our digital media network.

And again it has shown strong results this quarter and continues to show strong results. So stay.

They tune there because I believe there is going to be.

Todd Vasos: The great thing about our delivery piece is we're going to have more and more stores up and running, we believe, and we were great to be able to put out there 16,000 by year-end now, which is an acceleration from where we were. I think that's a real testament to what we've already seen so far. To use my terminology, we're going to put the pedal to the metal here because we see some real opportunity ahead. I would tell you, again, the platform across all the digital properties, the linchpin of this is our DG Media Network. It has shown strong results this quarter and continues to show strong results. Stay tuned there because I believe there's going to be even more incrementality that comes from that media network.

Even even more <unk> that comes from that media network.

We have a very.

Speaker #4: We believe, and we're grateful to be able to put out there 16,000 by year-end now, which is an acceleration from where we were.

Unique customer base as you know being that 80% of our stores are in small town Rural America.

And it is hard for CPG companies and other companies to get a hold of clientele that is just in those areas and we have all that data and so that data will be.

Speaker #4: And I think that's a real testament to what we've already seen so far. You know, to use my terminology, we're going to put the pedal to the metal here because we see some real opportunity ahead.

Speaker #4: And I would tell you again, the platform across all the digital properties—the linchpin of this—is our digital media network. And again, it has shown strong results this quarter.

We used in our media network and I would tell you that our partners already.

Very interested in that and then lastly.

Our secret sauce here. If you will is there is that.

So far to date.

Speaker #4: And continues to show strong results. So stay tuned there because I believe there's going to be even more incrementality that comes from that media network.

We've seen that 75% plus of our deliveries are in one hour or less and I would tell you that that is the fastest that we've seen.

Speaker #4: We have a very unique customer base, as you know, being that 80% of our stores are in small-town rural America. It is hard for CPG companies and other businesses to connect with clientele that are just in those areas.

Todd Vasos: We have a very unique customer base, as you know, being that 80% of our stores are in small-town rural America. It is hard for CPG companies and other companies to get a hold of clientele that is just in those areas, and we have all that data. That data will be used in our DG Media Network. I would tell you that our partners are already very interested in that. Lastly, our secret sauce here, if you will, is that so far to date, we have seen that 75%+ of our deliveries are in one hour or less. I would tell you that is the fastest that we've seen out there across the spectrum so far, especially in rural America, where it is hard to reach many, many customers. We believe that's a competitive advantage for us, and it will continue to be as we move forward.

Out there across the spectrum, so far especially in rural America.

Where it is hard to reach many many customers. So we believe that's a competitive advantage for us and we will continue to be as we move forward.

Speaker #4: And we have all that data. That data will be used in our media network. I would tell you that our partners are already very interested in that.

Our next question is from the line of Matthew Boss with Jpmorgan. Please proceed with your question.

Thanks, and congrats on a nice quarter.

Thank you.

Todd on your forecast for increasing pressure on the low income consumer as the year progresses.

Speaker #4: And then lastly, our secret sauce here, if you will, is that so far to date, we have seen that over 75% of our deliveries are in one hour or less.

What are you seeing in your survey work today across your income customer cohorts, and where do you see <unk> value proposition as it stands today relative to opportunities maybe plan to amplify value and Kelly.

Speaker #4: And I would tell you that that is the fastest that we've seen out there across the spectrum so far, especially in rural America, where it is hard to reach many, many customers.

On the gross margin, where do you see shrink recovery and in terms of earnings today, and how best to think about additional drivers of gross margin multi year from here.

Speaker #4: So, we believe that's a competitive advantage for us, and we'll continue to be as we move forward.

Yeah, I'll start Kelly and send it over to you.

Right now, Matt I would tell you that I would characterize the customer number one as resilient.

Speaker #2: Our next question is from the line of Matthew Boss with J.P. Morgan. Please proceed with your question.

Rob (Conference Operator): Our next question is from the line of Matthew Boss with JPMorgan Chase & Co. Please proceed with your question.

And number two seeking value and seeking value, we're seeing that in all cohorts of customer, meaning our core customer.

Speaker #7: Thanks and congrats on the next quarter.

Simeon Ari Gutman: Thanks, and congrats on the next quarter.

Speaker #4: Thank you.

Todd Vasos: Thank you.

Speaker #8: That's a Todd. On your forecast for increasing pressure on the low-income consumer as the year progresses, what are you seeing in your survey work today across your income customer cohorts?

Simeon Ari Gutman: Todd, on your forecast for increasing pressure on the low-income consumer as the year progresses, what are you seeing in your survey work today across your income customer cohorts? Where do you see Dollar General's value proposition as it stands today relative to opportunities maybe planned to amplify value? Kelly, on the gross margin, where do you see shrink recovery in terms of innings today and how best to think about additional drivers of gross margin multi-year from here?

Mid and high end customers all seeking value at this point, we're seeing it in our in our numbers our trade in has.

Speaker #8: And where do you see DG's value proposition as it stands today relative to opportunities maybe planned to amplify value? And Kelly, on the gross margin, where do you see shrink recovery in terms of innings today?

It has been accelerating over the last few quarters, we saw that again.

Coming into and out of Q2.

And what we're seeing from the customer it is a good start to Q3.

Speaker #8: And how best to think about additional drivers of gross margin multi-year from here?

Our back to school offering was solid and in good shape and I would tell you our harvest and Halloween.

Speaker #4: Yeah, I'll start, Kelly, and send it over to you. You know, right now, Matt, I would tell you that I would characterize the customer number one as resilient.

Todd Vasos: Yeah, I'll start, Kelly, and send it over to you. Right now, Matt, I would tell you that I would characterize the customer, number one, as resilient, and number two, seeking value. Seeking value, we're seeing that in all cohorts of customer, meaning our core customer, mid, and high-end customers, all seeking value at this point. We're seeing it in our numbers. Our trade-in has been accelerating over the last few quarters. We saw that again coming into and out of Q2. What we're seeing from the customer is a good start to Q3. Our back-to-school offering was solid and in good shape. I would tell you, our harvest and Halloween programs are off to a great start. It really shows, and what we see in our data is not only our existing customers, but those new customers coming in.

Programs are off to a great start.

And it really shows and what we see in our data is not only our existing customers, but those new customers coming in and those new customers coming in and have a little extra money in their pocket.

Speaker #4: And number two, seeking value. We’re seeing that in all cohorts of customers, meaning our core customers, mid-tier, and high-end customers—everyone is seeking value at this point.

And on that non consumable categories and as you heard in my prepared remarks, and I mentioned earlier, we saw a really nice balance in our sales of both consumables and non consumables, but I would tell you it's much deeper than that as well as they seek value we have a great <unk>.

Speaker #4: We're seeing it in our numbers. Our trade-in has been accelerating over the last few quarters. We saw that again coming into and out of Q2.

Speaker #4: And what we're seeing from the customer is a good start to Q3. You know, our back-to-school offering was solid and in good shape. I would tell you our harvest and Halloween programs are off to a great start.

Proposition for them right. So our everyday low price stance, we have never lost focus on that.

We are as good as ever across all classes of trade on our everyday price and our customers resonate with that very nicely. We have a great promotional cadence that we use to continue to stimulate that consumer and especially stimulate these newer consumers as they come into to deliver value.

Speaker #4: And it really shows, and what we see in our data is not only our existing customers but those new customers coming in. Those new customers coming in have a little extra money in their pocket.

Todd Vasos: Those new customers coming in have a little extra money in their pocket to spend on that non-consumable categories. As you heard in my prepared remarks, and I mentioned earlier, we saw a really nice balance in our sales of both consumables and non-consumables. I would tell you, it's much deeper than that as well. As they seek value, we have a great proposition for them, right? Our everyday low-price stance, we have never lost focus on that. We're as good as ever across all classes of trade on our everyday price, and our customers resonate with that very nicely. We have a great promotional cadence that we use to continue to stimulate that consumer and especially stimulate these newer consumers as they come in to deliver value, because they're not as familiar with that value proposition and what we offer them. Through digital properties, we're able to reach them.

Because they're not as familiar with that value proposition and what we offer them. So that that digital through digital properties, we're able to reach them and so a nice promotional cadence as well here's the other value proposition that I think gets lost at times.

Speaker #4: To spend on those non-consumable categories. As you heard in my prepared remarks, I mentioned earlier that we saw a really nice balance in our sales of both consumables and non-consumables.

Speaker #4: But I would tell you it's much deeper than that as well. As they seek value, we have a great proposition for them, right? So our everyday low price stance, we have never lost focus on that.

That is we still have and will continue to have at least 2000 items at a dollar or less everyday on the shelf.

Matter of fact, our value Valley area, which I know you know that pretty well.

Speaker #4: We're as good as ever across all classes of trade on our everyday price, and our customers resonate with that very nicely. We have a great promotional cadence that we use.

Over 500, Skus and they're rotating skus.

At that $1 price point still today with 2000 overall inside the store and I would tell you in value valley and across the store.

Speaker #4: To continue to stimulate that consumer, and especially to stimulate these newer consumers as they come in, to deliver value. Because they're not as familiar with that value proposition and what we offer them.

Gross margin on those items are.

They exceed the category margins in each one of those items that they play and so it's very sustainable for us and by the way when you look across the retail spectrum.

Speaker #4: So that digital through digital properties, we're able to reach them and so a nice promotional cadence as well. Here's the other value proposition that I think gets lost at times.

Todd Vasos: A nice promotional cadence as well. Here's the other value proposition that I think gets lost at times. We still have, and will continue to have, at least 2,000 items at $1 or less every day on the shelf. Matter of fact, our Value Valley area, which I know you know, Matt, pretty well, we have over 500 SKUs, and they're rotating SKUs at that $1 price point still today, with 2,000 overall inside the store. I would tell you, in Value Valley and across the store, the gross margin on those items, they exceed the category margins in each one of those items that they play in. It's very sustainable for us. By the way, when you look across the retail spectrum, it's a very elusive price point at this point.

It's a very elusive price point at this point I would say, we're one of the only ones that are really double down here and really push that $1 price point, so value to me and I believe ISR consumers look at it is multi pronged here at dollar general and is very sustainable.

Speaker #4: And that is, we still have and will continue to have at least 2,000 items at a dollar or less every day on the shelf.

Speaker #4: Matter of fact, our Value Valley area, which I know you know, Matt, pretty well, we have over 500 SKUs, and they're rotating SKUs at that $1 price point still today.

Well on the gross margin side I'll I'll take it in a couple of pieces that first on the shrink side again, we were just really excited to be outperforming industry production expectations that we contemplated in our long term framework again and timing and magnitude shrink continues to build than the trend and like I talked that earlier, we do.

Speaker #4: With $2,000 overall inside the store, I would tell you that in value valley and across the store, the gross margin on those items exceeds the category margins in each one of those items that they play in.

We anticipate it's going to continue to be a tailwind into 2025, even with the at that tougher lap in the second half and particularly in Q4, and if you don't mind I'm just going to list out all the actions that we're taking because as you know we've got a full team that sits on on this shrink problem in and they are really producing results.

Speaker #4: So, it's very sustainable for us. And by the way, when you look across the retail spectrum, it's a very elusive price point at this point.

Speaker #4: I would say we're one of the only ones that have really doubled down here and really pushed that $1 price point. So value, to me, and I believe as our consumers look at it, is multi-pronged here at Dollar General.

Todd Vasos: I would say we're one of the only ones that have really doubled down here and really pushed that $1 price point. Value to me, and I believe as our consumers look at it, is multipronged here at Dollar General and is very sustainable.

First thing was just the self checkout conversion and that's been a big tailwind, but we're also getting back to our operational excellence with strong in store control environments, and we see that because we continue to see shrink improvement in stores that never had self checkout and said that's that's great to see them all of the inventory reduction and SKU rationalization.

Speaker #4: And is very sustainable.

Speaker #6: And on the gross margin side, I'll take it in a couple of pieces. So first on the shrink side, you know, again, we were just really excited to be outperforming the shrink reduction expectations that we contemplated in our long-term framework. Again, timing and magnitude.

Kelly Dilts: On the gross margin side, I'll take it in a couple of pieces. First, on the shrink side, you know, again, we were just really excited to be outperforming the shrink reduction expectations that we contemplated in our long-term framework, again, in timing and magnitude. Shrink continues to bend the trend. Like I talked about earlier, we do anticipate it's going to continue to be a tailwind into 2025, even with the tougher laps in the second half, and particularly in Q4. If you don't mind, I'm just going to list out all the actions that we're taking, because as you know, we've got a full team that sits on this shrink problem, and they are really producing results. The first thing was just the self-checkout conversion, and that's been a big tailwind. We're also getting back to our operational excellence with strong in-store control environments.

Work is contributing and the improving retail turnover that you heard US talk about is certainly a contributor to this as well as just the expanded shrink incentive programs that we've put in place.

Speaker #6: Shrink continues to bend the trend, and like I talked about earlier, we do anticipate it's going to continue to be a tailwind into 2025, even with the tougher laps in the second half, and particularly in Q4.

And we're still utilizing the high shrink plan O grams, and then as you know we really worked at this end to end process enhancements. So that we make sure that we're mitigating shrink at all points of exposure and I think what all of this combined gets us really excited because as you can remember it takes a full year for benefits of any actions to truly.

Speaker #6: If you don't mind, I'm just going to list out all the actions that we're taking because, as you know, we've got a full team that sits on this shrink problem, and they are really producing results.

Speaker #6: You know, the first thing was just the self-checkout conversion, and that's been a big tailwind. But we're also getting back to our operational excellence with strong in-store control environments, and we see that because we continue to see shrink improvement in stores that never had self-checkout.

Sure weapon in the P&L and our work around shrink never end. So as we add continual actions, we should see some improvement so over the mid to long term, we do feel optimistic that we would get more than the 80 basis points of shrink improvement I think the other piece that we've talked about in the long term framework and that we're starting to see improve us.

Kelly Dilts: We see that because we continue to see shrink improvement in stores that never had self-checkout, and that's great to see. All the inventory reduction and SKU rationalization work is contributing. The improving retail turnover that you heard us talk about is certainly a contributor to this, as well as just the experience.

Speaker #6: And so, that's great to see. All the inventory reduction and SKU rationalization work is contributing. The improving retail turnover that you heard us talk about is certainly a contributor to this, as well as just the expanded shrink incentive programs that we've put in place.

Also around damages so.

Our goal going into 2025 for damages with flat to slightly favorable we're still holding that in the back half, but I'll tell you that Q2 exceeded our expectations and as you saw it was actually a call out of the good Guy and NR variant analysis and our earnings release, So really pleased to see that starting to take hold in.

Kelly Dilts: Shrink incentive programs that we put in place. We're still utilizing the high shrink planograms. As you know, we really worked at this end-to-end process enhancements so that we make sure that we're mitigating shrink at all points of exposure. I think what all of this combined gets us really excited because, as you can remember, it takes a full year for benefits of any actions to truly show up in the P&L. Our work around shrink never ends. As we add continual actions, we should see some improvement. Over the mid to long term, we do feel optimistic that we would give up more than the 80 basis points of shrink improvement. I think the other piece that we've talked about in the long-term framework and that we're starting to see improve is also around damages. Our goal going into 2025 for damages was flat to slightly favorable.

Speaker #6: We're still utilizing the high shrink planograms, and as you know, we've really worked at this end-to-end process enhancement to ensure that we're mitigating shrink at all points of exposure.

Speaker #6: I think what all of this combined gets us really excited because, as you can remember, it takes a full year for the benefits of any actions to truly show up in the P&L.

And just like shrink we've got a team after there's a lot of the things that help us on the shrink side also help us on the damage side, which is the inventory reduction SKU rationalization. We're also having a full court effort around product rotation I'm getting more precise in our inventory alleghany allocation, which helps us.

Speaker #6: And our work around shrink never ends. So, as we add continual actions, we should see some improvement. Over the mid to long term, we do feel optimistic that we would get more than the 80 basis points of shrink improvement.

Speaker #6: I think the other piece that we've talked about in the long-term framework, and that we're starting to see improve, is also around damages. So, our goal going into 2025 for damages was flat to slightly favorable.

To mitigate future exploration and.

Damages and then just that proactive investment in the repairs and maintenance at three of our two remodel program should also help us reduce cooler damages. So I would tell you between the two overall, we are just feeling really good about the path to improvement that 80 basis point on shrink the 40 basis points on damages that we identified.

Kelly Dilts: We're still holding that in the back half, but I'll tell you that Q2 exceeded our expectations. As you saw, it was actually a call out as a good guy in our variance analysis in our earnings release. Really pleased to see that starting to take hold. Just like shrink, we've got a team after this. A lot of the things that help us on the shrink side also help us on the damage side, which is the inventory reduction, SKU rationalization. We're also having a full court effort around product rotation, getting more precise in our inventory allocation, which helps us to mitigate future expiration damages. That proactive investment in the repairs and maintenance through our two remodel programs should also help us reduce cooler damages.

And in our framework that we rolled out in March and then just on the initiative side I think you've heard Todd talk all about the initiatives that we have in place to drive that 150 basis points around D. G Media network, all the exciting things that we're doing with delivery and the non consumable initiatives as well. So we are we feel good about gross margin as we head into that mid and long.

Their term.

Our next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Hi, Good morning, everyone and thank you for taking my question I wanted to follow up on the gross margin. Obviously, a very strong result, this quarter, our shrink a big driver.

Kelly Dilts: I would tell you, between the two overall, we are just feeling really good about the path to the improvement, that 80 basis point on shrink, the 40 basis points on damages that we identified in our framework that we rolled out in March. On the initiative side, I think you've heard Todd talk all about the initiatives that we have in place to drive at their 150 basis points around DG Media Network, all the exciting things that we're doing with delivery and the non-consumable initiatives as well. We feel good about gross margin as we head into that mid and longer term.

LIFO was an offset and it does seem like there's I don't know roughly like 80 basis points in here of of you know.

A tailwind that I mean, I guess it seems like a lot of it is initial markup. So can you just talk about what that is and then just a quick follow up SG&A. There had been some retailers talking about increased higher liability claims I'm just kind of curious is that something that.

You are seeing sort of like where you are in the process. There are from like an actuarial standpoint that assessment and if there's any risk there yeah.

Todd Vasos: Our next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Yeah. Thank you for the question so yeah on the life and I would say you know year to date Q2 reflects what we know is as regards to current tariff rates as well as it contemplates any cost increases that we've gotten from any of our vendors, but if you step back and just take a look at the big picture, what I would say is out of the 137 basis points improvement in gross.

Kevin Walker: Hi, good morning everyone. Thank you for taking my question. I wanted to follow up on the gross margin. Obviously, a very strong result this quarter. Shrink, a big driver. LIFO was an offset, and it does seem like there's, I don't know, roughly like 80 basis points in here of, you know, a tailwind that, I mean, I guess it seems like a lot of it is initial markup. Can you just talk about what that is? Just a quick follow-up. SG&A, there had been some retailers talking about increased higher liability claims. Just kind of curious, is that something that you are seeing? Where you are in the process there from an actuarial standpoint and assessment, and if there's any risk there? Thanks.

Margin, we got 108 basis points of that and shrink and then we're getting 29 basis points tailwind from all of the other areas combined so solid improvement.

On the gross margin front.

You want to address the.

Workers' comp yeah, yeah, Thank you Todd and.

The general liability front you know, we we are seeing some impact it's not material and generally where were seeing them.

Kelly Dilts: Thank you for the question. On the LIFO, I would say, you know, year to date, Q2 reflects what we know as regards to current tariff rates, as well as it contemplates any cost increases that we've gotten from any of our vendors. If you step back and just take a look at the big picture, what I would say is of the 137 basis points improvement in gross margin, we got 108 basis points of that in shrink, and then we're getting 29 basis points of tailwind from all of the other areas combined. Solid improvement on the gross margin front.

Are they a trend towards claims being more expensive as we as we resolve those but not material impact to us right now and any trends that we're seeing is certainly been contemplated in our guidance.

Our next question is from the line of <unk> <unk> with Bernstein. Please proceed with your question.

Great. Thank you so much for taking my question I wanted to break down the comp sales performance a bit more in terms of you mentioned the trade and benefit and those of course, the better store operations driving more traffic can you help us better understand what proportion of the comp is driven by more macro oriented trading versus more company specific.

Todd Vasos: You want to address the workers' comp and those people?

Kelly Dilts: Thank you, Todd. On the general liability front, we are seeing some impact. It's not material. Generally, we're seeing the trend towards claims being more expensive as we resolve those, but not material impact to us right now. Any trends that we are seeing have certainly been contemplated in our guidance.

And then going into next year as we start to lap the tougher trading comps what is going to be sustainable on the top line. Thank you.

Yeah, well I would think as we look at where we are today, let me address the first part.

And then we'll get to two that sustainability piece, we feel good about where we are both from our core consumer as well as this trade and consumer and I would tell you that a lot of the work that we did on back to basics has.

Todd Vasos: Our next question is from the line of Zihan Ma with Bernstein. Please proceed with your question.

Kevin Walker: Great, thank you so much for taking my question. I wanted to break down the comp sales performance a bit more in terms of, you mentioned the trade-in benefit and also, of course, the better store operations driving more traffic. Can you help us better understand what proportion of the comp is driven by more macro-oriented trade-in versus more company-specific? Going into next year, as we start to lapse the tougher trading comps, what is going to be sustainable on the top line? Thank you.

Served us well and quite frankly has set us up nicely for that trade and consumer.

Whereas at trade and consumer came into the brand over the last few quarters, they've seen a better store both from cleanliness in stock as.

As well as friendly.

As well as having somebody at the front into to.

To meet and greet them.

So I would tell you that.

Todd Vasos: Yeah, you know, I would think as we look at where we are today, let me address the first part and then we'll get to that sustainability piece. We feel good about where we are both from our core consumer as well as this trade-in consumer. I would tell you that a lot of the work that we did on back to basics has served us well and, quite frankly, has set us up nicely for that trade-in consumer. As that trade-in consumer came into the brand over the last few quarters, they've seen a better store both from cleanliness, in stock, as well as friendly, as well as having somebody at the front end to meet and greet them. I would tell you that from all the work that the team has done organically, it has produced a nice outcome on the comp of 2.8%.

From all the work that the team has done organically.

Has has produced a nice outcome on the comp of two 8% I would tell you that as I look at the composition as I mentioned earlier being pretty balanced between consumables and non consumables.

That.

The work the team has done on the merchandising side on our non consumable business has been phenomenal.

All of these brand partnerships that we've been talking about along with great execution at store level.

And the flow of freight from our distribution centers has all been very very good.

Two to.

To deliver that.

Upsized comp that we saw in our non consumable businesses, we believe as we move to the back half of the year, we're well positioned to think about it this way right now.

Yeah. Well, you know, I, I would think, as we look at at where we are today, let me address the first part. Um, and then we'll get to to that sustainability piece. Uh, we feel good about, uh, where we are both from our core consumer, as well as this, uh, trade and consumer. And I would tell you that a lot of the work that we did on Back to Basics has, um, has served us well and quite frankly has set us up nicely for that trade in consumer. Um, uh, as that trade and consumer came into, uh, the brand over the last few quarters. They've seen a, um, a better store both from cleanliness in stock, uh, as well as friendly, uh, as well as having somebody at the front end to um, uh, to meet and greet them. Uh, so I would tell you that, um, you know, from all the work that the team has done organically, uh,

As we look at the back half of the year, our value proposition is as strong as ever met.

Todd Vasos: As I look at the composition, as I mentioned earlier, being pretty balanced between consumables and non-consumables, the work the team has done on the merchandising side on our non-consumable business has been phenomenal. All these brand partnerships that we've been talking about, along with great execution at store level and the flow of freight from our distribution centers, has all been very, very good to deliver that outsized comp that we saw in our non-consumable businesses. We believe as we move to the back half of the year, we're well positioned. Think about it this way. Right now, as we look at the back half of the year, our value proposition is as strong as ever. As a matter of fact, we've got our $1 SKUs for the seasonal piece for the back half of the year. 25% of the offering is at $1 or less.

Matter of fact, we've got.

We've got.

About a $1 skus for the seasonal.

Piece for the back half of the year, 25% of the <unk>.

<unk> offering is at $1 or less.

So even in the face of tariffs.

We've been able to maintain a $1 price point, and our seasonal offering which should resonate with the consumer matter of fact, 70% of the total offering is at $3 or less.

So again the team has done a great job with that shows me and I believe we will show in our results with our customer is that value is alive and well at dollar general in there and they're seeing that as as a trade into the into the brand. So I would say, it's really both sides. It was some self help.

But also that consumer coming into the brand, but without that self help I'm not so sure that she would have stuck with us. So that really brings me to the second part of your question.

Has, uh, has produced a nice outcome on the comp of 2.8%. I would tell you that, as I look at the composition, as I mentioned earlier, being pretty balanced between consumables and non-consumables, uh, that, um, the work the team has done on the merchandising side of our non-consumable business has been phenomenal. Uh, all these brand partnerships that we've been talking about, along with great execution at the store level and the flow of freight from our distribution centers, has all been very, very good, uh, to, um, uh, to deliver that, um, outsized, uh, comp that we saw in our non-consumable businesses. We believe, as we move, uh, to the back half of the year, we’re well positioned. Think about it this way: um, right now, uh, as we look at the back half of the year, our value proposition is as strong as ever. Matter of fact, um, we've got...

And we do this very well and that is being able to retain that trading customer.

Todd Vasos: Even in the face of tariffs, we've been able to maintain a $1 price point in our seasonal offering, which should resonate with the consumer. As a matter of fact, 70% of the total offering is at $3 or less. The team has done a great job. What that shows me, and I believe will show in our results with our customer, is that value is alive and well at Dollar General. They're seeing that as a trade-in to the brand. I would say it's really both sides. It was some self-help, but also that consumer coming into the brand. Without that self-help, I'm not so sure that she would have stuck with us. That really brings me to the second part of your question. We do this very well, and that is being able to retain that trade-in customer. We've got a playbook that is very robust and dense.

We've got, um, our $1 SKUs, um, for the um, seasonal, um, uh, piece for the back half of the year. Twenty-five percent of the, um, offering is at $1 or less.

We've got a playbook that is very.

Our robust and dense.

We digitized it a few years back coming out of Covid.

And what I mean by digitize. It we had a great playbook you coming out of the great recession call. It that 2010 11 timeframe.

We digitize to coming out of Covid and in 'twenty, one 'twenty two.

And now we're pulling that playbook back out matter of fact, we've already started marketing to.

To these new customers digitally two to one continue to keep them engaged and to hopefully keep them.

On that dollar general journey, even if time start to get a little better or different for that core consumer so or I'm, sorry for that trading consumers. So we're working on all angles as you would imagine from dollar general.

Todd Vasos: We digitized it a few years back coming out of COVID. What I mean by digitize it, we had a great playbook coming out of the Great Recession, call it that 2010-2011 timeframe. We digitized it coming out of COVID in 2021, 2022. We are pulling that playbook back out. As a matter of fact, we've already started marketing to these new customers digitally to, one, continue to keep them engaged and, two, hopefully keep them on that Dollar General journey, even if times start to get a little better or different for that core consumer, or, I'm sorry, for that trade-in consumer. We are working on all angles, as you would imagine from Dollar General. Comp sales are the lifeblood of this business, and we're pushing to deliver a comp at or above where we said we would be.

That trade-in customer. Uh, we we've got a Playbook. Uh, that is uh, very um uh, robust and dense.

Comp sales are the lifeblood of this business and we're pushing to to deliver a comp at or above where we were.

We said we would be.

The next question is from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Thanks, Good morning, really nice work, there Todd and it seems like the only really missing ingredient here is getting the pump back above 3% and being able to consistently I guess, how are you feeling about that opportunity and what are the drivers to get there and then Kelly on the gross margin line a lot of questions. There can you talk about the interrelationship.

Between shrink in inventory damages, maybe size up the damages opportunity relative to maybe where you were in the past couple of years. Thank you.

Yeah sure. Thanks for the question.

In our long term framework as you probably recall, we feel very comfortable in that 2% to 3% to deliver that now where retailers.

Uh we digitized it. Um a few years back uh coming out of coid. Um and when I mean by digitizing we had a great Playbook coming out of the Great Recession. Call at that 201011 time frame. Um, we digitized it coming out of Co in in 20, uh, 122. Um, and now we're pulling that plate. Book back out. Matter of fact we've already started marketing uh, to these new customers digitally to, to 1. Um, continue to keep them engaged and 2. Hopefully keep them, uh, on on that Dollar, General Journey, uh, even, uh, if times start to get a little better or different for that core consumer. So, um, or I'm sorry for that trade in consumer, so we're working on all angles as you would imagine from Dollar General. Uh, but um, calm sales are the lifeblood of this business and uh, we're pushing to, uh, to deliver a comp at or above where we um, uh we said we would be

Pretty well you know this team well, we will we will strive for more to drive it above those numbers, but I would tell you we feel very comfortable in that two to three range.

Todd Vasos: The next question is from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Kevin Walker: Hey, thanks. Good morning. Real nice work here, Todd. It seems like the only really missing ingredient here is getting the comp back above 3% and being able to do it consistently. I guess, how are you feeling about that opportunity and what are the drivers to get there? Kelly, on the gross margin line, a lot of questions there. Can you talk about the interrelationship between shrink and inventory damages and maybe size up the damages opportunity relative to maybe where you were the past couple of years? Thank you.

As we go forward now in saying that we've got a lot of drivers not only the self help that we've talked about not only the great value proposition that we continue to.

The next question is from the line of Chuck Graham with Gordon haskett, please receive with your question. Hey uh thanks, good morning. Uh, real nice work here, Todd. Um, you know, it seems like the the only really missing ingredient here is is getting the comp back above 3%, and being able to do it consistently. I guess how, how are you feeling about that opportunity and and what are the drivers to get there?

Now for our core consumer as well as these trading consumers.

But what we also have is a plethora.

Of initiatives. So when you start to think about.

Our project renovate and elevates stores.

Todd Vasos: Yeah, Chuck, thanks for the question. In our long-term framework, as you probably recall, we feel very comfortable in that 2% to 3% to deliver that. Now, we're retailers. You know me pretty well. You know this team well. We will strive for more to drive it above those numbers. I would tell you, we feel very comfortable in that 2% to 3% range as we go forward. In saying that, we've got a lot of drivers, not only the self-help that we talked about, not only that great value proposition that we continue to have for our core consumer as well as these trade-in consumers, but what we also have is a plethora of initiatives. When you start to think about our Project Renovate and Project Elevate stores, those are great comp drivers.

And then, Kelly, on the gross margin line, a lot of questions there. Can you talk about the interrelationship between shrink and inventory? Damages? Maybe size up the damages opportunity relative to where you were the past couple of years. Thank you.

Those are great comp drivers matter of fact, our mature store base really threw up a very nice comp. This.

This past quarter, a lot of that driven again on all of the initiatives that we laid out but also as you start to look at what projects elevate renovate are doing.

They're starting to produce those comps of 6% to aid for renovate and starting to produce and.

Working our way to three to five on the on the project.

Elevate stores. So those are all great mature store base comp drivers.

And we've got a long runway for that as you would imagine over the next few years with 20, the almost 21000 stores now in the portfolio. So.

So we've got a great opportunity there and by the way the customer response has been overwhelming on these remodels and.

Todd Vasos: As a matter of fact, our mature store base really threw off a very nice comp this past quarter. A lot of that driven again on all of the initiatives that we laid out. Also, as you start to look at what Projects Elevate and Renovate are doing, they're starting to produce those comps of 6% to 8% for Renovate and starting to produce and working our way to 3% to 5% on the Project Elevate stores. Those are all great mature store base comp drivers. We've got a long runway for that, as you would imagine, over the next few years with 20,000 to almost 21,000 stores now in the portfolio. We've got a great opportunity there. By the way, the customer response has been overwhelming on these remodels.

And as important so as our associates our employee base is.

Yeah, Jack. Thanks for the question, you know, in our long-term framework, uh, as, as you probably recall, we feel very comfortable in that 2 to 3% to deliver that now we're retailers. Uh, you know, me pretty well, you know, this team. Well, uh, we will we will strive for more, uh, to drive it, uh, above those numbers. Uh, but I would tell you we we feel very comfortable in that 2 to 3 range. Uh, as we go forward now, in saying that we've got a lot of drivers, uh, not only the self-help that we talked about, not only that great value proposition that we continue to, um, uh, uh, have for our core consumer as well as these trading consumers. Uh, but what we also have, is a plethora of, um, of initiatives. So when you start to think about um our project uh renovate and Elevate, um stores, those are great. Comp drivers. Matter of fact our mature store base um really through off a very nice comp uh this um, this

Really loved the remodels, because theyre very proud because the customers are loving it and then lastly, we wanted to deliver a very balanced.

Portfolio sales and so those non consumable initiatives continue to be very important and I would tell you that the pump shelf is will continue to be important for us as we continue to test learn and then bring back.

To the mothership, if you will dollar general those learnings and then deploy those across the chain, we're doing that as we speak and I believe thats been some of the comp driver you've also seen on our non consumable businesses.

Todd Vasos: As important, so has our associate, our employee base has really loved the remodels because they're very proud because the customer is loving it. Lastly, we want to deliver a very balanced portfolio of sales. Those non-consumable initiatives continue to be very important. I would tell you that that pOpshelf will continue to be important for us as we continue to test and learn and then bring back to the mothership, if you will, Dollar General, those learnings and then deploy those across the chain. We're doing that as we speak. I believe that's been some of the comp driver you've also seen on our non-consumable businesses.

And then just as I think about shrink and damages one thing I'd just like to say, it's seeing shrink and damages in premium together as a real positive and so.

You know we've talked a lot a lot about shrink so maybe I'll just give you a little bit more color on the damage side and like I noted just a little bit earlier that we did expect damages to be flat to slightly favorable as we work towards that 40 basis points improvement over our mid to long term framework and we believe we're well on our way to that with Q2 weeks.

Past quarter, a lot of that, uh, driven again on all of the initiatives that, that we laid out. But also, as you start to look at what projects Elevate and renovate are are doing, um, they're they're, they're starting to produce those comps of 6 to 8, for renovate and starting to, uh, produce. Uh, and working our way to 3 to 5 on the, um, on the project, um, Elevate stores. So those are all great, mature store, base comp drivers. Uh, and we've got a long runway for that as you would imagine over the next few years, uh, with 20 to almost 21,000 stores now in the portfolio. Uh, so we've got a great opportunity there and by the way, the customer response has been overwhelming on these remodels, uh, and as important. So, as the, um, our associate our employee base, his his, um, really loved the, um, the remodels. And because they're very proud, uh, because of the customers loving it. Uh, and then, lastly,

Leading our expectations there and so.

As you as you probably noting in in your question you know a lot of the things that improved shrink will also improve damages and where we're seeing all of those things come to fruition and so we felt good about our ability in our in our path to that 40 basis points of improvement.

you know, we want to deliver a very balanced um uh portfolio of sales and so those um, non-consumable initiatives continue to be very important and I would tell you that uh that pop shelf is will continue to be important for us as we continue to to uh, test learn and then bring back uh, to the Mothership if you will Dollar General, those learnings and then deploy those across the chain, uh, we're doing that as we speak, and I believe that's been some of the comp driver, you've also

Kelly Dilts: Yeah, as I think about shrink and damages, one thing I'd just like to say is seeing shrink and damages improve together is a real positive. We've talked a lot about shrink, so maybe I'll just give you a little bit more color on the damage side. Like I noted just a little bit earlier, we did expect damages to be flat to slightly favorable as we work towards that 40 basis points improvement over our mid to long-term framework. We believe we're well on our way to that with Q2 exceeding our expectations there. As you're probably noting in your question, a lot of the things that improve shrink will also improve damages. We're seeing all of those things come to fruition, and we feel good about our ability and our path to that 40 basis points of improvement.

Also seen on our non-consumable businesses.

Okay.

And then just as I think about,

Shrinking damage.

is 1 thing, I'd just like,

The next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Improve together.

Hey, good morning, everyone I wanted to focus on SG&A Q2 seemed unique because of the incentive comp returning.

You talked about maintenance and repairs I guess in Q3 can you talk a little bit more about the path back to normal operating leverage in light of the 2% to 3% comps that you mentioned I guess a lot of costs that come back over the last two years, including this year year to date should we assume this is just catch up and then we enter next year with a more normal expense.

How do you guys think about that thank you so much.

Yeah, no that incentive piece is certainly a big headwind for us this year at almost $200 million and so I think probably a more normalized rate is one that we would exit out of this year as we think about doing.

The things that improve shrink will also improve damages. And we’re seeing all of those things come to fruition. So, we feel good about our ability and our path to that 40 basis points of improvement.

Todd Vasos: The next question comes from the line of Seth Ian Sigman with Barclays Bank PLC. Please receive your question.

Going into 2026, I will say you know theres just been a ton of work that around just making sure that we're mitigating SG&A deleverage as we move forward. It's part of our framework that we called out. So that's a huge focus for us specifically around simplifying work in driving efficiencies as well as as we think about the <unk>.

Kevin Walker: Hey, good morning everyone. I wanted to focus on SG&A. Q2 seemed unique because of the incentive comp returning. You talked about maintenance and repairs, I guess, in Q3. Can you talk a little bit more about the path back to normal operating leverage in light of the 2% to 3% comps that you mentioned? I guess a lot of costs have come back over the last two years, including this year, year to date. Should we assume this is just catch-up and then we enter next year with a more normal expense base? How do you guys think about that? Thank you so much.

The next question comes from the line of Seth Segment with Barclays. Please receive your question.

Opex side and how it plays into depreciation just optimizing capex to stabilize our depreciation and amortization and so and working hard to make sure. We're mitigating that SG&A deleverage and then with all of that gross margin levers that we have in place that's where we feel really good about getting to that 6% to 7% framework as as we can.

Kelly Dilts: Yeah, no, that incentive piece is certainly a big headwind for us this year at almost $200 million. I think probably a more normalized rate is one that we would exit out of this year as we think about going into 2026. I will say there's just been a ton of work around just making sure that we're mitigating SG&A deleverage as we move forward. It's part of our framework that we called out. That's a huge focus for us, specifically around simplifying work and driving efficiencies, as well as as we think about the CapEx side and how it plays into depreciation, just optimizing CapEx to stabilize depreciation and amortization. We're working hard to make sure we're mitigating that SG&A deleverage.

Hey, good morning everyone. I wanted to focus on SGNA. Q2 seemed unique because of the incentive comp returning. You talked about maintenance and repairs, I guess in Q3. Can you talk a little bit more about the path back to normal operating leverage in light of the 2% to 3% comps that you mentioned? I guess a lot of costs have come back over the last 2 years, including this year or year to date. Should we assume this is just catch up and then we enter next year with a more normal expense base? How do you guys think about that? Thank you so much.

However, the mid to longer term.

The next question is from the line of Kelly Bania with BMO capital markets.

Please proceed with your question.

Yeah, no, that that incentive piece is certainly um, a big headwind for us this year at almost $200 million and so I I think, you know, probably a more normalized rate is 1 that we would exit out of this year as we think about um, you know, going into to 2026. I will say, you know,

Hi, Good morning, and best of luck to you as well Kelly.

No one wanted to wanted to dig into the to the comps on the discretionary side it.

Sounds like they were in that maybe two and a half range, but can you unpack that between the price.

Mixing units and just just help us understand what is in the plan in terms of inflation are those discretionary categories in the back half.

Kelly Dilts: With all of the gross margin levers that we have in place, that's where we feel really good about getting to that 6% to 7% framework as we go over the mid to longer term.

Yes, that's a great question I would tell you that.

The AUR was very similar year over year in those categories matter of fact, a lot of this is spring and summer during Q2 sales in our seasonal areas as an example.

You know, there's just been a ton of work that around just making sure that that we're mitigating sgad leverage as we move forward. It's part of our framework that we called out. So that's a huge Focus for us. Specifically around simplifying work and driving efficiencies. Um as well as as we think about the capex side and how it plays into depreciation, just optimizing capex to to stabilize, uh, depreciation and amortization. And so, you know, working hard to to make sure we're mitigating that sgna de leverage and then with all of the growth margin, levers that we have in place, that's where we feel really good about getting to that 6 to 7% framework as, as we go over the mid to longer term.

Todd Vasos: The next question is from the line of Kelly Vanyat with BMO Capital Markets. Please proceed with your question.

The next question is from the line of Kelly Vania with BMO Capital Markets. Please receive your question.

Kevin Walker: Hi, good morning. Best of luck to you as well, Kelly.

And a lot of the goods that we brought in prior to tariffs.

Kelly Dilts: Thank you.

Hi, good morning, and best of luck to you as well, Kelly.

Kevin Walker: Wanted to dig into the comps on the discretionary side. Sounds like they were in that maybe 2.5% range. Can you unpack that between the price mix and units and just help us understand what is in the plan in terms of inflation for those discretionary categories in the back half?

Really were the drivers here so.

Tariff and price increases.

We're not a real factor.

Our overall comp in non consumables.

As I mentioned earlier.

You. Um, wanted wanted wanted to, um, wanted to dig into the to the comps. Um, on the discretionary side, um, sounds like the they were in that maybe 2 and a half, uh, range. But can you unpack that between the price?

Even with tariff numbers starting to flow into our seasonal.

Home and other categories, we are still holding price points on many of them and you heard me mentioned, the 25% of our holiday assortment will be at a dollar a lesson and as we look at 70% of our offering still be in the $3 or less so I would tell you that.

Uh, price, mix, and units—just help us understand what is in the plan in terms of inflation for those discretionary categories in the back half.

Todd Vasos: Yeah, that's a great question. I would tell you that the AUR was very similar year over year in those categories. Matter of fact, a lot of this is spring and summer during Q2 sales in our seasonal areas as an example. A lot of the goods that we brought in prior to tariffs really were the drivers here. Tariff and price increases were not a real factor in our overall comp in non-consumables. As I mentioned earlier, even with tariff numbers starting to flow into our seasonal home and other categories, we're still holding price points on many of them. You heard me mention the 25% of our holiday assortment will be at $1 or less. As we look at 70% of our offering still being at $3 or less.

That the team has done a really good job of trading off items.

And bringing in new items for the seasonal.

Areas to keep price points.

Pretty pretty stable for our consumer overall.

Especially as it as we look at our non consumable businesses. So.

I feel.

As if the.

Business is very stable, but growing and the reason I am bullish there is we're seeing the takeaway early on are our holiday.

Especially in our harvest and Halloween areas.

And those areas again have tariff rates embedded in them, but again very manageable for our core consumer.

Todd Vasos: I would tell you that the team has done a really good job of trading off items and bringing in new items for the seasonal areas to keep price points pretty stable for our consumer overall, especially as we look at our non-consumable businesses. I feel as if the business is very stable but growing. The reason I'm bullish there is we're seeing the takeaway early on our holiday, especially in our harvest and Halloween areas. Those areas, again, have tariff rates embedded in them, but again, very manageable for our core consumer. Lastly, I would tell you that all of the work that the team has done in non-consumables is really starting to come together and start to generate this positive momentum we're seeing. To your point, each of the three major categories in our non-consumable areas comped at two and a half plus.

Yeah, that's a great question. I would tell you that, um, the Aur, uh, was very similar year-over-year in, in those categories. Uh, matter of fact, you know, a lot of this is spring and summer, uh, during Q2 sales in our seasonal areas as an example. Uh, and, um, and, and a lot of the goods that we brought in prior to tariffs, uh, really were the drivers here. So, uh, tariff and price increases, uh, were were not a real Factor, uh, in our overall, comp in non-consumable. Um, and as I mentioned earlier, uh, even with tariff, uh, numbers starting to flow into our seasonal, uh, home, and, and other categories. We're still holding price points on many of them. And you heard me mention the 25% of our holiday assortment will be at a dollar or less. And and and as we look at 70% of our offering still being a 3 dollars or less. So I would tell you that,

And then lastly, I would tell you that all of the work that the team has done in non consumables is really starting to come together and start to generate this.

This positive momentum, we're seeing to your point.

Each of the three major categories in our non consumable areas comped at two and a half plus.

Some of them a couple of them crossing the three Mark and I would tell you feeling.

Sealing really good about that sustained momentum as we go forward with all the work that the team has done through brand partnerships.

That um uh that the team has done a really good job of trading off items um and bringing in new items for the seasonal um uh areas to keep price points. Um uh pretty, pretty stable for our consumer overall. Um, especially as it as we look at our our non-consumable businesses. So um, I I feel uh, as if as if the um, uh, business is very stable, but growing, uh, and the reason

As well as what the team has done an execution at store level and I can't say enough about that that is a very big component, especially for our trading consumer that's coming in.

To resonate with these items.

The next question from Atlanta, Peter Keith with Piper Sandler. Please proceed with your question.

Hi, Thank you and nice quarter, guys and Kelly best wishes.

I was wondering if you had an early view on how the one big beautiful Bill will have an impact on your core customer and then maybe digging into that a little bit it looks like snap dollars will get cut starting in October maybe by about high single digit percent is that something that's factored into the outlook do you think that will have any.

Todd Vasos: Some of them, a couple of them crossing the three mark. I would tell you, feeling really good about that sustained momentum as we go forward with all the work that the team has done through brand partnerships, as well as what the team has done at execution at store level. I can't say enough about that. That is a very big component, especially for our trade-in consumer that's coming in to resonate with these items. The next question is from the line of Peter Keith with Piper Sandler. Please receive your question.

Impact.

Yes, let me take the first one first in everything we know to date is factored into.

Our outlook now.

We don't believe any snap.

Has done at execution at store level, and I can't say enough about that. That is a very big component, especially for our trade in consumer. That's coming in, uh, to to resonate with these items.

Things that are out there, especially those related to work requirements.

<unk>.

Very impactful for us.

The next question comes from Peter Keith with Piper Sandler. Please proceed with your question.

Kevin Walker: Hey, thank you. A nice quarter, guys. Kelly, best wishes.

As we went through this a few years ago.

Kelly Dilts: Thank you.

Kevin Walker: I was wondering if you had an early view on how the one big beautiful bill will have an impact on your core customer. Maybe digging into that a little bit, it looks like SNAP dollars will get cut starting in October, maybe by about high single digit %. Is that something that's factored into the outlook? Do you think that will have any impact?

The work rule requirements.

It was not really a factor for that snap customer for US now as you look at.

Bill in totality.

Whether it's this year end items that will be coming up from 26 through 29.

We believe overall.

Hey, uh, thank you. A nice quarter, guys. And, uh, Kelly, best wishes. Um, I was wondering if you had an early view on how the big beautiful bill will have, uh, an impact on your core customer. And then maybe digging into that a little bit, it looks like Snap Dollars will get cut starting in October—maybe about high school digit percent. Is that something that's factored into the outlook? Do you think that will have any, uh, impact?

Todd Vasos: Yeah, let me take the first one first. Everything we know to date is factored into our outlook. Now, we don't believe any SNAP things that are out there, especially those related to work requirements, will be very impactful for us. As we went through this a few years ago, the work rule requirements were not really a factor for that SNAP customer for us. Now, as you look at the bill in totality, whether it's this year and items that will be coming up from 2026 through 2029, you know, we believe overall it should be a little bit of a tailwind for our core consumer.

It should be a little bit of a tailwind for our core consumer.

Some of you may be surprised at that but I would tell you as you look at those areas, especially the ones that are already in play.

Even though a lot of them won't be they won't recognize the income until tax time next year things like no tax on tips up to the up to the.

Levels no tax on overtime.

Social security no tax pieces all of that is very beneficial for our core consumer.

We believe we will get our fair share of those benefits as we move forward.

Yeah, let let me take the first 1. First it everything we know today is, is factored into, uh, our, our Outlook now. Uh, we, we don't believe, um, any snap, um, things that are out there, especially, uh, those related to, uh, work, uh, requirements, uh, will be, um, uh, very impactful for us. Uh, as as we, um, as we went through this, um, a few years ago, uh, the work, the work rule requirements. Uh, well was was, was not really a factor, uh, for for that, snap customer for us. Now, as you look at, um, the bill in totality, uh, whether it's this year and

So a lot of positives at least.

Initially early some of the headwinds.

Broader snap.

Todd Vasos: Some of you may be surprised at that, but I would tell you, as you look at those areas, especially the ones that are already in play, even though a lot of them won't be, they won't recognize the income until tax time next year, you know, things like no tax on tips up to the levels, no tax on overtime, the Social Security no tax pieces. All of that is very beneficial for our core consumer. We believe we'll get our fair share of those benefits as we move forward. A lot of positives, at least initially early. Some of the headwinds, broader SNAP cuts perhaps, and a few other things that probably come more in late 2026, 2027, 2028, we'll continue to watch for and see how they progress and what they look like.

What's perhaps.

And a few other things that probably come more in late 'twenty six 'twenty 728, we'll continue to watch for and see how they progress and what they look like but but overall feel really good about what our core customer initially we will see from these tax benefits we believe it.

Items that will be coming up from the 26th through the 29th. Um, you know, we believe, uh, overall. Uh, it should be a little bit of a tailwind for our core consumer. Um, some of you may be surprised at that, uh, but I would tell you, as you look at those areas, especially the ones that are already in play. Um, even though a lot of them won't be, um, they won't recognize the income until tax time next year, you know, things like no tax on tips.

Really we'll be including the child tax credits will really be a benefit for our core consumer.

Thank you.

Our last question is from the line of Robbie <unk> with Bank of America.

With your question.

Thanks for sneaking in sneaking me in here.

Can you just talk about what dollar general remind us what you guys are doing on the.

The fresh initiatives you guys are doing with DG market and maybe.

How you see competing with Wal Mart, and I guess, maybe even Amazon at some point trying to get more fresh food delivery into the rural markets.

Todd Vasos: Overall, I feel really good about what our core customer initially will see from these tax benefits. We believe it really will be, including the child tax credits, will really be a benefit for our core consumer.

Yes. Thank you for the question, we're really proud about the work that.

We have done in these fresh categories and quite frankly that work has been going on and.

A rating for the last 12 13 years here.

Uh, up to the, you know, up to the, um, uh, levels, uh, no tax on overtime. Uh, the Social Security, uh, no tax pieces, all of that, um, is very beneficial for our core consumer. Um, and we believe we will get our fair share of, um, of those benefits as we move forward. Uh, so a lot of positives, uh, at least, um, uh, initially. Early, some of the headwinds, uh, broader SNAP, um, uh, cuts perhaps, um, and a few other things that probably come more in late 2026, 2027, 2028, we'll continue to watch for and see how they progress and what they look like, but, uh, overall feel really good about, um, what our core customer, um, initially will see from these tax benefits. We believe it really will be including the child tax credits, will really be a benefit for, um, uh.

Our core consumer.

Excuse me at dollar General is you as a reminder, we stood up our own fresh distribution network.

Kevin Walker: Thank you.

Todd Vasos: Our last question is from the line of Robby Ohmes with Bank of America. Please proceed with your question.

Thank you.

In 2021 and into early 'twenty two.

Kevin Walker: Thanks for sneaking in here. Todd, can you just talk about with Dollar General, remind us what you guys are doing on the fresh initiatives you guys are doing with DG Market and maybe how you see competing with Walmart and I guess maybe even Amazon at some point trying to get more fresh food delivery into the rural markets?

Our last question is from the line of Robbie Ms. With Bank of America. Please proceed with your question.

Which has given us a real.

Leg up an opportunity to get product to our stores timely and in full.

We've gotten produced now in 7000 plus stores.

We've got fresh meat and thousands of others.

We are building.

Our DG market concept.

Todd Vasos: Thank you for the question. We're really proud about the work that we've done in these fresh categories. Quite frankly, that work has been going on and accelerating for the last 12, 13 years here at Dollar General. As a reminder, we stood up our own fresh distribution network in 2021 and into early 2022, which has given us a real leg up and opportunity to get product to our stores timely and in full. We've gotten produce now in 7,000 plus stores. We've got fresh meat in thousands of others. We are building our DG Market concept and also putting produce in even outside of DG Market concept in our Dollar General stores where it makes sense, especially, as you mentioned, in rural America.

Oh, thanks for sneaking in, sneaking me in here. Um, Todd, can you just, uh, you know, talk about, um, what Dollar General? Remind us what you guys are doing on the, um, the fresh, uh, initiatives. You guys are doing with DG market and, and maybe, um, how you see competing with, you know, Walmart and I guess maybe even Amazon at some point trying to get more fresh food, delivery into the rural markets.

And also putting produce in even outside of DG market concept, and our and our dollar general stores.

Where it makes sense, especially as you mentioned in Rural America.

And the great thing about our delivery pieces is.

And we're already seeing it in rural America, where folks are buying those fresh items fresh frozen deli dairy produce online and being delivered in an hour or less.

To our to our consumer base, we believe again as I mentioned earlier that to be a competitive advantage as we move forward, especially the speed that we're able to to offer her and at the value pricing that she knows and loves to that dollar general already so we believe that it's a powerful combination.

We will continue to cultivate in the years to come.

Thank you.

Yeah, thank you for the question. You know, we're we're really proud about the work that, um, uh, we've done in these fresh categories. And, and quite frankly, that work has been, uh, going on and, uh, accelerating, uh, for the last 12, 13 years here at, um, excuse me at Dollar General, as you as a reminder, you know, we stood up our own fresh distribution Network, um, in 2021 and into early 22, uh, which is given us a real, uh, leg up and opportunity, uh, to get product to our stores timely. And in full, uh, we've gotten produce now in 7,000 Plus stores. Um, we've got fresh meat and thousands of others. Uh, we, we are building. Um, our DG Market concept, uh, and also putting produce in, uh, even outside of DG Market Concept in our, in our Dollar, General stores, uh,

At this time, we've reached the end of our question and answer session and this also concludes today's conference.

Todd Vasos: The great thing about our delivery pieces is that we're already seeing it in rural America where folks are buying those fresh items, fresh, frozen, deli, dairy, produce online and being delivered in an hour or less to our consumer base. We believe, again, as I mentioned earlier, that to be a competitive advantage as we move forward, especially the speed that we're able to offer her and at the value pricing that she knows and loves from Dollar General already. We believe that it's a powerful combination that we will continue to cultivate in the years to come.

You may now disconnect your lines at this time, we thank you for your participation and have a wonderful day.

Again, as I mentioned earlier, that to be a competitive Advantage as we move forward, especially the um, uh, the speed that we're able to um, to offer her. And at the value pricing that she knows and loves from that Dollar General, uh, already. So we believe that it's a powerful combination uh, that we will uh, continue to cultivate in the years to come

Kevin Walker: Thank you.

Todd Vasos: At this time, we've reached the end of our question and answer session, and this will also conclude today's conference. You may now disconnect your lines at this time. We thank you for your participation and have a wonderful day.

Thank you.

At this time, we've reached the end of our question-and-answer session, and this will also conclude today's conference.

You may now disconnect your line to this time. We thank you for your participation and have a wonderful day.