Dollar(DG) - 2026 Q2 - Quarterly Report

Cautionary Disclosure Regarding Forward-Looking Statements Outlines forward-looking statements and inherent risks that could cause actual results to differ materially Forward-Looking Statements Overview Identifies forward-looking statements, primarily in 'Management's Discussion and Analysis,' noting actual results may materially differ due to risks - Forward-looking statements are identified by words such as 'anticipate,' 'expect,' 'plan,' 'will,' and similar expressions, primarily found in 'Management's Discussion and Analysis' and 'Note 7. Commitments and Contingencies'[8] - Actual results may differ materially from expectations due to various risks, and the company does not undertake to update these statements[9][15] Risk Factors Affecting Forward-Looking Statements Forward-looking statements are subject to economic, operational, legal, and competitive risks that could cause actual results to vary significantly - Economic factors, including employment levels, inflation, higher fuel/energy/healthcare/housing/product costs, interest rates, consumer debt, and changes in government assistance programs, can significantly impact actual results[9][12] - Operational risks include failure to achieve strategic initiatives (merchandising, real estate, digital), competitive pressures, inventory shrinkage and damages, supply chain disruptions, and IT system security failures[10][12] - Legal and regulatory changes, including minimum wage increases, tax law changes, and outcomes of legal disputes, also pose significant risks[10][14] PART I—FINANCIAL INFORMATION Presents the company's unaudited consolidated financial statements, management's discussion and analysis, and disclosures on market risk and controls ITEM 1. FINANCIAL STATEMENTS Presents unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes Consolidated Balance Sheets Total assets increased by $520.4 million and shareholders' equity by $598.4 million as of August 1, 2025, driven by cash and property Consolidated Balance Sheets (in thousands) | Metric | August 1, 2025 (in thousands) | January 31, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Cash and cash equivalents | $1,284,567 | $932,576 | $351,991 | | Merchandise inventories | $6,609,690 | $6,711,242 | $(101,552) | | Total current assets | $8,398,679 | $8,163,925 | $234,754 | | Net property and equipment | $6,398,049 | $6,209,481 | $188,568 | | Total assets | $31,653,111 | $31,132,733 | $520,378 | | Current portion of long-term obligations | $19,326 | $519,463 | $(500,137) | | Total current liabilities | $6,701,666 | $6,868,702 | $(167,036) | | Total liabilities | $23,640,980 | $23,719,026 | $(78,046) | | Total shareholders' equity | $8,012,131 | $7,413,707 | $598,424 | Consolidated Statements of Income Net sales increased by 5.1% to $10.73 billion for 13 weeks and 5.2% to $21.16 billion for 26 weeks, with corresponding net income and EPS growth Consolidated Statements of Income (in thousands, except per share) | Metric (in thousands, except per share) | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | % Change (13 Weeks) | | :-------------------------------------- | :------------------------- | :------------------------- | :------------------ | | Net sales | $10,727,737 | $10,210,361 | 5.1% | | Gross profit | $3,361,668 | $3,059,479 | 9.9% | | Operating profit | $595,428 | $549,962 | 8.3% | | Net income | $411,426 | $374,190 | 10.0% | | Diluted EPS | $1.86 | $1.70 | 9.4% | | Metric (in thousands, except per share) | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | % Change (26 Weeks) | | :-------------------------------------- | :------------------------- | :------------------------- | :------------------ | | Net sales | $21,163,716 | $20,124,382 | 5.2% | | Gross profit | $6,592,956 | $6,051,628 | 8.9% | | Operating profit | $1,171,541 | $1,096,066 | 6.9% | | Net income | $803,354 | $737,507 | 8.9% | | Diluted EPS | $3.64 | $3.35 | 8.7% | Consolidated Statements of Comprehensive Income Comprehensive income increased by 9.8% to $413.0 million for 13 weeks and 9.1% to $806.7 million for 26 weeks, driven by net income and other gains Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | % Change (13 Weeks) | | :-------------------- | :------------------------- | :------------------------- | :------------------ | | Net income | $411,426 | $374,190 | 10.0% | | Comprehensive income | $412,987 | $376,062 | 9.8% | | Metric (in thousands) | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | % Change (26 Weeks) | | :-------------------- | :------------------------- | :------------------------- | :------------------ | | Net income | $803,354 | $737,507 | 8.9% | | Comprehensive income | $806,701 | $739,299 | 9.1% | Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $8.01 billion by August 1, 2025, primarily due to net income, partially offset by dividends Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | January 31, 2025 | August 1, 2025 | | :-------------------- | :--------------- | :------------- | | Total Shareholders' Equity | $7,413,707 | $8,012,131 | Key Changes (26 Weeks Ended August 1, 2025): * Net income: $803,354 thousand * Dividends paid: $(259,731) thousand * Share-based compensation expense: $52,977 thousand Consolidated Statement of Cash Flows Operating cash flow increased by $162.1 million to $1.81 billion, while financing cash flow significantly increased due to debt repayments Consolidated Statement of Cash Flows (in thousands) | Metric (in thousands) | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | Change (in thousands) | | :-------------------- | :------------------------- | :------------------------- | :-------------------- | | Net cash from operating activities | $1,814,855 | $1,652,729 | $162,126 | | Net cash from investing activities | $(691,494) | $(694,158) | $2,664 | | Net cash from financing activities | $(771,370) | $(273,163) | $(498,207) | | Net increase in cash and cash equivalents | $351,991 | $685,408 | $(333,417) | | Cash and cash equivalents, end of period | $1,284,567 | $1,222,691 | $61,876 | - Repayments of long-term obligations significantly increased cash used in financing activities, totaling $509.6 million in the 2025 period compared to $10.3 million in the 2024 period[30][136] Notes to Consolidated Financial Statements These notes detail accounting policies, EPS, income taxes, leases, debt, fair value, legal matters, segment reporting, and common stock transactions 1. Basis of presentation Interim financial statements follow U.S. GAAP, with LIFO calculations based on estimates and a $74.6 million provision for 26 weeks - Interim LIFO calculations are based on management's estimates and are subject to adjustment at year-end[36] LIFO Provision (in millions) | Period | LIFO Provision (in millions) | | :----- | :--------------------------- | | 13-week ended Aug 1, 2025 | $62.3 | | 13-week ended Aug 2, 2024 | $10.5 | | 26-week ended Aug 1, 2025 | $74.6 | | 26-week ended Aug 2, 2024 | $20.8 | - The company uses supply chain finance programs, with $317.1 million in outstanding obligations as of August 1, 2025[37] 2. Earnings per share Diluted EPS was $1.86 for 13 weeks and $3.64 for 26 weeks, calculated based on weighted average common shares outstanding Earnings per share | Metric | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | | :----- | :------------------------- | :------------------------- | | Basic EPS | $1.87 | $1.70 | | Diluted EPS | $1.86 | $1.70 | | Metric | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :----- | :------------------------- | :------------------------- | | Basic EPS | $3.65 | $3.35 | | Diluted EPS | $3.64 | $3.35 | 3. Income taxes The effective income tax rate increased to 23.4% for 26 weeks due to Pillar Two minimum tax, with U.S. cash taxes expected to decrease Effective Income Tax Rate | Period | Effective Income Tax Rate (2025) | Effective Income Tax Rate (2024) | | :----- | :------------------------------- | :------------------------------- | | 13-week ended Aug 1 | 23.5% | 22.3% | | 26-week ended Aug 1 | 23.4% | 22.8% | - The increase in the effective income tax rate is primarily due to the enactment of the Pillar Two minimum tax in a certain jurisdiction[49] - The One Big Beautiful Bill Act (OBBBA) is expected to significantly decrease U.S. cash taxes in 2025, with no material impact on the effective tax rate[50] 4. Leases Operating lease costs for 26 weeks were $983.1 million, with a weighted-average remaining lease term of 9.3 years Operating Lease Costs (in millions) | Metric | 26 Weeks Ended Aug 1, 2025 (in millions) | 26 Weeks Ended Aug 2, 2024 (in millions) | | :----- | :--------------------------------------- | :--------------------------------------- | | Operating lease costs | $983.1 | $929.2 | - As of August 1, 2025, the weighted-average remaining lease term for operating leases was 9.3 years, and the weighted average discount rate was 4.6%[51] 5. Current and long-term obligations Total debt was $5.75 billion as of August 1, 2025, with $500 million in senior notes redeemed and $600 million planned for redemption Current and Long-Term Obligations (in thousands) | Metric (in thousands) | August 1, 2025 | January 31, 2025 | | :-------------------- | :------------- | :--------------- | | Total Debt | $5,745,102 | $6,238,488 | | Less: current portion | $(19,326) | $(519,463) | | Long-term obligations | $5,725,776 | $5,719,025 | - The company has a $2.375 billion unsecured five-year revolving credit facility, maturing September 3, 2029, with no outstanding borrowings as of August 1, 2025[54][57] - In April 2025, the company redeemed $500.0 million of 4.15% senior notes and plans to redeem $600.0 million of 3.875% senior notes in the third quarter of 2025[59][124] 6. Assets and liabilities measured at fair value Liabilities measured at fair value, primarily debt and deferred compensation, are classified within Level 1 and Level 2 Fair Value Measurements at August 1, 2025 (in thousands) | Liabilities (in thousands) | Level 1 (Quoted Prices in Active Markets) | Level 2 (Significant Other Observable Inputs) | Total Fair Value at August 1, 2025 | | :------------------------- | :---------------------------------------- | :-------------------------------------------- | :--------------------------------- | | Current and long-term obligations | $5,499,954 | $171,551 | $5,671,505 | | Deferred compensation | $51,644 | — | $51,644 | - The company does not have any fair value measurements categorized within Level 3 as of August 1, 2025[60] 7. Commitments and contingencies The company faces shareholder class action and derivative lawsuits, with outcomes uncertain but not expected to materially affect financial statements - The company is a party to shareholder class action lawsuits (e.g., Washtenaw County) and derivative actions (e.g., Silva, Dunn, Caliguiri) alleging federal securities law violations and breach of fiduciary duties[65][68][69] - The court granted defendants' motion to dismiss the second consolidated amended complaint in the Shareholder Securities Litigation without prejudice on June 23, 2025[65] - While the company believes pending legal matters will be resolved without a material adverse effect, adverse decisions or settlements could materially affect future operating results or financial statements[66][70] 8. Segment reporting The company operates as one segment, with consumables accounting for 82.49% of net sales for the 26 weeks ended August 1, 2025 - The company manages its business as one reportable operating segment, primarily within the United States[71] Net Sales by Product Category | Product Category | 13 Weeks Ended Aug 1, 2025 (% of Net Sales) | 13 Weeks Ended Aug 2, 2024 (% of Net Sales) | | :--------------- | :---------------------------------------- | :---------------------------------------- | | Consumables | 82.22% | 82.25% | | Seasonal | 10.31% | 10.33% | | Home products | 4.77% | 4.70% | | Apparel | 2.70% | 2.72% | | Product Category | 26 Weeks Ended Aug 1, 2025 (% of Net Sales) | 26 Weeks Ended Aug 2, 2024 (% of Net Sales) | | :--------------- | :---------------------------------------- | :---------------------------------------- | | Consumables | 82.49% | 82.52% | | Seasonal | 10.06% | 10.03% | | Home products | 4.81% | 4.77% | | Apparel | 2.64% | 2.68% | 9. Common stock transactions $1.38 billion remains for share repurchases, but none are planned for 2025 to maintain credit rating, while $0.59 quarterly dividends were paid - As of August 1, 2025, the company had approximately $1.38 billion available under its common stock repurchase program[75] - No shares were repurchased during the 26-week periods ended August 1, 2025, and August 2, 2024, and no repurchases are planned for the remainder of 2025 to maintain credit rating and financial flexibility[76][138] - The company paid a quarterly cash dividend of $0.59 per share for the first two quarters of 2025 and declared another $0.59 dividend payable in October 2025[77] Report of Independent Registered Public Accounting Firm Ernst & Young LLP found no material modifications needed for interim financial statements to conform with U.S. GAAP - Ernst & Young LLP reviewed the interim financial statements and found no material modifications needed for conformity with U.S. GAAP[79] - The firm confirmed that the consolidated balance sheet as of January 31, 2025, is fairly stated in relation to the previously audited annual financial statements[80] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial condition, operating results, key performance indicators, liquidity, capital resources, and strategic outlook General This section introduces the Management's Discussion and Analysis, to be read with financial statements and forward-looking statements disclosure - The discussion and analysis should be read with the unaudited consolidated financial statements and the cautionary disclosure regarding forward-looking statements[83] Executive Overview Dollar General, a leading discount retailer, addresses macroeconomic pressures through strategic growth, operational efficiency, and employee development, showing progress in reducing inventory shrink - Dollar General is the largest discount retailer in the U.S. with 20,746 stores in 48 states and Mexico as of August 1, 2025[84] - Key macroeconomic factors affecting customers include unemployment, inflation, wage growth, tax policies, interest rates, and government assistance programs. The reinstatement of defaulted student loan collections in May 2025 adds uncertainty[85] - The company's long-term operating priorities are: 1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing its position as a low-cost operator, and 4) investing in team development[88] - The company is expanding digital initiatives (Dollar General app, third-party delivery, DG Media Network) and store remodels (Project Elevate, Project Renovate) to drive growth and enhance customer experience[93][94] - In 2025, plans include opening approximately 575 new stores (plus up to 15 in Mexico), remodeling 2,000 stores via Project Renovate, 2,250 via Project Elevate, and relocating 45 stores, totaling 4,885 real estate projects[95] - The company has made progress in reducing inventory shrink for four consecutive quarters and saw improvement in damages during the first two quarters of 2025[92] Key Performance Indicators Key performance indicators show same-store sales growth of 2.6% for 26 weeks, with improved average sales per square foot and inventory turnover Same-Store Sales | Metric | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | | :----- | :------------------------- | :------------------------- | | Same-store sales | 2.8% | 0.5% | | Metric | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | | :----- | :------------------------- | :------------------------- | | Same-store sales | 2.6% | 1.4% | Other Key Performance Indicators | Metric | August 1, 2025 | August 2, 2024 | | :----- | :------------- | :------------- | | Average sales per square foot | $266 | $263 | | Inventory turnover | 4.3 | 3.9 | Results of Operations Net sales increased by 5.2% for 26 weeks, driven by new stores and same-store sales, with improved gross profit rates and increased SG&A expenses Results of Operations Summary | Metric | 13 Weeks Ended Aug 1, 2025 | 13 Weeks Ended Aug 2, 2024 | % Change (13 Weeks) | Basis Point Change (13 Weeks) | | :-------------------------------------- | :------------------------- | :------------------------- | :------------------ | :---------------------------- | | Net sales (in millions) | $10,727.7 | $10,210.4 | 5.1% | | | Gross profit (% of net sales) | 31.34% | 29.96% | | 137 | | SG&A expenses (% of net sales) | 25.79% | 24.58% | | 121 | | Operating profit (% of net sales) | 5.55% | 5.39% | | 16 | | Net income (in millions) | $411.4 | $374.2 | 10.0% | | | Diluted EPS | $1.86 | $1.70 | 9.4% | | | Metric | 26 Weeks Ended Aug 1, 2025 | 26 Weeks Ended Aug 2, 2024 | % Change (26 Weeks) | Basis Point Change (26 Weeks) | | :-------------------------------------- | :------------------------- | :------------------------- | :------------------ | :---------------------------- | | Net sales (in millions) | $21,163.7 | $20,124.4 | 5.2% | | | Gross profit (% of net sales) | 31.15% | 30.07% | | 108 | | SG&A expenses (% of net sales) | 25.62% | 24.62% | | 99 | | Operating profit (% of net sales) | 5.54% | 5.45% | | 9 | | Net income (in millions) | $803.4 | $737.5 | 8.9% | | | Diluted EPS | $3.64 | $3.35 | 8.7% | | - The increase in same-store sales for the 13-week period was driven by a 1.5% increase in customer traffic and a 1.2% increase in average transaction amount[113] - Gross profit rate increase was primarily due to lower shrink, higher inventory markups, and lower inventory damages, partially offset by an increased LIFO provision and increased markdowns[114][118] - SG&A expenses increased as a percentage of net sales primarily due to higher incentive compensation, repairs and maintenance, and benefits (13 weeks) and retail labor (26 weeks)[115][119] Liquidity and Capital Resources The company maintains sufficient liquidity, plans $1.3-1.4 billion in capital expenditures for 2025, and manages debt redemptions while monitoring credit ratings - The company expects sufficient liquidity from cash flow, existing cash, and credit facilities to fund operations, capital spending, and dividends for the next several years[121][123] - Capital expenditures for 2025 are projected to be approximately $1.3 billion to $1.4 billion, supporting new store growth, remodels, supply chain, and technology initiatives[135] Credit Ratings | Rating Agency | Senior unsecured debt rating | Commercial paper rating | Outlook | | :------------ | :--------------------------- | :---------------------- | :------------ | | Moody's | Baa3 | P-3 | Stable outlook| | Standard & Poor's | BBB | A-2 | Negative outlook| Current Financial Condition / Recent Developments Inventory represents 45% of total assets, with credit ratings from Moody's (stable) and S&P (negative) impacting financing costs - Inventory balance represented approximately 45% of total assets (excluding operating lease assets, goodwill, and other intangible assets) as of August 1, 2025[126] - Credit ratings impact financing costs and insurance premiums; maintaining or improving ratings is important[128] Changes in Cash Flows Operating cash flow increased by $162.1 million, while financing cash flow increased due to debt repayments, and merchandise inventories decreased by 7.4% per store Cash Flow Activity (26 Weeks, in millions) | Cash Flow Activity (26 Weeks) | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :---------------------------- | :----------------- | :----------------- | :------------------- | | Operating activities | $1,814.9 | $1,652.7 | $162.2 | | Investing activities | $(691.5) | $(694.2) | $2.7 | | Financing activities | $(771.4) | $(273.2) | $(498.2) | - Merchandise inventories decreased 2% in the 2025 period compared to flat in the 2024 period. On a per-store basis, inventories decreased by 7.4% at August 1, 2025, compared to August 2, 2024[132] Property and Equipment Purchases (26 Weeks, in millions) | Property and Equipment Purchases (26 Weeks, in millions) | 2025 | 2024 | | :------------------------------------------------------- | :----- | :----- | | Existing stores improvements, upgrades, remodels, and relocations | $365.4 | $255.0 | | Distribution and transportation-related capital expenditures | $151.1 | $198.7 | | New stores primarily for leasehold improvements, fixtures and equipment | $142.8 | $216.1 | | Information systems upgrades and technology-related projects | $32.2 | $19.6 | Share Repurchase Program $1.38 billion remains for share repurchases, but none are planned for 2025 to preserve the investment-grade credit rating and financial flexibility - Approximately $1.38 billion remains authorized under the common stock repurchase program as of August 1, 2025[137] - No shares were repurchased in the first quarter of 2025, and no repurchases are planned for the remainder of the year to preserve the investment-grade credit rating and financial flexibility[138] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes to quantitative and qualitative market risk disclosures have occurred since the prior annual report - No material changes to market risk disclosures since the Annual Report on Form 10-K for the fiscal year ended January 31, 2025[139] ITEM 4. CONTROLS AND PROCEDURES Disclosure controls and procedures were effective as of August 1, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of August 1, 2025[140] - No material changes in internal control over financial reporting occurred during the quarter ended August 1, 2025[141] PART II—OTHER INFORMATION Includes disclosures on legal proceedings, risk factors, other information, and a list of exhibits filed with the Form 10-Q ITEM 1. LEGAL PROCEEDINGS Legal proceedings disclosures, including shareholder class action and derivative lawsuits, are incorporated by reference from Note 7 - Legal proceedings information is incorporated by reference from Note 7 to the unaudited consolidated financial statements[144] ITEM 1A. RISK FACTORS No material changes to risk factors from the Annual Report on Form 10-K, except as noted in the 'Executive Overview' - No material changes to risk factors from the Annual Report on Form 10-K, except as noted in the 'Executive Overview' of this Form 10-Q[145] ITEM 5. OTHER INFORMATION No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended August 1, 2025[146] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and certifications - The exhibit index includes corporate governance documents, compensation agreements, certifications, and interactive data files in Inline XBRL format[147][150] Signature This section contains the official signature confirming the submission of the report Signature The report was signed by Kelly M. Dilts, Executive Vice President & Chief Financial Officer, on August 28, 2025 - The report was signed by Kelly M. Dilts, Executive Vice President & Chief Financial Officer, on August 28, 2025[154]