Thank you so much for joining us. It's my pleasure to introduce the members of the management team for Dollar General and to moderate our lunch keynote. I think DG needs little introduction. One of the largest U.S. retailers, with over $38 billion in sales and well over 19,000 stores across the country. Today, we have with us Jeff Owen, Chief Executive Officer, Kelly Dilts, Executive Vice President and Chief Financial Officer, and Kevin Walker, Vice President of Investor Relations. Kevin's gonna read a disclaimer, and then we can get started. Thank you. Statements made during today's fireside chat will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are statements about our financial guidance, strategy, initiatives, plans, goals, priorities, opportunities, expectations, or beliefs about future matters, and other statements that are not limited to historical facts. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations, beliefs, and projections. Factors that might cause actual results to differ materially from those projected in the forward-looking statements include, but are not limited to, those identified in our earnings release issued on August 31, 2023, under Risk Factors in our 2023 Form 10-K, filed on March 24, 2023, and any later filed periodic reports, and in the comments made during this event. For additional information regarding such factors, please see our second quarter earnings release and our 2023 Form 10-K and later filed Forms 10-Q. 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 today unless required by law. Now, it is my pleasure to turn this event over to Kate, Jeff, and Kelly. Thank you. Thanks again for joining us today. Yeah, thanks for having us. I thought we could start with just talking about the consumer, your, your consumer specifically. Just what is your view on the health of your consumer, and what are you seeing in terms of trading into DG and your basket composition? Well, our consumer, typically, we serve a household income... Our customer has household income around $35,000. So I'll preface what I'm about to say, but she's always under duress. And, we feel, being there for her is one of the highest honors we can have at Dollar General. But she certainly, in 2023, she's under some challenge. You know, we talked about this in our first quarter call. It really showed up in mid-March, where the SNAP reductions and the tax refund lowering, or in some cases, didn't get one at all, really put pressure on our consumer. As she's still battling the inflationary pressures, even though it's moderating, it's certainly on a two-year stack, is still significant for our consumer. As you go through this year, certainly gas prices are lower than last year, but they're accelerating. Shelter is one of the things that our customer is suffering from, having to pay more for. The good news is that our customer is fully employed. The low unemployment is really a good sign for her. But at the end of the day, you know, Dollar General, we're here, and we're an all-weather brand and a brand that is very, very good at being able to serve that low-income consumer. So what we're focused on is being there for her for that value and convenience, so she can lean on Dollar General even more, as she continues to fight some of these pressures, that we expect will continue throughout the back half of this year. I think, you know, one of the, one of the questions that we get a lot is just trying to understand, you know, how much of the pressure is coming from the health of the consumer and how much might be coming from what's happening in the competitive environment. So can you talk about your market share and how it's trended in both consumables and discretionary recently, and how you're thinking about any kind of changes in the competitive dynamic and how you're dealing with it? Sure. I mean, you know, what we like to do here at Dollar General is really focus on the things that we can control. So certainly on the macro front, we talked about that already, already. But certainly some of the execution challenges that quite frankly were some self-inflicted. We've left sales on the table, and so we've talked about this before as it relates to share gains. We continue to see share gains both in our consumable and non-consumable. Having said that, we know we could get, and we have the right to get even more. And we believe that some of the things we're doing to we believe will allow us to emerge even stronger, as we look forward, will allow us to get back to those historical share gains. We still see from a share perspective, where our primary customers are the same they've been for many, many years, and we believe there's still much share for us to gain there, and that's primarily drug and grocery. So as we look forward, we're pleased that we're growing share. We're not pleased we're growing as much as we want. We believe that the improvements we've made in execution are beginning to show signs of us accelerating, and we believe the accelerated investments we just announced here recently in our second quarter call will allow us to return to the operational excellence that we're accustomed to delivering. Just leaning into the competitive landscape a little bit more. Obviously, one of your competitors has been refocusing its effort on the in-store experience. I think, you know, other competitors have been very price competitive. How do you think this will impact the broader industry in general as well as DG? Well, I think, you know, retail is competitive, and it has been for the 30 years I've been in it. That's why I love being in retail. That's what makes it fun. You know, as I think about us and the competitive landscape, you know, one of the things to keep in mind is 80% of our stores are in communities of 20,000 or less. So we're really proud to serve the underserved customers, especially in rural America. And that puts us uniquely positioned to be able to do that. As it relates to the competitive environment, you know, the promotional world is still very rational. That's good to see. And then also, our price position. You know, we responded to the customer's need, and we completed that in the second quarter, because being there for the customer is our primary responsibility here. And so we're pleased with how she's responded to some of the targeted investments we made, and, we're pleased with the results we've seen there, and we're pleased with our pricing position as we head to the back half, and then as we move into 2024. Can we talk about the pricing a little bit? I think it was on a certain amount of SKUs in which you sharpened your prices a little bit more. But could you walk us through maybe exactly why this was the right time, why maybe those prices weren't necessarily as sharp as where you had wanted them to be? And are we kind of through that price investment at this point? Well, as I said just a second ago, we believe that we know and talk to our customer as well as anybody. And also, that combined with some of the first-party data we have, we have a lot of richness in that customer, and understanding kinda how to serve her best. And so when we moved through, and especially in that, that March time period I talked about, I was real proud of the way the team responded quickly to begin to test some ways for us to be there for the customer, as this was a customer response. We were pleased with our price position, but for that customer, and facing some of the challenges I mentioned in the first question around SNAP reduction and tax refunds and inflation, we felt as if we had the opportunity to be there for her even more. And that's why it was so surgical and targeted, and we felt as if we had an opportunity to get sharper in a few of the items that matter most to our customer. That's why we did that. And as I mentioned earlier, we feel really good about where we are today, and we do feel good about what we're seeing when we see the basket contain one of those targeted items. We like what we're seeing with the customer as well, and we'll continue to be there to serve her. But our merchants do a phenomenal job of working with our suppliers and leveraging our scale. You know, you gotta remember, Dollar General, we have tremendous scale, and we're a limited assortment SKU retailer. So we're always looking at ways to bring value to the customer. That's not new to us, and we'll continue to do that. But in terms of the targeted investments, we feel good about what we completed, and we feel real good about where we are right now. If we can move on then to promotions. Generally, you're not a promotional retailer, but you have noted that promotions are gonna be higher in the second half to work through your inventory, especially in non-consumables. Could you maybe talk about what that could look like to the consumer as we enter into the back half? From an inventory standpoint, how are you thinking about inventory going into 2024 as a result of these actions? Kelly, you wanna kick that off? Yeah, absolutely. So how we're thinking about the non-consumable side is really we've made a lot of good progress in the second quarter, working through some of the inventory. And we had excess inventory going into 2023 and knew we would need to work that down. So long lead time products, so we've been working through that. In the second quarter, we actually pulled back on import receipts by about 40%. So what that shows is that we've been buying around that product as we start to push that out into the stores. The other thing that we saw is on the non-consumable side, we saw a decrease in that product of about 4% in the quarter. So definitely moving in the right direction. But, as Jeff alluded to, we wanna get there faster, and we wanna do some more. So, the thought now is as we go through the back half of the year, we believe we'll be able to clear a lot of that product and put it on promotion, and that does a couple of things. One, it should drive sales and traffic; it gives her permission, really, to buy those discretionary items. And we tested that kinda Q1, Q2, and liked what we saw there. And so we think as we move into the back half, especially during the holidays, that she's gonna need that from us to buy that discretionary product. The other thing it does for us is, as we bring inventory levels down, you can get a shrink and damage benefit from lower inventory levels, and so we would expect to see that. The other thing that we should see is efficiency on the labor side, and that would be both in the distribution centers as well as in the stores. Once we move that product out, it being a little bit slower turning, you start to get more efficient, as you don't have to work around that product in those locations. And then, we expect to see, you know, maybe a little bit of a help on how the store manager is feeling, too, as we work inventory down. They don't have to touch that inventory as much, and what we know is store manager tenure is very important, and so we expect to see some benefit from that. I'd say the other investment, because that's about $95 of the $170 that we talked about, the other $25, part of that is also associated with inventory, and so that's gonna be around demand forecasting. We made some changes in leadership, and we're able to identify some opportunities that are more on the core side of the business and making sure that we're optimizing those inventory levels as well, making sure we get in that faster-turning product and maybe not as much of the slower-turning product. And so we believe that that'll have a benefit as well, probably over the next 18-24 months, a little bit longer term. But we do think we can take about $500 million out of the system, and reducing working capital is important to us as well, and so we should see some benefits there. So I'd say both of those things really should help set us up into 2024 and beyond, and feeling better about where we're heading from an inventory perspective. ... Can you characterize the health of the inventory, just how- Mm-hmm -you feel about, the age of the inventory? And I think one of the, dynamics overlapping from last year was you were, not in stock as much last year. That's right. Yet I think maybe this year you might be better. So can you talk about if the in- stocks are where you want it to be? Are there categories maybe where you're still trying to figure that out, and just talk a little bit more about the inventory quality? Yeah. I think we're still looking to improve our in- stocks. Mm-hmm. How we're really thinking about it now is, I think this comes into maybe more of the labor investment that we talked about, is really there's in-stock, which means you have it, but if it's in the back of the store and not on shelf, it's not part of that convenience pillar. So Jeff talked about that value pillar, and we feel really good about that. So kind of check, now we need to work through the convenience side of things around the on-shelf availability. And so as we put labor into the stores, we're starting to see that product get back on the shelf, and that'll be important as we go through the back half of the year as well. That leads right into the labor investment discussion, which is probably where we spend most of our time in terms of questions that we get. Mm-hmm. And so, you know, DG has been investing a lot more in stores through labor hours. I know the question's been asked: how do you know what the right level of investment is? Mm-hmm. You started with $100 million. I think you've upped it to $150 million. Can you walk us through the decision as to why that's the right number, and why maybe this isn't more of an issue or a longer-term issue that could dampen your margins going forward? Yeah. So the 150, we announced the 100 and then came back on the 50. And what I'll say is, by pulling forward some of the investment that we did into the second quarter, we were able to do some test and learns on that. And so we did a lot of analytics around: what is the optimal level of or labor hours in the stores? And so we took a look at a bunch of store attributes. I think probably the most important for this group would be around what's the volume of the store, what's the urbanicity of the store, what's the number of competitors, and how close are they? And took a look at then what made sense. And so, you know, we learned a little bit about what's too little, and I think we learned about what gave us diminishing returns, and then the optimal level, just kind of in the middle, and that's what we're targeting now. So very surgical on the hours, and we feel really good about that. And what I'll also say before I get to the other investment that we made is, as we go forward and feel good about those hours, what they're gonna do is they're gonna even maximize for us as we move forward into 2024 and beyond on those hours. Because as we get that supply chain healthy and our trucks get on time, she's not gonna have a lot of noise in the stores to deal with on inefficiencies. And so as we get more efficient in the supply chain, which we've come a long way from the beginning of the year, but by the end of the year, reach target levels, that's gonna really open up those labor hours to do other things in the store. So we feel good that it's enough on a go-forward basis as well. The other thing that we were able to do in the second quarter is establish Smart Teams. We did that in about the last seven weeks of the quarter, and what we saw there is we actually saw a nice sales lift from the stores that had Smart Teams and more focused stores for us, and that has sustained. That's something that we were happy to see and certainly part of the decision to embed those teams into our infrastructure on a go-forward basis. So they really helped the stores get back on the rails. As Jeff likes to say: "We've kind of widened the road now for the stores," so maybe they don't fall off as quickly. And if they do, we certainly can get them back on track much faster with the investment we're making in those Smart Teams. Are those Smart Teams an incremental investment, or are they just existing members of your team that you're reallocating to deal with these, these stores? Well, first of all, I'll just say the Smart Team, it's a huge deal. Mm-hmm. And I mean, I've been at this business at Dollar General for 30 years, and so, obviously, every district in this company now has specialized resources to deploy to stores that can get off track. And so it is embedded, it is incremental, and it is permanent now in our base. And so what we feel great about is, you know, the model that we have at Dollar General thrives on stability. Mm-hmm. We haven't had stability in the supply chain. We're getting much, much closer. We still have a bit to go, but I think as we exit out of 2023, we'll be much more stable, which allows us to have stability on the inventory side, meaning more of the product we want on the shelf and less of the product that we don't. We've accelerated some things to get us even more efficient there, and then it thrives on stability inside the store. Stability inside the store shows up in terms of the store manager retention and stability. One of the things with the Smart Team that we're really excited, and I'm super proud of what the team was able to do so quickly, was to pivot and test and learn this concept, which we've used sparingly in the past, but did it make sense today to have a permanent fixture in our arsenal? What we saw was, even though we just deployed it, call it mid-June, we saw stability levels at the store manager level we haven't seen this year. We're very excited about what we see show up in terms of our stabilizing the turnover at the store manager level. We know what is the right number for us. We don't necessarily disclose that, but we know what it is, and we're very excited about what this Smart Team has allowed us to do, coupled with the other labor hours investment, coupled with stability across the supply chain, reducing the inventory. And then we also talked a little bit about some of the longer term things we've been doing around a pilot to make it simpler to operate a Dollar General store go forward than it is today. So you combine all those things together, and we feel really good about our ability to exceed that customer's expectation and sustain it. How many stores would you say you're touching with all of these labor initiatives? Of the 19,000, between the Smart Teams and the incremental hours, how many stores do you think you're touching? Well, every store is getting touched- Mm-hmm. in some degree. And what I think we do really well here at DG is we, we test, refine, we learn, and we're very surgical and apply where the return on the investment is at its maximum. We, we know when it can become even diminishing, as Kelly said earlier. So I'd say every store is getting touched, but not every store is getting the same. Mm-hmm. Every district has a Smart Team, and that is universal across the entire landscape. In terms of how many people are on each Smart Team, really depends on the volume complexity and the geography of the district itself. That's kind of our approach, and it's really worked well for us. Okay. I wanted to ask a couple of questions about supply chain, 'cause it does sound like we're maybe getting closer to the end of some of the disruption and instability here. Can you maybe talk about what you have been able to control in terms of improving the supply chain? And what are you thinking with regards to supply chain investments that are still needed over the next couple of years? So we're pleased with the progress we're seeing in the supply chain, and it's certainly improved. But we still have a standard that we have not achieved yet. So we still have room to go. I wanna be clear on that. But what we have seen is service levels continue to improve, and are much, much better than they were a year ago or even two years ago. And so that shows up in terms of in-stock has improved, on-time deliveries have improved, the ability to satisfy orders have improved. Our capacity has improved. We have capacity coming online. So feel good about our catch up there on the supply chain side. Mm-hmm. Feel good about our leadership. We recently announced a new Executive VP leading the supply chain. He's a gentleman that led our creation of the fresh supply chain, which many of you know, is an incredibly complex initiative. So feel great about Rod and what he's gonna bring to the team. Felt like it was the right time to do that. And then long term. Long term, feel real good. We built the fresh supply chain for the future in mind, so we're in good shape there. And then as we bring some of our facilities online, we've also introduced our first full-scale automation in one of our legacy DCs. And why is that important? Because what that allows us to do is to take the highest cost, touch in the DC and automate it, so it brings the cost of that down significantly. It also allows us to increase the capacity of the facility itself, so we have to build fewer DCs over time. And the third thing it can do is customizes the order by store, so that when a store receives their delivery, it's customized for that particular store rather than an average of a bunch of stores. Mm-hmm. When you can take footsteps and speed out of it, that gets it to the shelf faster, which is the number one thing our customers are looking for. Just considering, you know, just the amount of investments both in the supply chain and labor, obviously, there's a CapEx piece to the supply chain, but a lot of this is coming in SG&A depreciation and labor investment. How should we be thinking about the long-term margin for Dollar General? Because I do think you're facing a good amount of more costs than you've dealt with historically. What is the right operating margin, do you think, for this business, given what you know today? And, we've done a lot of work at looking at the long term, that's for sure. And, and what we can say is that we feel really good about the level of operating profit growth that we have in the future and getting back to those historic rates. So I think we have a lot going on at Dollar General to help drive that. We've got, the fresh initiative, which is still kind of middle innings there. Mm-hmm. I would say we still have optimization work that we can do on that, as well as we start to scale produce, bringing produce and fresh meat in-house as well, can help on the cost side. We've got DG Media Network, which is something that we're really excited about and can continue to grow. I think that also lends itself to some personalization activity. So we love that first-party data and being able to make decisions on how the customer actually responds. So that's great. On the supply chain side, we've talked about that. It's really around supply chain efficiencies, some automation. Certainly, the private fleet has helped as well as we think about that. Looking forward, I think we've got some opportunities, probably around private brands- Mm-hmm. and just global sourcing. Just shoring up margins, maybe from a DG perspective, you've got pOpshelf, which is a nice offset as we work through those stores. And then the health initiative that we're doing as well, we really like the margins on that product. It's much more similar to the non-consumable side of things than the consumable business. So a lot going on to help drive those things. I would say that, you know, underpinning that is always our low-cost operator mindset and just making sure that we are extracting as much cost as we can. Any complexities we can pull upstream is always beneficial, because if we can save dollars down in the 20,000 stores, we almost always like that number as we can pull costs out of that. So, all of that said, it's, you know, the goal is to drive sales and to drive cost efficiency as we go forward in the next few years. ...has anything really meaningfully changed in terms of your investment behind some of those growth initiatives? I know pOpshelf is still growing, but maybe- Right You refined the number of doors you're opening. But with regards to the fleet or DG Fresh, has anything been slowed down there in order to concentrate on what's happening now? Yeah, no, we like the initiatives and have certainly been funding them in prior years and in this year as well, and we feel good about the returns on what we're doing. So new stores still give a great return. It's 20%+. Same thing with remodels, and so those are great places for us to put our capital and we're still making that our number one priority. I will say, I think what has changed, though, in May, we added a member to my, our executive team. Mm-hmm. What we were able to do was we refined focus on the DG core, but we didn't stifle innovation for the future. Yeah. So one of the things that is really important to our forward strategy is certainly we know how to execute better than we're executing today, and we believe we will, and we're excited about where that's going. But at the same time, one of the things at Dollar General that we pride ourselves on is looking down the road and around the corner. And so with the new executive, Steve Deckard, leading this, what it allowed us to do is take our initiatives and really be under one leader so that we're allowed now for the core leadership team, which has a tremendous amount of Dollar General experience, as you know, to focus more on our DG core. And so with both of those, we'll get higher levels of execution. We'll certainly help the strategic initiatives, but also we're continuing to look at the long term, and we really like the prospects of our long-term growth, and those continue to move forward simultaneously. Very helpful. Thank you. We are asking four questions of all companies that are sitting with us, yesterday and today. We talked a little bit about what your consumer is facing right now, but as we look into 2024, are you thinking that your consumer is going to be facing more headwinds, less headwinds, or about the same versus right now? Well, as I mentioned earlier, our customer is always facing headwinds. Yeah. As we look to 2024, you know, we'll have to see. But right now, one of the things that is critical to her, I said it earlier, is her employment level. Low unemployment really benefits all consumers, but certainly ours, and so certainly if that were to change, obviously that could have some increased headwinds for our consumer. And also as unemployment rises, a lot of times what we're not seeing this year, which we typically do, is when unemployment is higher, we see a trade-down into our space at a higher degree than we're seeing right now. So as that number changes, there's a headwind, but maybe a tailwind as well. Mm-hmm. What we're squarely focused on is being there from a value and a convenience aspect for a core consumer that's always under duress. Mm-hmm. That's why we feel really good, not only about having 80% of our stores in these small communities that can serve this customer with a quick in-and-out shop that allows her to stay in her community, which is incredibly important. But also, the acceleration and the actions we talked about will set Dollar General up to be there for her, as she'll be able to lean on us more if the economic conditions tend to change even more for her. I think one dynamic, I'm inserting a quick question in here, just because in the last few weeks, it does seem like gas prices are- Mm-hmm ... getting a little bit higher after a reprieve for a little while. Can you talk to us quickly about the headwind, but the possible offset of maybe keeping her a little bit closer to home and therefore shopping DG more often? Well, I'd say independent of any economic driver, what our customer tells us is they love shopping in the 3-5-mile proximity of most of our stores because they know the people they're shopping with, and they know the people that are serving them. So that's really important, but certainly, when you add on the economic pressure around gas prices on her, you know, we say this all the time: the reason we want someone—we wanna be fast for our customer is because when she's not, when she's shopping, she's not working. When she's not working, she's not earning because she's an hourly worker. And so getting her in and out and on her way is incredibly important for us. So when you look at the gas prices, there's usually a band, you know, that probably, you know, a couple dollar band, where it really starts to impact her purchase decision. But certainly, staying close to home, combined with higher gas prices, and working close to home and not having to drive further, also is a very attractive opportunity for a worker's perspective as well at Dollar General. So, we'll keep a close eye on that, but certainly, being, staying close to home is a good thing. We talked a little bit in our other presentations about share of wallet and just how discretionary just hasn't been a super healthy category- Mm-hmm ... for the past year, as the consumers dealt with a lot of inflation on consumables. So as we start to see maybe some of this inflation pressure alleviate, are you expecting any kind of return to discretionary spend in 2024? Well, discretionary is still an important element in our value proposition. We you know, you got to remember, our discretionary offering is, many of the items are less than five bucks. So, it's still an important aspect of her purchasing, and even though obviously we're not pleased with the sales and the discretionary pullback, our customer will go where she's going, and she's buying essentials right now at a rate that we haven't seen- That's right ... in many, many years. But as we look forward, you know, we're still growing share in the, in the discretionary space, which is a good sign. And then the other thing about this accelerated inventory action that we talked about is it's gonna allow us... And our merchants, I know I brag a lot, but they're amazing. They know the customers, and they can spin and react as fast as anybody in the business. So now, as we look forward, our non-consumable business is much more of an in-and-out plan a zone. And so as we get through this inventory, what we'll be able to do is tweak the assortment to better match what her purchasing patterns are. So instead of, as an example, a pillow or a blanket, you might see more utilitarian. Maybe it's a plastic container, a non-consumable product, but one that is more utilitarian. And so you'll see our assortment evolve, and this will give us an opportunity to really take advantage of that as we look into 2024. Thank you. We're also asking a question around pricing. Now that inflation seems to have peaked, how are you thinking about pricing in 2024? Do you anticipate to raise, lower, or maintain pricing next year? Say we feel good about our pricing position, and we're very fortunate to have the scale that we have and be in the locations that we are. So, feel great about pricing. Promotional world is rational right now, and we, we always, as you can imagine, with value, convenience being so important, we, we track it very closely, but right now we feel real good. Our last question is on destocking. Obviously, you're working through inventory now- Right ... but going into 2024, is it at the beginning of 2024, where you expect your inventory levels to be clean? As we think about inventory, certainly the non-consumable, we feel good about what we're gonna be able to do to further reduce that. Mm-hmm. As we look to 2024 and beyond, I think one of the things Kelly mentioned, that might be unique to us is that we believe, and part of this has to do with some of the organizational changes we made back in May. We believe that there's a way for us to be even more efficient with our working capital. Mm-hmm. So as you think about the core business, the $500 million Kelly mentioned, that's on our core side, which is the majority of the inventory. We believe we can get much more efficient. And so our goal is, we believe we can get our working capital to work harder, be more efficient, and that'll just permeate throughout the entire P&L. Mm-hmm. It just shows up, as you know, in many, many different places, from lower shrink to lower expenses from an efficiency standpoint. We're squarely focused on the ability to do that over time and feel good about the trajectory we're on right now. Thank you so much for joining us today. Thanks for having us. Appreciate it. Thank you.