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dollargeneral.com under News & Events.
Despite the challenging operating environment, our team remains steadfast in their dedication to fulfilling our mission of serving others by providing affordable, convenient and close to home access to everyday essentials, and I could not be more proud of their efforts.
Throughout the pandemic, our priority has been the health and safety of our employees and customers, while meeting the critical needs of the communities we serve as an essential retailer.
Protective equipment dedicated certain store hours for the most vulnerable members of our communities and, most recently, removed barriers for our frontline associates to receive the vaccine.
In total, we invested approximately $248 million in response to the pandemic in 2020, including about $167 million in appreciation bonuses for eligible front-line employees to demonstrate our appreciation for their exceptional performance during an incredibly challenging year.
At Dollar General, we remain committed to being part of the solution, and believe we are uniquely positioned to continue supporting our customers through our network of more than 17,000 stores located within five miles of approximately 75% of U.S. population.
At the same time, we remain focused on advancing our operating priorities and strategic initiatives as we continue to meet the evolving needs of our customers and further position Dollar General for long-term sustainable growth.
To that end, we are excited to share an update on some of our plans for 2021.
First, we plan to further the rollout of several value-creating initiatives, including our non-consumables initiative, Fast Track and the completion of our initial rollout of DG Fresh.
In addition, while still early, we are very pleased with the results of our pOpshelf stores, which have far exceeded our initial expectations for both sales and gross margin.
As a result, we plan to accelerate our pace of new store openings for pOpshelf in 2021 and expect to incorporate this concept into a number of our larger format Dollar General locations as we look to capitalize on the significant growth opportunity we see for this differentiated concept.
We are also pleased to highlight key changes to our development strategy, including plans to build on the success of our Dollar General Plus Store or DGP, and the introduction of two new store formats, which we began testing in 2020.
Similar to our larger footprint, DGP concept, the first new format has selling space of approximately 8,500 square feet, which compares to about 7,300 square feet of selling space for our traditional store.
Beginning later this year, this new format along with our DGP concept will become our base prototype for nearly all new stores, replacing both our traditional and higher, cooler count DGTP format, allowing for a more optimized assortment and room to accommodate future growth.
Our second new format is even larger with approximately 9,500 square selling feet, and will be deployed opportunistically across new store relocation and remodel opportunities.
Notably, on average, our DGP and new store formats are outperforming the chain on a comp sales basis and have considerably higher sales volumes compared to both the traditional and DGTP store, which bodes well for the future as we look to increase their unit counts in the years ahead.
Finally, we are pleased to provide an update on a number of our new small box store opportunities we see available in the Continental United States, which represents an increase compared to our prior estimate.
Jeff will discuss these updates in more detail later in the call.
But first, let's recap some of the highlights for the fourth quarter and full year.
The quarter was once again highlighted by strong growth on both the top and bottom lines.
We're pleased that, for the quarter, our three non-consumable categories once again delivered a combined comp sales increase well in excess of our consumable business.
Of note, this represents our 11th consecutive quarter of year-over-year comp sales growth in our combined non-consumable categories, which we believe speaks to the strong and sustained momentum in these product categories.
From a monthly cadence perspective, comp sales in December increased in the high-single digit range with similar mid-teens growth in both November and January.
In total, fourth quarter net sales increased 17.6% to $8.4 billion, primarily driven by comp sales growth of 12.7%.
These results include significant growth in average basket size and units in particular, partially offset by decline in customer traffic.
And while customers continue to consolidate trips, on average, they are spending more with us compared to last year.
Once again, this quarter, we increased our market share in highly consumable product sales, as measured by syndicated data, driven by a meaningful increase in both units and dollars.
Importantly, our data suggests an increase in new customers this quarter as compared to Q4 of 2019.
These new customers continue to skew younger, higher income and more ethnically diverse, underscoring the broadening appeal of our value and convenience proposition.
We continue to be encouraged by the retention rates of new customers and we are working to drive even higher levels of engagement with more personalized marketing and continued execution of our key initiatives.
We're particularly pleased that we delivered significant operating margin expansion, which contributed the fourth quarter diluted earnings per share of $2.62, an increase of 24.8% over the prior year.
For the full year, net sales increased 21.6% to $33.7 billion, including net sales growth of 28.1% in our combined non-consumable categories.
Comp sales for the year increased 16.3%, representing our 31st consecutive year of same-store sales growth.
In 2020, we celebrated the opening of our 17,000 store and the launch of our newest store concept pOpshelf.
In total, we completed a record 2,780 real estate projects during the year, exceeding our initial target of 2,580 projects as we continue to build and strengthen the foundation for future growth.
From a position of strength, we also made targeted investments in other key areas, including the acceleration of certain strategic initiatives to strengthen our competitive position and further differentiate and distance Dollar General from the rest of the discount retail landscape.
Collectively, our fourth quarter and full year results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to enable sustainable growth while creating meaningful long-term shareholder value.
As a mature retailer in growth mode, we are also laying the groundwork for future initiatives, which we believe will unlock additional growth opportunities as we move forward.
We operate in one of the most attractive sectors in retail.
And in an environment where customers continue to seek safe and convenient experiences, we believe our unique store footprint, further enhanced through our multiyear initiatives, provides a distinct competitive advantage and positions us well for continued success.
Overall, I am proud of our associates and all that we've achieved over the past year.
We feel very good about the underlying business and I'm excited about the opportunities that lie ahead.
Now that Todd has taken you through a few highlights of the quarter and full year, let me take you through some of its important financial details.
Unless we specifically note otherwise, all comparisons are year-over-year.
All references to earnings per share refer to diluted earnings per share and all years noted refer to the corresponding fiscal year.
As Todd already discussed sales, I will start with gross profit, which was positively impacted in the quarter by a significant increase in sales, including the impact of COVID-19.
Gross profit as a percentage of sales was 32.5% in the fourth quarter, an increase of 77 basis points, which represents our seventh consecutive quarter of year-over-year gross margin rate expansion.
This increase was primarily attributable to: a reduction in markdowns as a percentage of sales, higher initial markups on inventory purchases, a greater proportion of sales coming from non-consumable categories and a reduction in shrink as a percentage of sales.
These factors were partially offset by: increased transportation and distribution costs, which were impacted by increased volume, some of which is attributable to the COVID-19 pandemic as well as higher transportation rates and discretionary employee bonus expense for our distribution center and private fleet employees.
SG&A as a percentage of sales was 22.2%, an increase of 48 basis points.
This increase was primarily driven by incremental costs related to COVID-19, including appreciation bonuses paid to our frontline retail employees and health and safety-related expenses as well as increased incentive compensation expense and hurricane-related expenses.
These items were partially offset by certain expenses, which were lower as a percentage of sales, including occupancy costs, retail labor and depreciation and amortization.
Moving down the income statement.
Operating profit for the fourth quarter increased 21% to $872 million.
As a percent of sales, operating profit was 10.4%, an increase of 30 basis points.
Operating profit in the fourth quarter was positively impacted by COVID-19, primarily through higher sales.
The benefit from higher sales was partially offset by approximately $96 million or 110 basis points of incremental investments that we made in response to the pandemic, including approximately $69 million in appreciation bonuses for eligible frontline employees and additional measures taken to further protect our employees and customers.
Our effective tax rate for the quarter was 22.7% and compares to 23% in the fourth quarter last year.
Finally, as Todd noted earlier, earnings per share for the fourth quarter increased 24.8% to $2.62, which contributed to full year earnings per share of $10.62, an increase of 59.9%.
Turning now to our balance sheet and cash flow, which remain strong and provide us the financial flexibility to further support our customers and employees during these unprecedented times while continuing to invest for the long term and provide meaningful returns to shareholders.
Merchandise inventories were $5.2 billion at the end of the year, an increase of 12.2% overall and 6.3% on a per-store basis.
While a lot of stocks remain higher than we would like for certain high-demand products, we continue to make good progress with improving our in-stock position and are pleased with our overall inventory levels.
In 2020, we generated significant cash flow from operations totaling $3.9 billion, an increase of $1.6 billion or 73.2%.
Total capital expenditures for the year were $1 billion and included our planned investments in new stores, remodels and relocations, distribution and transportation projects and spending related to our strategic initiatives.
During the quarter, we repurchased 4.3 million shares of our common stock for $900 million and paid a quarterly dividend of $0.36 per common share outstanding at a total cost of $87 million.
With today's announcement of an incremental share repurchase authorization, we have remaining authorization of approximately $2.4 billion under the repurchase program.
Our capital allocation priorities continue to serve us well and remain unchanged.
Our first priority is investing in high-return growth opportunities, including new store expansion and our strategic initiatives.
We also remain committed to returning significant cash to shareholders through anticipated share repurchases and quarterly dividend payments, all while maintaining our current investment-grade credit rating and managing to a leverage ratio of approximately 3 times adjusted debt to EBITDA.
Moving to our financial outlook for 2021.
We continue to operate in a time of uncertainty regarding the severity and duration of the COVID-19 pandemic, including its impact on the economy, consumer behavior and our business.
Despite continued uncertainty, we are providing select annual guidance in an effort to provide the best view we reasonably can, based on what we currently know.
That said, there could be a number of potential headwinds and tailwinds this year, which are not incorporated into our guidance as the timing, degree and potential impacts on our business are currently unclear, including, but not limited to: the recently approved government stimulus package; other unknown external factors related to the ongoing health crisis, including its impact on consumer behavior and additional changes to minimum wage rates.
With this in mind, we currently expect the following for 2021: net sales in the range of a 2% decline to flat; a same-store sales decline of 4% to 6% but which reflects growth of approximately 10% to 12% on a two-year stack basis; and earnings per share in the range of $8.80 to $9.50, which reflects a compound annual growth rate between 15% and 20% or between 14% and 19% on an adjusted basis over a two-year period, which is well above our long-term goal of delivering at least 10% annual earnings per share growth on an adjusted basis.
Our earnings per share guidance assumes an effective tax rate in the range of 22% to 23%.
Capital spending is expected to be in the range of $1.05 billion to $1.15 billion as we continue to invest in our strategic initiatives and core business to support and drive future growth.
We also plan to repurchase a total of approximately $1.8 billion of our common stock this year, reflecting our strong liquidity position and confidence about the long-term growth opportunity for our business.
Let me now provide some additional context as it relates to our expectations.
Given the unusual situation, I will elaborate on our comp sales trends thus far in Q1.
Despite approximately 8,400 lost store operating days as a result of closures due to winter weather across the country, same-store sales for the month of February increased 5.7%, reflecting a healthy comp sales increase of 11.2% on a two-year stack basis.
From the end of February through March 16, comp sales decreased approximately 16% as we are in the midst of lapping our most difficult monthly comp sales comparison of the year.
As a reminder, comp sales growth for the month of March in 2020 was 34.5%.
Looking ahead, we remain cautious in our 2021 sales outlook, given the continued significant uncertainty that still exists as well as the unique comparisons against last year.
That said, as you think about the sales cadence of 2021, our performance is expected to be stronger in the second half, given a more difficult sales comparison in the first half and particularly in Q1.
Turning to gross margin.
In 2020, gross margins benefited from a greater proportion of sales coming from our higher-margin non-consumable categories, driven by a full year net sales percentage increase of these categories well in excess of our consumables business.
We expect our sales mix will ultimately shift toward our consumables categories in 2021, resulting in pressure on our rate.
However, the timing of when this dynamic may occur and its corresponding impact to gross margin are currently uncertain.
Gross margins in 2020 also benefited from a reduction in markdowns, including the benefit of higher sell-through rates as a result of significant customer demand in seasonal and other clearance-sensitive non-consumable categories.
In 2021, we expect our markdown rates will increase somewhat from the abnormally low levels we saw in 2020, which likely will create some gross margin pressure compared to last year.
In addition, while we continue to see the effect of higher carrier rates and fuel costs, our ongoing efforts to improve efficiencies and reduce expenses, including further expansion of our private fleet, are expected to help partially mitigate these cost pressures in 2021.
Also, please keep in mind that the second and third quarters represent the most challenging laps of the year from a gross profit rate perspective, following improvements of 167 basis points in Q2 2020 and 178 basis points in Q3 2020.
In terms of SG&A, while we expect to incur ongoing expenses related to the pandemic in 2021, overall, we anticipate a meaningful reduction in COVID-19-related costs compared to last year.
However, the leverage from these reduced costs is expected to be offset by deleverage associated with lower comp sales and approximately $60 million to $70 million in incremental year-over-year investments related to our strategic initiatives as we further their rollouts.
With regard to our strategic initiatives, in aggregate, we anticipate they will positively contribute to operating profit and margin in 2021, driven by NCI and DG Fresh as we expect the benefits to gross margin from our initiatives will more than offset the associated expense.
Finally, we estimate operating profit will be negatively impacted by approximately $35 million to $40 million in Q1 as a result of lost sales from storage closures and expenses related to the widespread winter weather that we experienced in February.
In closing, we are very proud of the team's execution and performance, which resulted in exceptional fourth quarter and full year results.
As always, we continue to be disciplined in how we manage expenses and capital, with the goal of delivering consistent, strong financial performance while strategically investing for the long term.
We remain confident in our business model and our ongoing financial priorities to drive profitable same-store sales growth, healthy new store returns, strong free cash flow and long-term shareholder value.
Let me take the next few minutes to update you on our operating priorities, including our strategic initiatives and plans for 2021.
Our first operating priority is driving profitable sales growth.
The team did a fantastic job in 2020.
[Technical Issues] NCI consists of a new and expanded product offering in key non-consumable categories.
The NCI offering was available in more than 5,800 stores at the end of 2020, including nearly 400 stores in our light version.
This compares to our prior expectation of more than 5,600 stores at year-end.
Given our strong performance to-date, we plan to expand this offering to about 5,700 additional stores this year, bringing the total number of NCI stores to more than 11,000 by year-end.
This total includes over 2,100 stores in our light version, which incorporates a vast majority of the NCI assortment but through a more streamlined approach.
Moving to our newest concept, pOpshelf, which further builds on our success in learnings with NCI.
pOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value with about 95% of our items priced at $5 or less.
We opened our first five locations in 2020.
And as Todd mentioned, given our strong results to date, we plan to accelerate the rollout of pOpshelf in 2021.
In fact, we are now targeting to have a total of up to 50 pOpshelf stores opened by year-end compared to our previous goal of about 30 total locations.
In addition to these stores, we also plan to incorporate this concept in up to 25 Dollar General stores in 2021.
In terms of our store-within-a-store concept, a smaller footprint pOpshelf shop will be prominently positioned in the center of the store, and we will display both Dollar General and pOpshelf branding on exterior entrances to build and maximize awareness.
From these initial stores, our goal is to test, learn and ultimately expand to more locations over time as we look to leverage the unique strengths of these complementary formats and build on our early success with pOpshelf by making it more available to a broader range of customers.
Turning now to DG Fresh, which is a strategic, multiphase shift to self-distribution of frozen and refrigerated goods.
The primary objective of DG Fresh is to reduce product costs on our frozen and refrigerated items, and we continue to be very pleased with the product cost savings we are seeing.
In fact, DG Fresh continues to be the largest contributor to the gross margin benefit we are realizing from higher initial markups on inventory purchases, and we expect this benefit to grow as we continue to scale this transformational initiative.
Another important goal of DG Fresh is to increase sales in these categories.
We are pleased with the success we are seeing on this front, driven by higher overall in-stock levels and the introduction of new products in select stores being serviced by DG Fresh.
Given our success to-date, we are further accelerating the rollout of additional offerings with the recent introduction of even more products, including both national and private brands as we look to further optimize our assortment while increasing our relevance with customers.
And while produce is not included in our initial rollout plans, we believe DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time as we look to further capitalize on our extensive self-distribution capabilities.
In total, we were self-distributing to more than 16,000 stores from 10 facilities at the end of 2020.
This compares to our previous expectation of over 14,000 stores at year-end.
Overall, we remain well on-track to complete our initial rollout across the chain in 2021.
Moving to our cooler expansion program, which continues to be our most impactful merchandising initiative.
During 2020, we added more than 62,000 cooler doors across our store base.
In total, we expect to install more than 65,000 cooler doors in 2021 as we continue to build on our multiyear track record for growth in cooler doors and associated sales.
As a reminder, in 2019, we began incorporating high-capacity coolers into the majority of our new, remodeled and relocated stores, creating additional opportunities to drive higher on-shelf availability and deliver a wider product selection, all enabled by DG Fresh.
Next, a quick update on our FedEx relationship.
This convenient customer package pickup and dropoff service is now available in over 8,500 stores, with plans to be in a total of over 9,500 stores by year-end, further advancing our long track record of serving rural communities.
In addition to the gross margin benefits associated with NCI and DG Fresh, we continue to pursue additional opportunities to enhance gross margin, including improvements in private brand sales, global sourcing and supply chain efficiencies.
With regards to our supply chain, our plans for 2021 include further expansion of our private fleet, which accounted for more than 20% of our outbound fleet at the end of 2020.
Reducing stem miles is also an important contributor to these efforts, and the recent opening of our Walton, Kentucky dry distribution center is expected to drive additional efficiencies as we move ahead.
We also plan to open two additional DG Fresh facilities in 2021 as we look to further optimize our fresh network and support future growth.
In addition, we anticipate our combination DG Fresh and dry distribution center in Blair, Nebraska will be completed in late [Technical Issues] contribute to a further reduction in stem miles over time.
Finally, while we are very pleased with our progress in 2020, shrink reduction remains an important area of opportunity.
We continue to build on our success with electronic article surveillance by increasing the number of items tagged while further leveraging technology to drive even higher levels of in-store execution.
Our second priority is capturing growth opportunities.
Our proven high-return, low-risk real estate model continues to be a core strength of our business.
In 2020, we completed a total of 2,780 real estate projects, including 1,000 new stores, 1,670 remodels and 110 relocations.
Additionally, we now have produce in more than 1,100 stores.
For 2021, we expect to open 1,050 new stores, remodel 1,750 stores and relocate 100 stores, representing 2,900 real estate projects in total.
We also plan to add produce in approximately 700 stores, bringing the total number of stores that carry produce to more than 1,800.
In addition, as Todd noted earlier, we continue to advance the evolution of our store base with plans to build on the success of our DGP format, including the introduction of two new format types.
With about 8,500 square feet of selling space, both our first new format and DGP concept allow for expanded higher capacity cooler counts, an extended queue line and a broader product assortment, including NCI, a larger health and beauty section and produce in select stores.
In total, we expect more than 550 of our overall real estate projects this year to be in one of these format types as we look to further enhance our value and convenience proposition, particularly in rural America.
The second new format consists of about 9,500 square feet of selling space.
In addition to an extended queue line and broader assortment, this larger layout also includes nearly 50 high-capacity coolers and expanded produce offering, fresh meat and additional checkout lanes, including a self-checkout bullpen with multiple stations.
We believe this even larger format better positions us to meet the growing needs of our customers, particularly in highly underserved markets, and we are targeting more than 100 locations by year-end.
Overall, these larger formats allow us to incorporate our best and most impactful initiatives and are designed to expand high-growth, traffic-building categories in a more customer-friendly format all while continuing to drive strong returns.
Moving to an update on the number of new store opportunities.
Through a combination of our growing relevance with customers, format innovation, an evolving retail landscape and leveraging new technologies, we estimate there are now approximately 13,000 additional small-box store opportunities in the Continental U.S. which are available for a Dollar General store.
This compares to our prior estimate of nearly 12,000 opportunities and is inclusive of our 2021 new unit pipeline.
Although these opportunities are available to all small-box retailers, as a leader in small-box retail, combined with our proven track record of new unit development and format innovation, we believe we are well positioned to capture a disproportionate share as we move ahead.
And while we continue to evaluate, we currently estimate pOpshelf could add approximately 3,000 additional store opportunities in the Continental U.S., with about another 1,000 additional opportunities available for our smaller footprint DGX format.
When taken together, we estimate there are a total of approximately 17,000 new store opportunities available across our format types which we believe represents a long runway for new unit growth.
Overall, our real estate pipeline remains robust, and we are excited about the significant new store opportunities ahead.
Next, our digital initiative, which is an important complement to our brick-and-mortar footprint as we continue to deploy and leverage technology to further enhance the customer in-store experience.
Overall, our strategy consists of building a digital ecosystem that is specifically tailored to provide our customers with an even more convenient, frictionless and personalized shopping experience.
We made significant progress in 2020, highlighted by the accelerated rollout of DG Pickup, our Buy Online Pick Up In-store offering to more than 17,000 stores providing another convenient access point for those seeking a more contactless shopping experience.
During the year, we also saw continued growth in customer engagement across our digital ecosystem, including our digital coupon offering, shopping list feature, cart calculator shopping and budgeting tool, eCommerce site, DG Go!
mobile checkout and our mobile app, which ended the year with nearly 4 million monthly active users.
Looking ahead, our plans include providing more relevant, meaningful and personalized offerings with the goal of driving even higher levels of customer engagement and loyalty.
Our third operating priority is to leverage and reinforce our position as a low-cost operator.
Over the years, we've established a clear and defined process to control spending, which governs our disciplined approach to spending decisions.
This zero-based budgeting approach, internally branded as Save to Serve, keeps the customer at the center of all we do, while reinforcing our cost control mindset.
Our Fast Track initiative is a great example of this approach, where our goals include: increasing labor productivity in our stores, enhancing customer convenience and further improving on-shelf availability.
We continue to be pleased with the labor productivity improvements we are seeing as a result of our efforts around both rolltainer and case pack optimization, which have led to the more efficient stocking of our stores.
The second component of Fast Track is self-checkout, which provides customers with another flexible and convenient checkout solution while also driving greater efficiencies for our store associates.
Self-checkout was available in more than 1,600 stores at the end of 2020, with plans for an aggressive expansion as we move ahead.
In fact, we expect to introduce this offering into the vast majority of our stores by the end of 2022.
Our underlying principles are to keep the business simple but move quickly to capture growth opportunities while controlling expenses and always seeking to be a low-cost operator.
Our fourth operating priority is investing in our diverse teams through development, empowerment and inclusion.
As a growing retailer, we continue to create new jobs in the communities we serve.
And for those associates already on our team, this growth is resulting in numerous opportunities for career advancement.
In fact, more than 12,000 of our current store managers are internal promotes, and we continue to innovate on the development opportunities we can offer our teams, including continued expansion of our private fleet and those associated with DG Fresh as well as pOpshelf.
In addition, we transitioned to a virtual learning environment in 2020, resulting in the continued development of our people, including nearly 3 million training hours for our employees, all supported by our award-winning training and development programs.
Importantly, we believe these efforts continue to yield positive results across our store base, as evidenced by continued record low store manager turnover, record staffing levels, healthy applicant flows and a robust internal promotion pipeline.
We believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent.
Overall, we are making great progress against our operating priorities and strategic initiatives.
We have a robust set of initiatives in place for 2021 and are confident in our plans to drive long-term sustainable growth while creating meaningful value for our shareholders.
In closing, I am proud of our team's performance and our 2020 results, which further demonstrate our unique combination of value and convenience, continues to resonate with customers and positions us well going forward.
I look forward to all that we can accomplish together in the year ahead.

user
q4 earnings per share $2.62.
q4 same store sales rose 12.7 percent.
q4 sales $8.4 billion versus refinitiv ibes estimate of $8.28 billion.
board of directors increases share repurchase program authorization.
as of january 29, 2021, total merchandise inventories, at cost, were $5.2 billion compared to $4.7 billion as of january 31, 2020.
sees fiscal year 2021 net sales in range of a 2% decline to flat.
sees fy 2021 earnings per share $8.80 to $9.50.
sees fiscal year 2021 share repurchases of approximately $1.8 billion.
sees fiscal year 2021 capital expenditures in range of $1.05 billion to $1.15 billion.
reiterating its plans to execute 2,900 real estate projects in fiscal year 2021.
dollar general - from jan 30, 2021 through feb 26, 2021 same-store sales increased about 5.7% versus first accounting period of fiscal year 2020.
believes consumer behavior driven by covid-19 had significant positive effect on qtrly net sales and same-store sales.
dollar general - from feb 27, 2021 through march 16, 2021, same-store sales decreased about 16% versus comparable timeframe in 2020 fiscal year.

assistant