This is the Dollar General Corporation third quarter 2008 conference call on Wednesday, December 3, 2008 at 9 a.m. Central Time. Good morning Ladies and Gentlemen, and thank you for participating in today’s call. This call is being recorded by Conference America. No other recordings or rebroadcasts of this session are allowed without the company’s permission. It is now my pleasure to turn the call over to Emma Jo Kauffman, Dollar General’s Senior Director of Investor Relations.

In a moment Rick Dreiling, our Chairman and Chief Executive Officer, and David Tehle, Chief Financial Officer, will discuss the company’s 2008 third quarter financial results and deliver a brief update on our operating priorities as well as share some thoughts on the fourth quarter. After they speak you will have an opportunity to ask questions. Before they begin let me take a moment to reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Today’s comments will include forward-looking statements such as those about operating initiatives, sales and store growth, margin expansion, expense management, inventory levels, capital expenditures, future operating and financial performance, and the anticipated shareholder litigation settlement. Because such statements are subject to significant risks and uncertainties, we cannot assure you that they will prove to be correct or that any trends will continue. Important factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in our Form 10K filed with the SEC on March 28, 2008 and our third quarter 10Q and our third quarter financial results press release issued this morning and in the comments that will be made on this call. Statements made in this call are accurate only as of today’s date and may not remain correct at a later time. Dollar General undertakes no obligation to update any information discussed in this call. In addition we will refer to certain measures not derived in accordance with GAAP including EBITDA and adjusted EBITDA. Reconciliations of these measures to net income as well as the calculations of SG&A improvement excluding certain strategic and merger related items and the ratio of long-term obligations to adjusted EBITDA are included in this morning’s third quarter press release which can be located on our website at www.dollargeneral.com under Investor Information Press Releases. EBITDA and adjusted EBITDA should not be considered alternatives to net income, operating income, operating cash flows or any other performance measure determined in accordance with GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. We encourage you to consult our most recent Form 10Q for our definition of EBITDA and adjusted EBITDA along with the limitations on the use of these measures as analytical tools. Now I’ll return the call over to Rick Dreiling.

We are very pleased to report strong results again for the third quarter. David will provide more detail on our results in just a moment, but I wanted to review some key highlights of the quarter. Same-store sales were up 10.6% marking our second consecutive quarter of double-digit comps. We expanded our gross margin rate by 175 basis points to 29.7%. We reduced our SG&A as a percentage of sales by 68 basis points and our adjusted EBITDA for the quarter increased by 61% to $228.6 million. These results reflect Dollar General’s commitment in this difficult economic environment to serving our customers and improving our operations. They reflect the constant focus throughout the organization on our four basic operating priorities: One, driving productive sales growth; two, increasing our gross margin; three, leveraging process improvements and information technology to reduce costs; and four, strengthening and expanding Dollar General’s culture of serving others. Our customers are responding well to the changes we have made in our stores which include improvements to store appearance, the introduction of new products and plan-o-grams, and the expansion of our private label offerings. Importantly our commitment to providing quality products and great value in a conveniently located customer friendly small box environment continues to resonate well with our customers. With that I’ll turn the call over to David to take you through the financial details of the quarter.

As Rick said we had a great third quarter. Sales for the third quarter were $2.60 billion, up $286.1 million or 12.4% from last year. Highly consumables sales increased 16.6%, basic clothing increased 4.1%, seasonal sales increased 3.0% and home products increased 1.7% from last year. Same-store sales increased 10.6% with positive comps in all four of our merchandising categories in every geographic region. Increased traffic and average ticket each contributed significantly to the sales increase. As Rick mentioned our customers have reacted favorably to the changes we’ve made this year. While it’s difficult to quantify the financial impact of cleaner, neater, more organized and better merchandise stores, we believe improvements in store appearance contributed to our performance this quarter. We have also experienced favorable customer response to our merchandising and other store operations initiatives including extended store hours, new and expanded merchandise plan-o-gram resets and new impulse racks. Our gross profit rate in the 2008 third quarter was 29.7% compared to 28% in the 2007 quarter, an increase of 175 basis points. This increase was the result of higher average markups, improved inventory shrink, lower markdowns, and improved transportation and logistics efficiencies which more than offset fuel cost increases and an additional $15.7 million non-cash LIFO charge resulting from continued inflationary pressures. We continue to work closely with our vendors to eliminate unnecessary costs but some increases have been unavoidable. We have been effective in taking price increases this year as appropriate to offset those rising product costs. Markdowns in the ’08 quarter were in line with our expectations and we continue to make good progress in reducing shrink. For the quarter the average price of diesel was $3.97 per gallon, an increase of 34% from the ’07 quarter but down from the all-time high of $4.67 per gallon…

As David just highlighted, we had a very strong third quarter. Our operating initiatives are continuing to gain traction and the current economic landscape is driving more consumers to Dollar General. To leverage this we’re intently focused on helping our customers make the most of their spending dollars as we work to keep our prices low while maintaining the selection of products that our customers prize. We believe that our strategy is allowing us in this difficult time to prove to both our new and existing customers that they can count on Dollar General for quality, value and convenience. While we are encouraged by the third quarter results as we look ahead, we remain cautious about the fourth quarter and the holiday season because of the many challenges and the uncertainties proposed by the economy. We believe Dollar General is more prepared for the 2008 fourth quarter than it has been in many years. We are pleased with the continued decrease in employee turnover in our stores which has helped us accelerate the execution of our operating priorities. Our stores look better, our inventory shrink is down significantly and our recent sales results indicate that our customers enjoy shopping more at Dollar General. We’re glad to see lower gasoline prices which we hope will have a positive impact on discretionary consumer spending. We continue to watch trends very closely so that we can respond quickly and appropriately, and at the same time we will continue to manage our business and execute our priorities to capitalize on current market conditions while driving toward long-term productivity of the company. In preparation for the holiday season we began our marketing and advertising campaigns earlier this year to let customers know that Dollar General is an ideal destination or many of their holiday decorating…

(Operator Instructions) Our first question comes from Emily Shanks - Barclays Capital.

You had very nice gross profit margin improvement. I was hoping you could give us just a sense of what the magnitude of that improvement by way of contribution was between average higher markups as well as the decreased shrink?

We don’t break that out specifically in terms of the basis points. As I mentioned in the prepared comments, the markup which I’ll give you a little bit of flavor on what the markup is. The markup was provided by sharper purchasing on the part of our merchants as well as some higher rebates we were able to get from our vendors as well as some pricing initiatives that we took; and then after that the inventory shrink and the lower markdowns versus last year also had a pretty large impact on margin; and then followed by the improved transportation and logistics costs, some of the things we’re doing to increase cube in the trucks and change our transportation routes and things of that nature. Hopefully that gives you a little bit more flavor of what makes it up.

If I could add anything as you all think about our growth in our margin, it’s a lot of fronts. We have a private label initiative, the work we’re doing on negotiating with the vendors, the work that’s being done on the warehouse and transportation side, and the work on shrink. We’re trying to keep all of those balls in the air.

Is it fair to say that we should think about their weighting by order that they were listed? Is that fair?

They’re all pretty important; the ones we listed there.

As I think about next year’s store growth, can you count on how many new stores you’re already locked into the leases for fiscal year ’09?

At the end of the fourth quarter, the next time we have a call, we’ll lay all of that out on the table. What we’d like to do is wait until that time.

You had mentioned that strength was seen across all geographies. Can you speak to any trend differentials across the country? Some stronger than others, recognizing of course that all were positive?

Yes. In my many, many years of retailing we’re seeing pretty consistent growth in every region we’re in. There is really no region outperforming the others. We’re seeing really, really solid performance everywhere.

Our next question comes from Karru Martinson - Deutsche Bank.

When we look at the SG&A, should we consider this kind of the run rate going forward or are there other initiatives here that you feel could have a meaningful or a similar type reduction going forward?

We always look at cost savings and SG&A. Currently we talk about our cardboard recycling and what that’s done for us, but we have initiatives in every aspect of the business. We look at our real estate area; we look at our common area maintenance; we look at our property taxes and shipping; we look at our UPS charges; we look at our inventory services; travel services. We scour everything and hopefully every quarter we can make some improvements in our costs. I’m not going to give guidance here for next year but we have a continuing effort to control and reduce costs in this company and I don’t see that changing at any point. And that’s not even mentioning the sourcing initiatives that we have going on in the cost of sales side of the business.

When we look at the shareholder lawsuit, just to be clear, we’re done with the expenses, we’re done with the settlement, maybe a little bit of leftover but that’s how we should be looking at that?

That’s exactly right.

As you guys are driving traffic and certainly impressive comps, are you seeing people coming to you in terms of the merchandising? Is there anything that you would single out as drivers here?

Yes. We’re very fortunate right now and while the evidence that we have is more anecdotal, we’re seeing new customers and we’re seeing our customers that historically have come in coming in more often. There is no doubt that the new plan-o-grams that we have rolled out, the new items we’ve added, our new private label offerings are definitely driving traffic into the store.

With fuel costs coming down and benefiting your consumers, would you expect to see a benefit from that as well?

Yes. As we’re looking at the drop in fuel costs, you’re taking an item that the consumer was dealing with that they have to have. Gasoline being down a dollar a gallon, one can argue that puts more discretionary income into their pocket and it should bode well.

In terms of your own cost structure?

We’re definitely seeing declines in the price of diesel.

Yes. It definitely will help cut distribution and transportation costs as we move forward assuming that it stays down of course. It’s hard to predict what it’ll do in the future.

Our next question comes from Grant Jordan - Wachovia.

Congrats on the very strong numbers. As you look at the quarter, obviously very strong comps. Can you just directionally give us a thought as to how those comps played out over the quarter and maybe if you’ve seen any significant changes in consumer behavior since the end of the quarter?

The comps tracked pretty much consistently across every week. They did not accelerate. They did not de-accelerate. As I said in my notes, we were happy with what happened in the organization on Thanksgiving Day and Black Friday.

It seems like you’ve definitely taken a stance to put more holiday merchandise on the floor, maybe more in the toy area particularly. Have you seen any early customer response to that? I assume that kind of flows through with your comments about Thanksgiving and Black Friday.

Yes. We actually put our holiday merchandise into the stores earlier this year which put us in a position of being able to have a fuller assortment more quickly. In regard to the toys, much the same thing. We put the toys into the stores earlier and one of our strategies going forward is to be in the seasonal business earlier. I think some of our sales numbers reflect that.

I believe now that you’re down under 5 times leverage you don’t have to pay anything off on the free cash flow sweep under your bank loan agreement. What are your thoughts about excess cash going into next year and do you still think we’ll see a good debt pay-down after the end of the year?

You’re correct in your assumption there on the cash sweep. Our first priority is investing in our business as we’ve said because we believe it’s our highest return on investment for our dollars in terms of capital expenditures to support the business and inventory to support our customers. We’re okay holding some excess cash right now due to the volatile environment that we’re in and we think being conservative is actually prudent. Clearly we will continue to evaluate our business trends over the next couple of quarters and we’re in continuous discussions with our equity sponsors and we will consider a debt buy-back when it’s appropriate. We have not backed away from our long-term objective of deleveraging the company. Clearly taking down the debt is a key long-term objective and it’s obviously still on our radar screen.

Our next question comes from [Karen Elbrick] - Goldman Sachs. [Karen Elbrick] - Goldman Sachs: You guys are obviously very impressive across the board. I think it was expected you’d do well in consumables but obviously all categories are doing well. Particularly standing out was apparel. What do you think in merchandising you’re doing right, because it was particularly impressive relative to your composition? Do you attribute it to merchandising layout, products? What do you think you’ve got right there?

I think there are a couple things going on. Number one, I think our stores are much cleaner and much more orderly than they have been in the past which believe it or not enhances the shopping experience and allows us to be in a position where the product in the store can be the star. I think also while we have a long way to go, we’re doing a better job of sourcing and a better job in the quality of product we have at the price we’re offering it at. Particularly as you reflect on what has taken place in regards to the improvement in store standards albeit we have a ways to go, we’re getting trial from customers who haven’t been in the store in a while and they’re coming in and they’re going, “Oh my gosh. This isn’t the Dollar General we had two years ago” or “I was in two years ago.” It’s laid out properly, they’re seeing fresher products because of the Alpha strategy last year, the past pack-a-way’s all gone, and there’s fresh merchandise.

I think a couple of other things also would be the lower turnover of the store employees. We have a more experienced workforce out there and it helps take care of the customer better when they come into the store. And then our signage is better in the stores too so people can find things easier. It’s a little more appealing to them particularly in some of the non-consumable areas. [Karen Elbrick] - Goldman Sachs: Not to be greedy given how good these results are, but it’s definitely exceeded our expectations far earlier. As we look at some of the margin opportunities you had outlined at the time of the deal, it seems like for a lot of them you’re just kind of hitting the tip of the iceberg. Is that a fair assessment if you look at things, because SKU rationalizations, direct sourcing, zone pricing? Are we early on still in some of those initiatives?

Yes. If this was a football game, we’re still in the first quarter.

Our next question comes from Colleen Burns - Oppenheimer.

On the private label side, I think in the second quarter you said your penetration as about a little less than 16%. Did you see that number increase in the third quarter?

Yes. Our private label penetration in the third quarter is at 20.2% now. That’s compared to last year at 17.2%. So we saw a nice acceleration through the quarter.

Do you see that as the main driver of further improvement in gross margin as you look ahead?

Yes. I think we have many, many opportunities on our margin side and there’s no doubt private label will play an ever-increasing role in that as we move through 2009 and beyond.

On the competitive front, have you started to see any changes from your competitors given your success or anything out there that you can comment on?

As I look across the competitive environment I would tell you it’s more promotional than I’ve ever seen and I think I’ve said that a couple quarters in a row now. Do I see anybody doing anything specifically against us? The answer’s no. I think as you look at retailing in general, everybody’s scrapping for every dollar and they’re doing everything they can.

Our next question comes from [Mike Shritgast - Longacre]. [Mike Shritgast - Longacre]: I was wondering if you could talk about how much comp store hours were up? You indicated that you had extended store hours in a number of stores.

Those sorts of things are very difficult to measure because we have so many things going on. As we’re looking at comp stores and looking at extended hours, we look at it as merely another step similar to cleaning up the stores, similar to merchandising in displays better. What we’ve done is basically given every district the opportunity to increase the store hours in order to meet the customers’ needs for convenience and we let them make the call on it. [Mike Shritgast - Longacre]: Do you know what percentage of stores increased the store hours?

We have touched every store in the chain in some manner. [Mike Shritgast - Longacre]: You said customers were coming in more often. Any sense if the average ticket still the same when they come in more often, meaning is someone coming twice and spending [inaudible] each time?

We’re seeing our average ticket increase. So they’re coming more often and spending a little more when they come.

Our next question comes from Doug Kahn - Royal Bank of Scotland.

A quick follow up on the competitor question. If you could just share a little bit now your strategy philosophy on price points on what’s sort of the average price points you’re looking for now in the stores vis-à-vis the competitors? And then also your SKU levels; has that changed at all over the last couple quarters and how you might characterize it versus the competition?

A couple of comments. As I look across the price points we are an EDLP operator and we’re highly focused on delivering everyday low prices, and that’s where our concentration is. Occasionally we do supplement that. When we get better deals on product we’ll supplement that with promotional merchandise. As I survey the competition, I am seeing more and more promotional pricing out there. My view on the advantage of being an EDLP operator, the consumer knows what they can get when they come into your store. A promotional price, you never know what the price is going to be and you hope that it’s better when you go in. I’ve always subscribed to the theory that promotional pricing is renting sales as opposed to EDLP pricing where you create a bond with the customer. In regards to our SKU rationalization and the work that’s taken place, we have added approximately 500 SKUs through the course of the year in the new plan-o-grams. We’re very pleased with the sales they’re driving and we also believe that that change, the addition of those items, has broadened the appeal of our categories to customers that are coming in.

That’s a net growth of 500? I assume you’ve taken some away as well?

That’s correct. Net net we’re 500 ahead.

Overall your price point versus some of the competitors out there, would you say on average you’re slightly higher than what we’re seeing at some of the other stores in the category?

I would say that I’m very comfortable where our pricing is across all the major channels when we’re compared against it.

Could you characterize for us right now your ability to repay debt in terms of the capacity you might have if you chose to repurchase some of your debt or to pay down some of your debt?

There are several baskets that you have to look at in the credit agreement. It’s a little bit complicated in terms of giving an answer on that. It would be somewhere in excess of $50 million.

Our next question comes from Mary Gilbert - Imperial Capital.

Where is your average ticket now? It used to be just under $10, right?

Yes. It’s still in that vicinity.

So it’s still just under $10?

It might be slightly north of that. Right in the $10 range.

Given the performance dynamics that we’re seeing, and I realize that the equity markets are pretty lousy right now, but could there be an opportunity in 2009 of conducting an IPL and taking advantage of the drivers that we see here?

It’s a little soon for me to be talking about that. Right now we’re just really focused on managing the company and meeting the expectations of our customers. When the time comes to talk about that, we’ll throw it on the table.

That makes sense. So when we look at free cash flow that the business is going to throw off, essentially what you want to do is redeploy it back into the stores. Is that sort of how you’re going to look at your capital programs?

Clearly our number one investment is in our stores and making sure that we have the merchandise and that it’s displayed properly through fixture programs and things of that nature and then the support structure to support the stores, whether that be systems or distribution or transportation; making sure that everything focuses on the store. You’re right.

But also what about expansion as well?

Are you talking about store expansion into other markets?

Yes.

Again we’re really focused. It’s a same-store sales story right now and we will announce our growth plans on our next call for 2009. And when it’s appropriate to look out further we’ll be the first ones to tell that too.

Our next question comes from [Ryan Bloom] - The Hartford. [Ryan Bloom] - The Hartford: I was curious to get some insights as to what you’re doing right in terms of your vendor negotiations? You seem to be getting a good deal of concessions. Do you think that there’s an inflection point from industry dynamics or this is just your typical going back to the table?

I think two things are happening at Dollar General. I think number one, the team has gotten really tough on cost increases and the advantage we have as a company is we need to have bottled water. I don’t specifically have to have everybody’s bottled water. That puts us in a position where we can leverage that and I think we’re doing a better job of negotiating costs. The second thing and probably the most important is that with the same-store sales number we’re driving, we’re getting growth and consequently that means the vendors that are dealing with us are getting growth also. It’s easy to want to promote with someone who is winning. And then finally I would say this too. I think we’re reaching the level now where the retail team is executing at a far, far, far superior rate than it has in a very long time. When we make a commitment that there’s going to be a display of merchandise or we’re going to make a commitment we’re going to move X number of cases, because of the support we have from the retail team we’re able to pull that off; and the vendors respond to that.

I think the vendors are very excited when they see our comp store sales and they really want to participate in that so it makes the discussions easier when your comps are growing like ours are. [Ryan Bloom] - The Hartford: Perception is everything to the extent that you’re participating and are favorably positioned in 2009; there’s a real recognition of that in the vendor trade?

I’d say so, yes. [Ryan Bloom] - The Hartford: I wanted to understand more broadly. Historically I guess the dollar store industry has suffered. When gas prices did go higher typically the dollar stores felt a little bit more pain than they have within the past year or year and a half and that’s worked to your advantage. Do you think that there’s any risk now that gas prices are lower that you’ll lose some of the share gains that you’ve had from say the discounters, people more willing to go take a longer trip for a bigger purchase? How do you think about that?

I think as I reflect on it even though gas prices are down, they still are high. I think what we are seeing is that the fact that the price of a gallon of gasoline is down a dollar, it’s actually putting more discretionary spend into the consumer’s pocket. And consequently it they’re spending it with us. We can’t lose sight of the fact that this company is on the verge of having 19 consecutive years of same-store sales growth. That has come in good times and bad, and I think the company particularly Dollar General has survived irregardless of what’s going on around it. [Ryan Bloom] - The Hartford: Now that you’ve been at the helm here for a while, is there any area that you’d revisit where there may be a structural impediment to your closing the gap versus your competitors from a gross margin standpoint or do you think you’re more confident than ever before t hat you can get there and maybe even exceed original expectations?

Again I don’t really want to stand up and throw a number out on the table, but I will say this. Every day I come to work I continue to be encouraged by the opportunities that exist at Dollar General, not only in terms of our chances to grow the margin but to grow sales and reduce costs at the same time. I would say, again like my comment that if this is a football game, we’re all somewhere in the first quarter. That’s the opportunities that I believe still exist here. [Ryan Bloom] - The Hartford: Where do you see most of your private label growth coming from? Is it broad-based or is there some category that’s outperforming another?

At this stage of the game because of the changes we’ve made in quality, the changes we’ve made in the selection in the labeling, it’s very broad-based right now.

Our next question comes from [Steve Puckowitz - Admiral Capital Management]. [Steve Puckowitz - Admiral Capital Management]: Based on the inventory surge this quarter, obviously it drops off in the fourth quarter in February ’09 and quarter end. Can you give me a rough idea of where you expect that to be? We’re at $1.6 billion now. What do you see in February ’09?

We’re not going to give guidance on inventory quite that granular. We really manage by the turns more than anything else. Again when you have comps like we have and some of the new initiatives that we put in the stores, we have to be increasing inventory to continue to feed the business. So we’re really more concerned about that turn number, and as I mentioned our turns are at 5.0 and we’re well above where we were last year at I believe it was 4.6. That’s how we’ll continue to manage the inventory as we move forward is through the turns. [Steve Puckowitz - Admiral Capital Management]: Where do you see the turn going to for this quarter?

That’s a little more guidance than we’re willing to give. We’ll just keep working on that turn number.

Our next question comes from [Mike Shritgast - Longacre]. [Mike Shritgast - Longacre]: How long do you have the hedge on your bank debt for?

We have several hedges on the bank that we have one set of swaps that are for five years that went in in July of ’07, that’s $953 million; and then we have another swap that has two years that we put in in February of this past year. [Mike Shritgast - Longacre]: And how much was that?

$350 million.

There are no further questions at this time.

Thank you all again for joining us today. We look forward to updating you on our full-year results and our plans for next year in March of 2009. Thank you.

This concludes today’s teleconference. You may now disconnect.