Good morning, my name is Hope, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dollar General First Quarter 2015 Earnings Call. Today is Tuesday, June 2, 2015. [Operator Instructions] This call is being recorded. [Operator Instructions] I would now like to turn the conference over to Ms. Mary Winn Pilkington, Vice President of Investor Relations and Public Relations. Ms. Pilkington, you may begin your conference.

Thank you, Hope, and good morning, everyone. On the call today are Rick Dreiling, our Chairman and CEO; Todd Vasos, our COO; and David Tehle, our CFO. We will first go through our prepared remarks, and then we will open up the call for questions. Our earnings release issued today can be found on our website at dollargeneral.com, under Investor Information, Press Releases. Let me caution you that today's comments will include forward-looking statements about our expectations, plans, predictions and other nonhistorical matters, such as our 2015 forecasted financial results and capital expenditures; our planned fiscal 2015 operating initiatives and merchandising initiatives; our 2015 and 2016 store growth initiatives; our share repurchase expectations; and capital allocation strategy and statements regarding future consumer economic trends. Important factors that could cause actual results or events to differ materially from those reflected in or implied by our forward-looking statements are included in our earnings release issued this morning, our 2014 10-K, which was filed on March 20, 2015, our 2015 first quarter 10-Q filed this morning; and in the comments that are made on this call. We encourage you to read these documents. You should not unduly rely on forward-looking statements, which speak only as of today's date. Dollar General disclaims any obligation to update or revise any information discussed in this call. Now it is my pleasure to turn the call over to Rick.

Thank you, Mary Winn, and thanks to everyone for joining our call. Last week, we had very exciting news announcing that Todd Vasos would be the next CEO of Dollar General. Todd will be an excellent CEO and I believe a great future lies ahead for Dollar General under his leadership. I have worked side-by-side with Todd for many years. And I know firsthand his ability to be both strategic and tactical, to not only visualize success, but put together the right team with the right strategy to make it happen. At Dollar General, I have loved our spirit of service and our passion for taking care of our customers, helping our employees grow and giving back to our communities. Working with this team has been incredibly rewarding and although this will be my last earnings conference call, I am excited to have the opportunity to remain as Chairman until the end of the fiscal year to support Todd as we drive the business. With that, let's now turn to our results for the first quarter of 2015. This quarter is a very good start to the new year as we look to capitalize on the numerous opportunities ahead of us. Let's recap some of the highlights of the first quarter of 2015. First quarter sales increased 8.8% to $4.9 billion. We delivered same-store sales growth of 3.7% for the quarter. Overall, we were pleased with the sales cadence for the quarter, particularly in light of the Easter holiday shift to earlier in the year. In the quarter, same-store sales growth was balanced across both consumables and non-consumables. The non-consumable categories have now had 5 consecutive quarters of improvement, with seasonal apparel and home all comping positive in the first quarter. I am pleased with the progress we've made in…

Thank you, Rick. Let me first say how excited and honored I am to have the privilege to lead Dollar General. I'm grateful that Rick will remain as Chairman, as his guidance and counsel will be incredibly valuable to me. Turning to the first quarter, we have made notable progress against our key initiatives for 2015. We continue to grow transactions and item units in syndicated share data for the quarter. In the most recent syndicated data, we experienced consistent mid- to high single-digit growth in both units and dollar share for the 4-, 12-, 24- and 52-week periods. As we shared with you last quarter, we are on track to meet targeted labor investments to grow market share in a competitive environment, while providing for positive financial returns. Currently, we are in the midst of rolling out these selected labor investments in phases. We have 3 phases within the program. Our Phase 1 stores are now receiving the incremental labor investments. The store operations team has specific metrics and timetable for determining the financial return criteria for achieving results based on a similar 2014 test and learn program. Our 2014 test and learn stores continue to show improvement across performance metrics such as sales, shrink, in-stock, which are all very encouraging. The great part of this initiative is that we can be nimble in making adjustments to the model as appropriate. Based on the 2014 test results and the early results of Phase 1, we are very encouraged by our progress. We anticipate rolling this investment to the Phase 2 and Phase 3 stores in the second half of the year. The labor hour investment in this select group of stores is designed to ensure we deliver on our consumer expectations in more competitive markets, with product in-stock and…

Thank you, Todd, and good morning, everyone. Rick and Todd have taken you through the highlights of our first quarter and many of our strategic initiatives, so I'll share more details on the rest of the financial results, starting with gross profit. Gross profit for the first quarter was $1.5 billion or 30.5% of sales, an increase of 45 basis points from last year's first quarter. As compared to the prior year, the most significant drivers were higher initial inventory markups, better inventory shrink performance and lower transportation costs. SG&A expense increased by 13 basis points over the 2014 period to $1.1 billion or 21.8% of sales in the first quarter. The majority of the SG&A increase was due primarily to higher incentive compensation, advertising costs and repairs and maintenance. Partially offsetting these items were increased cash-back-related convenience fees. Our tax rate for the quarter was generally flat to last year at 37.7%. Moving now to our balance sheet and cash flow. At quarter end, merchandise inventories were $2.8 billion, up 9% in total and 3% on a per-store basis. We generated cash from operations of $344 million in the quarter, an increase of $92 million compared to the first quarter of 2014. During the quarter, we repurchased 7.1 million shares of our common stock for $535 million. We also paid our first dividend of $0.22 per common share outstanding totaling $66 million. Since the inception of the share repurchase program in December 2011, we have repurchased over $2.8 billion of our common stock. We currently have a remaining authorization of approximately $689 million. We remain committed to our disciplined capital allocation strategy. We aim to create lasting value for our shareholders through anticipated quarterly dividends and share repurchases, all while maintaining our investment grade rating and managing to a…

Thank you, David. As this is our last earnings call together, please accept my many thanks for your friendship and business partnership. What you've done over your career at Dollar General has been significant, from taking the company private in 2007 to our return to the public markets in 2009. You've been instrumental in transforming Dollar General and in fueling our impressive growth. For all of us at Dollar General, thank you for all you've done over the last 11 years. Our long-term commitment to growth and shareholder value are unchanged. Even as the competitive landscape continues to evolve, we have a business model that is proven and resilient. Our business generates significant cash flow and we are in a position to invest in store growth, while continuing to return cash to shareholders through consistent share repurchases and dividends. To all of the 109,000 Dollar General employees that fulfill our mission of serving others by providing our customers with convenience, value and service every day, please accept my appreciation and thanks. With that, Mary Winn, we would now like to open up the call to Todd and David for questions.

Okay. Hope, we'll take the first call, please.

Your first question comes from the line of Paul Trussell with Deutsche Bank.

And congrats, Todd, and also congrats to you on the successful transition, Rick -- Rick and David.

Thank you.

So just want to talk about cadence. Rick, you spoke to being pleased with the sales cadence. Could you please help us understand how you started and ended the period from a same-store sales standpoint and quantify any impact from any one-off headwinds, such as the earlier Easter, whether there was an impact, note that's notable from weather or West Coast ports? And also, on sales, David reiterated the guidance regarding the first half better than the second half. Just any other color as we should be thinking about the second quarter trend to-date would be helpful.

Yes, Paul, this is Todd, let me first say that the first quarter sales trajectory and trend were pretty much exactly like we thought they would be. Obviously, we knew the calendar. We knew that the Easter shift would play a key factor in how the quarter shaped up and it played out exactly the way we really thought it would and that was benefiting period 2 of the quarter and then taken away some sales in period 3. So the quarter shaped up pretty much like we thought. There was some headwind, as you indicated, with a little weather that we saw, just like everyone else, I'm sure, in that latter part of February, early March time frame. But as that subsided and mitigated, our sales returned to a more normalized pattern and again, where we thought. And as we look forward, Paul, we're pretty satisfied and confident in our guidance of sales that we put out at the beginning of the year. So I think the best way to look at it is that we're well on track to be within that guidance.

Now on gross margins, very good performance there, could you give a little bit more detail on what is driving the higher mark-ups? And are there any headwinds that we should be thinking about going forward that could offset some of the improvement in shrink and lower transportation cost?

Paul, we're very pleased with our gross margin performance. I think the teams did an outstanding job and to call out a few of the teams in supply chain and merchandising in particular, they did a real good job in mitigating some of that West Coast issue that we were facing and they did it over a course of a long period of time. As they saw this start to materialize, they made some very early changes late last year to move some goods to the East Coast, and that really helped us. Then as we looked at the quarter, the mix really did benefit us. And as you heard from the prepared remarks, we were very happy with our sales and our sales trajectories in non-consumables. And so as you look at the non-consumable piece, it helped our margin as we looked year-over-year. DC and trans did a nice job, as I indicated, not only on the West Coast piece, but also, they continue working their productivity gains within the DCs, as well as looking at how we mitigate any issues with some of the driver shortages that have been out there. Again, our teams, I think, have done a pretty good job with that. And of course, fuel helped a little bit, as it is much lower than last year. And then lastly, we're very, very encouraged by our shrink results and our trajectory on shrink. We think that the work that's been done over the last 12 to 18 months has some legs to it. And we're seeing it broad-based, as we indicated, across many, many categories. So we feel pretty good. But as you look, just to keep in mind, gross margins, the headwinds get a little bit tougher and the laps get a little tougher as we move through the quarter -- sorry, through the rest of the year and into the upcoming quarter. So keep that in mind as you take a look at that.

[Operator Instructions] We'll now go to Michael Lasser with UBS.

Congrats to everybody on the new roles and moving on. I want to talk a little bit more about the labor investment that you're making. Can you give us some sense of the economic return that you've seen from the test? And how scalable you think that the return will be and what form it will be? Is it mostly going to be a sales lift?

Yes, Michael, it's Todd once again. I think the best way to look at it is that, our operations teams have a real defined metric goal that they need to reach. And as we indicated, it is goals around sales being the #1 driver. The whole thought around this is to make sure that our in-store experience for the consumer is top-notch as she enters our stores. And as we've said for the last couple of calls, this labor investment at store level is about getting product on the shelf, about getting out of the back room and getting the truck work in a more timely manner, so that as the consumer enters the store, she has what she needs on the shelf at the time she needs it and can get out of the store quickly. So there definitely is metrics involved and we're pretty pleased with what we see so far. But again, it's early. But we're pretty pleased and look forward to rolling out Phases 2 and 3 of the program as we work through the rest of the year.

And so should we -- I appreciate your commentary about the comparisons getting tougher, but with the labor investment, should we expect that some of the comparison will be mitigated by the sales lift that you anticipate you'll achieve through this initiative?

Yes, and I think that's fair to say. But again, we knew going into the year as we laid our guidance, we've layered that in as being a benefit for us. But I think might be you're exactly right. It's fair to say that, that should help us as we move into the back half of the year.

Okay. And then my last question, Todd, is you mentioned some headwinds that you're going to be facing, aside from tough compares on the gross margin side. What exactly are you referring to on the gross margin headwinds? And so should we, should not expect that the 45 basis points of expansion is necessarily achievable -- sustainable?

Yes, I think the way to look at it is one, we're fairly confident that we will have expansion for the year. But as we continue to move throughout the year, the compares get a little tougher to last year and that rate of growth with gross margin will subside somewhat as we continue to move. But we feel pretty confident that we'll have expansion as we move through the rest of the year.

Your next question comes from the line of Matthew Boss with JPMorgan.

So on the top line, this 3% to 3.5% same-store sales guidance for the year, it appears prudent, given the tougher compares as the year progresses. My question, have you baked in any changes in macro backdrop with some of the wage increases? And then from a category perspective, what areas of the store would you expect to outpace that guide over the next 12 months?

Well, as we look at it, we really haven't factored anything for the wages and we watch all trends in retail, and wages being one of them, and I think we've got a pretty strong track record of doing what we need to do at the time we need to do it. And the nice thing about Dollar General is we have the flexibility to be able to do that. So we feel pretty confident in that. But we'll watch it. And as we look at sales as we move through the rest of the year, the work that the teams have done in non-consumables, I have to tell you, we feel very good about that. And again, that work has been ongoing for years, Matt, as you know. And as we've always said, as the consumer starts to have a little bit more money, we think that we've got the right formula for her on non-consumables. So we still consider non-consumables as a great rounding out of the basket. And I think Q1 showed that. And I think as we move through the rest of the year, our non-consumable categories will continue to perform very well for us.

Great. And then can you just talk about what you're seeing in the competitive environment? And particularly any changes that you've noticed with some of your peers currently under transition today?

Yes, I think the -- when you look at the macro environment out there in retail, it's always very competitive. But I think the best way to still characterize it is it's been very rational across all channels of trade, mass, grocery and drug. And we watch, just like everyone, we watch everything everyone's doing and we'll act accordingly. But I have to tell you, at this point, we really haven't seen anything that is out of the ordinary. But we're doing -- and we're doing things and we're controlling what we can control and working our plan. And where we think the year is going to fall out and that's where we're squarely focused. And if we keep our head down and do that, and then also watch what's going on around us, I think we're going to have a pretty good year here.

Your next question comes from the line of Scot Ciccarelli with RBC Capital Markets.

Two questions. First of all, you've made a couple of comments just regarding in-stock levels and one of the reasons you're increasing the labor investment is to improve the in-stock level to make sure the stores are prepared. so I guess the question is, do you think you've had an issue with in-stock levels, first? And then second, just kind of, again, this is a broader macro question, I guess, but a lot of the data out there suggests that blue collar labor trends continue to improve. We're starting to see some upward pressure on wages, which I would think would create a good environment for Dollar General. I'm wondering how you would characterize the health of your core consumer at this point?

Sure. Scot, I think it's fair to say, on the in-stock piece, that we haven't been fully satisfied with where our in-stocks have been and been trending. In saying that, I think we've done some very prudent things and taken some actions, as you heard in my prepared remarks, to offset some of those in-stock issues that we've seen start to pop up over the last 12 to 18 months. Now in saying that, we've got a lot of things in place to make sure that our in-stock levels are appropriate. But as you can tell, we do have some opportunities still. So we're working that plan and stay tuned for more information as we continue to move through the year on it. But we're confident that we'll be able to reel that in and get our in-stocks back to where we think they should be. As it relates to our core consumer, I think you nailed it. I think that the consumer is feeling a little bit better. But again, our core consumer is always a little bit stretched. And as you know, she is the first, usually, to start to feel it, when the economy starts to go a little sideways and she's also the last to usually roll out of that, when she starts to go back to work and things start to get a little better. But I think the way to look at it is that she also has to feel confident over a longer period of time. And I think as we continue to move through the year and if everything stays where it's at or gets a little bit better, her confidence level is going to build and her spending will probably build with that. Because again, she is -- she doesn't have a lot of disposable income, she doesn't have bank accounts and credit cards. And so she has to see a sustained time where she starts to feel good and once that happens, I think you'll start to see her spend a little bit more.

Your next question is from the line of Dan Binder with Jefferies.

And congratulations to both of you, Rick and Todd. My question was a follow-up on this labor investment. Can you just remind us how many stores were in the test? How many that were on Phase 1? And then considering the investments you're making where we...

Dan, did we lose you? [Technical Difficulty]

His line disconnected. Your next question comes from the line of Charles Grom with Sterne Agee.

On the 2014 labor initiatives, I don't know if it was really his question actually, but on the 2014 test that you did, can you just give us some perspective on how many stores that you tested it in and what the degree of improvement was in your in-stock levels, and also from a sales perspective, what the lift was?

Yes, when we rolled out the 2014 test, Chuck, I think it's fair to say it was a done in a pretty big group of stores and it was done across a lot of different geographic areas of the country to make sure that we felt good about the results that were coming out of it. So in our test and learn program, as you know, using APT, we have the unique ability to be able to really focus in on that. And then glean the learnings from it. So it was broad based in a lot of different geographic areas, but I think the biggest thing to take away was that we saw significant sales increases that were sustainable. And as well as our in-stock positions had increased. And what we're waiting for to come through on this as well, that will be a trailer to both the '14 test and anything we do in '15, we're hoping to get some shrink goodness out of this as we continue to move as well. But again, that will be yet to come and we won't probably recognize that until later this year and into early next year.

Okay, great. And then just to dovetail into that, David, when we think about SG&A dollar growth in the balance of the year, 9.5% here in the first quarter, should we think about that rising as we roll out the labor initiatives to more stores?

Yes, I think as we look at it, we still believe it takes approximately a 3.5% comp on an ongoing basis to lever our SG&A. Now having said that, that ebbs and flows and it depends upon what our investments in, in a particular quarter, and obviously, we were a little higher in Q1 on incentive comp, advertising and repairs and maintenance. And yes, as we go through the back half of the year, we will be making some investments in labor that will reduce the leverage in terms of how much we can lever SG&A. And as Todd said, we think that's a great investment, but it takes a little bit of time to get that payback as customers, obviously, the hope is we'll get more transactions and a bigger basket as customer -- customers come into the store and that will come over time. So again, big expectations for it. But as we're implementing it, the back half of the year puts a little pressure on SG&A.

Okay. Great. And then one more for you David, just on the cash flow statement, it looks like you had some help on the payables front, an increase from the end of the year, when it looks like typically over the past few years, you guys see a decline. Just wondering why the payable balance rose so much.

Yes, 2 things there. Last year, on payables, we had a little bit of a negative and this year, we had a little bit of a positive, the same items, that had to do with the receipts. And we talked about the West Coast situation and this year, we got a whole slug of receipts in rather late in the quarter that we didn't have to pay for right away and last year, we got receipts a little bit earlier that we paid for a little quicker. So a little bit of hurt last year and a little bit of help this year. Put them together, it was an enough to, as you say, kind of stick out of the cash flow statement.

Okay, great. And congrats on your retirement.

Thank you.

We do have Dan Binder back online with Jefferies.

Anyway, so I did have some other questions, though. You recently opened your 12,000th store. Maybe you can give us a little bit of an update based on kind of the white space and the opportunities, competitive environment, what you think the opportunity is for Dollar General here?

Yes, we think the opportunity is very bright. We've stated that we've got 13,000 opportunities that exist in the continental United States. We know we'll get our very fair share of those. As a matter of fact, as we've already announced, we've accelerated our growth to ensure that we get the very best sites that are out there. So we feel very good about the white spaces there still. And we feel good about the new states that we've entered and where those sales trends are moving. So all in all, the future is pretty bright when you look at store -- building stores and store expansion and our future expansion plans.

Okay. And then just one other question. On -- you talked about better in-stock levels. I'm not sure if you want to quantify, but what is sort of the ideal economical level of in-stocks that you think you want to be at longer term? And maybe if you could also include in that conversation how much of the inventory is being pushed to the stores versus pulled? Is it all central replenishment? Or do they have -- do store managers have some flexibility to request product, too?

Yes, those are good questions. And when we look at inventory levels, there is no doubt that we do have specific goals in mind by category and even down to the goods themselves. So in our top 250 items, we want 99%-plus in-stocks. And as you go down the food chain, if you will, on items, that expectation becomes a little less because we know that we're not -- we wouldn't want to be 99% in-stock across the board. But in saying that, our consumers expect a very high level of in-stock when they come into the store. And we feel that by making sure that we've got the product on the shelf and again, implementing the sky shelf program as I indicated, will help keep that -- those goods out of the back room and customer-facing. So those are some of the initiatives we're working on to make sure that those in-stock levels stay pretty high. And then when you look at just overall, our inventory, we feel that it's pretty clean and we feel good about it.

Your next question is from the line of Dan Wewer with Raymond James.

Todd, I wanted to ask you about your thoughts on private label opportunities. So when we look at competitors such as Aldi, obviously, remarkably successful, with almost 100% private brand assortment. And I'm assuming that Family Dollar's private label assortment will grow once it becomes a part of Dollar Tree. So when you think about Dollar General, do you see an opportunity to further push your private label penetration higher? Or do you think just the opposite, to differentiate yourself from those competitors, perhaps, focus more on branded product?

Yes, those are good questions. We very much love private brands. We know that they are definitely a pillar of our inventory that we have. As a matter of fact, our consumers look to us for a great alternative in private brand. So to answer your question specifically, we look to continue to expand our private brands, not only the items, but also the quality that we put forward to the consumer. And we also want to make sure that it's an extreme value for our consumer. The other lever that we have that we continue to expand and you'll see a further expansion as we go through '15, will be our Smart & Simple label, which in fact gets us to even a lower price point for our customer, to really hit that affordability piece that she craves right now, especially in a lot of the consumable type areas. So we're bullish about our private brand program and you'll continue to see us move forward and expand that as we move into the latter part of this year and to next.

And just, Todd, one follow-up question, with the 900 stores opening next year, I don't think a retailer has ever opened that many stores in a year, is it your experience that Dollar General finds that first-year volumes are greater when you're the first small box value retailer in a market? Is that the key reason why you're pushing the expansion rate higher?

Yes, the way we look at it is, first of all, 900 stores is a big number, but our real estate team is very, very good at what they do. We're confident in the site selection and that's probably the most important thing around volume, is getting the right site and our proprietary tools that we use really hones in those sites for us and enables us to get there. Now there is no doubt that being first-mover does give you some advantage. And we'll continue to capitalize on any dislocation that may be out there. But 900 stores is aggressive, but we feel very confident in delivering that.

Your next question is from the line of Alvin Concepcion with Citigroup.

I think you touched upon personalizing promotions. I'm just curious how far away are you from being able to do that? And are you partnering with anyone on the data analytics?

To answer your question specifically, we were already doing targeted marketing based on purchase habits from our consumers on that card. Again, the beauty of this is it looks and feels like a loyalty card, but it has none of that backstage cost that is very prohibitive out there. So we are partnering with many of the CPG companies, and quite frankly, the majority of them are very, very excited about partnering with us to offer our consumers a real deal on these digital coupon platforms. But what they're even more jazzed about, if you will, is the ability to seed them, based on their purchase history, with coupons that are very relevant to them. And we're pretty happy with the early results of it, and you're going to see a lot more from us as we move over the next few quarters.

Great. And just another one about operating profits. I think it grew about 13% in the quarter. Your guidance is 7% to 9% for the year. I know there's some comparisons in the back half of the year. I'm wondering, is there some conservatism built into that as well? And how much of it is from labor investments incrementally stepping up? Just wondering if you could help us through the puts and takes on margins over the course of the year?

Yes, well, clearly, it is early in the year. We've only been through one quarter and as you said, the comparisons do get a little more difficult as we get in the second half the year. So I think let's just stay tuned on that one and we'll see how it all plays out. We are making more investment in labor as we go through the year, talked about that. And again, we believe we'll have a great return on that. It's just going to take a little while for us to get that return.

And last one for me, I'm just wondering if you could talk about direct sourcing as an opportunity in 2015, just an update there?

Yes, again, direct sourcing is one of our key pillars of gross margin and gross margin expansion, but also offers our consumers a real value and affordability in that sweet spot of $1 to $5. So we want to continue and we will continue to grow our global sourcing efforts. And as we move through 2015 and into next year, we continue to put satellite offices in more countries around the globe to make sure that we have boots on the street and really finding the next best factories that can deliver that promise to the consumer. So we're full speed ahead on global sourcing.

Your next question is from the line of Matt Nemer with Wells Fargo Securities.

First, I'm wondering if you can give us any read, early read, on the repackaging of your private brands. I think the goal was to have most of those in store by mid-year. And I'm wondering if you're getting any sales lift from that?

Yes, Matt, as we look at the private brand repackaging and just the effort, in general, it's way early to give a real solid read on it. But I can tell you that half of the goods that we repackaged by about mid-year, and then the remainder 90% will be done probably by the end of the second and into the early third quarter. But the early read has been fairly positive. When we look at it, we are looking at it by item, by category. And there are a few changes that we've made already based on that. But overall, the consumer response has been very positive. And again, we did a lot, which we always do, a lot of consumer work before we launched each and every one of those items. So we had a real good idea of what it would do and it's coming very, very close to what we thought. But just like anything, there's always a little bit of back-and-forth that we need to do and a few items that we're changing as we speak.

Got it, okay. And then on a separate topic, the digital coupon platform, can you give us a sense for how many of your customers have signed up for that or maybe the percent of baskets that are using a digital coupon? Just so we can kind of gauge the size of that -- that effort right now?

We really, Matt, haven't quantified that. But I could tell you that we've got goals and metrics in place to hit and we are on actually exceeding those sign-ups already through Q1 and now as we go into Q2. And as you heard, we're launching different programs in each quarter to encourage sign-up and to get people really involved in it. So stay tuned, more to come on that, because it's in its infancy stage, but we think it's a real differentiator for our channel.

Okay. That's fair. And then just lastly, on the sky shelf initiative, is that more about the flow of inventory through the store, or adding safety stock to the store? And if it's the latter, how does that impact inventory dollars per store over time?

Yes, Matt, it really is the first. And that is, it facilitates getting product out of that back room and getting it right in front of the customer. Our store teams do a fabulous job day in and day out taking care of our customers. We want to make it easier for them. And the easiest way to stock the goods on the shelf would not be to go back in the back room and have to find it, but to be able to look right above the items and be able to stock it very effectively and efficiently that way. And that was really the impetus behind us doing that, was to make it easier on the stores. Now the byproduct of that is better in-stocks, because once again, if you see an aisle and you happen to be passing by the aisles, you may not have time in the way we did it in the past, to run in the back room to get the item, but you know what, you definitely have time to stop for a few seconds, look up and if it's there, pull a few down and put it on the shelf. So I think it's going to kill 2 birds with one stone and make things a lot easier for the stores, but also be able to enhance our in-stock position.

If anything, from a working capital point of view, it should reduce working capital, because it will be out there, you'll get it on the shelf quicker, it will sell quicker, and it should, in no way, will it add inventory. It's just being more efficient with the inventory and actually, hopefully, making it turn even quicker.

Makes a lot of sense. Todd, congrats on your new role.

Thank you, Matt.

Your next question comes from the line of John Heinbockel with Guggenheim Securities.

I wanted to follow up on corporate brand topic. So how satisfied do you think you are with corporate brand pricing, particularly versus the hard discounters? And then with Smart & Simple, how much do you think -- will there be a Smart & Simple alternative in every category and subcategory? And if so, where do you get the shelf space for that, is that national brand or more facings?

John, a couple of good questions. Number one, we look at pricing, whether it's national brand or private brand, across the entire spectrum of where we do business, every 2 weeks. So we're very, very attuned to pricing. And we feel pretty confident on both our national brand, but especially our private brand pricing, as it relates to mass grocery and drug. Now in saying that, well, we continue to watch pricing as national brands get -- may get more aggressive. We also then make sure that we watch our spreads between national brand and private brands. And at those times, we'll reduce our prices if need be to keep those spreads. But as you look at our private brands and the way that we're looking at them, Smart & Simple does play a key role in that affordability piece. And I wouldn't say that we're going to have it in every single category. But I can tell you that right now, the 45 or 50 items that we launched this year or late last year and into this year, has been very, very good for us. The consumer has -- has resonated with the consumer. They like the value and the affordability that Smart & Simple offers, with a pretty good promise on the quality of the item. So stay tuned, John. I think you're going to see an acceleration of Smart & Simple as we go forward, because we know that it's a true differentiator for us, but also it really helps the consumer.

And then lastly, as a follow-up, if you think about -- I mean, your share is still very small in any of your categories. Where is the best opportunity to drive, think beyond 2015, investing in more labor investing and price, is there enough elasticity if you invest in price to drive some of that share? How do you look at the 2 versus each other?

Well, we look at both all the time. And we look at the marketplace all the time. And I think you know us pretty well. If we feel that we need to invest in labor, we do. If we feel like we need to invest in price, we do. The real key, and we've said it many, many times, is driving units. If we drive units through the store and those transactions, then comps sales come. So we're confident in that model and the nice thing is we have the flexibility, and we've proven that over time, to be able to take whatever action we need to take to make sure that we continue to drive market share. And by the way, our market share continues to grow, as you heard, and we don't see that stopping, because we've got a real good strong category management plan out there that will leverage up on a lot of different areas to be able to drive that market share.

Your next question is from the line of Stephen Grambling with Goldman Sachs.

This is actually just a follow-up on an earlier comment on the non-consumables. Can you just provide a little more detail on what has changed in apparel, specifically to drive the better results and maybe what are some of the ongoing initiatives that will continue to be benefiting this part of the mix?

Yes, that's a great question. A few things, and we've been working on apparel for many years, but Cindy Long and her team have done a phenomenal job in getting this very, very relevant in apparel. And when we look at apparel, it's both basics and then fashion basics. We're not out there on the cutting-edge of fashion, but fashion basics is really where Cindy and her team have brought us. And the consumer is really resonating. And then as we took her learnings from that, and then put in the affordability pieces that we've now ingrained within our category management process to include apparel, the consumers have really, really responded to that. So we are -- we're pretty bullish on apparel. I don't think any of us would have probably said that a few years ago. But I can tell you that the team has done some real nice work there and we see that only enhancing as we continue to move through the rest of this year.

Great, that's helpful. And then maybe changing gears. I realize oftentimes you don't comment on these specifically, but can you just talk to your thought process more generally about evaluating acquisitions?

We've always said, and David can also chime in here. We'll look at anything that may be out there. But the great thing about our model is that, and you've heard me a little earlier, we've got 13,000 or so opportunities in the continental United States alone. So we're very, very focused on that organic growth right now. But never say never. And we're always going to look at everything. But we feel very confident in our real estate model and where we're headed right now.

Thanks, best of luck in the new role.

Thank you.

Your next question comes from the line of Scott Mushkin with Wolfe Research.

And so I guess my question is more as we look out. I mean, obviously, this year is going kind of on plan and maybe even a little bit better. But as we move out to next year and we talk about the labor investments, got another competitor of yours now upping the starting salaries to $10, so it's going to put some probably further pressure on that labor line. Plus the 900 stores, it just seems as I kind of look at '17, it looks a little harder from my perspective. And I wanted you to talk me out of that.

Yes, I think it's fair to say that we've got a very, very strong plan that we're executing against for this year. We've already laid plans for 2016. Stay tuned. I think you're going to be pretty happy as we continue to move through this. We've proven that we can continue to move comp sales. We've proven that we can continue to balance the P&L pretty strong and still return a lot to the shareholders. And I think that you're going to continue to see that from us. But -- and as it relates to the wages, we're continuing to monitor that. We monitor everything out there in retail and wages are no different. But keep in mind, we still have a lot of flexibility. And the real hallmark of a great retailer is the ability to drive productivity at store level and we'll continue to do that. And if we can continue to do that, it will afford us that flexibility to do whatever we need to do to be competitive.

And then just one follow-up. I noticed -- I think your rent growth is close to 15% last year. As we accelerate the stores, and obviously, we're at the kind of tail end of the -- it looks like economic cycle, at least more at the end, how is rent growth? How should we think about rent growth going forward? Is it harder to get space as you're paying more? Or no?

Yes, I think, and again, we don't give specific guidance on individual line items, but we have an extremely sophisticated, effective real estate process, as Todd mentioned earlier, and we're very pleased with what we see out of that. We believe we're getting the lowest rent possible for somebody in our space. We're happy with what we're driving there. And again, it's all about productivity in the box. As we look at the individual boxes, if we're dealing with a little higher rent, then we've got to figure out how to make that box more productive to pay for that rent. And again, I think we've got a lot of programs to do that, also. So it's just part of the evolution of our model as we move forward. And I think we've got a lot of strategies to help offset those higher rents.

Thank you. I know we're leaving some people in the queue, so I apologize about that, but Matt Hancock and I will be around to take any calls. So please feel free to give me a call, and thank you for joining us today.

Thank you. This does conclude today's conference call. You may now disconnect.