Dollar General Corporation (DG) Q4 2020 Earnings Report, Transcript and Summary

Good morning. My name is Donna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dollar General Fourth Quarter 2020 Earnings Call. Today is Thursday, March 18, 2021. [Operator Instructions] This call is being recorded. [Operator Instructions] Now I'd like to turn the conference over to Mr. Donny Lau, Vice President of Inves Relations and Corporate Strategy. Mr. Lau, you may now begin your conference.

Thank you, Donna, and good morning, everyone. On the call with me today are Todd Vasos, our CEO; Jeff Owen, our COO; and John Garratt, our CFO. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News & Events. Let me caution you that today's comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our strategy, plans, initiatives, goals, priorities, opportunities, investments, guidance, expectations or beliefs about future matters and other statements that are not limited to historical fact. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections, including, but not limited to those identified in our earnings release issued this morning under Risk Factors in our 2019 Form 10-K filed on March 19, 2020, and in our Form 10-Q filed on December 3, 2020, and in the comments that are made on this call. 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 unless required by law. We also may reference certain financial measures that have not been derived in accordance with GAAP. Reconciliations to the most comparable GAAP measures are included in this morning's earnings release, which as I mentioned, is posted on investor.dollargeneral.com under News & Events. At the end of our prepared remarks, we will open the call up for your questions. [Operator Instructions] Now it is my pleasure to turn the call over to Todd.

Thank you, Donny, and welcome to everyone joining our call. We are pleased with our strong finish to fiscal 2020, and I thank all of our associates for their extraordinary efforts over the past year to support our customers, our communities and each other. Despite a 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. In response to the COVID pandemic, we implemented several safety protocols; enhanced our benefits and leave policies; invested in personnel and personnel 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 frontline 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 5 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're 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 nonconsumables 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 POP SHELF 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 POP SHELF 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 2 new store formats, which we began testing in 2020. Similar to our larger-footprint DGP concept, the first new format has a 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 formats, 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 3 nonconsumable 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 nonconsumable categories, which we believe speaks to the strong and sustained momentum in these product categories. From a multi-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 a 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 broadened 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 to fourth quarter diluted EPS 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 nonconsumable 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 17,000th store and the launch of our newest store concept, POP SHELF. 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. With that, I'll now turn the call over to John.

Thank you, Todd, and good morning, everyone. 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 EPS 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 nonconsumable 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, EPS for the fourth quarter increased 24.8% to $2.62, which contributed to full year EPS 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 3x 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 2-year stack basis; and EPS 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 2-year period, which is well above our long-term goal of delivering at least 10% annual EPS growth on an adjusted basis. Our EPS 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. With regards to shareholder returns, as outlined in today's press release, our Board of Directors recently approved a quarterly dividend payment of $0.42 per share, which represents an increase of 16.7%. 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. Finally, as noted in today's press release, our outlook for 2021 real estate projects remains unchanged from what we stated in our Q3 earnings release on December 3, 2020. 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 2-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 nonconsumable 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 towards 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 nonconsumable 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 the 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 associate 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. With that, I will turn the call over to Jeff.

Thank you, John. 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, executing against our portfolio of growth initiatives. Let me highlight some of our more recent efforts as we look to further build on our progress in 2021. Starting with our nonconsumables initiative, or NCI. As a reminder, NCI consists of a new and expanded product offering in key nonconsumable 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, POP SHELF, which further builds on our success in learnings with NCI. POP SHELF 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 5 locations in 2020. And as Todd mentioned, given our strong results to date, we plan to accelerate the rollout of POP SHELF in 2021. In fact, we are now targeting to have a total of up to 50 POP SHELF 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 POP SHELF shop will be prominently positioned in the center of the store, and we will display both Dollar General and POP SHELF 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 POP SHELF 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 2 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 2022, which should 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 2 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 are currently -- we currently estimate POP SHELF 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, e-commerce 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 POP SHELF. 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 want to offer my heartfelt thank you to each of our more than 157,000 employees across the company for the incredible work they do every day to fulfill our mission of serving others. I look forward to all that we can accomplish together in the year ahead. With that, operator, we would now like to open the lines for questions.

[Operator Instructions] Our first question today is coming from Michael Lasser of UBS.

So it looks like you're guiding to about 60 basis points of operating margin expansion between 2019 and 2021. Why wouldn't it be more than that? Given you're comping better than your algorithm would suggest on a 2-year stack basis, plus you're benefiting from all these margin-enhancing initiatives like DG Fresh, Fast Track, NCI and others. And how -- within that, how would you expect your gross margin to shake out this year versus 2019?

Yes, so I'll tackle both those questions, Michael. This is John. First of all, I'd say we're really pleased with what we did in 2020, expanding our operating margin 223 basis points. We didn't give specific guidance on operating margin or the components. But we did call out that some of the headwinds, the biggest headwind being the SG&A deleverage that goes along with lower comp sales this year. We also talked about anticipating a mix shift back toward consumables, which does have a margin impact to both the sales mix as well as markdowns, as we would be lapping unusually low clearance markdowns last year. And then we also mentioned higher carrier rates and fuel costs. So these are all costs that pressure operating margin overall. Now you also asked about gross margin. As you think about gross margin, again, we feel great about what we did this year, delivering 77 basis points of gross margin expansion. This is our seventh consecutive quarter doing that, 117 basis points for the year. And to your point, initiatives like DG Fresh and NCI are really contributing and impactful to the biggest drivers that we called out. The 3 biggest drivers we called out were lower markdowns, higher initial markups and the mix benefit in NCI and DG Fresh were significant contributors to those. But we also, as I mentioned, are seeing, in the near term, higher distribution and transportation costs. So as we look ahead in the near term, these will weigh in the near term. But as you look at the longer term, we do feel like we're well positioned to continue expanding -- resume expanding gross margin and operating margin over the longer term for the reasons you mentioned, the scaling of these initiatives that are the gifts that keep on giving and all the levers we've talked about before within gross margin and within SG&A. But at the same time, it's noted that we continue to invest in the business. And so to make sure we sustain our ambition of being 10% double-digit EPS growers over the long term, we are continuing, as we called out, to reinvest in the business. We mentioned $60 million to $70 million that's hitting SG&A next year. And then the other thing I'll mention is in terms of COVID expenses, we will continue to have some COVID expenses associated with protecting and ensuring the health and safety of our employees and customers. How much that is going to be varies on what the situation dictates. But we've captured all our best estimates in the guidance for these drivers.

Understood. That's very helpful. And my second question is very myopic. And we're all just trying to figure out what's going to happen as we get through the next several months. And if we just take the math of down 16% versus the 34.5% in March of last year, it would imply a high teens 2-year stack. So can you give us some flavor for how March unfolded last year? Have you -- are you just now entering the toughest compares within the month such that a high teens 2-year stack would be kind of a false positive indication on what to expect over the next few months?

Yes. I can help you there, Michael. I'll start by saying it's bumpy, right? There's a lot of noise. You had the storm in February. And then in March, you're extrapolating over a very short period of time, which was pretty bumpy last year. But to help you out here, we called out, yes, as you mentioned, the negative 16% month-to-date from the end of February through March 16 this year. If you look at the corresponding period of time last year, it was not dissimilar to the 34.5% comp where we ended the period, so fairly representative. But again, there's a fair bit of noise within this so I'd be cautious in extrapolating too much based on that. But hopefully, that helps you understand where we were at this point.

That certainly does. Good luck.

Our next question is coming from Simeon Gutman of Morgan Stanley.

A couple of questions. I guess, first, on the comps. The 10% to 12% that you mentioned in the release on a 2-year stack, it actually felt like that's a doable number going forward if you take all the initiatives. And so -- yet you're still going to have stimulus, at least in the first part of the year, probably now and for a little while longer. And so I guess the top line feels a little conservative in that regard. Just can you talk about that? Any thoughts around it? Why -- if the 10% to 12%, in our view, is doable, why couldn't the top line end up being a little bit stronger?

Sure. Let me unpack that for you. And again, just dialing the clock back a little bit, we've said historically that this model works really well at a 2% to 4% comp. That's the engine of the 10%-plus EPS growth algorithm. So with a 2-year comp stack of 10% to 12% over 2 years, that represents a pretty meaningful step-change improvement over that. And I tell you, we feel great about the fundamentals of the business. As you said, the relevance of the brand, the broadening appeal, the new customers we've brought in, the bigger baskets we're enjoying, I'd say the business model has never been stronger. And as noted, the initiatives are really clicking and contributing to this relevance. So we feel good about the guidance that we've provided. But we did note that -- and it's based on what we know, but what we did note was that we didn't include the impact of stimulus because it's really relatively unknown what impact it will have, to what degree it might help. So that's not taken into consideration in the guidance. It could be an upside. I hope it is. But there's just a lot of uncertainty when you think about: one, compared to the previous stimulus rounds, which helped us, the economy is opening up now more. And so we are competing with other segments of the economy outside of retail for that share of wallet. So how much we get is uncertain. And then the other piece is surveys of consumers have said that they plan to save more this time. They plan to spend more paying off bills. Now a lot of times, what people say and do is 2 different things and so it remains to be seen if that's the case. So we're cautiously optimistic. We didn't build it in. It could be an upside, but it's just very difficult to say if it will be upside and to what degree.

Okay, that's helpful. And then my follow-up, and maybe take another shot at something Michael just asked. If you look at the gross margins versus 2019, and John, you mentioned some transportation costs, is there any reason why they shouldn't be higher than 2019?

Yes. Again, I don't want to get into the specifics of guidance around operating margin for this year. We wanted to give -- there's a high degree of uncertainty, we wanted to give some guidance that we gave the top line and the bottom line. I'll just say that we're really pleased with the performance we've been delivering over the last few years, growing our gross margin and the operating margin again over 2 points this year. But again, there's a lot of unknown this year, a lot of potential pressures. With that comp that we mentioned, when you look at this year, that does create some deleverage. And again, we are investing in the business. Now again, that investment piece is accretive, but then you do have other pressures such as carrier rates, and then obviously, you do have other inflationary pressures.

Our next question is coming from Matthew Boss of JPMorgan.

So Todd or John, maybe on the same-store sales acceleration to the mid -- that we've seen so far, what have you seen from discretionary versus consumables? And then on the double-digit 2-year stack that you forecasted for this year, how much of the acceleration, relative to the past 2 years, do you believe is driven by new customer acquisition or market share gains? Trying to get a sense for that 2-year stack of double digits relative to mid- to high single digits, the trailing 2 years. How much of this acceleration do you believe is sustainable?

Yes. This is Todd. Yes, I would tell you, let me take the second part first. I would tell you that, that comp, we believe that we are retaining a nice portion of the new customers that we saw come in. We can see that with our data at a pretty good real-time rate. And the great thing is, we've seen them continue to come back, so repeat as well. So we feel good about that going into '21. We see them still here in '21, which is really good to see. And again, with all of our initiatives that we've got put together, I would tell you that it gives her a lot of confidence to continue to shop with us. So I know I'm not going to give you exactly what you're looking for, but I would tell you that it plays a portion of it. But I would also say that all of our initiatives also really come into play here. And then what we've seen so far, just to give you a little bit more color, nonconsumables or that discretionary side of the business continues to do very well for us into the early part of Q1 here. And as we move through March, it will become even more meaningful because as you recall, the stock-up trip from last year, with the pandemic, with paper and cleaning and many of the consumable, food, perishable areas really took off last year and nonconsumables were a little soft, quite frankly. And we're seeing the opposite, quite frankly, right now. So that's great to see. But what we can also see is that our initiatives around nonconsumables has really helped because our baskets seem to be a little higher with those nonconsumables in them as well. So they're spending at a good rate there, and we believe that she'll continue to do that as we move into the middle part of the year.

Great. And then maybe just to follow up, John, on the SG&A front. Could you just help quantify what you've embedded in the guidance from a COVID expense perspective, just so we can baseline it? And then ex the strategic investments, is there any change to 2.5% to 3%? I think that's roughly been the underlying comp leverage point in the model. Any change to that?

Yes. I'll tackle both of those. First, in terms of the COVID spend, obviously, we're going to do what's necessary to ensure the health and safety of our employees and customers. The guidance captures the best guess of the spending needs associated with that. That's, of course, going to vary based on the severity and duration of the pandemic. But safe to say, we've built in a considerable reduction of that, assuming an improvement of the situation there. And that's what's captured in the guidance. We didn't give a specific number on that, but it is a considerable step down. As you think about SG&A and the 2.5% to 3% leverage point, we've kind of dissuaded people from sticking to that because there is that geography that you noted. One, we are investing in SG&A to drive overall operating margin expansion, particularly gross margin. And so as you look at things like DG Fresh, as we're taking over self-distribution NCI, you spend a little bit on SG&A to save a lot more and drive a lot more benefit on gross margin, so it's very beneficial, overall. But it does throw off the math on that. And then there are some other initiatives like POP SHELF and others that are more -- have more of a start-up cost nature. So it pressures that. And then the other thing we've done is we've really stepped up the remodels, and so that puts a little bit of pressure on the front end of that. So if you strip all those out, that's a lot to strip out, that, as well as the COVID expenses, yes, we're still looking at that 2.5% to 3% leverage point. Nothing has structurally changed. And our -- certainly, our focus on cost containment is sharper than ever. But that's really the only change to that. But for the next few years, as we scale those and we operationalize DG Fresh, you have to put a little bit of labor in the stores, for instance, and a little bit of contract labor to remodel the stores. That's really the big driver of that. But overall, it's accretive from a dollar perspective and a rate perspective.

Our next question is coming from Scot Ciccarelli of RBC Capital Markets.

So I apologize upfront about another sales-related question. But we do know that the stack comps start to get distorted when we deal with bigger numbers and bigger swings. So if we were to basically dollarize your comps, for lack of a better term, it looks like there really wasn't much of a change in your sales run rate, like from a sales per store perspective between March -- February and March. So 2 questions: first, is that a fair assumption? And then related to that, assuming you maintain a pretty steady -- are you assuming that you're going to maintain a pretty steady sales per store cadence for the balance of the year? Or are you expecting a deceleration in kind of sales per store during the course of the year as we hopefully enter a more normalized environment?

Yes. That's a good question. I'll start with the second question. As you look at the guidance we provided this year, we do -- a key element of that is assuming that we retain a considerable portion of the new customers that came in and the bigger baskets that came in. A big piece of that is the initiatives we've put in place, like NCI that position us so well to get a piece of that share of wallet as people came into the brand and like what they saw as well as the coolers that provided a fuller fill in trip when people are looking for groceries. So we've assumed a pretty considerable retention of that. But as we've looked at it throughout the year, we've also said that the share of wallet probably will shift a little bit. Right now, there is, concurrent with the pandemic, there is a consolidation of trips and we're benefiting from that as well as, again, benefiting from that share of wallet. So as you go through the year, we assume you do lose a little bit of that tailwind as you're competing with other segments of the economy for that share of wallet. But still very positive on how much we can retain and, again, the fundamentals of the business and the relevance of the brand as people have come in. And again, as we said, I don't want to dissect February and March too much because again, it was pretty bumpy with the storms in February and a lot of puts and takes in March. And again, you're extrapolating over a pretty short period of time. So when you strip out all the noise, I would tell you that, again, with the guidance we provided, that contemplates what we've seen up to this point. And I think the wildcard is, again, stimulus, and we just didn't put anything in for that because we just don't know what that benefit will be and to what degree.

But John, just to be clear, like in terms of sales per store, maybe a different way to look at it, did you see much of a change between February and March?

No. I would say, as you strip out some of the noise I mentioned, we think the core business is performing similar and performing very well when you look at those stacks.

Our next question is coming from Karen Short of Barclays.

I just wanted to get a little bit of color in terms of how we should think about kind of the composition of traffic versus ticket as we go into calendar '21? I mean, obviously, you saw a pretty meaningful, I think, deceleration in traffic in February, but that's off of a pretty high number in February of the prior year. So wondering if you could talk a little bit about that just broadly. And then I wanted to talk a little bit more about '22 as it relates to gross margins. So the question I have on that is, how should we think about the base level of gross margin for '22? Because it seems like you are at a much more permanently elevated base on the gross margin front. And I know '21 is just so hard to talk through because there are so many moving parts, but I wanted to kind of pivot the conversation to '22 on the gross margin front.

Thanks for the question, Karen. I'll take the first part and then kick it over to John for the '22 gross margin discussion. So on the traffic side, again, February was pretty choppy. You had the storms that, quite frankly, we -- you saw in the release, 8,500 store hours of lost time. But the bigger thing is we -- for a day to almost 2 days, we had anywhere from 20% to 30% of our store base close for that time. So it's a little choppy to be able to talk about traffic in February and then what's happened in March. But I think the way to look at it is we feel really good about that traffic number overall, where we see it. It was very similar to where it had been coming out of Q4. As John said, as you start to pull away some of these puts and takes, I think it's important. We saw a little bit of an uptick in traffic when that stimulus came out, the second round of stimulus. And with only a couple of days to measure, we've seen an uptick in traffic and overall sales with this recent stimulus. But again, I caution, it's still very early to tell what's going to happen here. But I think the bigger picture is we're retaining a lot of those customers, as I mentioned earlier, that we got during the pandemic. And we're still working very hard to keep Dollar General top of mind to those customers, so that when she continues to consider where to shop for her everyday needs and many of these new nonconsumable type items that we've got in our stores, she still comes to us. So we believe we're seeing that repeat customer. And there's no reason why -- we deserve and have the right to keep that customer based on our service of her in the past as well as what we believe we can do in the future for her. John?

Yes. And then to the second part of the question, and I agree with you, there's just a lot of noise in 2021. I think one thing I would point to, as you look at over that 2-year period, lots of puts and takes. But when you get to the bottom line, a 2-year CAGR of 15% to 20%, I think, really speaks to the step-change performance in the top line and the flow-through. It makes you feel good about the future. Now I don't want to give specific guidance around 2022. It's premature for that. But as you unpack the drivers of gross margin in Q4 and for the full year, as I mentioned, it's the strategic initiatives which are the core drivers of that. And those still have a lot of tentacles and legs to those that help us going forward. And we're reloading with other initiatives to help drive gross margin. Now the one thing that, we mentioned, [ juiced ] 2020 a little bit was the mix. So that's why we cautioned that we expect the mix to normalize or move back toward consumables somewhat, which is a bit of a drag. But the thing -- the other items driving that gross margin expansion, we expect to continue. And so that's why I mentioned that as we get through the noise of this year and would encourage people to look at that 2-year stack and push forward, the same drivers are there, that makes you feel good about our ability to continue to grow gross margin over the long term, not only the scaling of the existing initiatives in new ones but really pleased what we've seen with the shrink improvement, the supply chain efficiencies, a lot of opportunities still around private brands, penetration expansion for in-sourcing expansion. The team continues to do a great job with category management. Again, when you look at our scale and our growing scale as a limited SKU shop, it really puts us in a very favorable position to get best pricing there and protect our margins while also being well priced. And on the price front, we'll always reserve the right to invest as needed. But as we look at now and as we've seen for quite a while now, we feel like we're in the best position on pricing we've been in and don't see, at least the foreseeable future, the need to invest there. So we feel good about the long-term ability to continue to grow gross margin while also driving traffic and sales.

Yes. Karen, I would also just say real quick and then get to the next question, is that I feel as good about this business than I have the 12, almost 13 years that I've been here. And the long-term outlook of this business is stronger than ever. And as John indicated, I think once we get through the noise of '21, I believe that algorithm is very much intact. And as you have seen, even prior to COVID, we were running at the top end of that algorithm and many of the components of it. And there's no reason why that shouldn't continue as we can -- as we go long term.

No, I complete -- I just want to clarify, on the 8,400 lost days, I get that to be -- it's about 180 basis points to the comp. Is that fair?

Well, I think the way to -- yes, I think the way to look at this is, I think we did quantify the impact of the storm on operating profit, and a meaningful piece of that was the sales impact. So if you look at the overall dollars we quantified, about half of that was sales flow-through. So maybe that's the way to dimensionalize that.

Our next question is coming from Rupesh Parikh of Oppenheimer.

So I guess, John, first, starting with guidance. I was curious what your team is assuming for the promotional backdrop. And as your trends have turned negative and a number of other players are also starting to turn negative, I was just curious if you have seen any shifts in the promotional backdrop lately.

Yes. As you look at the promotional backdrop, we think it remains rational. It's been that way for the last about 1.5 years, so things have been pretty consistent. And so as we look forward, we're not assuming any major changes there because we feel like we're very well positioned on price. And Todd, do you want to add anything?

Yes, Rupesh, I would tell you, from a position of strength last year, we've positioned ourselves to be in the best position in pricing than we've been in many, many years. And so if you take a look at our everyday pricing, we are better than we've been across all channels of trade. And as John indicated, the promotional environment has been pretty stable and tame, and quite frankly, has been that way for 1.5 years. So we feel pretty good about where we are but always reserve the right if we need to help our consumer out, we'll do that. But right now, we don't see that in the near future.

Okay, great. And then maybe just one follow-up question. So Todd, just curious on your latest thoughts on what you're seeing from your consumer base on your service. Because it does appear to us, I mean, it is a fairly strong consumer out there, stimulus is coming. So I just want to get your thoughts there.

Yes. I would tell you the consumer -- our core consumers always stretch, as you know, but I have to repeat that each time because she really is. And I would tell you that in the last 6 to 8 months, she's felt the stress of this pandemic probably a little bit more than she was feeling in the early part of the pandemic. And in some cases, because again, lack of work or not working that full 40-hour shift to that full-time that she was doing in many cases. And our core consumer is probably a little bit more stretched at this point. In saying that, what we have also seen, though, is her ability to spend when she needs to and stimulus has really helped that. So we're in round 3, and as I indicated, it's very early on in that third round. We're bullish on her ability to have some extra money to spend. And we're also bullish, when we think about the back half of the year, the child tax credit piece that will be coming out for children from July through December should also benefit our core consumer. And then obviously, the extension of the SNAP benefit piece also helps. So there is a lot of tailwind. We just, in our guidance, didn't contemplate any of that because, again, it's so -- first of all, it's so new, we just don't know how to dimensionalize it. But I think the important thing, Rupesh, to keep in mind is that we're well positioned to capture a large portion of that if she's outspending it. And I believe she will spend it. That is who our core consumer is. But as John said, there are other -- we're not as concerned about retail. We believe we will get our -- more than our fair share at retail. It's just some of these other areas that are now open, whether it be dining out, whether it be travel, to some degree, that will be competed against. But we still feel good about being able to service her with that extra money.

Our next question is coming from Chandni Luthra of Goldman Sachs.

I wanted to talk about these new banners that you spoke of today. And especially with POP SHELF, you mentioned doing a store-within-a-store concept with signage for both POP SHELF and the Dollar General banner outside. As you think about your core customer, what gives you confidence that the customers will not feel an alienation to the core banner with this double signage outside in a store-within-a-store concept? How do you think about that?

Yes, that's a great question. And I would tell you, first of all, our core consumer is a little bit of a different consumer than the POP SHELF consumer. But in the areas that we're looking to put these store-within-the-store concepts, it is a little higher demographic than our core. So just to give you some color, in these areas, the demographics are more in the $50,000 to $75,000 income range versus our true Dollar General of $35,000 to $40,000 range, somewhere in there. So it's not quite the POP SHELF, where it's $75,000-plus. But I believe that the crossover, there's enough there to entice the consumer to come in. The second piece of it is that we believe that -- and we've already proven it with some cross-pollination of items within Dollar General that were in POP SHELF and how well they sold within the box of just a true Dollar General without even having any signage up with POP SHELF. So we know those same items will resonate with even our core consumers. So we believe we can capture both sides of that equation, higher end as well as continue to service the lower-end consumer with this new box. It is a test, right? So just keep that in mind. It will be 25 stores this year. But if it works, and we believe it will, there could be some additional ones that we do in '22 and many more as we continue to move forward.

Got it. And my follow-up is around new customer retention strategy that you mentioned during your third quarter call around -- some strategy around basically retaining those new customers. Could you give an update on that as to what you're doing to retain new customers that you gained during this time?

Yes. Thank you. Well, we started that retention effort back in September. We thought it was the right time to start launching it because we knew, because of the way we were doing it, this wasn't a pricing item retention strategy. This was a retention strategy to keep Dollar General top of mind with these newer customers. And when the pandemic starts to wane, we would keep -- Dollar General would still be in the consideration set. So to be able to do that, it takes months to be able to instill that piece into the customer's mindset. And so we've been working it hard, now for the better part of 5 months, coming on 6 months. And we believe that we've seen the benefit of that already. When we saw the benefits of stimulus start to wane in November and even early December before the second wave came out, we were still seeing that repeat customer come into the store. So that gave us confidence that what we were doing was working. And now even into Q1, as I mentioned earlier, we're still seeing that core customer -- or I'm sorry, that new customer show up within our stores. Even though the pandemic is starting to wane even a little bit more, we're still seeing that customer. We will not leave the foot off the accelerator here. We believe that we'll continue to do everything we can to drive that consumer in. And as John indicated, a large part of that comp this year is predicated on retaining a good portion of those consumers, which, again, we believe we have the right to service that consumer based on what we've seen so far.

We're showing time for one final question today. Our last question will be coming from Paul Trussell of Deutsche Bank.

You've shared a lot today. I guess maybe I'd be looking for just additional details on where you are on some of your initiatives and what we should be thinking about over the course of the next 12 months. Specifically DG Fresh, would love for you to elaborate there in addition to DG GO! and other ways that you are just overall kind of attacking to keep market share.

Paul, this is Jeff. Thank you for that question, and we are very proud of our accomplishments with DG Fresh. The team has done a fantastic job of accelerating that rollout and the capabilities that it's providing for us. So to be in 16,000 stores-plus is really an accomplishment. And originally, as we talked about, DG Fresh was all about reducing product costs, improving in-stocks and a broader assortment and we've hit on all 3. So that is performing very well. The other thing that we're excited about is the future and what it can potentially provide for us as we continue to grow. When you think back for a second on the formats that we've also introduced, the reason we're able to build larger stores with more coolers is really dependent on our strategic planning process that started several years ago, and DG Fresh is a certain core to all of that. And so when you think about the future and our new format prototype that we're going to be moving to in the mid part of '21, DG Fresh is going to play a key role in being able to continue to broaden that assortment for the customer. And then as you look to the future, we also believe that DG Fresh plays a key role in unlocking our ability to do produce in over 10,000 stores as we look ahead. So DG Fresh, again, complicated initiative that the team did a phenomenal job of implementing but is going to set us up for the future in a big way. On the digital side, I would say, remember, on DG Pickup, 17,000 stores-plus going from pilot to full rollout in less than a year is, again, a tremendous accomplishment of the team. But I will say we continue to make great progress there and expanding the assortment. We've optimized our substitution technology. And one thing you got to keep in mind is we're providing optionality for this customer. But our store itself is an incredibly convenient proposition. And when you combine being 5 miles within 75% of the population and self-checkout that we've got in 1,600 stores right now, the convenience bar continues to rise. But we're very pleased with what we're seeing so far there. And then finally, I would tell you, in terms of engagement with the customer, that's the other thing on the digital side she's asking for. And with 4 million active users and growing, we feel real good about what we're doing there as well. So 2 key initiatives that we look to continue to contribute to our future success.

Just lastly, John, I appreciate the CapEx and kind of share buyback guidance. Maybe just talk about your approach to cash kind of priorities overall and how to think about that even beyond 2021.

Yes. I'll start by saying our capital allocation priorities haven't changed. And the first priority remains investing in high-return growth opportunities like new store growth, remodels and the strategic initiatives that just provide fantastic returns. Then it's still continuing to pay a competitive dividend, which we recently increased 16.7%. And then it's buying back shares with the excess cash and debt capacity. But as we've always noted, we want to protect our current investment-grade credit rating, so we keep the leverage ratio around 3. So we bought back this year. I mean, we're able to do all and buy back $2.5 billion of shares with the extra cash. Next year, we're targeting $1.8 billion. And then I think also, meaningfully, what you saw last year is we accelerated virtually every strategic initiative with the extra cash, which is again our first priority, investing in the business. So that served us very well and remains unchanged.

Ladies and gentlemen, this concludes today's event. Thank you for your interest in Dollar General. You may disconnect your lines and log off the webcast, and have a wonderful day.