Robert:
Good morning. My name is Robert, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Dollar General Corporation Fourth Quarter 2024 earnings call. Today is Thursday, March 13, 2025. All lines have been placed on mute to prevent any background noise. The call is being recorded. Instructions for listening to the replay of the call are available in the company's earnings press release issued this morning. Now I'd like to turn the conference over to your host, Mr. Kevin Walker, Vice President of Investor Relations. Kevin, you may now begin your conference.

Kevin Walker:
Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO, and Kelly Dilts, our CFO. Our earnings release issued today can be found on our website at investors.dollargeneral.com under news and 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 are statements about our financial guidance, long-term growth framework, strategy, initiatives, plans, goals, priorities, opportunities, 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 expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning, under risk factors in our 2023 Form 10-K filed on March 25, 2024, and any later filed periodic report 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 Corporation disclaims any obligation to update or revise any information discussed in this call unless required by law. At the end of our prepared remarks, we will open up the call for your questions. To allow us to address as many questions as possible in the queue, please limit yourself to one question. Now it is my pleasure to turn the call over to Todd.

Todd Vasos:
Thank you, Kevin, and welcome to everyone joining our call. We are pleased with our performance in the fourth quarter, including solid execution and top-line results. As we reflect on the quarter as well as the full year, it is clear that our back-to-basics work has yielded positive results, positioning us well as we enter 2025 and look to the future. I want to thank our associates for their ongoing commitment to serving our customers and communities. Their dedication is on display every day in thousands of Dollar General Corporation stores, and in our distribution centers, private fleet, and store support center as we all work together to fulfill our mission of serving others. On today's call, I will begin by recapping some of the highlights of our Q4 performance as well as discussing the portfolio optimization actions we recently undertook for both Dollar General Corporation and Pop Shelf. After that, Kelly Dilts will share details of our financial performance as well as our financial guidance for 2025, and we'll conclude with thoughts on our long-term financial framework. And then I will wrap up the call with an update on some of our key initiatives that we believe will be important drivers of our performance in 2025 and beyond. Turning now to the fourth quarter performance. Net sales increased 4.5% to $10.3 billion in Q4, compared to net sales of $9.9 billion in last year's fourth quarter. With this solid finish to 2024, I am excited to note that for the first time in the company's history, we delivered fiscal year sales of more than $40 billion. This is a testament to the essential role Dollar General Corporation serves as America's neighborhood general store in more than 20,000 communities across the country. We are here for what matters for the customers every day, and the relevance of our value and convenience offering is clear. During the fourth quarter, we continued to grow market share in both dollars and units in highly consumable product sales, and also grew market share in non-consumable product sales. Same-store sales increased 1.2% during the quarter and were driven entirely by growth of 2.3% in average transaction amount. This included relatively even contributions from increases in average unit retail price per item and average items per transaction. This growth was partially offset by a decline of 1.1% in customer traffic during the quarter, which was impacted by ongoing financial pressures of the core consumer as well as lapping the strong traffic increase of 3.7% from Q4 of 2023. The comp sales increase was driven entirely by growth in our consumable category and was partially offset by declines in our seasonal home and apparel category. From a monthly cadence perspective, all three periods were positive, with comp sales growth in December and January relatively even and both outpacing November. Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation. Many of our customers report that they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities. As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer. In turn, we know our customers expect value and convenience more than ever. We are committed to providing the value they need and continue to feel very good about our everyday low price position relative to competitors and other classes of trade. With regards to current tariffs that have been announced on products that we sell, we believe we are well-positioned to mitigate the impact in 2025. We were able to successfully mitigate the tariff impact in 2018 and 2019, though we did take retail price increases in some instances along with others across the industry. Given the already stressed financial condition of our core customer, we are closely monitoring these and any other potential economic headwinds, including any changes to government entitlement programs. Importantly, we remain focused on doing everything we can to deliver the value our customers want and need. Before I turn the call over to Kelly Dilts, I want to share an update on our work to continue to strengthen our foundation for future growth. As we look to build on the success of our back-to-basics work, we have undertaken a thorough review of our business to identify opportunities to further strengthen our foundation. With this in mind, we conducted a real estate portfolio optimization review of both our Dollar General Corporation and Pop Shelf banners during the fourth quarter. As a result of the review of our Dollar General Corporation portfolio, we made the decision to close 96 stores. While this is less than 1% of our overall store base, those stores, many of which are in urban locations, have become increasingly challenging to successfully operate. These stores likely would have been closed in the ordinary course of the store's life cycle when their leases expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward. I also want to discuss the results of our Pop Shelf portfolio review. After analyzing business performance and revised outlooks for our current portfolio of Pop Shelf locations, we identified 51 store closure candidates based on financial and operational considerations from our test and learn phase. We plan to convert six of these 51 locations to Dollar General Corporation stores and close the remaining 45 stores. This will leave 180 stores remaining as part of the Pop Shelf banner. As a result of these actions, as well as impairment charges primarily associated with Pop Shelf Go Forward stores, our Q4 financial results include a negative impact to operating profit of $232 million or approximately $0.81 in EPS. As we enter 2025, we are optimistic about the Pop Shelf banner and our opportunity to drive improvements in our sales results. As customers' feedback on the brand and shopping experience continue to be strong. Going forward, we plan to build on the strength to increase sales through a variety of initiatives centered around new brand partnerships, an enhanced in-store experience, and new and expanded categories. As an example of these efforts, we recently implemented a new store layout with a heightened focus on toys, party, candy, and the beauty categories. While still early, we have been pleased with the results as we have seen a nice double-digit sales lift across a broad array of our Pop Shelf stores. In addition to the opportunity to increase sales and ultimately realize further growth in the Pop Shelf banner, we are also able to leverage learnings from this banner and apply them in our non-consumable categories in our Dollar General Corporation stores to further strengthen that offering for our DG customers. We are looking forward to the opportunity to improve Pop Shelf results in 2025, and we will continue to evaluate the brand to ensure we are seeing the desired impact of these activities and optimization. In summary, while we never like to close stores before their lease expiration, we believe this portfolio review across both our DG and Pop Shelf banners has further strengthened the foundation of this business as we position the company for the future. Finally, I want to take a moment to congratulate both Steve Deckard and Tracy Hermann on their new leadership roles within the organization. Steve has been a valued strategic leader at Dollar General Corporation for many years. And I'm confident he will serve the company well in his new role focused on expansion of the Dollar General Corporation footprint, process improvement, and leadership of our corporate strategy. And Tracy's deep experience and connection with our field teams along with her commitment to operational excellence, execution, and innovation make her the ideal leader for our store operations team. As we focus on delivering the best in-store experience for our customers and associates. Overall, we are proud of the continued progress we are making and are pleased with how it has positioned us to drive profitable sales growth and capture growth opportunities while creating long-term shareholder value. I will discuss more about our plans and initiatives to drive these results in a few moments. But first, let me turn the call over to Kelly Dilts to discuss our Q4 financial results as well as our 2025 financial guidance and long-term financial goals.

Kelly Dilts:
Thank you, Todd, and good morning, everyone. Now that Todd's taken you through a few of the top-line highlights of the quarter, let me take you through some of the other 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. For Q4, gross profit as a percentage of sales was 29.4%, a decrease of 8 basis points. This decrease was primarily attributable to increases in markdowns, inventory damages, and distribution costs, and a greater proportion of sales coming from the consumables category. These factors were partially offset by lower shrink and higher inventory markups. We continue to be pleased with the results of our shrink mitigation efforts, which drove a year-over-year shrink improvement of 68 basis points in Q4. Shrink improvements have continued through the early part of the first quarter, and we anticipate this benefit should continue throughout 2025. Now turning to SG&A, which was 26.5% as a percentage of sales, an increase of 294 basis points. The increase reflects the fourth quarter impairment charges totaling $214 million related to the portfolio review. Other expenses that were a greater percentage of net sales in the fourth quarter were retail labor, incentive compensation, repairs and maintenance, depreciation and amortization, and technology-related expenses, partially offset by a decrease in professional fees. Moving down the income statement, operating profit for the fourth quarter decreased 49% to $294 million, including the negative impact of approximately $232 million associated with the charges resulting from the portfolio review. As a percentage of sales, operating profit was 2.9%, a decrease of 302 basis points. Net interest expense for the quarter decreased to $66 million compared to $77 million in last year's fourth quarter. Our effective tax rate for the quarter was 16.2% and compares to 20% in the fourth quarter last year. This lower rate is primarily due to the effect of certain rate-impacting items on lower earnings before taxes. Finally, EPS for the quarter decreased 52.5% to $0.87, including a negative impact of approximately $0.81 per share associated with the charges resulting from the portfolio review. Turning now to our balance sheet and cash flow. Merchandise inventories were $6.7 billion at the end of the year, a decrease of $283 million or 4% compared to the prior year, and a decrease of 6.9% on a per store basis. I'd like to recognize the great work the team has done to reduce our inventory position while increasing sales and improving in stocks, while also providing positive operational impacts in both our stores and distribution centers. In 2024, the business generated cash flows from operations of $3 billion, an increase of $604 million or 25%, which was driven by improved working capital management. In 2024, total capital expenditures were $1.3 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 returned cash to shareholders through a quarterly dividend of $0.59 per common share outstanding for a total payout of $130 million. Overall, we're pleased with our cash and inventory positions and the progress we've made in strengthening our balance sheet over this last year. These results are a testament to the strength of this business model as well as the focused efforts on getting back to basics across the organization. With that in mind, I'd like to discuss our financial outlook for 2025. We plan to continue building on the progress we've made and our guidance for 2025 contemplates continued investment and work to further strengthen the foundation of this business. Importantly, we believe these efforts will lay the groundwork for growth in the years ahead, which I'll discuss in just a moment. With that in mind, we expect the following for 2025. Net sales growth in the range of 3.4% to 4.4%, same-store sales growth in the range of 1.2% to 2.2%, and EPS in the range of $5.10 to $5.80. Our EPS guidance assumes an effective tax rate of approximately 23.5%. We expect capital spending in the range of $1.3 billion to $1.4 billion designed to support our ongoing growth and which is aligned to our capital allocation priorities that continue to serve us well. As a reminder, our first priority is investing in our business, including our existing store base as well as high return growth opportunities such as new store expansion and strategic initiatives. To that end, we're excited to begin work on approximately 4,885 real estate projects in 2025, including 575 new store openings in the United States, 2,000 full remodels, 2,250 Project Elevate remodels, and 45 locations. And up to 15 additional new stores in Mexico. In addition, we are investing in a number of technology projects, including a finance and HR modernization project which is primarily focused on a new enterprise resource planning system that will be implemented over the next couple of years. Next in our capital allocation priorities, we seek to return cash to shareholders through a quarterly dividend payment and over time and when appropriate share repurchases. To that end, our board of directors recently approved a quarterly cash dividend of $0.59 per share. We do not plan to repurchase common stock this year although share repurchases remain an important part of our future. Finally, although our leverage ratio remains above our target of approximately three times adjusted debt to adjusted EBITDAR, we are focused on improving our debt metrics in support of our commitment to our current investment-grade credit ratings. Which as a reminder are BBB and BAA2. Now let me provide some additional context as it relates to our outlook for 2025. While our guidance is centered around a macro-neutral outlook, the full range does recognize that there's still uncertainty both in the broader macro environment as well as for our core customer. We are currently anticipating continued economic pressure on our core customer, though at a relatively consistent level to what they were experiencing as we closed 2024. With regards to gross margin, we expect the most significant factor to be continued positive shrink results, which we anticipate will be a tailwind throughout 2025. Within SG&A, we're taking action to reduce controllable expenses throughout the business. That said, we expect to deleverage in 2025 at our current expected levels of sales and operating expenses. This pressure includes an ongoing headwind from retail wage rate inflation, which we expect to continue between 3.5% and 4%. In addition, we expect our operating leverage to be pressured by a return to normalized short-term and long-term incentive compensation after two years of significantly lower than average payout. At target payout, this represents a headwind of $120 million. Finally, we expect the continued headwind from depreciation and amortization. Primarily as a result of higher capital spending and inflation in building materials in prior years. While we do not anticipate providing quarterly financial guidance, I do want to provide a couple of notes on our expected cadence of financial results in 2025. We expect the first half of the year to be more pressured by initial expenses related to our remodels, including Project Elevate, as we expect to execute more real estate projects in the first half of 2025 than we did in the first half of 2024. Importantly, we are working to complete the vast majority of our real estate projects by the end of Q3 in order to maximize the number of operating weeks which will benefit 2025. In addition, we expect Q1 to be impacted by labor expense headwinds compared to Q1 of 2024, when we still had self-checkout in a majority of the stores. Importantly, we believe our plans for 2025 will position us well to drive growth in subsequent years as we look to begin moving toward our medium and longer-term financial goals. While the recent focus has been on back-to-basics actions and supporting the core business, we believe we are poised for future growth as we look to 2026 and beyond. With that in mind, I want to discuss our long-term financial framework. We manage our business with a sharp focus on creating sustainable, long-term shareholder value. Following a successful year of strengthening the foundation, and as a part of our ongoing strategic planning process, we have updated our medium and longer-term financial framework, particularly for the next three to five years, and we'd like to share our updated perspective with you today. It's important to note that we are aiming to achieve some of these components of this model sooner than others. So I will note our specific goals as well as the respected targeted timelines. Starting with net sales. We are targeting annual growth in the range of 3.5% to 4%, including approximately two new unit growth. Both of which we plan to begin in 2025. Beginning in 2026, we're targeting annual same-store sales growth in the range of approximately 2% to 3%. These ranges assume that our core customer, while always seeking value, returns to a more stable financial condition. And also that we will drive more of our same-store sales through our mature stores. Turning to operating margin, we're targeting expansion to begin in 2026 and then longer term to continue expanding toward our goal in the range of 6% to 7% as early as 2028. We have a variety of gross margin and SG&A catalysts to drive this expansion moving forward. Specifically, within gross margin, we are working to drive improvement that will build over the next five years centered around the following. First, expanding the contribution from our initiatives, particularly our DG Media Network. But also including other efforts such as our non-consumable merchandising strategy. Collectively, we believe the potential benefit from all of our initiatives, some of which Todd Vasos will discuss, is approximately 150 basis points. Next, we're focused on returning to pre-pandemic shrink levels, which we believe represents a potential benefit of approximately 80 basis points. And also improving damages, which we believe represents a potential benefit of approximately 40 basis points. And within SG&A, we are targeting reductions over the next five years through initiatives aimed at simplifying work and driving efficiencies, reducing repairs and maintenance expense, and optimizing capital expenditure to stabilize depreciation and amortization expense. Much of the focus of Steve Deckard and his team will be centered around many of these areas. Ultimately, our goal with these efforts is to increase profitability and minimize SG&A deleverage on sales over the medium to longer term. Our capital allocation priorities will continue to drive our financial strategies. We are targeting annual capital expenditures to be approximately 3% of sales and expect to be in a position to restart share repurchases as early as 2026. We believe this long-term framework will enable us to continue investing in growth initiatives that expand our ability to serve customers with value and convenience while also returning cash to shareholders. Finally, beginning in 2026, our long-term financial framework seeks to deliver annual EPS growth of at least 10% on an adjusted basis. In conclusion, we're excited about the plans and the future of Dollar General Corporation and are confident in our long-term approach. We believe the business model is strong, and we are well-positioned to drive sustainable long-term growth on both the top and bottom lines while creating long-term shareholder value. With that, I'll turn the call back over to Todd Vasos.

Todd Vasos:
Thank you, Kelly. We're excited about our plans for both the near term and long term. And I want to take the next few minutes to highlight some of the most important initiatives across four areas of the business. I'll start with some of the near-term actions focused on building on our back-to-basics work to further enhance the in-store experience for our associates and customers. We know that an essential part of convenience for our customer is the ability to not only reach the store easily, but also the quality and speed of their in-store experience. We are focused on retraining in our stores and asking our teams to recommit to creating a fast, and friendly experience for our customers on every visit. To enable our associates to deliver on this effort and focusing on serving our customers, we are also working to further simplify the operating model by removing unnecessary activities and friction points from our stores. These efforts include a continued focus on inventory and SKU productivity. We believe these efforts along with further assortment and allocation optimization will contribute to the shrink and damage improvement contemplated in our long-term framework. We are also working on tasks upstream, such as sorting in our distribution centers and case pack optimization. To allow our teams to get products to the shelf even quicker with fewer touches. Finally, we are targeting completion of our next-generation point of sale rollout in the first half of the year, which will simplify the checkout process as well as other in-store activities. Ultimately, we believe these efforts focused on our core business will build on the progress we've made and allow us to better serve our stores and our customers. Next, I want to briefly mention Project Elevate, which we announced in December. As a reminder, this is our new incremental remodel initiative aimed at bolstering performance in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. As we focus on driving greater profitability in our mature store base, our goal for Project Elevate stores is to drive first-year comp sales lifts in the range of 3% to 5%, while also mitigating future expenses, particularly in repairs and maintenance. These projects include physical asset refreshes as well as merchandising optimization and will impact approximately 80% of the total store. When combined with our enhanced full remodel program, which we call Project Renovate, we expect to touch approximately 20% of our store base annually and to significantly improve the shopping experience in our stores while elevating the brand and driving greater top and bottom-line contributions from our expansive mature store base. Next, I want to briefly mention Project Elevate, which we announced in December. As a reminder, this is our new incremental remodel initiative aimed at bolstering performance in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. As we focus on driving greater profitability in our mature store base, our goal for Project Elevate stores is to drive first-year comp sales lifts in the range of 3% to 5%, while also mitigating future expenses, particularly in repairs and maintenance. These projects include physical asset refreshes as well as merchandising optimization and will impact approximately 80% of the total store. When combined with our enhanced full remodel program, which we call Project Renovate, we expect to touch approximately 20% of our store base annually and to significantly improve the shopping experience in our stores while elevating the brand and driving greater top and bottom-line contributions from our expansive mature store base. The third area I want to discuss is our digital initiative, which is an important complement to our unique physical footprint. We are pleased with the growing engagement we are seeing across our digital properties, including our mobile app, our website, delivery options, and the DG Media Network. We have a highly successful and incremental delivery partnership with DoorDash in more than 16,000 of our stores. We expect to continue growing sales through this channel-exclusive partnership in 2025 as we continue to expand the number of stores in the program. In addition, we recently began processing both SNAP and EBT transactions through this program, which we believe will drive new customer acquisition and continue to drive incremental sales. Importantly, the learnings from this initiative along with our own customer work have provided the foundation from which to launch our own delivery offering with our unique customer base. As we announced last quarter, we began a test of same-day home delivery from a handful of our stores in September. We have begun expanding this offering more broadly and are currently partnering with DoorDash to fully execute a delivery offering through our DG digital solutions from approximately 400 stores. While it's still very early, we've been pleased with the initial customer response to this offering, including higher average baskets than those in our brick-and-mortar stores. We believe our expansive real estate footprint uniquely positions us to offer a compelling home delivery option and ultimately become the fastest delivery alternative for customers in our communities, further expanding their access to value and convenience that saves them time and money every day. Looking ahead, we plan marketing to drive awareness of this opportunity in the current stores while also beginning to scale this offering more significantly with the goal of up to 10,000 stores by the end of 2025. The linchpin of our digital initiative is our DG Media Network, which enables a more personalized experience for our unique customer base while delivering a higher return on ad spend for our partners. With the expansion of our delivery offering, our multichannel platform will enable us to accelerate the scaling of our media network in 2025 as well. In turn, we believe we can further evolve the relationship with our customers, driving greater customer loyalty within the digital platform while ultimately increasing market share and driving profitable sales growth. The final initiative I wanted to discuss is our non-consumable growth strategy. Our three non-consumable categories, home, seasonal, and apparel, combined to deliver more than $7 billion in sales in 2024. Our customers have continued to respond favorably to the treasure hunt approach we introduced in our stores as evidenced by our continued market share gains in these categories. However, as the overall discretionary shopping environment has softened, we have seen our consumable sales well outpace our non-consumable sales in recent years. As a result, the lower margin sales have pressured our overall gross and operating margins as consumable sales mix has continued to climb to 82%. In conjunction with the financial framework Kelly Dilts laid out earlier, our goal is to increase non-consumable mix by at least 100 basis points by the end of 2027, and ultimately return non-consumable sales closer to approximately 20% of the overall sales mix over the next five years, while maintaining our strong performance in our consumable businesses. To reach this goal, we have identified four pillars of growth to drive sales in non-consumable categories over the next three years. These pillars include first, brand partnerships, where we look to build on the success of current programs to work with well-known brands to showcase quality and value for our customers. The second is a revamped treasure hunt where we plan to upgrade our rotational home assortment to enhance the value equation for our customers. Next is the reallocation of space within our home category. This pillar is focused on reducing less productive space in certain departments and reallocating to more productive and relevant offerings for our customers. The final pillar is focused on increasing productivity in non-consumable categories by injecting newness in core planograms and non-core space allocation, such as new programs in certain categories while leveraging category innovation in more established programs. We are implementing a multi-pronged marketing approach to showcase the breadth and quality of our assortment in these areas while amplifying the value message. Ultimately, we believe we can capture additional market share to drive significant top and bottom-line growth in alignment with our long-term financial goals. In closing, we're excited about the plans and the future of Dollar General Corporation and are confident in our long-term approach. We believe the business model is strong, and we are well-positioned to drive sustainable long-term growth on both the top and bottom lines while creating long-term shareholder value. With that, I'll turn the call back over to Todd Vasos.

Todd Vasos:
Thank you, Kelly. We're excited about our plans for both the near term and long term. And I want to take the next few minutes to highlight some of the most important initiatives across four areas of the business. I'll start with some of the near-term actions focused on building on our back-to-basics work to further enhance the in-store experience for our associates and customers. We know that an essential part of convenience for our customer is the ability to not only reach the store easily, but also the quality and speed of their in-store experience. We are focused on retraining in our stores and asking our teams to recommit to creating a fast, and friendly experience for our customers on every visit. To enable our associates to deliver on this effort and focusing on serving our customers, we are also working to further simplify the operating model by removing unnecessary activities and friction points from our stores. These efforts include a continued focus on inventory and SKU productivity. We believe these efforts along with further assortment and allocation optimization will contribute to the shrink and damage improvement contemplated in our long-term framework. We are also working on tasks upstream, such as sorting in our distribution centers and case pack optimization. To allow our teams to get products to the shelf even quicker with fewer touches. Finally, we are targeting completion of our next-generation point of sale rollout in the first half of the year, which will simplify the checkout process as well as other in-store activities. Ultimately, we believe these efforts focused on our core business will build on the progress we've made and allow us to better serve our stores and our customers. Next, I want to briefly mention Project Elevate, which we announced in December. As a reminder, this is our new incremental remodel initiative aimed at bolstering performance in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. As we focus on driving greater profitability in our mature store base, our goal for Project Elevate stores is to drive first-year comp sales lifts in the range of 3% to 5%, while also mitigating future expenses, particularly in repairs and maintenance. These projects include physical asset refreshes as well as merchandising optimization and will impact approximately 80% of the total store. When combined with our enhanced full remodel program, which we call Project Renovate, we expect to touch approximately 20% of our store base annually. We aim to significantly improve the shopping experience in our stores while elevating the brand and driving greater top and bottom-line contributions from our expansive mature store base. We are pleased with our performance in the fourth quarter, including solid execution and top-line results. As we reflect on the quarter as well as the full year, it is clear that our back-to-basics work has yielded positive results, positioning us well as we enter 2025 and look to the future. I want to thank our associates for their ongoing commitment to serving our customers and communities. Their dedication is on display every day in thousands of Dollar General Corporation stores, and in our distribution centers, private fleet, and store support center as we all work together to fulfill our mission of serving others. On today's call, I will begin by recapping some of the highlights of our Q4 performance as well as discussing the portfolio optimization actions we recently undertook for both Dollar General Corporation and Pop Shelf. After that, Kelly Dilts will share details of our financial performance as well as our financial guidance for 2025, and we'll conclude with thoughts on our long-term financial framework. And then I will wrap up the call with an update on some of our key initiatives that we believe will be important drivers of our performance in 2025 and beyond. Turning now to the fourth quarter performance. Net sales increased 4.5% to $10.3 billion in Q4, compared to net sales of $9.9 billion in last year's fourth quarter. With this solid finish to 2024, I am excited to note that for the first time in the company's history, we delivered fiscal year sales of more than $40 billion. This is a testament to the essential role Dollar General Corporation serves as America's neighborhood general store in more than 20,000 communities across the country. We are here for what matters for the customers every day, and the relevance of our value and convenience offering is clear. During the fourth quarter, we continued to grow market share in both dollars and units in highly consumable product sales, and also grew market share in non-consumable product sales. Same-store sales increased 1.2% during the quarter and were driven entirely by growth of 2.3% in average transaction amount. This included relatively even contributions from increases in average unit retail price per item and average items per transaction. This growth was partially offset by a decline of 1.1% in customer traffic during the quarter, which was impacted by ongoing financial pressures of the core consumer as well as lapping the strong traffic increase of 3.7% from Q4 of 2023. The comp sales increase was driven entirely by growth in our consumable category and was partially offset by declines in our seasonal home and apparel category. From a monthly cadence perspective, all three periods were positive, with comp sales growth in December and January relatively even and both outpacing November. Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation. Many of our customers report that they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities. As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer. In turn, we know our customers expect value and convenience more than ever. We are committed to providing the value they need and continue to feel very good about our everyday low price position relative to competitors and other classes of trade. With regards to current tariffs that have been announced on products that we sell, we believe we are well-positioned to mitigate the impact in 2025. We were able to successfully mitigate the tariff impact in 2018 and 2019, though we did take retail price increases in some instances along with others across the industry. Given the already stressed financial condition of our core customer, we are closely monitoring these and any other potential economic headwinds, including any changes to government entitlement programs. Importantly, we remain focused on doing everything we can to deliver the value our customers want and need. Before I turn the call over to Kelly Dilts, I want to share an update on our work to continue to strengthen our foundation for future growth. As we look to build on the success of our back-to-basics work, we have undertaken a thorough review of our business to identify opportunities to further strengthen our foundation. With this in mind, we conducted a real estate portfolio optimization review of both our Dollar General Corporation and Pop Shelf banners during the fourth quarter. As a result of the review of our Dollar General Corporation portfolio, we made the decision to close 96 stores. While this is less than 1% of our overall store base, those stores, many of which are in urban locations, have become increasingly challenging to successfully operate. These stores likely would have been closed in the ordinary course of the store's life cycle when their leases expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward. I also want to discuss the results of our Pop Shelf portfolio review. After analyzing business performance and revised outlooks for our current portfolio of Pop Shelf locations, we identified 51 store closure candidates based on financial and operational considerations from our test and learn phase. We plan to convert six of these 51 locations to Dollar General Corporation stores and close the remaining 45 stores. This will leave 180 stores remaining as part of the Pop Shelf banner. As a result of these actions, as well as impairment charges primarily associated with Pop Shelf Go Forward stores, our Q4 financial results include a negative impact to operating profit of $232 million or approximately $0.81 in EPS. As we enter 2025, we are optimistic about the Pop Shelf banner and our opportunity to drive improvements in our sales results. As customers' feedback on the brand and shopping experience continue to be strong. Going forward, we plan to build on the strength to increase sales through a variety of initiatives centered around new brand partnerships, an enhanced in-store experience, and new and expanded categories. As an example of these efforts, we recently implemented a new store layout with a heightened focus on toys, party, candy, and the beauty categories. While still early, we have been pleased with the results as we have seen a nice double-digit sales lift across a broad array of our Pop Shelf stores. In addition to the opportunity to increase sales and ultimately realize further growth in the Pop Shelf banner, we are also able to leverage learnings from this banner and apply them in our non-consumable categories in our Dollar General Corporation stores to further strengthen that offering for our DG customers. We are looking forward to the opportunity to improve Pop Shelf results in 2025, and we will continue to evaluate the brand to ensure we are seeing the desired impact of these activities and optimization. In summary, while we never like to close stores before their lease expiration, we believe this portfolio review across both our DG and Pop Shelf banners has further strengthened the foundation of this business as we position the company for the future. Finally, I want to take a moment to congratulate both Steve Deckard and Tracy Hermann on their new leadership roles within the organization. Steve has been a valued strategic leader at Dollar General Corporation for many years. And I'm confident he will serve the company well in his new role focused on expansion of the Dollar General Corporation footprint, process improvement, and leadership of our corporate strategy. And Tracy's deep experience and connection with our field teams along with her commitment to operational excellence, execution, and innovation make her the ideal leader for our store operations team. As we focus on delivering the best in-store experience for our customers and associates. Overall, we are proud of the continued progress we are making and are pleased with how it has positioned us to drive profitable sales growth and capture growth opportunities while creating long-term shareholder value. I will discuss more about our plans and initiatives to drive these results in a few moments. But first, let me turn the call over to Kelly Dilts to discuss our Q4 financial results as well as our 2025 financial guidance and long-term financial goals.

Kelly Dilts:
Thank you, Todd, and good morning, everyone. Now that Todd's taken you through a few of the top-line highlights of the quarter, let me take you through some of the other 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. For Q4, gross profit as a percentage of sales was 29.4%, a decrease of 8 basis points. This decrease was primarily attributable to increases in markdowns, inventory damages, and distribution costs, and a greater proportion of sales coming from the consumables category. These factors were partially offset by lower shrink and higher inventory markups. We continue to be pleased with the results of our shrink mitigation efforts, which drove a year-over-year shrink improvement of 68 basis points in Q4. Shrink improvements have continued through the early part of the first quarter, and we anticipate this benefit should continue throughout 2025. Now turning to SG&A, which was 26.5% as a percentage of sales, an increase of 294 basis points. The increase reflects the fourth quarter impairment charges totaling $214 million related to the portfolio review. Other expenses that were a greater percentage of net sales in the fourth quarter were retail labor, incentive compensation, repairs and maintenance, depreciation and amortization, and technology-related expenses, partially offset by a decrease in professional fees. Moving down the income statement, operating profit for the fourth quarter decreased 49% to $294 million, including the negative impact of approximately $232 million associated with the charges resulting from the portfolio review. As a percentage of sales, operating profit was 2.9%, a decrease of 302 basis points. Net interest expense for the quarter decreased to $66 million compared to $77 million in last year's fourth quarter. Our effective tax rate for the quarter was 16.2% and compares to 20% in the fourth quarter last year. This lower rate is primarily due to the effect of certain rate-impacting items on lower earnings before taxes. Finally, EPS for the quarter decreased 52.5% to $0.87, including a negative impact of approximately $0.81 per share associated with the charges resulting from the portfolio review. Turning now to our balance sheet and cash flow. Merchandise inventories were $6.7 billion at the end of the year, a decrease of $283 million or 4% compared to the prior year, and a decrease of 6.9% on a per store basis. I'd like to recognize the great work the team has done to reduce our inventory position while increasing sales and improving in stocks, while also providing positive operational impacts in both our stores and distribution centers. In 2024, the business generated cash flows from operations of $3 billion, an increase of $604 million or 25%, which was driven by improved working capital management. In 2024, total capital expenditures were $1.3 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 returned cash to shareholders through a quarterly dividend of $0.59 per common share outstanding for a total payout of $130 million. Overall, we're pleased with our cash and inventory positions and the progress we've made in strengthening our balance sheet over this last year. These results are a testament to the strength of this business model as well as the focused efforts on getting back to basics across the organization. With that in mind, I'd like to discuss our financial outlook for 2025. We plan to continue building on the progress we've made and our guidance for 2025 contemplates continued investment and work to further strengthen the foundation of this business. Importantly, we believe these efforts will lay the groundwork for growth in the years ahead, which I'll discuss in just a moment. With that in mind, we expect the following for 2025. Net sales growth in the range of 3.4% to 4.4%, same-store sales growth in the range of 1.2% to 2.2%, and EPS in the range of $5.10 to $5.80. Our EPS guidance assumes an effective tax rate of approximately 23.5%. We expect capital spending in the range of $1.3 billion to $1.4 billion designed to support our ongoing growth and which is aligned to our capital allocation priorities that continue to serve us well. As a reminder, our first priority is investing in our business, including our existing store base as well as high return growth opportunities such as new store expansion and strategic initiatives. To that end, we're excited to begin work on approximately 4,885 real estate projects in 2025, including 575 new store openings in the United States, 2,000 full remodels, 2,250 Project Elevate remodels, and 45 locations. And up to 15 additional new stores in Mexico. In addition, we are investing in a number of technology projects, including a finance and HR modernization project which is primarily focused on a new enterprise resource planning system that will be implemented over the next couple of years. Next in our capital allocation priorities, we seek to return cash to shareholders through a quarterly dividend payment and over time and when appropriate share repurchases. To that end, our board of directors recently approved a quarterly cash dividend of $0.59 per share. We do not plan to repurchase common stock this year although share repurchases remain an important part of our future. Finally, although our leverage ratio remains above our target of approximately three times adjusted debt to adjusted EBITDAR, we are focused on improving our debt metrics in support of our commitment to our current investment-grade credit ratings. Which as a reminder are BBB and BAA2. Now let me provide some additional context as it relates to our outlook for 2025. While our guidance is centered around a macro-neutral outlook, the full range does recognize that there's still uncertainty both in the broader macro environment as well as for our core customer. We are currently anticipating continued economic pressure on our core customer, though at a relatively consistent level to what they were experiencing as we closed 2024. With regards to gross margin, we expect the most significant factor to be continued positive shrink results, which we anticipate will be a tailwind throughout 2025. Within SG&A, we're taking action to reduce controllable expenses throughout the business. That said, we expect to deleverage in 2025 at our current expected levels of sales and operating expenses. This pressure includes an ongoing headwind from retail wage rate inflation, which we expect to continue between 3.5% and 4%. In addition, we expect our operating leverage to be pressured by a return to normalized short-term and long-term incentive compensation after two years of significantly lower than average payout. At target payout, this represents a headwind of $120 million. Finally, we expect the continued headwind from depreciation and amortization. Primarily as a result of higher capital spending and inflation in building materials in prior years. While we do not anticipate providing quarterly financial guidance, I do want to provide a couple of notes on our expected cadence of financial results in 2025. We expect the first half of the year to be more pressured by initial expenses related to our remodels, including Project Elevate, as we expect to execute more real estate projects in the first half of 2025 than we did in the first half of 2024. Importantly, we are working to complete the vast majority of our real estate projects by the end of Q3 in order to maximize the number of operating weeks which will benefit 2025. In addition, we expect Q1 to be impacted by labor expense headwinds compared to Q1 of 2024, when we still had self-checkout in a majority of the stores. Importantly, we believe our plans for 2025 will position us well to drive growth in subsequent years as we look to begin moving toward our medium and longer-term financial goals. While the recent focus has been on back-to-basics actions and supporting the core business, we believe we are poised for future growth as we look to 2026 and beyond. With that in mind, I want to discuss our long-term financial framework. We manage our business with a sharp focus on creating sustainable, long-term shareholder value. Following a successful year of strengthening the foundation, and as a part of our ongoing strategic planning process, we have updated our medium and longer-term financial framework, particularly for the next three to five years, and we'd like to share our updated perspective with you today. It's important to note that we are aiming to achieve some of these components of this model sooner than others. So I will note our specific goals as well as the respected targeted timelines. Starting with net sales. We are targeting annual growth in the range of 3.5% to 4%, including approximately two new unit growth. Both of which we plan to begin in 2025. Beginning in 2026, we're targeting annual same-store sales growth in the range of approximately 2% to 3%. These ranges assume that our core customer, while always seeking value, returns to a more stable financial condition. And also that we will drive more of our same-store sales through our mature stores. Turning to operating margin, we're targeting expansion to begin in 2026 and then longer term to continue expanding toward our goal in the range of 6% to 7% as early as 2028. We have a variety of gross margin and SG&A catalysts to drive this expansion moving forward. Specifically, within gross margin, we are working to drive improvement that will build over the next five years centered around the following. First, expanding the contribution from our initiatives, particularly our DG Media Network. But also including other efforts such as our non-consumable merchandising strategy. Collectively, we believe the potential benefit from all of our initiatives, some of which Todd Vasos will discuss, is approximately 150 basis points. Next, we're focused on returning to pre-pandemic shrink levels, which we believe represents a potential benefit of approximately 80 basis points. And also improving damages, which we believe represents a potential benefit of approximately 40 basis points. And within SG&A, we are targeting reductions over the next five years through initiatives aimed at simplifying work and driving efficiencies, reducing repairs and maintenance expense, and optimizing capital expenditure to stabilize depreciation and amortization expense. Much of the focus of Steve Deckard and his team will be centered around many of these areas. Ultimately, our goal with these efforts is to increase profitability and minimize SG&A deleverage on sales over the medium to longer term. Our capital allocation priorities will continue to drive our financial strategies. We are targeting annual capital expenditures to be approximately 3% of sales and expect to be in a position to restart share repurchases as early as 2026. We believe this long-term framework will enable us to continue investing in growth initiatives that expand our ability to serve customers with value and convenience while also returning cash to shareholders. Finally, beginning in 2026, our long-term financial framework seeks to deliver annual EPS growth of at least 10% on an adjusted basis. In conclusion, we're excited about the plans and the future of Dollar General Corporation and are confident in our long-term approach. We believe the business model is strong, and we are well-positioned to drive sustainable long-term growth on both the top and bottom lines while creating long-term shareholder value. With that, I'll turn the call back over to Todd Vasos.

Todd Vasos:
Thank you, Kelly. We're excited about our plans for both the near term and long term. And I want to take the next few minutes to highlight some of the most important initiatives across four areas of the business. I'll start with some of the near-term actions focused on building on our back-to-basics work to further enhance the in-store experience for our associates and customers. We know that an essential part of convenience for our customer is the ability to not only reach the store easily, but also the quality and speed of their in-store experience. We are focused on retraining in our stores and asking our teams to recommit to creating a fast, and friendly experience for our customers on every visit. To enable our associates to deliver on this effort and focusing on serving our customers, we are also working to further simplify the operating model by removing unnecessary activities and friction points from our stores. These efforts include a continued focus on inventory and SKU productivity. We believe these efforts along with further assortment and allocation optimization will contribute to the shrink and damage improvement contemplated in our long-term framework. We are also working on tasks upstream, such as sorting in our distribution centers and case pack optimization. To allow our teams to get products to the shelf even quicker with fewer touches. Finally, we are targeting completion of our next-generation point of sale rollout in the first half of the year, which will simplify the checkout process as well as other in-store activities. Ultimately, we believe these efforts focused on our core business will build on the progress we've made and allow us to better serve our stores and our customers. Next, I want to briefly mention Project Elevate, which we announced in December. As a reminder, this is our new incremental remodel initiative aimed at bolstering performance in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. As we focus on driving greater profitability in our mature store base, our goal for Project Elevate stores is to drive first-year comp sales lifts in the range of 3% to 5%, while also mitigating future expenses, particularly in repairs and maintenance. These projects include physical asset refreshes as well as merchandising optimization and will impact approximately 80% of the total store. When combined with our enhanced full remodel program, which we call Project Renovate, we expect to touch approximately 20% of our store base annually and to significantly improve the shopping experience in our stores while elevating the brand and driving greater top and bottom-line contributions from our expansive mature store base. We are pleased with our performance in the fourth quarter, including solid execution and top-line results. As we reflect on the quarter as well as the full year, it is clear that our back-to-basics work has yielded positive results, positioning us well as we enter 2025 and look to the future. I want to thank our associates for their ongoing commitment to serving our customers and communities. Their dedication is on display every day in thousands of Dollar General Corporation stores, and in our distribution centers, private fleet, and store support center as we all work together to fulfill our mission of serving others. On today's call, I will begin by recapping some of the highlights of our Q4 performance as well as discussing the portfolio optimization actions we recently undertook for both Dollar General Corporation and Pop Shelf. After that, Kelly Dilts will share details of our financial performance as well as our financial guidance for 2025, and we'll conclude with thoughts on our long-term financial framework. And then I will wrap up the call with an update on some of our key initiatives that we believe will be important drivers of our performance in 2025 and beyond. Turning now to the fourth quarter performance. Net sales increased 4.5% to $10.3 billion in Q4, compared to net sales of $9.9 billion in last year's fourth quarter. With this solid finish to 2024, I am excited to note that for the first time in the company's history, we delivered fiscal year sales of more than $40 billion. This is a testament to the essential role Dollar General Corporation serves as America's neighborhood general store in more than 20,000 communities across the country. We are here for what matters for the customers every day, and the relevance of our value and convenience offering is clear. During the fourth quarter, we continued to grow market share in both dollars and units in highly consumable product sales, and also grew market share in non-consumable product sales. Same-store sales increased 1.2% during the quarter and were driven entirely by growth of 2.3% in average transaction amount. This included relatively even contributions from increases in average unit retail price per item and average items per transaction. This growth was partially offset by a decline of 1.1% in customer traffic during the quarter, which was impacted by ongoing financial pressures of the core consumer as well as lapping the strong traffic increase of 3.7% from Q4 of 2023. The comp sales increase was driven entirely by growth in our consumable category and was partially offset by declines in our seasonal home and apparel category. From a monthly cadence perspective, all three periods were positive, with comp sales growth in December and January relatively even and both outpacing November. Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation. Many of our customers report that they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities. As we enter 2025, we are not anticipating improvement in the macro environment, particularly for our core customer. In turn, we know our customers expect value and convenience more than ever. We are committed to providing the value they need and continue to feel very good about our everyday low price position relative to competitors and other classes of trade. With regards to current tariffs that have been announced on products that we sell, we believe we are well-positioned to mitigate the impact in 2025. We were able to successfully mitigate the tariff impact in 2018 and 2019, though we did take retail price increases in some instances along with others across the industry. Given the already stressed financial condition of our core customer, we are closely monitoring these and any other potential economic headwinds, including any changes to government entitlement programs. Importantly, we remain focused on doing everything we can to deliver the value our customers want and need. Before I turn the call over to Kelly Dilts, I want to share an update on our work to continue to strengthen our foundation for future growth. As we look to build on the success of our back-to-basics work, we have undertaken a thorough review of our business to identify opportunities to further strengthen our foundation. With this in mind, we conducted a real estate portfolio optimization review of both our Dollar General Corporation and Pop Shelf banners during the fourth quarter. As a result of the review of our Dollar General Corporation portfolio, we made the decision to close 96 stores. While this is less than 1% of our overall store base, those stores, many of which are in urban locations, have become increasingly challenging to successfully operate. These stores likely would have been closed in the ordinary course of the store's life cycle when their leases expired. However, we determined that closing these locations now will allow us to optimize our allocation of resources going forward. I also want to discuss the results of our Pop Shelf portfolio review. After analyzing business performance and revised outlooks for our current portfolio of Pop Shelf locations, we identified 51 store closure candidates based on financial and operational considerations from our test and learn phase. We plan to convert six of these 51 locations to Dollar General Corporation stores and close the remaining 45 stores. This will leave 180 stores remaining as part of the Pop Shelf banner. As a result of these actions, as well as impairment charges primarily associated with Pop Shelf Go Forward stores, our Q4 financial results include a negative impact to operating profit of $232 million or approximately $0.81 in EPS. As we enter 2025, we are optimistic about the Pop Shelf banner and our opportunity to drive improvements in our sales results. As customers' feedback on the brand and shopping experience continue to be strong. Going forward, we plan to build on the strength to increase sales through a variety of initiatives centered around new brand partnerships, an enhanced in-store experience, and new and expanded categories. As an example of these efforts, we recently implemented a new store layout with a heightened focus on toys, party, candy, and the beauty categories. While still early, we have been pleased with the results as we have seen a nice double-digit sales lift across a broad array of our Pop Shelf stores. In addition to the opportunity to increase sales and ultimately realize further growth in the Pop Shelf banner, we are also able to leverage learnings from this banner and apply them in our non-consumable categories in our Dollar General Corporation stores to further strengthen that offering for our DG customers. We are looking forward to the opportunity to improve Pop Shelf results in 2025, and we will continue to evaluate the brand to ensure we are seeing the desired impact of these activities and optimization. In summary, while we never like to close stores before their lease expiration, we believe this portfolio review across both our DG and Pop Shelf banners has further strengthened the foundation of this business as we position the company for the future. Finally, I want to take a mo