UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

(Mark One)

~~QUARTERLY REPORT~~☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~PURSUANT TO SECTION 13 OR 15(d)~~

~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended August ~~3, 2018~~2, 2019

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission File Number: 001-11421

DOLLAR GENERAL CORPORATION

(Exact name of Registrant as specified in its charter)

TENNESSEE		61-0502302
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

100 MISSION RIDGE

GOODLETTSVILLE, TN37072

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: ~~(615)~~ (615) 855-4000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.875 per share	DG	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated filer~~ Accelerated Filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had ~~265,534,401~~257,068,296 shares of common stock outstanding on August ~~24, 2018.~~23, 2019.

PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

August 3,

February 2,

2018

2018

(Unaudited)

(See Note 1)

ASSETS

Current assets:

Cash and cash equivalents

$
265,288

$
267,441

Merchandise inventories

3,896,432

3,609,025

Income taxes receivable

68,353

108,265

Prepaid expenses and other current assets

287,753

263,121

Total current assets

4,517,826

4,247,852

Net property and equipment

2,857,274

2,701,282

Goodwill

4,338,589

4,338,589

Other intangible assets, net

1,200,322

1,200,428

Other assets, net

29,938

28,760

Total assets

$
12,943,949

$
12,516,911

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of long-term obligations

$
1,909

$
401,345

Accounts payable

2,294,996

2,009,771

Accrued expenses and other

611,389

549,658

Income taxes payable

7,250

4,104

Total current liabilities

2,915,544

2,964,878

Long-term obligations

2,776,811

2,604,613

Deferred income taxes

569,690

515,702

Other liabilities

302,962

305,944

Commitments and contingencies

Shareholders’ equity:

Preferred stock

—

—

Common stock

232,340

235,141

Additional paid-in capital

3,222,233

3,196,462

Retained earnings

2,928,064

2,698,352

Accumulated other comprehensive loss

(3,695)

(4,181)

Total shareholders’ equity

6,378,942

6,125,774

Total liabilities and shareholders' equity

$
12,943,949

$
12,516,911


	August 2,		February 1,
	2019		2019
ASSETS	(Unaudited)		(see Note 1)
Current assets:
Cash and cash equivalents	$	259,568	$	235,487
Merchandise inventories		4,419,628		4,097,004
Income taxes receivable		61,692		57,804
Prepaid expenses and other current assets		178,250		272,725
Total current assets		4,919,138		4,663,020
Net property and equipment		3,020,406		2,970,806
Operating lease assets		8,405,346		—
Goodwill		4,338,589		4,338,589
Other intangible assets, net		1,200,111		1,200,217
Other assets, net		33,939		31,406
Total assets	$	21,917,529	$	13,204,038
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term obligations	$	555	$	1,950
Current portion of operating lease liabilities		915,075		—
Accounts payable		2,727,079		2,385,469
Accrued expenses and other		666,251		618,405
Income taxes payable		3,310		10,033
Total current liabilities		4,312,270		3,015,857
Long-term obligations		2,573,483		2,862,740
Long-term operating lease liabilities		7,480,871		—
Deferred income taxes		627,765		609,687
Other liabilities		173,980		298,361
Commitments and contingencies
Shareholders’ equity:
Preferred stock		—		—
Common stock		224,935		227,072
Additional paid-in capital		3,292,902		3,252,421
Retained earnings		3,234,944		2,941,107
Accumulated other comprehensive loss		(3,621)		(3,207)
Total shareholders’ equity		6,749,160		6,417,393
Total liabilities and shareholders' equity	$	21,917,529	$	13,204,038

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

For the 13 weeks ended

For the 26 weeks ended


August 3,

August 4,

August 3,

August 4,

2018

2017

2018

2017

Net sales

$
6,443,309

$
5,828,305

$
12,557,772

$
11,437,930

Cost of goods sold

4,468,436

4,037,783

8,720,650

7,948,425

Gross profit

1,974,873

1,790,522

3,837,122

3,489,505

Selling, general and administrative expenses

1,429,397

1,297,376

2,801,462

2,522,564

Operating profit

545,476

493,146

1,035,660

966,941

Interest expense

25,451

23,748

50,224

48,752

Other (income) expense

1,019

—

1,019

3,502

Income before income taxes

519,006

469,398

984,417

914,687

Income tax expense

111,769

174,615

212,328

340,415

Net income

$
407,237

$
294,783

$
772,089

$
574,272

Earnings per share:

Basic

$
1.53

$
1.08

$
2.89

$
2.09

Diluted

$
1.52

$
1.08

$
2.88

$
2.09

Weighted average shares outstanding:

Basic

266,457

273,690

267,362

274,191

Diluted

267,226

274,132

268,180

274,674

Dividends per share

$
0.29

$
0.26

$
0.58

$
0.52


	For the 13 weeks ended				For the 26 weeks ended
	August 2,		August 3,		August 2,		August 3,
	2019		2018		2019		2018
Net sales	$	6,981,753	$	6,443,309	$	13,604,938	$	12,557,772
Cost of goods sold		4,832,817		4,468,436		9,453,726		8,720,650
Gross profit		2,148,936		1,974,873		4,151,212		3,837,122
Selling, general and administrative expenses		1,571,161		1,429,397		3,061,200		2,801,462
Operating profit		577,775		545,476		1,090,012		1,035,660
Interest expense		24,810		25,451		50,743		50,224
Other (income) expense		—		1,019		—		1,019
Income before income taxes		552,965		519,006		1,039,269		984,417
Income tax expense		126,410		111,769		227,701		212,328
Net income	$	426,555	$	407,237	$	811,568	$	772,089
Earnings per share:
Basic	$	1.65	$	1.53	$	3.14	$	2.89
Diluted	$	1.65	$	1.52	$	3.13	$	2.88
Weighted average shares outstanding:
Basic		257,793		266,457		258,407		267,362
Diluted		259,102		267,226		259,683		268,180

Dividends per share	$	0.32	$	0.29	$	0.64	$	0.58

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

For the 13 weeks ended

For the 26 weeks ended

August 3,

August 4,

August 3,

August 4,


2018

2017

2018

2017

Net income

$
407,237

$
294,783

$
772,089

$
574,272

Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $86, $125, $172 and $253, respectively

244

205


487

406

Comprehensive income

$
407,481

$
294,988

$
772,576

$
574,678


	For the 13 weeks ended				For the 26 weeks ended
	August 2,		August 3,		August 2,		August 3,
	2019		2018		2019		2018
Net income	$	426,555	$	407,237	$	811,568	$	772,089
Unrealized net gain (loss) on hedged transactions, net of related income tax expense (benefit) of $86, $86, $172, and $172, respectively		243		244		487		487
Comprehensive income	$	426,798	$	407,481	$	812,055	$	772,576

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

(Unaudited)

(In ~~thousands)~~thousands, except per share amounts)

For the 26 weeks ended


August 3,

August 4,


2018

2017

Cash flows from operating activities:

Net income

$
772,089

$
574,272

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

221,511

197,616

Deferred income taxes

12,500

6,750

Loss on debt retirement

1,019

3,502

Noncash share-based compensation

21,779

16,839

Other noncash (gains) and losses

12,120

11,359

Change in operating assets and liabilities:

Merchandise inventories

(292,934)

(205,385)

Prepaid expenses and other current assets

(25,727)

(43,240)

Accounts payable

270,862

292,074

Accrued expenses and other liabilities

61,096

26,751

Income taxes

43,058

(92,940)

Other

(84)

(1,368)

Net cash provided by (used in) operating activities

1,097,289

786,230

Cash flows from investing activities:

Purchases of property and equipment

(370,968)

(314,050)

Proceeds from sales of property and equipment

1,349

343

Net cash provided by (used in) investing activities

(369,619)

(313,707)

Cash flows from financing activities:

Issuance of long-term obligations

499,495

599,556

Repayments of long-term obligations

(575,664)

(750,584)

Net increase (decrease) in commercial paper outstanding

(149,400)

25,000

Costs associated with issuance and retirement of debt

(4,384)

(9,524)

Repurchases of common stock

(349,538)

(163,736)

Payments of cash dividends

(154,708)

(142,339)

Other equity and related transactions

4,376

(4,638)

Net cash provided by (used in) financing activities

(729,823)

(446,265)

Net increase (decrease) in cash and cash equivalents

(2,153)

26,258

Cash and cash equivalents, beginning of period

267,441

187,915

Cash and cash equivalents, end of period

$
265,288

$
214,173

Supplemental schedule of noncash investing and financing activities:

Purchases of property and equipment awaiting processing for payment, included in Accounts payable

$
77,541

$
69,912


								Accumulated
	Common			Additional				Other
	Stock	Common		Paid-in		Retained		Comprehensive
	Shares	Stock		Capital		Earnings		Loss		Total
Balances, May 3, 2019	258,322	$	226,032	$	3,275,917	$	3,074,584	$	(3,864)	$	6,572,669
Net income	—		—		—		426,555		—		426,555
Dividends paid, $0.32 per common share	—		—		—		(82,391)		—		(82,391)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		243		243
Share-based compensation expense	—		—		10,874		—		—		10,874
Repurchases of common stock	(1,353)		(1,184)		—		(183,804)		—		(184,988)
Other equity and related transactions	99		87		6,111		—		—		6,198
Balances, August 2, 2019	257,068	$	224,935	$	3,292,902	$	3,234,944	$	(3,621)	$	6,749,160


Balances, May 4, 2018	267,553	$	234,109	$	3,210,527	$	2,795,620	$	(3,938)	$	6,236,318
Net income	—		—		—		407,237		—		407,237
Dividends paid, $0.29 per common share	—		—		—		(77,091)		—		(77,091)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		244		244
Share-based compensation expense	—		—		9,373		—		—		9,373
Repurchases of common stock	(2,096)		(1,835)		—		(197,702)		—		(199,537)
Other equity and related transactions	75		66		2,333		—		(1)		2,398
Balances, August 3, 2018	265,532	$	232,340	$	3,222,233	$	2,928,064	$	(3,695)	$	6,378,942


Balances, February 1, 2019	259,511	$	227,072	$	3,252,421	$	2,941,107	$	(3,207)	$	6,417,393
Net income	—		—		—		811,568		—		811,568
Dividends paid, $0.64 per common share	—		—		—		(165,147)		—		(165,147)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		487		487
Share-based compensation expense	—		—		24,505		—		—		24,505
Repurchases of common stock	(3,039)		(2,659)		—		(382,315)		—		(384,974)
Transition adjustment upon adoption of leases accounting standard (see Note 1)	—		—		—		28,830		—		28,830
Other equity and related transactions	596		522		15,976		901		(901)		16,498
Balances, August 2, 2019	257,068	$	224,935	$	3,292,902	$	3,234,944	$	(3,621)	$	6,749,160


Balances, February 2, 2018	268,733	$	235,141	$	3,196,462	$	2,698,352	$	(4,181)	$	6,125,774
Net income	—		—		—		772,089		—		772,089
Dividends paid, $0.58 per common share	—		—		—		(154,748)		—		(154,748)
Unrealized net gain (loss) on hedged transactions	—		—		—		—		487		487
Share-based compensation expense	—		—		21,779		—		—		21,779
Repurchases of common stock	(3,685)		(3,225)		—		(346,313)		—		(349,538)
Transition adjustment upon adoption of intra-entity transfers accounting standard (see Note 1)	—		—		—		(41,316)		—		(41,316)
Other equity and related transactions	484		424		3,992		—		(1)		4,415
Balances, August 3, 2018	265,532	$	232,340	$	3,222,233	$	2,928,064	$	(3,695)	$	6,378,942

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	For the 26 weeks ended
	August 2,		August 3,
	2019		2018
Cash flows from operating activities:
Net income	$	811,568	$	772,089
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		245,908		221,511
Deferred income taxes		8,118		12,500
Loss on debt retirement		—		1,019
Noncash share-based compensation		24,505		21,779
Other noncash (gains) and losses		4,001		12,120
Change in operating assets and liabilities:
Merchandise inventories		(321,085)		(292,934)
Prepaid expenses and other current assets		(8,516)		(25,727)
Accounts payable		323,217		270,862
Accrued expenses and other liabilities		58,614		61,096
Income taxes		(10,611)		43,058
Other		(5,198)		(84)
Net cash provided by (used in) operating activities		1,130,521		1,097,289
Cash flows from investing activities:
Purchases of property and equipment		(293,060)		(370,968)
Proceeds from sales of property and equipment		1,467		1,349
Net cash provided by (used in) investing activities		(291,593)		(369,619)
Cash flows from financing activities:
Issuance of long-term obligations		—		499,495
Repayments of long-term obligations		(525)		(575,664)
Net increase (decrease) in commercial paper outstanding		(280,700)		(149,400)
Costs associated with issuance and retirement of debt		—		(4,384)
Repurchases of common stock		(384,974)		(349,538)
Payments of cash dividends		(165,136)		(154,708)
Other equity and related transactions		16,488		4,376
Net cash provided by (used in) financing activities		(814,847)		(729,823)
Net increase (decrease) in cash and cash equivalents		24,081		(2,153)
Cash and cash equivalents, beginning of period		235,487		267,441
Cash and cash equivalents, end of period	$	259,568	$	265,288
Supplemental schedule of noncash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities	$	847,498	$	—
Purchases of property and equipment awaiting processing for payment, included in Accounts payable	$	82,055	$	77,541

See notes to condensed consolidated financial statements.

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Basis of presentation

~~1.Basis of presentation~~

The accompanying unaudited condensed consolidated financial statements of Dollar General Corporation and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Such financial statements consequently do not include all of the disclosures normally required by U.S. GAAP for annual financial statements or those normally made in the Company’s Annual Report on Form 10-K, including the condensed consolidated balance sheet as of February ~~2, 2018~~1, 2019 which was derived from the audited consolidated financial statements at that date. Accordingly, readers of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended February ~~2, 2018~~1, 2019 for additional information.

The Company’s fiscal year ends on the Friday closest to January 31. Unless the context requires otherwise, references to years contained herein pertain to the Company’s fiscal year. The Company’s ~~2018~~2019 fiscal year is scheduled to be a 52-week accounting period ending on ~~February 1, 2019,~~January 31, 2020, and the ~~2017~~2018 fiscal year was a 52-week accounting period that ended on February ~~2, 2018.~~1, 2019.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the Company’s customary accounting practices. In management’s opinion, all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the consolidated financial position as of August ~~3, 2018~~2, 2019 and results of operations for the 13-week and 26-week accounting periods ended August ~~3, 2018~~2, 2019 and August ~~4, 2017~~3, 2018 have been made.

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Because the Company’s business is moderately seasonal, the results for interim periods are not necessarily indicative of the results to be expected for the entire year.

The Company uses the last-in, first-out (“LIFO”) method of valuing inventory. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels, sales for the year and the expected rate of inflation or deflation for the year. The interim LIFO calculations are subject to adjustment in the final year-end LIFO inventory valuation. The Company recorded a LIFO provision ~~(benefit)~~ of ~~$3.4~~$3.2 million and ~~$(0.5)~~$3.4 million in the respective 13-week periods, and ~~$5.5~~$6.6 million and ~~$0.3~~$5.5 million in the respective 26-week periods, ended August ~~3, 2018~~2, 2019 and August ~~4, 2017.~~3, 2018. In addition, ongoing estimates of inventory shrinkage and initial markups and markdowns are included in the interim cost of goods sold calculation.

The Company adopted new accounting guidance related to leases as of February 2, 2019, using the modified retrospective approach. Under this approach, existing leases were recorded at the adoption date, and comparative periods were not restated and are presented under previously existing guidance. In addition, the Company elected the package of practical expedients permitted under the transition guidance in the standard, which among other things, allowed the carry forward of historical conclusions for lease identification, lease classification, and initial direct costs. The Company is accounting for leases with a term of less than one year under the short-term policy election. The Company also elected the practical expedient to not separate lease components from the non-lease components (typically fixed common-area maintenance costs at its retail store locations) for all classes of leased assets. The Company chose not to elect the hindsight practical expedient. Factors incorporated into the calculation of lease discount rates include the valuations and yields of the Company’s senior notes, their credit spread over comparable U.S. Treasury rates, and an index of the credit spreads for all North American investment grade companies by rating. To determine an indicative secured rate, the Company uses the estimated credit spread improvement that would result from an upgrade of one ratings classification by tenor.

Adoption of the leasing standard resulted in right of use operating lease assets and operating lease liabilities of approximately $8.0 billion each as of February 2, 2019. The cumulative effect of applying the standard resulted in an adjustment to retained earnings of $28.8 million at February 2, 2019, primarily for the elimination of deferred gain on a 2013 sale-leaseback transaction. Because the standard was adopted under the modified retrospective approach, it did not impact the Company’s historical consolidated net income or cash flows.

In ~~May 2014,~~February 2018, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~comprehensive~~ new accounting ~~standards~~guidance for the reclassification of certain tax effects from accumulated other comprehensive income which gives entities the option to reclassify to retained earnings tax effects related to items that have been stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (“TCJA”). An entity that elects to reclassify these amounts must reclassify stranded tax effects related to the ~~recognition of revenue and~~TCJA’s change in ~~August 2015,~~US federal tax rate for all items accounted for in other comprehensive income. These entities can also elect to reclassify other stranded effects that relate to the ~~FASB deferred~~TCJA but do not directly relate to the ~~effective date to annual reporting periods beginning after December 15, 2017.~~change in the federal tax rate. The Company adopted this ~~guidance using the modified retrospective approach effective February 3, 2018, and such adoption had no effect on the Company’s consolidated results of operations, financial position or cash flows.~~

In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will resultstandard in the ~~lessee recognizing~~first quarter of 2019 and recorded a ~~right-of-use asset and~~transition adjustment of $0.9 million, which is reflected as a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. As originally issued, this guidance required a modified retrospective approach for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. In July 2018, the FASB issued additional guidance which allows companiesreclassification from accumulated other comprehensive loss to ~~record the cumulative effect~~

~~of applying the new standard as an adjustment to the opening balance of~~ retained earnings in the year of adoption as an alternative to the modified retrospective approach. The Company formed a project team to assess and implement the standard, which has completed its internal evaluation of existing contractual arrangements for embedded leases. The project team is also testing computations in the Company’s lease administration system, integrating interfaces between the lease administration system and the enterprise resource planning systems, identifying and implementing new processes and controls to ensure compliance, and is in the process of evaluating and documenting the Company’s accounting conclusions related to the new standard. As a result of the efforts of this project team, the Company has identified its store leases as the area in which it would most likely be affected by the new guidance. The Company’s assessment of the impact that adoption of this guidance will have on itsaccompanying condensed consolidated financial ~~statements is ongoing, and the Company anticipates a material impact because it is party to a significant number of lease contracts for its stores.~~statements.

In October 2016, the FASB issued amendments to existing guidance related to accounting for intra-entity transfers of assets other than inventory, which ~~affects~~affected the Company’s historical accounting for intra-entity transfers of certain intangible assets. This guidance iswas effective for ~~public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017.~~the Company in 2018. The amendments ~~are~~were applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted this guidance effective February 3, 2018 which resulted in an increase in deferred income tax liabilities and a decrease in retained earnings of $41.3 million.

In January 2017, the FASB issued amendments to existing guidance related to the subsequent measurement of goodwill. These amendments modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Subsequent to adoption, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments should be applied on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. The Company currently does not anticipate a material effect on its consolidated results of operations, financial position or cash flows to result from the adoption of this guidance.

2.~~Earnings per share~~

2.	Earnings per share

Earnings per share is computed as follows (in thousands, except per share data):


	13 Weeks Ended August 2, 2019					13 Weeks Ended August 3, 2018
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	426,555	257,793	$	1.65	$	407,237	266,457	$	1.53
Effect of dilutive share-based awards			1,309					769
Diluted earnings per share	$	426,555	259,102	$	1.65	$	407,237	267,226	$	1.52


	26 Weeks Ended August 2, 2019					26 Weeks Ended August 3, 2018
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	811,568	258,407	$	3.14	$	772,089	267,362	$	2.89
Effect of dilutive share-based awards			1,276					818
Diluted earnings per share	$	811,568	259,683	$	3.13	$	772,089	268,180	$	2.88

13 Weeks Ended August 3, 2018

13 Weeks Ended August 4, 2017




Weighted






Weighted


Net

Average

Per Share

Net

Average

Per Share

Income

Shares

Amount

Income

Shares

Amount

Basic earnings per share

$
407,237

266,457

$
1.53

$
294,783

273,690

$
1.08

Effect of dilutive share-based awards

769

442

Diluted earnings per share

$
407,237

267,226

$
1.52

$
294,783

274,132

$
1.08

26 Weeks Ended August 3, 2018

26 Weeks Ended August 4, 2017




Weighted






Weighted


Net

Average

Per Share

Net

Average

Per Share

Income

Shares

Amount

Income

Shares

Amount

Basic earnings per share

$
772,089

267,362

$
2.89

$
574,272

274,191

$
2.09

Effect of dilutive share-based awards

818

483

Diluted earnings per share

$
772,089

268,180

$
2.88

$
574,272

274,674

$
2.09

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is determined based on the dilutive effect of share-based awards using the treasury stock method.

Share-based awards that were outstanding at the end of the respective periods, but were not included in the computation of diluted earnings per share because the effect of exercising such awards would be antidilutive, were

~~0.9~~ 0.6 million and ~~2.6~~0.9 million in the ~~2018 and 2017~~respective 13-week periods, and ~~0.9~~0.6 million and ~~2.6~~0.9 million in the ~~2018 and 2017~~respective 26-week periods, ~~respectively.~~ended August 2, 2019 and August 3, 2018.

3.	Income taxes

~~3.Income taxes~~

Under the accounting standards for income taxes, the asset and liability method is used for computing the future income tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns.

Income tax reserves are determined using the methodology established by accounting standards for income taxes which require companies to assess each income tax position taken using the following two-step approach. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position.

The Company’s ~~2013~~2014 and earlier tax years are not open for further examination by the Internal Revenue Service (“IRS”).The IRS, at its discretion, may choose to examine the Company’s ~~2014~~2015 through ~~2016~~2017 fiscal year income tax filings. The Company has various state income tax examinations that are currently in progress. Generally, with few exceptions, the Company’s ~~2014~~2015 and later tax years remain open for examination by the various state taxing authorities.

As of August ~~3, 2018,~~2, 2019, the total reserves for uncertain tax benefits, interest expense related to income taxes and potential income tax penalties were ~~$1.1~~$5.0 million, ~~$0.8~~$1.0 million and $0.9 million, respectively, for a total of ~~$2.8~~$6.9 million. This total amount is reflected in noncurrent ~~Other~~other liabilities in the condensed consolidated balance sheet.

��

The Company’s reserve for uncertain tax positions will not be reduced in the coming twelve months as a result of expiring statutes of limitations. As of August ~~3, 2018,~~2, 2019, approximately ~~$1.1~~$5.0 million of the reserve for uncertain tax positions would impact the Company’s effective income tax rate if the Company were to recognize the tax benefit for these positions.

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted. The Company has not fully completed its accounting for the income tax effects of the TCJA. As discussed in SEC Staff Accounting Bulletin No. 118, the accounting for the TCJA should be completed within one year from enactment. During the 26-week period ended August 3, 2018, the Company made no adjustments to the provisional amounts recorded at February 2, 2018. Any adjustments to the provisional amounts recorded at February 2, 2018 will be reflected upon the completion of the Company’s accounting for the TCJA.

The effective income tax rates for the 13-week and 26-week periods ended August ~~3, 2018~~2, 2019 were ~~21.5%~~22.9% and ~~21.6%~~21.9%, respectively, compared to rates of ~~37.2%~~21.5% and ~~37.2%~~21.6%, respectively, for the 13-week and 26-week periods ended August ~~4, 2017.~~3, 2018. The tax rates for the ~~2018~~ 13-week and 26-week periods were ~~lower~~higher than the comparable ~~2017~~ 13-week and 26-week periods in 2018 primarily due to ~~the federal tax~~an increase in state income taxes resulting from law changes, ~~contained~~which was partially offset by greater tax benefits associated with share-based compensation.

4.Leases

As of August 2, 2019, the Company’s primary leasing activities were real estate leases for most of its retail store locations and certain of its distribution facilities. Many of the Company’s store locations are subject to build-to-suit arrangements with landlords which typically carry a primary lease term of up to 15 years. The Company does not control build-to-suit properties during the construction period. Store locations not subject to build-to-suit arrangements are typically shorter-term leases. Certain of the Company’s leased store locations have variable payments based upon actual costs of common area maintenance, real estate taxes and property and liability insurance. In addition, some of the Company’s leased store locations have provisions for variable payments based upon a specified percentage of defined sales volume. The Company’s leased distribution facilities are subject to operating lease agreements, with the exception of one distribution facility which is subject to a financing transaction. The Company’s lease agreements generally do not contain material restrictive covenants.

Most of the Company’s leases include one or more options to renew and extend the lease term. The exercise of lease renewal options is at the Company’s sole discretion. Generally, a renewal option is not deemed to be reasonably certain to be exercised until such option is legally executed. The Company’s leases do not include purchase options or

residual value guarantees on the leased property. The depreciable life of leasehold improvements are limited by the expected lease term.

All of the Company’s leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the ~~TCJA, including~~condensed consolidated balance sheet. At August 2, 2019, the ~~change~~weighted-average remaining lease term for the Company’s leases is 10.2 years, and the weighted average discount rate is 4.4%. For the 26-week period ended August 2, 2019, operating lease cost of $622.4 million and variable lease cost of $120.0 million were reflected as selling, general and administrative expenses in the ~~federal income tax rate to 21%~~condensed consolidated statement of income. Cash paid for amounts included in the ~~2018 periods compared to 35%~~measurement of operating lease liabilities of $626.3 million was reflected in cash flows from operating activities in the ~~2017 periods.~~condensed consolidated statement of cash flows for the 26-week period ended August 2, 2019.

The scheduled maturity of the Company’s operating lease liabilities is as follows:


(In thousands)
2019	$	634,593
2020		1,238,277
2021		1,182,516
2022		1,112,780
2023		1,037,980
Thereafter		5,180,000
Total lease payments (a)		10,386,146
Less imputed interest		(1,990,200)
Present value of lease liabilities	$	8,395,946

a)	Excludes approximately $0.7 billion of legally binding minimum lease payments for leases signed which have not yet commenced.

5.	Current and long-term obligations

~~4.Current and long-term obligations~~

Current and long-term obligations consist of the following:


	August 3,		February 2,

					August 2,		February 1,
(In thousands)	2018		2018		2019		2019
Senior unsecured credit facilities
Term Facility	$	—	$	175,000
Revolving Facility		—		—	$	—	$	—
1.875% Senior Notes due April 15, 2018 (net of discount of $16)		—		399,984
3.250% Senior Notes due April 15, 2023 (net of discount of $1,204 and $1,322)		898,796		898,678
4.150% Senior Notes due November 1, 2025 (net of discount of $598 and $632)		499,402		499,368
3.875% Senior Notes due April 15, 2027 (net of discount of $395 and $413)		599,605		599,587
4.125% Senior Notes due May 1, 2028 (net of discount of $491)		499,509		—
3.250% Senior Notes due April 15, 2023 (net of discount of $962 and $1,084)						899,038		898,916
4.150% Senior Notes due November 1, 2025 (net of discount of $526 and $562)						499,474		499,438
3.875% Senior Notes due April 15, 2027 (net of discount of $356 and $375)						599,644		599,625
4.125% Senior Notes due May 1, 2028 (net of discount of $449 and $471)						499,551		499,529
Unsecured commercial paper notes		280,800		430,200		86,200		366,900
Capital lease obligations		11,659		12,321		—		10,977
Tax increment financing due February 1, 2035		7,335		7,335		5,835		6,360
Debt issuance costs, net		(18,386)		(16,515)		(15,704)		(17,055)
		2,778,720		3,005,958
						2,574,038		2,864,690
Less: current portion		(1,909)		(401,345)		(555)		(1,950)
Long-term portion	$	2,776,811	$	2,604,613	$	2,573,483	$	2,862,740

At August ~~3, 2018,~~2, 2019, the Company maintained a $1.25 billion senior unsecured revolving credit facility (the “Revolving Facility”) that provides for the issuance of letters of credit up to $175.0 million and is scheduled to mature on February 22, 2022.

Borrowings under the Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at the Company’s option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of August ~~3, 2018~~2, 2019 was 1.10% for LIBOR borrowings and ~~0.10%~~0.10% for base-rate borrowings. The Company is also required to pay a facility fee, payable on any used and unused commitment amounts of the Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of August ~~3, 2018,~~2, 2019, the commitment fee rate was 0.15%. The applicable interest rate margins for borrowings, the facility fees and the

letter of credit fees under the Revolving Facility are subject to adjustment from time to time based on the Company’s long-term senior unsecured debt ratings.

The Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability to: incur additional liens; sell all or substantially all of the Company’s assets; consummate certain fundamental changes or change in the Company’s lines of business; and incur additional subsidiary indebtedness. The Revolving Facility also contains financial covenants which require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of August ~~3, 2018,~~2, 2019, the Company was in compliance with all such covenants. The Revolving Facility also contains customary events of default.

On June 11, 2018, the Company voluntarily prepaid the entire $175.0 million outstanding balance of its senior unsecured term loan facility and recognized an associated loss of $1.0 million which is reflected in Other (gains) losses in the consolidated statement of income for the 13-week and 26-week periods ended August 3, 2018. As of August ~~3, 2018,~~2, 2019, the Company had no outstanding borrowings, outstanding letters of credit of ~~$9.1~~$6.7 million, and borrowing availability of $1.24 billion under the Revolving Facility that, due to its intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$774.1~~$976.1 million. In addition, as of August ~~3, 2018,~~2, 2019, the Company had outstanding letters of credit of ~~$38.9~~$42.7 million which were issued pursuant to separate agreements.

As of August ~~3, 2018,~~2, 2019, the Company had a commercial paper program under which the Company may issue unsecured commercial paper notes (the “CP Notes”) from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company intends to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of August ~~3, 2018,~~2, 2019, the Company’s condensed consolidated balance sheet reflected

outstanding unsecured CP Notes of ~~$280.8~~$86.2 million classified as long-term obligations due to its intent and ability to refinance these obligations as long-term debt. An additional ~~$186.0~~$181.0 million of outstanding CP Notes were held by a wholly-owned subsidiary of the Company and are therefore not reflected on the condensed consolidated balance sheet. As of August ~~3, 2018,~~2, 2019, the outstanding CP Notes had a weighted average borrowing rate of ~~2.3%~~2.5%.

On April 10, 2018, the Company issued $500.0 million aggregate principal amount of 4.125% senior notes due 2028 (the “2028 Senior Notes”), net of discount of $0.5 million, which are scheduled to mature on May 1, 2028. Interest on the 2028 Senior Notes is payable in cash on May 1 and November 1 of each ~~year, with the first payment commencing on November 1, 2018.~~year. The Company incurred $4.4 million of debt issuance costs associated with the issuance of the 2028 Senior Notes.

Effective April 15, 2018, the Company redeemed $400.0 million aggregate principal amount of outstanding 1.875% senior notes due 2018 (the “2018 Senior Notes”). There was no gain or loss associated with the redemption. The Company funded the redemption price for the 2018 Senior Notes with proceeds from the issuance of the 2028 Senior Notes.

6.	Assets and liabilities measured at fair value

On April 11, 2017, the Company issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”), net of discount of $0.4 million, which are scheduled to mature on April 15, 2027. Interest on the 2027 Senior Notes is payable in cash on April 15 and October 15 of each year. The Company incurred $5.2 million of debt issuance costs associated with the issuance of the 2027 Senior Notes.

On April 27, 2017, the Company redeemed $500.0 million aggregate principal amount of outstanding 4.125% senior notes due 2017 (the “2017 Senior Notes”), resulting in a pretax loss of $3.4 million which is reflected in Other (income) expense in the condensed consolidated statement of income for the 13-week and 26-week periods ended August 4, 2017. The Company funded the redemption price for the 2017 Senior Notes with proceeds from the issuance of the 2027 Senior Notes.

~~5.Assets and liabilities measured at fair value~~

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The Company does not have any fair value measurements categorized within Level 3 as of August ~~3, 2018.~~2, 2019.

The following table presents the Company’s ~~assets and~~ liabilities ~~disclosed~~required to be measured at fair value as of August ~~3, 2018,~~2, 2019, aggregated by the level in the fair value hierarchy within which those measurements are classified.

Quoted Prices

in Active

Markets

Significant

for Identical

Other

Significant

Total Fair

Assets and

Observable

Unobservable

Value at

Liabilities

Inputs

August 2,

(In thousands)

(Level 1)

(Level 2)

(Level 3)

2019

Liabilities:

Long-term obligations (a)

2,645,339

92,035

—

2,737,374

Deferred compensation (b)

27,278

—

27,278

Quoted Prices






in Active

Markets

Significant

for Identical

Other

Significant

Total Fair

Assets and

Observable

Unobservable

Value at

Liabilities

Inputs

Inputs

August 3,

(In thousands)

(Level 1)

(Level 2)

(Level 3)

2018

Liabilities:

Long-term obligations (a)

$
2,467,011

$
299,793

$
—

$
2,766,804

Deferred compensation (b)

25,875

—

—

25,875

(a)

~~(a)~~

Included in the condensed consolidated balance sheet at book value as Current portion of long-term obligations of ~~$1,909~~$555 and Long-term obligations of ~~$2,776,811.~~

$2,573,483.

(b)

~~(b)~~

Reflected at fair value in the condensed consolidated balance sheet as Accrued expenses and other current liabilities of ~~$2,620~~$2,131 and noncurrent Other liabilities of ~~$23,255.~~

$25,147.

~~6.Commitments~~7.Commitments and contingencies

Legal proceedings

From time to time, the Company is a party to various legal matters ~~involving claims incidental to~~in the ~~conduct~~ordinary course of its business, including actions by employees, consumers, suppliers, government agencies, or others. The Company has recorded accruals with respect to these matters, where appropriate, which are reflected in the Company’s consolidated financial statements. For some matters, a liability is not probable or the amount cannot be reasonably estimated and therefore an accrual has not been made. In the 13-week period ended August 2, 2019, the Company recorded an accrual of $31.0 million for losses the Company believes are both probable and reasonably estimable relating to certified class actions and associated matters in Wage and Hour/Employment Litigation and Consumer/Product Litigation.

Except as described below and based on information currently available, the Company believes ~~based upon information currently available,~~ that ~~such~~its pending legal matters, both individually and in the aggregate, will be resolved without a material adverse effect on the Company’s consolidated financial statements as a whole. However, litigation and other legal matters involve an element of uncertainty. Future developments could cause these actions or claims to have a material adverse effect on the Company’s results of operations, cash flows, or financial position. In addition, certain of these matters, if decided adversely to the Company or settled by the Company, may result in liability material to the Company’s financial position or may negatively affect operating results ifAdverse decisions and settlements, including any required changes to the Company’s business, ~~operation are required.~~

~~Wage and Hour Litigation~~

~~The Company is defending the following wage and hour matters (collectively the “Wage/Hour Litigation”):~~

~~California Wage/Hour Litigation (“Key Carriers”)~~: Plaintiffs allege, on behalf of themselves and other similarly situated current and former “key carriers,” that the Company failed to comply with California law, in some or all of the following respects: failure to provide meal and rest periods, failure to provide accurate wage statements, and failure to provide appropriate termination pay. Plaintiffs seek to recover alleged unpaid wages, injunctive relief, consequential damages, pre-judgment interest, statutory penalties under the Private Attorney General Act (the “PAGA”) and attorneys’ fees and costs.

~~California Wage/Hour Litigation (“Non Key Carriers”)~~: Plaintiff alleges, on behalf of herself and other current and former “hourly non-key carrier” employees, that the Company failed to comply with California law in some or all of the following respects: failure to pay for all time worked, failure to pay timely wages, failure to provide meal and rest breaks, and failure to provide accurate wage statements and appropriate termination pay. Plaintiff seeks to recover penalties under the PAGA, attorneys’ fees and costs, and pre-judgment and post-judgment interest.

~~Pennsylvania Wage/Hour Litigation~~: Plaintiff, a former distribution center employee, alleges that he and other similarly situated current and former hourly distribution center employees were subjected to unlawful policies and practices and were denied regular and overtime wages in violation of federal and Pennsylvania law. Plaintiff seeks to proceed on a nationwide collective basis under federal law and a statewide class basis under Pennsylvania law and to recover alleged unpaid wages, liquidated damages, statutory damages, and attorneys’ fees and costs.

~~Tennessee Wage/Hour Litigation~~: Plaintiffs allege that they and other similarly situated current and former “key holders” were not paid for all hours worked in violation of federal, Illinois and Tennessee law. Plaintiffs seek to proceed on a nationwide collective basis under federal law and a statewide class basis under Tennessee and Illinois law and to recover alleged unpaid wages, statutory and common law damages, liquidated damages, pre- and post-judgment interest and attorneys’ fees and costs. The Company has reached a preliminary agreement with plaintiffs, which must be submitted to and approved by the Court, to resolve this matter for an amount not material to the Company’s financial statements as a whole.

The Company is vigorously defending the Wage/Hour Litigation and believes that its policies and practices comply with federal and state laws and that these actions are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or other ~~similar action, or the size of any putative class or classes. Likewise, except as~~developments in such matters, including without limitation those matters disclosed in Note 6 to the resolution of the Tennessee Wage/Hour Litigation, at this time it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, except as to the resolution of the Tennessee Wage/Hour Litigation, the Company is unable to estimate any potential loss or range of loss in these

~~matters; however, if the Company is not successful in its defense efforts, the resolution of these actions could have a material adverse effect on the Company’s~~audited consolidated financial statements ~~as a whole.~~

~~Other Employment Litigation~~

~~The Company is defending the following employment-related matters (collectively the “Employment Litigation”):~~

~~California Suitable Seating Litigation: Plaintiff alleges that the Company failed to provide her and other current and former California store employees with “suitable seats”~~contained in ~~violation of California law. Plaintiff seeks to recover penalties under the PAGA, injunctive relief, and attorneys’ fees and costs.~~

~~EEOC Litigation~~: The United States Equal Employment Opportunity Commission (“EEOC”) alleges that the Company’s use of post offer, pre-employment physical assessments, as applied to candidates for the general warehouse position in the Bessemer, Alabama distribution center, violates the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). The EEOC seeks injunctive and monetary relief for a class of applicants and employees under the ADA and GINA.

The Company is vigorously defending the Employment Litigation and believes that its employment policies and practices comply with federal and state law and that these matters are not appropriate for class or similar treatment. At this time, it is not possible to predict whether these matters will be permitted to proceed as a class or in a similar fashion, or the size of any putative class or classes. Likewise, at this time, it is not possible to estimate the value of the claims asserted, and no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. For these reasons, the Company is unable to estimate any potential loss or range of loss in these matters; however if the Company is not successful in its defense efforts, the resolution of these matters could have a material adverse effect on the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2019 under “Wage and Hour/Employment Litigation,” could affect our consolidated operating results in future periods or could result in liability or other amounts material to the Company’s annual consolidated financial ~~statements as a whole.~~statements.

Consumer/Product Litigation

In December 2015 the Company was first notified of several lawsuits in which plaintiffs allege violation of state law, including state consumer protection laws, relating to the labeling, marketing and sale of certain Dollar General private-label motor oil. Each of these lawsuits, as well as additional, similar lawsuits filed after December 2015, was filed in, or removed to, various federal district courts of the United States (collectively “the Motor Oil Lawsuits”).

On June 2, 2016, the United States Judicial Panel on Multidistrict Litigation (“JPML”) granted the Company’s motion to centralize the Motor Oil Lawsuits in a matter styled In re Dollar General Corp. Motor Oil Litigation, Case MDL No. 2709, before the United States District Court for the Western District of Missouri (“Motor Oil MDL”). Subsequently, plaintiffs in the Motor Oil MDL filed a consolidated amended complaint, in which they ~~seek~~sought to certify two nationwide classes and multiple statewide sub-classes and for each putative class member some or all of the following relief: compensatory damages, injunctive relief, statutory damages, punitive damages and attorneys’ fees. The Company’s motion to dismiss the allegations raised in the consolidated amended complaint was granted in part and denied in ~~part.~~part on August 3, 2017. To the extent additional consumer lawsuits alleging violation of laws relating to the labeling, marketing and sale of Dollar General private-label motor oil have been or will be filed, the Company expects that such lawsuits will be transferred to the Motor Oil MDL.

In May 2017, the Company received a Notice of Proposed Action from the Office of the New Mexico Attorney General (the “New Mexico AG”) which alleges that the Company’s labeling, marketing and sale of certain Dollar

General private-label motor oil violated New Mexico law (the “New Mexico Motor Oil Matter”). The State is represented in connection with this matter by counsel for plaintiffs in the Motor Oil MDL.

On May 25, 2017, in response to the Notice of Proposed Action, the Company filed an action in New Mexico federal court seeking a declaratory judgment that the New Mexico AG is prohibited by, among other things, the United States Constitution, from pursuing the New Mexico Motor Oil Matter and an order enjoining the New Mexico AG from pursuing such an action. (~~Dollar General Corporation v. Hector H. Balderas, D.N.M., Case No. 1:17-cv-00588). Thereafter, on~~ June 20, 2017, the New Mexico AG filed an action in the First Judicial District Court, County of Santa Fe, New Mexico pertaining to the New Mexico Motor Oil Matter. (Hector H. Balderas v. Dolgencorp, LLC, Case No. D-101-cv-2017-01562). The Company removed this matter to New Mexico federal court on July 26, 2017, and ~~filed a motion to dismiss the action. The matter~~it was transferred to the Motor Oil ~~MDL and the New Mexico AG has moved to~~

~~remand it to state court.~~MDL. (Hector H. Balderas v. Dolgencorp, LLC, D.N.M., Case No. 1:17-cv-772). ~~The Company’s~~On April 23, 2019, the matter was remanded to state court, and on May 3, 2019, the ~~New Mexico AG’s above-referenced motions are pending.~~Company moved to dismiss the action.

On September 1, 2017, the Mississippi Attorney General (the “Mississippi AG”), who also is represented by the counsel for plaintiffs in the Motor Oil MDL, filed an action in the Chancery Court of the First Judicial District of Hinds County, Mississippi in which the Mississippi AG alleges that the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil violated Mississippi law. (Jim Hood v. Dollar General Corporation, Case No. G2017-1229 T/1) (the “Mississippi Motor Oil Matter”). The Company removed this matter to Mississippi federal court on October 5, 2017, and filed a motion to dismiss the action. The matter was transferred to the Motor Oil MDL and the Mississippi AG moved to remand it to state court. (Jim Hood v. Dollar General Corporation, N.D. Miss., Case No. 3:17-cv-801-LG-LRA). On May 7, 2019, the Mississippi AG renewed its motion to remand. The Company’s and the Mississippi AG’s above-referenced motions are pending.

On January 30, 2018, the Company received a Civil Investigative Demand (“CID”) from the Office of the Louisiana Attorney General requesting information concerning the Company’s labeling, marketing and sale of certain Dollar General private-label motor oil (the “Louisiana Motor Oil Matter”). In response to the CID, the Company filed a petition for a protective order on February 20, 2018 in the 19^th Judicial District Court for the Parish of East Baton Rouge, Louisiana seeking to set aside the CID. (In re Dollar General Corp. and Dolgencorp, LLC, Case No. 666499). The Company’s petition is pending.

~~A mediation held in the Motor Oil MDL on February 26, 2018, was unsuccessful.~~ On August 20, 2018, plaintiffs moved to certify two nationwide classes relating to their claims of alleged unjust enrichment and breach of implied warranties. In addition, plaintiffs moved to certify ~~17 statewide classes~~a multi-state class relating to their claims of breach of implied warranties and multiple statewide classes relating to alleged unfair trade practices/consumer fraud, ~~statutory~~unjust enrichment and breach of implied warranty claims. The Company opposed the plaintiffs’ certification motion. On March 21, 2019, the court granted the plaintiffs’ certification motion as to 16 statewide classes regarding claims of unjust enrichment and 16 statewide classes regarding state consumer protection laws. Subsequently, the court certified an additional class, bringing the total to 17 statewide classes. The court denied plaintiffs’ certification motion in all other respects. On June 25, 2019, the United States Court of Appeals for the Eighth Circuit granted the Company’s Petition to Appeal the lower court’s certification rulings.

The Company is vigorously defending these matters and believes that the labeling, marketing and sale of its private-label motor oil comply with applicable federal and state requirements and are not misleading. The Company further believes that these matters are not appropriate for class or similar treatment. At this time, however, it is not possible to predict whether these matters ultimately will be permitted to proceed as a class or in a similar fashion ~~whether on a statewide or nationwide basis,~~ or the size of any putative class or classes. Likewise, ~~at this time, it is not possible to estimate the value of the claims asserted, and~~ no assurances can be given that the Company will be successful in its defense of these matters on the merits or otherwise. ~~For these reasons, the~~The Company ~~is unable to estimate the potential loss or range of~~now believes that a loss in ~~these matters; however, if~~this matter is both probable and reasonably estimable, and during the ~~Company~~13-week period ended August 2, 2019, recorded an accrual for an amount that is not successful in its defense efforts, the resolution of the Motor Oil MDL, the New Mexico Motor Oil Matter, the Mississippi Motor Oil Matter or the Louisiana Motor Oil Matter could have a material adverse effect onimmaterial to the Company’s consolidated financial statements as a whole.

8.	Segment reporting

~~7.Segment reporting~~

The Company manages its business on the basis of one reportable operating segment. As of August ~~3, 2018,~~2, 2019, all of the Company’s operations were located within the United States with the exception of certain ~~subsidiaries~~product sourcing operations in Hong Kong and China, ~~and a liaison office in India,~~ which collectively are not material with regard to assets, results of operations or

otherwise to the condensed consolidated financial statements. The following net sales data is presented in accordance with accounting standards related to disclosures about segments of an enterprise.


	13 Weeks Ended				26 Weeks Ended
	August 3,		August 4,		August 3,		August 4,

									13 Weeks Ended				26 Weeks Ended
									August 2,		August 3,		August 2,		August 3,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Classes of similar products:
Consumables	$	4,988,063	$	4,484,359	$	9,760,451	$	8,799,872	$	5,428,005	$	4,988,063	$	10,641,160	$	9,760,451
Seasonal		792,513		717,993		1,483,544		1,380,631		854,093		792,513		1,591,071		1,483,544
Home products		345,161		327,648		699,794		660,798		375,068		345,161		750,781		699,794
Apparel		317,572		298,305		613,983		596,629		324,587		317,572		621,926		613,983
Net sales	$	6,443,309	$	5,828,305	$	12,557,772	$	11,437,930	$	6,981,753	$	6,443,309	$	13,604,938	$	12,557,772

9.	Common stock transactions

~~8.Common stock transactions~~

On August 29, 2012, the Company’s Board of Directors authorized a common stock repurchase program, which the Board has since increased on several occasions. Most recently, on March ~~14, 2018,~~13, 2019, the Company’s Board of Directors authorized a $1.0 billion increase to the existing common stock repurchase program. As of August ~~3, 2018,~~2, 2019, a cumulative total of ~~$6.0~~$7.0 billion had been authorized under the program since its inception and approximately $1.0 billion remained available for repurchase. The repurchase authorization has no expiration date and allows repurchases from

time to time in the open market or in privately negotiated transactions. The timing and number of shares purchased depends on a variety of factors, such as price, market conditions, compliance with the covenants and restrictions under the Company’s debt agreements and other factors. Repurchases under the program may be funded from available cash or borrowings, including under the Company’s Revolving Facility and issuance of CP Notes discussed in further detail in Note 4.5.

Pursuant to its common stock repurchase program, during the 26-week periods ended August ~~3, 2018,~~2, 2019 and August ~~4, 2017,~~3, 2018, the Company repurchased in the open market approximately 3.0 million shares of its common stock at a total cost of $385.0 million and approximately 3.7 million shares of its common stock at a total cost of $349.5 million, ~~and approximately 2.3 million shares of its common stock at a total cost of $163.7 million,~~ respectively.

The Company paid a quarterly cash dividend of ~~$0.29~~$0.32 per share during each of the first and second quarters of ~~2018.~~2019. On August 28, ~~2018,~~2019, the Company’s Board of Directors declared a quarterly cash dividend of ~~$0.29~~$0.32 per share, which is payable on or before October ~~23, 2018~~22, 2019 to shareholders of record on October ~~9, 2018.~~8, 2019. The amount and declaration of future cash dividends is subject to the sole discretion of the Company’s Board of Directors and will depend upon, among other things, the Company’s results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Board may deem relevant in its sole discretion.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Dollar General Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Dollar General Corporation and subsidiaries (the Company) as of August ~~3, 2018,~~2, 2019, the related condensed consolidated statements of income, ~~and~~ comprehensive income, and shareholders’ equity for the thirteen and twenty-six week periods ended August ~~3, 2018~~2, 2019 and August ~~4, 2017,~~3, 2018, the condensed consolidated statements of cash flows for the twenty-six week periods ended August ~~3, 2018~~2, 2019 and August ~~4, 2017,~~3, 2018, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of February ~~2, 2018,~~1, 2019, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated March ~~23, 2018,~~22, 2019, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February ~~2, 2018,~~1, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


	/s/ Ernst & Young LLP

August ~~30, 2018~~29, 2019
Nashville, Tennessee

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~General

~~General~~

This discussion and analysis is based on, should be read with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations as contained in our Annual Report on Form 10-K for the fiscal year ended February ~~2, 2018.~~1, 2019. It also should be read in conjunction with the disclosure under “Cautionary Disclosure Regarding Forward-Looking Statements” in this report.

Executive Overview

We are among the largest discount retailers in the United States by number of stores, with ~~15,015~~15,836 stores located in 44 states as of August ~~3, 2018. Our~~2, 2019, with the greatest concentration of stores is in the southern, southwestern, midwestern and eastern United States. We offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health and beauty products and pet supplies, and non-consumable products such as seasonal merchandise, home decor and domestics, and basic apparel. Our merchandise includes national brands from leading manufacturers, as well as our own private brand ~~selections.~~selections with prices at substantial discounts to national brands. We offer our customers these national brand and private brand products at everyday low prices (typically $10 or less) in our convenient small-box locations.

We believe our convenient store formats, locations, and broad selection of high-quality products at compelling values have driven our substantial growth and financial success over the years and through a variety of economic cycles. We are mindful that the majority of our customers are value-conscious, and many have low and/or fixed incomes. As a result, we are intensely focused on helping our customers make the most of their spending dollars. Our core customers are often among the first to be affected by negative or uncertain economic conditions and ~~are~~ among the last to feel the effects of improving economic conditions particularly when trends are inconsistent and of an uncertain duration. The primary macroeconomic factors that affect our core customers include the unemployment and underemployment rates, wage growth, ~~fuel prices,~~changes in U.S. and global trade policy (including price increases from tariffs), and changes to certain government assistance programs, such as the Supplemental Nutrition Assistance ~~Program, and potential changes in U.S. trade policy.~~Program. Additionally, our customers are impacted by increases in those expenses that generally comprise a large portion of their household budget, such as rent, healthcare and ~~healthcare.~~fuel prices. Finally, significant unseasonable or unusual weather patterns can impact customer shopping behaviors.

We remain committed to the following long-term operating priorities as we consistently strive to improve our performance while retaining our customer-centric focus: 1) driving profitable sales growth, 2) capturing growth opportunities, 3) enhancing our position as a low-cost operator, and 4) investing in our people as a competitive advantage.

We seek to drive profitable sales growth through initiatives aimed at increasing customer traffic and average transaction amount, as well as an ongoing focus on enhancing our gross margins while maintaining both everyday low price and affordability. Several of these initiatives are also designed to capture growth opportunities and are discussed in more detail below. Even asamount. As we work to provide everyday low prices and meet our customers’ affordability needs, we ~~also~~ remain focused on enhancing our margins through effective category management, inventory shrink reduction initiatives, private brands penetration, distribution and transportation efficiencies, global sourcing, and pricing and markdown optimization. Several of our sales-driving initiatives are also designed to capture growth opportunities and are discussed in more detail below.

Historically, our sales of consumables, which tend to have lower gross margins, have been the key drivers of net sales and customer traffic, while sales of non-consumables, which tend to have higher gross margins, have contributed to more profitable sales growth and an increase in average transaction amount. In ~~the first half of 2018,~~recent years, our sales mix has continued to shift slightly toward consumables, and, within consumables, slightly toward lower margin departments such as perishables and tobacco. While we expect some sales mix challenges to persist, certain of our initiatives are intended to address these trends, although there can be no assurance we will be successful in ~~their reversal.~~reversing them.

We continue to make progress on and invest in certain strategic initiatives that we believe will help drive profitable sales growth and capture long-term growth opportunities. Such opportunities include leveraging existing and

developing new digital tools and technology to provide our customers with additional shopping access points and even greater

convenience. ~~Following an in-depth analysis,~~Additionally, we ~~are also testing~~tested a refreshed approach to our ~~non-consumables~~non-consumable product ~~offerings.~~offerings in 2018, and have implemented this initiative in more than 1,500 stores through the end of the 2019 second quarter. This ~~non-consumables initiative is a~~ merchandising strategy ~~that~~ offers a new, differentiated and limited assortment that will change throughout the year. ~~Our goal for~~As we extend this initiative more broadly in 2019, our goal is to continue to improve the shopping experience while delivering exceptional value within key areas of our non-consumable categories.

~~The imposition~~In 2019, we are continuing our rollout of ~~proposed or future tariffs by~~ the ~~U.S. government could~~“DG Fresh” initiative, a self-distribution model for fresh and frozen products that is designed to enhance sales, reduce product costs, improve our in-stock position and enhance item assortment. We are currently operating three DG Fresh distribution facilities, which are serving more than 3,500 stores, and we plan to open at least one additional self-distribution facility in 2019.

Tariffs on products from China, as applied to both our direct imports and domestic purchases, did not have a material impact on our ~~core customers, as well as~~financial results in the first half of 2019. Effective May 10, 2019, tariff rates on certain products from China increased from 10% to 25%, and these rates are scheduled to increase to 30% on October 1, 2019. Additionally, a 15% tariff on a fourth list of products is anticipated to go into effect, in part, on September 1, 2019, with the tariff on the remaining items on this list going into effect on December 15, 2019. We believe we can mitigate the potential sales and margin impact of such increased tariffs on our ~~business, although~~financial results for the remainder of 2019, particularly in light of our performance through the end of the second quarter of 2019, through various sourcing, merchandising and pricing efforts. However, these and additional increases in tariff ~~regulations currently in effect are not expected~~rates or expansions of products subject to tariffs, if any, may have a ~~material~~more significant impact on our ~~direct imports. It is more difficult, however, to assess the potential~~business. Further, as noted above, changes in trade policy that result in higher prices for our customers may negatively impact ~~to products that we buy from domestic vendors with global supply chains. We continue to monitor updates,~~their budgets, and ~~we are actively working to mitigate such pressures through various merchandising efforts, although there~~consequently, their spending. There can be no assurance we will be successful in our efforts to mitigate the impacts of existing or future tariffs in whole or in ~~part.~~part, including but not limited to any impacts on customer spending.

To support our other operating priorities, we remain focused on capturing growth opportunities. In the first half of ~~2018,~~2019, we opened ~~510~~489 new stores, remodeled ~~643~~653 stores, and relocated 6746 stores. For ~~2018,~~2019, we plan to open approximately ~~900~~975 new stores, remodel approximately 1,000 ~~mature store locations,~~stores, and relocate approximately 100 stores for an approximate total of ~~2,000~~2,075 real estate projects.

We continue to innovate within our channel and are able to utilize the most productive of our various store formats based on the specific market opportunity. We expect that our traditional 7,300 square foot store format will continue to be the primary store layout for new stores, relocations and remodels in ~~2018.~~2019. We expect approximately ~~400~~500 of the planned 1,000 remodels in ~~2018~~2019 to ~~include~~use a ~~higher cooler count for~~higher-cooler-count store format that enables us to offer an increased selection of perishable items. In addition, our smaller format store (less than 6,000 square feet) allows us to capture growth opportunities in metropolitan areas as well as in rural areas with a low number of households. We continue to incorporate lessons learned from our various store formats and layouts into our existing store base with a goal of driving increased customer traffic, average transaction amount, same-store sales and overall store productivity.

To support our new store growth and drive productivity, we continue to make investments in our traditional distribution center ~~network. Our~~network for non-refrigerated merchandise. Most recently, we began shipping from our distribution ~~centers~~center in Longview, Texas ~~and~~in January 2019. In addition, our distribution center in Amsterdam, New York ~~respectively, are~~is currently under ~~construction. We~~construction, and we expect ~~both of these distribution centers~~ to begin shipping from this facility later in ~~the 2019 calendar year.~~2019.

We have established a position as a low-cost operator, always seeking ways to reduce or control costs that do not affect our customers’ shopping ~~experience.~~experiences. We plan to continue enhancing this position over time ~~as we aim to continually streamline our business~~ while ~~also~~ employing ongoing cost discipline to reduce certain expenses as a percentage of sales. Nonetheless, we seek to maintain flexibility to invest in the business as necessary to enhance our long-term profitability.

We also have launched “Fast Track”, an initiative aimed at further enhancing our convenience proposition and in-stock position as well as increasing labor productivity within our stores. The first phase of Fast Track involves optimizing sorting processes within our distribution centers, as well as increased shelf-ready packaging, to allow for greater store-level stocking efficiencies, followed by the second-phase pilot of a self-checkout option in a limited number of stores later in 2019. These and certain other strategic initiatives will require us to incur upfront expenses for which, in some respects, there may not be an immediate or acceptable return in terms of sales or enhanced profitability.

Certain operating expenses such as wage rates and occupancy costs have continued to increase in recent years. While we expect these increases to persist, certain of our initiatives and plans are intended to help offset these challenges, although there can be no assurance we will be successful in mitigating them.

Our employees are a competitive advantage, and we ~~are always searching for~~proactively seek ways to continue investing in them. ~~We invest in our employees in an effort~~Our goal is to create an environment that attracts and retains talented personnel, ~~as we believe that,~~ particularly at the store level, because employees who are promoted from within our company generally have longer tenures and are greater contributors to improvements in our financial performance. We believe our investments in compensation and training for our store managers have contributed to improved customer experience scores, higher sales and improved turnover metrics.

To further enhance shareholder returns, we repurchased shares of our common stock and paid a quarterly cash dividend in the second quarter of 2019. We intend to continue our share repurchase activity, and to pay quarterly cash dividends, throughout 2019, subject to Board discretion and approval.

Highlights of our ~~2018~~2019 second quarter results of operations compared to the ~~2017~~2018 second quarter and our financial condition at August ~~3, 2018~~2, 2019 are set forth below. Basis points amounts referred to below are equal to 0.01% as a percentage of net sales.

●

Net sales increased ~~10.6%~~8.4% to ~~$6.44~~$6.98 billion. Sales in same-stores increased ~~3.7% due to~~4.0% reflecting increases in ~~both~~ average transaction amount and customer traffic. Average sales per square foot for all stores over the 52-week period ended August ~~3, 2018~~2, 2019 was ~~$229.~~

$234.

●

Gross profit, as a percentage of net sales, was 30.8% in the 2019 period compared to 30.6% in the 2018 period, ~~compared to 30.7% in the 2017 period, a decrease~~an increase of 713 basis points, reflecting ~~changes in the mix of~~lower markdowns relative to net sales ~~among other factors discussed below.~~

as well as higher initial inventory markups.

●

SG&A expense, as a percentage of net sales, was 22.5% in the 2019 period compared to 22.2% in the 2018 period, an increase of 32 basis points, primarily due to expenses of $31.0 million related to certain legal matters.

●

Operating profit increased 5.9% to $577.8 million in the 2019 period compared to ~~22.3% in the 2017 period, a decrease of 8 basis points, reflecting reductions in repairs and maintenance costs and lease termination expenses, among other factors discussed below.~~

~~Interest expense increased by $1.7 million to $25.5~~$545.5 million in the 2018 period.

●

Interest expense decreased by $0.6 million to $24.8 million in the 2019 period primarily due to ~~higher~~lower weighted average ~~borrowing rates.~~

borrowings.

●

The effective income tax rate for the ~~2018~~2019 period was ~~21.5%~~22.9% compared to a rate of ~~37.2%~~21.5% for the ~~2017~~2018 period primarily due to ~~the Tax Cuts and Jobs Act.~~

increases in state income taxes.

●

Net income was $426.6 million, or $1.65 per diluted share, in the 2019 period compared to net income of $407.2 million, or $1.52 per diluted share, in the 2018 ~~period compared to net income of $294.8 million, or $1.08 per diluted share, in the 2017~~ period.

Highlights of the first half of ~~2018~~2019 include:

●

Cash generated from operating activities was ~~$1.1~~$1.13 billion for the ~~2018~~2019 period, an increase of ~~39.6%~~3.0% over ~~$786.2 million~~$1.10 billion in the comparable ~~2017~~2018 period.

●

Total cash dividends of $165.1 million, or $0.64 per share, were paid during the 2019 period, compared to $154.7 million, or $0.58 per share, ~~were paid during the 2018 period, compared to $142.3 million, or $0.52 per share,~~ in the comparable ~~2017~~2018 period.

●

Inventory turnover was ~~4.7~~4.5 times on a rolling four-quarter basis. On a per store basis, inventories at August ~~3, 2018~~2, 2019 increased by ~~3.9%~~7.5% over the balances at August ~~4, 2017.~~

3, 2018.

The above discussion is a summary only. Readers should refer to the detailed discussion of our results of operations below in the current year periods as compared with the prior year periods as well as our financial condition at August ~~3, 2018.~~2, 2019.

Results of Operations

Accounting Periods. We utilize a 52-53 week fiscal year convention that ends on the Friday nearest to January 31. The following text contains references to years ~~2018~~2019 and ~~2017,~~2018, which represent the 52-week fiscal years ending or ended January 31, 2020 and February 1, 2019, ~~and February 2, 2018,~~ respectively. References to the second quarter accounting periods for ~~2018~~2019 and ~~2017~~2018 contained herein refer to the 13-week accounting periods ended August 2, 2019 and August 3, 2018, ~~and August 4, 2017,~~ respectively.

Seasonality. The nature of our business is somewhat seasonal. Primarily because of sales of Christmas-related merchandise, operating profit in our fourth quarter (November, December and January) has historically been higher than operating profit ~~achieved~~ in each of the first three quarters of the fiscal year. Expenses, and to a greater extent operating profit, vary by quarter. Results of a period shorter than a full year may not be indicative of results expected for the entire year. Furthermore, the seasonal nature of our business may affect comparisons between periods.

The following table contains results of operations data for the second 13-week periods and the 26-week periods of ~~2018~~2019 and ~~2017,~~2018, and the dollar and percentage variances among those periods:


	13 Weeks Ended						2018 vs. 2017				26 Weeks Ended						2018 vs. 2017

																					13 Weeks Ended						2019 vs. 2018				26 Weeks Ended						2019 vs. 2018
(amounts in millions, except	August 3,			August 4,			Amount		%		August 3,			August 4,			Amount		%		August 2,			August 3,			Amount		%		August 2,			August 3,			Amount		%
per share amounts)	2018			2017			Change		Change		2018			2017			Change		Change		2019			2018			Change		Change		2019			2018			Change		Change
Net sales by category:
Consumables	$	4,988.1		$	4,484.4		$	503.7	11.2	%	$	9,760.5		$	8,799.9		$	960.6	10.9	%	$	5,428.0		$	4,988.1		$	439.9	8.8	%	$	10,641.2		$	9,760.5		$	880.7	9.0	%
% of net sales		77.41	%		76.94	%						77.72	%		76.94	%						77.75	%		77.41	%						78.22	%		77.72	%
Seasonal		792.5			718.0			74.5	10.4			1,483.5			1,380.6			102.9	7.5			854.1			792.5			61.6	7.8			1,591.1			1,483.5			107.5	7.2
% of net sales		12.30	%		12.32	%						11.81	%		12.07	%						12.23	%		12.30	%						11.69	%		11.81	%
Home products		345.2			327.6			17.5	5.3			699.8			660.8			39.0	5.9			375.1			345.2			29.9	8.7			750.8			699.8			51.0	7.3
% of net sales		5.36	%		5.62	%						5.57	%		5.78	%						5.37	%		5.36	%						5.52	%		5.57	%
Apparel		317.6			298.3			19.3	6.5			614.0			596.6			17.4	2.9			324.6			317.6			7.0	2.2			621.9			614.0			7.9	1.3
% of net sales		4.93	%		5.12	%						4.89	%		5.22	%						4.65	%		4.93	%						4.57	%		4.89	%
Net sales	$	6,443.3		$	5,828.3		$	615.0	10.6	%	$	12,557.8		$	11,437.9		$	1,119.8	9.8	%	$	6,981.8		$	6,443.3		$	538.4	8.4	%	$	13,604.9		$	12,557.8		$	1,047.2	8.3	%
Cost of goods sold		4,468.4			4,037.8			430.7	10.7			8,720.7			7,948.4			772.2	9.7			4,832.8			4,468.4			364.4	8.2			9,453.7			8,720.7			733.1	8.4
% of net sales		69.35	%		69.28	%						69.44	%		69.49	%						69.22	%		69.35	%						69.49	%		69.44	%
Gross profit		1,974.9			1,790.5			184.4	10.3			3,837.1			3,489.5			347.6	10.0			2,148.9			1,974.9			174.1	8.8			4,151.2			3,837.1			314.1	8.2
% of net sales		30.65	%		30.72	%						30.56	%		30.51	%						30.78	%		30.65	%						30.51	%		30.56	%
Selling, general and administrative expenses		1,429.4			1,297.4			132.0	10.2			2,801.5			2,522.6			278.9	11.1			1,571.2			1,429.4			141.8	9.9			3,061.2			2,801.5			259.7	9.3
% of net sales		22.18	%		22.26	%						22.31	%		22.05	%						22.50	%		22.18	%						22.50	%		22.31	%
Operating profit		545.5			493.1			52.3	10.6			1,035.7			966.9			68.7	7.1			577.8			545.5			32.3	5.9			1,090.0			1,035.7			54.4	5.2
% of net sales		8.47	%		8.46	%						8.25	%		8.45	%						8.28	%		8.47	%						8.01	%		8.25	%
Interest expense		25.5			23.7			1.7	7.2			50.2			48.8			1.5	3.0			24.8			25.5			(0.6)	(2.5)			50.7			50.2			0.5	1.0
% of net sales		0.39	%		0.41	%						0.40	%		0.43	%						0.36	%		0.39	%						0.37	%		0.40	%
Other (income) expense		1.0			—			1.0	—			1.0			3.5			(2.5)	—			—			1.0			(1.0)	(100.0)			—			1.0			(1.0)	(100.0)
% of net sales		0.02	%		0.00	%						0.01	%		0.03	%						0.00	%		0.02	%						0.00	%		0.01	%
Income before income taxes		519.0			469.4			49.6	10.6			984.4			914.7			69.7	7.6			553.0			519.0			34.0	6.5			1,039.3			984.4			54.9	5.6
% of net sales		8.05	%		8.05	%						7.84	%		8.00	%						7.92	%		8.05	%						7.64	%		7.84	%
Income tax expense		111.8			174.6			(62.8)	(36.0)			212.3			340.4			(128.1)	(37.6)			126.4			111.8			14.6	13.1			227.7			212.3			15.4	7.2
% of net sales		1.73	%		3.00	%						1.69	%		2.98	%						1.81	%		1.73	%						1.67	%		1.69	%
Net income	$	407.2		$	294.8		$	112.5	38.1	%	$	772.1		$	574.3		$	197.8	34.4	%	$	426.6		$	407.2		$	19.3	4.7	%	$	811.6		$	772.1		$	39.5	5.1	%
% of net sales		6.32	%		5.06	%						6.15	%		5.02	%						6.11	%		6.32	%						5.97	%		6.15	%
Diluted earnings per share	$	1.52		$	1.08		$	0.44	40.7	%	$	2.88		$	2.09		$	0.79	37.8	%	$	1.65		$	1.52		$	0.13	8.6	%	$	3.13		$	2.88		$	0.25	8.7	%

13 WEEKS ENDED AUGUST ~~3, 2018~~2, 2019 AND AUGUST ~~4, 2017~~3, 2018

Net Sales. The net sales increase in the ~~2018~~2019 period reflects a same-store sales increase of ~~3.7%~~4.0% compared to the ~~2017~~2018 period. Same-stores include stores that have been open for at least 13 months and remain open at the end of the reporting period. For the ~~2018~~2019 period, there were ~~13,568~~14,764 same-stores which accounted for sales of ~~$6.0~~$6.6 billion. The increase in same-store sales reflects an increase in average transaction amount driven by higher average item retail prices, as well as an increase in customer traffic. Same-store sales increased in the consumables, seasonal and home products categories and declined in the apparel category. The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit. For the 2019 period, gross profit increased by 8.8%, and as a percentage of net sales increased by 13 basis points to 30.8% compared to the 2018 period. A reduction in markdowns as a percentage of net sales and higher initial markups on inventory purchases each contributed to the increase in the gross profit rate. These factors were partially offset by higher shrink, increased distribution costs, and a greater proportion of sales coming from the consumables category, which generally has a lower gross profit rate than our other product categories, and sales of lower margin products comprising a higher proportion of sales within the consumables category.

Selling, General & Administrative Expenses (“SG&A”). SG&A was 22.5% as a percentage of net sales in the 2019 period compared to 22.2% in the comparable 2018 period, an increase of 32 basis points. We recorded expenses of $31.0 million, or 44 basis points, in the 2019 period reflecting our estimate for the settlement of legal matters discussed in Note 7 to the condensed consolidated financial statements. These results also reflect an increase in expenses for store supplies. These items were partially offset by lower utilities costs as a percentage of sales and reductions in benefits costs, workers’ compensation and general liability expenses.

Interest Expense. Interest expense decreased by $0.6 million to $24.8 million in the 2019 period primarily due to lower average outstanding borrowings. See Liquidity and Capital Resources.

Income Taxes. The effective income tax rate for the 2019 period was 22.9% compared to a rate of 21.5% for the 2018 period which represents a net increase of 1.4 percentage points. The tax rate for the 2019 period was higher than the comparable 2018 period primarily due to an increase in state income taxes resulting from law changes, which was partially offset by greater tax benefits associated with share-based compensation.

26 WEEKS ENDED AUGUST 2, 2019 AND AUGUST 3, 2018

Net Sales. The net sales increase in the 2019 period reflects a same-store sales increase of 3.9% compared to the 2018 period. For the 2019 period, there were 14,764 same-stores which accounted for sales of $12.9 billion. The increase in same-store sales reflects increases in average transaction amount and customer traffic. The increase in average transaction amount was driven by ~~both higher average units sold and~~ higher average retail prices per transaction. Same-store sales increased in the consumables, seasonal and ~~apparel~~home products categories and declined in the ~~home product~~apparel category. The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

Gross Profit. For the ~~2018~~2019 period, gross profit increased by ~~10.3%~~8.2%, and as a percentage of net sales decreased by 7 basis points to 30.6% compared to the 2017 period. A greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, the sales of lower margin products comprising a higher proportion of consumables sales, higher markdowns, and increased transportation costs contributed to the decline in the gross profit rate. These factors were partially offset by an improved rate of inventory shrinkage and higher initial markups on inventory purchases. We believe our improved rate of inventory shrinkage reflects our continued implementation of in-store defensive merchandising and technology-based tools, including a significant increase in the number of stores utilizing Electronic Article Surveillance (“EAS”). We believe that the results from those stores in which EAS has been implemented suggests that EAS improves our inventory shrinkage which in turn helps to improve our in-stock position. As a result of increasing carrier and fuel rates, our transportation costs have continued to increase and pressured our overall gross margin in the second quarter. To mitigate these ongoing pressures, we continue to pursue

~~opportunities such as stem mile reduction, shipment load optimization and private fleet expansion to improve our distribution and transportation efficiencies.~~

~~Selling, General & Administrative Expenses (“SG&A”).~~ SG&A was 22.2% as a percentage of net sales in the 2018 period compared to 22.3% in the comparable 2017 period, a decrease of 8 basis points. The 2018 period results reflect lower repairs and maintenance expenses, a reduction in lease termination expenses primarily due to acquired stores in the 2017 period, lower fixed asset impairment costs, and a reduction in retail labor expenses as a percentage of sales, partially offset by an increase in professional fees, higher incentive compensation expenses, and increased costs to support certain loss prevention initiatives.

~~Interest Expense. Interest expense increased by $1.7 million to $25.5 million in the 2018 period primarily due to higher weighted average borrowing rates. See Liquidity and Capital Resources.~~

~~Income Taxes.~~ ~~The effective income tax rate for the 2018 period was 21.5% compared to a rate of 37.2% for the 2017 period which represents a net decrease of 15.7 percentage points.~~ The tax rate for the 2018 period was lower than the comparable 2017 period primarily due to the federal tax law changes contained in the Tax Cuts and Jobs Act, including the change in the federal income tax rate to 21% in the 2018 period compared to 35% in the 2017 period.

~~26 WEEKS ENDED AUGUST 3, 2018 AND AUGUST 4, 2017~~

~~Net Sales.~~ The net sales increase in the 2018 period reflects a same-store sales increase of 2.9% compared to the 2017 period. For the 2018 period, there were 13,568 same-stores which accounted for sales of $11.6 billion. The increase in same-store sales reflects an increase in average transaction amount, partially offset by a decline in customer traffic. The increase in average transaction amount was driven by both higher average units sold and higher average retail prices per transaction. Same-store sales increased in the consumables and seasonal categories and declined in the apparel and home products categories. The net sales increase was also positively affected by sales from new stores, modestly offset by sales from closed stores.

~~Gross Profit.~~ ~~For the 2018 period, gross profit increased by 10.0%, and as a percentage of net sales increased by~~ 5 basis points to ~~30.6%~~30.5% compared to the ~~2017~~2018 period. ~~Higher initial markups on inventory purchases~~Increased distribution costs, and ~~an improved rate of inventory shrinkage contributed to the increase in the gross profit rate. These factors were partially offset by~~ a greater proportion of sales of consumables, which generally have a lower gross profit rate than our other product categories, and the sales of lower margin products comprising a higher proportion of consumables sales, contributed to the decrease in the gross profit rate. These factors were partially offset by a reduction in markdowns as a percentage of net sales and ~~increased transportation costs.~~higher initial markups on inventory purchases.

Selling, General & Administrative Expenses. SG&A was ~~22.3%~~22.5% as a percentage of net sales in the ~~2018~~2019 period compared to ~~22.1%~~22.3% in the comparable ~~2017~~2018 period, an increase of 2619 basis points. ~~The 2018~~We recorded expenses of $31.0 million, or 23 basis points, in the 2019 period ~~results reflect increased occupancy costs, utilities and professional fees, each~~reflecting our estimate for the settlement of ~~which increased at a rate greater than~~legal matters discussed in Note 7 to the ~~increase in net sales,~~condensed consolidated financial statements. These expenses were partially offset by ~~reductions,~~lower utilities costs as a percentage of sales and reductions in ~~repairs~~workers’ compensation and ~~maintenance expenses and lease termination expenses primarily due to acquired stores in the 2017 period.~~ general liability expenses.

Interest Expense. Interest expense increased by ~~$1.5~~$0.5 million to ~~$50.2~~$50.7 million in the ~~2018~~2019 period primarily due to higher weighted average borrowing rates.

Income Taxes. The effective income tax rate for the ~~2018~~2019 period was ~~21.6%~~21.9% compared to a rate of ~~37.2%~~21.6% for the ~~2017~~2018 period which represents a net ~~decrease~~increase of ~~15.6~~0.3 percentage points. The tax rate for the ~~2018~~2019 period was ~~lower~~higher than the comparable ~~2017~~2018 period primarily due to ~~the federal tax~~an increase in state income taxes resulting from law changes, ~~contained in the Tax Cuts and Jobs Act, including the change in the federal income~~which was partially offset by greater tax ~~rate to 21% in the 2018 period compared to 35% in the 2017 period.~~benefits associated with share-based compensation.

Accounting Standards

for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. In July 2018, the FASB issued additional guidance which allows companies to record the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption as an alternative to the modified retrospective approach. We formed a project team to assess and implement the standard, which has completed its internal evaluation of existing contractual arrangements for embedded leases. The project team is also testing computations in our lease administration system, integrating interfaces between the lease administration system and the enterprise resource planning systems, identifying and implementing new processes and controls to ensure compliance, and is in the process of evaluating and documenting our accounting conclusions related to the new standard. As a result of the efforts of this project team, we have identified store leases as the area in which we would most likely be affected by the new guidance. Our assessment of the impact that adoption of this guidance will have on our consolidated financial statements is ongoing and we are anticipating a material impact because we are party to a significant number of lease contracts for our stores.

of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Subsequent to adoption, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments should be applied on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. We currently do not anticipate a material effect on our consolidated results of operations, financial position or cash flows to result from the adoption of this guidance.

Liquidity and Capital Resources

At August ~~3, 2018,~~2, 2019, we had a $1.25 billion unsecured revolving credit agreement (the “Revolving Facility”), $2.5 billion aggregate principal amount of senior notes, ~~outstanding,~~ and a commercial paper program that may provide borrowing availability of up to $1.0 billion. At August ~~3, 2018,~~2, 2019, we had total consolidated outstanding debt (including the current portion of long-term obligations) of ~~$2.8~~$2.6 billion, which includes commercial paper borrowings (“CP Notes”) and senior notes, ~~balances,~~ all of which are described in greater detail below. Our borrowing availability under the Revolving Facility may be effectively limited by ~~borrowings under the commercial paper program~~our CP Notes as further described below.

We believe our cash flow from operations and existing cash balances, combined with availability under the Revolving Facility, the ~~commercial paper program~~CP Notes and access to the debt markets will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending and anticipated dividend payments for a period that includes the next twelve months as well as the next several years. However, our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the issuance of debt, equity or other securities, the proceeds of which could provide additional liquidity for our operations.

For the remainder of fiscal ~~2018,~~2019, we anticipate potential combined borrowings under the Revolving Facility and our ~~commercial paper program~~CP Notes to be a maximum of approximately $800 million outstanding at any one time, including any anticipated borrowings to fund repurchases of common stock.

Revolving Credit Facility

On February 22, 2017, we entered into the Revolving Facility of which up to $175.0 million is available for the issuance of letters of credit and which is scheduled to mature on February 22, 2022.

Borrowings under the Revolving Facility bear interest at a rate equal to an applicable interest rate margin plus, at our option, either (a) LIBOR or (b) a base rate (which is usually equal to the prime rate). The applicable interest rate margin for borrowings as of August ~~3, 2018~~2, 2019 was 1.10% for LIBOR borrowings and 0.10% for base-rate borrowings. We must also pay a facility fee, payable on any used and unused commitment amounts of the Revolving Facility, and customary fees on letters of credit issued under the Revolving Facility. As of August ~~3, 2018,~~2, 2019, the commitment fee rate

was 0.15%. The applicable interest rate margins for borrowings, the facility fees and the letter of credit fees under the Revolving Facility are subject to adjustment from time to time based on our long-term senior unsecured debt ratings.

The Revolving Facility contains a number of customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, our (including our subsidiaries’) ability to: incur additional liens; sell all or substantially all of our assets; consummate certain fundamental changes or change in our lines of business; and incur additional subsidiary indebtedness. The Revolving Facility also contains financial covenants that require the maintenance of a minimum fixed charge coverage ratio and a maximum leverage ratio. As of August ~~3, 2018,~~2, 2019, we were in compliance with all such covenants. The Revolving Facility also contains customary events of default.

As of August ~~3, 2018,~~2, 2019, under the Revolving Facility, we had no outstanding borrowings, outstanding letters of credit of ~~$9.1~~$6.7 million, and borrowing availability of $1.24 billion that, due to our intention to maintain borrowing availability related to the commercial paper program described below, could contribute incremental liquidity of ~~$774.1~~$976.1 million at August ~~3, 2018.~~2, 2019. In addition, as of August ~~3, 2018~~2, 2019 we had outstanding letters of credit of ~~$38.9~~$42.7 million which were issued pursuant to separate agreements.

Commercial Paper

As of August ~~3, 2018,~~2, 2019, our condensed consolidated balance sheet reflected outstanding unsecured CP Notes of ~~$280.8~~$86.2 million classified as long-term obligations due to our intent and ability to refinance these obligations as long-term debt. An additional ~~$186.0~~$181.0 million of outstanding CP Notes were held by a wholly-owned subsidiary and are therefore not reflected on the condensed consolidated balance sheet. ~~Under this program, we~~We may issue the CP Notes from time to time in an aggregate amount not to exceed $1.0 billion outstanding at any time. The CP Notes may have maturities of up to 364 days from the date of issue and rank equal in right of payment with all of our other unsecured and unsubordinated indebtedness. We intend to maintain available commitments under the Revolving Facility in an amount at least equal to the amount of CP Notes outstanding at any time. As of August ~~3, 2018,~~2, 2019, the consolidated outstanding CP Notes had a weighted average borrowing rate of ~~2.3%~~2.5%.

Senior Notes

In April 2013 we issued $900.0 million aggregate principal amount of 3.25% senior notes due 2023 (the “2023 Senior Notes”) at a discount of $2.4 million, which are scheduled to mature on April 15, 2023. In October 2015 we issued $500.0 million aggregate principal amount of 4.150% senior notes due 2025 (the “2025 Senior Notes”) at a discount of $0.8 million, which are scheduled to mature on November 1, 2025. In April 2017 we issued $600.0 million aggregate principal amount of 3.875% senior notes due 2027 (the “2027 Senior Notes”) at a discount of $0.4 million, which are scheduled to mature on April 15, 2027. In April 2018 we issued $500.0 million aggregate principal amount of 4.125% senior notes due 2028 (the “2028 Senior Notes”) at a discount of $0.5 million, which are scheduled to mature on May 1, 2028. Collectively, the 2023 Senior Notes, 2025 Senior Notes, 2027 Senior Notes and 2028 Senior Notes comprise the “Senior Notes”, each of which were issued pursuant to an indenture as supplemented and amended by supplemental indentures relating to each series of Senior Notes (as so supplemented and amended, the “Senior Indenture”). Interest on the 2023 Senior Notes and the 2027 Senior Notes is payable in cash on April 15 and October 15 of each year. Interest on the 2025 and 2028 Senior Notes is payable in cash on May 1 and November 1 of each ~~year, with interest on the 2028 Senior Notes commencing on November 1, 2018.~~year.

We may redeem some or all of the Senior Notes at any time at redemption prices set forth in the Senior Indenture. Upon the occurrence of a change of control triggering event, which is defined in the Senior Indenture, each holder of our Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

The Senior Indenture contains covenants limiting, among other things, our ability (subject to certain exceptions) to consolidate, merge, or sell or otherwise dispose of all or substantially all of our assets; and our ability and the ability of our subsidiaries to incur or guarantee indebtedness secured by liens on any shares of voting stock of significant subsidiaries.

The Senior Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on our Senior Notes to become or to be declared due and payable, as applicable.

Current Financial Condition / Recent Developments

Our inventory balance represented approximately ~~53%~~55% of our total assets exclusive of goodwill, operating lease assets, and other intangible assets as of August ~~3, 2018.~~2, 2019. Our ability to effectively manage our inventory balances can have a significant impact on our cash flows from operations during a given fiscal year. Inventory purchases are often somewhat seasonal in nature, such as the purchase of warm-weather or Christmas-related merchandise. Efficient management of our inventory has been and continues to be an area of focus for us.

As described in Note 67 to the unaudited condensed consolidated financial statements, we are involved in a number of legal actions and claims, some of which could potentially result in material cash payments. Adverse developments in those actions could materially and adversely affect our liquidity.

Our senior unsecured debt is rated “Baa2,” by Moody’s with a stable outlook and “BBB” by Standard & Poor’s with a stable outlook, and our commercial paper program is rated “P-2” by Moody’s and “A-2” by Standard and Poor’s. Our current credit ratings, as well as future rating agency actions, could (i) impact our ability to finance our operations on satisfactory terms; (ii) affect our financing costs; and (iii) affect our insurance premiums and collateral requirements

necessary for our self-insured programs. There can be no assurance that we will maintain or improve our current credit ratings.

Unless otherwise noted, all references to the ~~“2018~~“2019 period” and the ~~“2017~~“2018 period” in the discussion of “Cash flows from operating activities,” “Cash flows from investing activities,” and “Cash flows from financing activities” below refer to the 26-week periods ended August 2, 2019 and August 3, 2018, ~~and August 4, 2017,~~ respectively.

Cash flows from operating activities. Cash flows from operating activities were ~~$1.1~~$1.13 billion in the ~~2018~~2019 period, which represents a ~~$311.1~~$33.2 million increase compared to the ~~2017~~2018 period. Net income increased by ~~$197.8~~$39.5 million in the ~~2018~~2019 period over the ~~2017~~2018 period. Changes in merchandise inventories resulted in a ~~$292.9~~$321.1 million decrease in the ~~2018~~2019 period as compared to a decrease of ~~$205.4~~$292.9 million in the ~~2017~~2018 period. Changes in accounts payable resulted in a $323.2 million increase in the 2019 period compared to a $270.9 million increase in the 2018 ~~period compared to a $292.1 million increase in the 2017~~ period, due primarily to the timing of receipts and payments. Changes in income taxes in the ~~2018~~2019 period compared to the ~~2017~~2018 period ~~reflect lower income tax payments~~are primarily ~~resulting from~~due to the timing of payments for income ~~taxes paid and the reduction in the federal income tax rate to 21% from 35% under the Tax Cuts and Jobs Act.~~taxes.

On an ongoing basis, we closely monitor and manage our inventory balances, and they may fluctuate from period to period based on new store openings, the timing of purchases, and other factors. Merchandise inventories increased by 8% in the 2019 period and also increased 8% in the 2018 period, ~~and increased 6% in the 2017 period. In the 2018 period compared to the 2017 period,~~with changes ~~in inventory balances~~ in our four inventory categories ~~were~~ as follows: ~~the~~ consumables ~~category~~ increased by ~~11% in both periods; the seasonal category increased 5%~~8% compared to a ~~minimal decrease; the~~11% increase; seasonal increased 9% compared to a 5% increase; home products ~~category~~ increased by 15% compared to a 5% increase; and apparel decreased by 5% compared to a 3% ~~increase; and apparel decreased by 3% compared to a 4%~~ decrease.

Cash flows from investing activities. Significant components of property and equipment purchases in the 2019 period included the following approximate amounts: $136 million for improvements, upgrades, remodels and relocations of existing stores; $68 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; $54 million for distribution and transportation-related capital expenditures; and $28 million for information systems upgrades and technology-related projects. The timing of new, remodeled and relocated store openings along with other factors may affect the relationship between such openings and the related property and equipment purchases in any given period. During the 2019 period, we opened 489 new stores and remodeled or relocated 699 stores.

Significant components of property and equipment purchases in the 2018 period included the following approximate amounts: $147 million for improvements, upgrades, remodels and relocations of existing stores; $113 million for distribution and transportation-related capital expenditures; $81 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; and $24 million for information systems upgrades and technology-related projects. The timing of new, remodeled and relocated store openings along with other factors may affect the relationship between such openings and the related property and equipment purchases in any given period. During the 2018 period, we opened 510 new stores and remodeled or relocated 710 stores.

Significant components of property and equipment purchases in the 2017 period included the following approximate amounts: $126 million for improvements, upgrades, remodels and relocations of existing stores; $90 million for distribution and transportation-related capital expenditures; $81 million related to new leased stores, primarily for leasehold improvements, fixtures and equipment; and $13 million for information systems upgrades and technology-related projects. During the 2017 period, we opened 574 new stores and remodeled or relocated 555 stores.

Capital expenditures for ~~2018~~2019 are currently projected to be in the range of ~~$725~~$775 million to ~~$800~~$825 million. We anticipate funding ~~2018~~2019 capital requirements with a combination of some or all of the following: existing cash balances, cash flows from operations, availability under our Revolving Facility and/or the issuance of additional CP Notes. We

plan to continue to invest in store growth through the development of new stores and the remodel or relocation of existing stores. Capital expenditures in ~~2018~~2019 are anticipated to support our store growth as well as our remodel and relocation initiatives, including capital outlays for leasehold improvements, fixtures and equipment; the construction of new stores; costs to support and enhance our supply chain initiatives including new and existing distribution center facilities and our private fleet; technology and other strategic initiatives; as well as routine and ongoing capital requirements.

Cash flows from financing activities. ~~Net~~In the 2018 period, net proceeds from the issuance of the 2028 Senior Notes ~~in the 2018 period~~ were $499.5 million and ~~net proceeds from the issuance of the 2027 Senior Notes in the 2017 period were $599.6 million. In the 2018 period,~~ we redeemed all outstanding 1.875% senior notes due 2018 for $400.0 ~~million and made a principal payment on the Term Facility of $175.0~~ million. ~~In the 2017 period, we redeemed all outstanding 4.125% senior notes due 2017 for $500.0 million and made a principal payment on the Term Facility of $250.0 million. Commercial~~Net commercial paper borrowings ~~were a net decrease in the 2018 period of $149.4 million and a net increase of $25.0~~decreased by $280.7 million in the ~~2017~~2019 period and decreased by $149.4 million in the 2018 period. There were no borrowings or repayments under the Revolving Facility during the ~~2018~~2019 or ~~2017~~2018 periods. Also during the ~~2018~~2019 and ~~2017~~2018 periods, we repurchased ~~3.7~~3.0 million and ~~2.3~~3.7 million shares of our common stock at a total cost of ~~$349.5~~$385.0 million and ~~$163.7~~$349.5 million, respectively, and paid cash dividends of $165.1 million and $154.7 million, ~~and $142.3 million,~~ respectively.

Share Repurchase Program

At August ~~3, 2018,~~2, 2019, our common stock repurchase program had a total remaining authorization of approximately $1.0 ~~billion, which included the increase of $1.0 billion to the authorization available under this common stock repurchase program approved by our Board of Directors on March 14, 2018.~~billion. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. The authorization has no expiration date and may be modified or terminated from time to time at the discretion of our Board of Directors. For more information about our share repurchase program, see Note 89 to the condensed consolidated financial statements contained in Part I, Item 1 of this report and Part II, Item 2 of this report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended February ~~2, 2018.~~1, 2019.

~~ITEM 4.CONTROLS AND PROCEDURES.~~

ITEM 4.

~~(a)Disclosure Controls and Procedures~~. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.CONTROLS AND PROCEDURES.

(a)Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

~~(b)Changes in Internal Control Over Financial Reporting~~. There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the quarter ended August 3, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(b)Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the quarter ended August 2, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2423

PART II—OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

~~ITEM 1.LEGAL PROCEEDINGS.~~

The information contained in Note 67 to the unaudited condensed consolidated financial statements under the heading “Legal proceedings” contained in Part I, Item 1 of this report is incorporated herein by this reference.

ITEM 1A.

RISK FACTORS.

~~ITEM 1A.RISK FACTORS.~~

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended February ~~2, 2018.~~1, 2019.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

The following table contains information regarding purchases of our common stock made during the quarter ended August ~~3, 2018~~2, 2019 by or on behalf of Dollar General or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

Issuer Purchases of Equity Securities


				Total Number	Approximate
				of Shares	Dollar Value
				Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans	Under the Plans
Period	Purchased	per Share		or Programs(a)	or Programs(a)
05/04/19-05/31/19	39,505	$	126.57	39,505	$	1,141,137,000
06/01/19-06/30/19	681,385	$	135.02	681,385	$	1,049,138,000
07/01/19-08/02/19	631,935	$	139.24	631,935	$	961,150,000
Total	1,352,825	$	136.74	1,352,825	$	961,150,000

Total Number

Approximate

of Shares

Dollar Value

Purchased

of Shares that May

Total Number

Average

as Part of Publicly

Yet Be Purchased

of Shares

Price Paid

Announced Plans or

Under the Plans

Period

Purchased

per Share

Programs(a)

or Programs(a)

05/05/18-05/31/18

—

$
—

—

$
1,203,616,000

06/01/18-06/30/18

1,752,603

$
94.50

1,752,603

$
1,037,998,000

07/01/18-08/03/18

344,045

$
98.59

344,045

$
1,004,079,000

Total

2,096,648

$
95.17

2,096,648

$
1,004,079,000

(a)

~~(a)~~

On September 5, 2012, the Company announced a program permitting the Company to repurchase a portion of its outstanding shares not to exceed a dollar maximum established by the Company’s Board of Directors. The program was most recently amended on March ~~14, 2018~~13, 2019 to increase the repurchase authorization by $1.0 billion, bringing the total value of authorized share repurchases under the program to ~~$6.0~~$7.0 billion. Under the authorization, purchases may be made in the open market or in privately negotiated transactions from time to time subject to market and other conditions. This repurchase authorization has no expiration ~~date~~.

date.

ITEM 6.

EXHIBITS.

~~ITEM 6.EXHIBITS.~~

See the Exhibit Index to this report immediately before the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.

2524

CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We include “forward-looking statements” within the meaning of the federal securities laws throughout this report, particularly under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2, and “Note 6.7. Commitments and Contingencies” included in Part I, Item 1, among others. You can identify these statements because they are not limited to historical fact or they use words such as “may,” “will,” “should,” “expect,” “believe,” “anticipate,” “project,” “plan,” “estimate,” “aim,” “goal,” “opportunity,” “intend,” “could,” “can,” “would,” “committed,” “likely,” “scheduled, ~~to,~~” “predict,” “seek,” “potential,” “strive,” “subject to,” “focused on,” ~~“continue,”~~ or ~~“will result in,~~“continue,” and similar expressions that concern our strategy, plans, initiatives, intentions or beliefs about future occurrences or results. For example, statements relating to estimated and projected expenditures, cash flows, results of operations, financial condition and liquidity; plans and objectives for, and expectations regarding, future operations, economic and competitive market conditions, growth or initiatives, including the number of planned store openings, remodels and relocations, store format plans, progress of strategic (including our non-consumables initiative, DG Fresh, and Fast Track), merchandising and margin enhancing initiatives, trends in sales of consumable and non-consumable products, results of the investment in and training of our personnel; potential future stock repurchases and cash dividends; anticipated borrowing under the Revolving Facility and our commercial paper program; the potential impact of legal or regulatory changes and our responses thereto, including the potential impact of tariffs imposed by the U.S. government; efforts to improve distribution and transportation efficiencies, including anticipated timing of distribution center openings; and the expected outcome or effect of pending or threatened litigation or audits are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that may change at any time, so our actual results may differ materially from those that we expected. We derive many of these statements from our operating budgets and forecasts, which are based on many detailed assumptions that we believe are reasonable. However, it is very difficult to predict the effect of known factors, and we cannot anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from the expectations expressed in our forward-looking statements include, without limitation:

●

~~economic conditions and other~~ economic factors, including but not limited to employment ~~levels, credit availability~~levels; inflation; higher fuel, energy, health care and ~~spending patterns, inflation, commodity prices, fuel prices,~~housing costs, interest rates, consumer debt levels, and tax rates; tax law changes that negatively affect credits and refunds; lack of available credit; decreases in, or elimination of, government subsidies such as unemployment and food assistance programs; commodity rates; transportation, lease and insurance costs; wage rates; foreign exchange rate fluctuations; measures that create barriers to or increase the costs ~~associated with~~of international trade (including increased import duties or tariffs),; and ~~healthcare~~changes in laws and ~~housing costs,~~regulations, and their effect on, as applicable, ~~consumer demand,~~ customer ~~traffic, customer~~spending and disposable income, our ability to execute our ~~strategic~~strategies and initiatives, our ~~costs~~cost of goods sold, and our SG&A expenses ~~and~~(including real estate ~~costs;~~

costs);

●

failure to ~~successfully execute~~achieve or sustain our strategies and initiatives, including those relating to merchandising, ~~marketing,~~ real estate and new store development, store formats, digital, shrink, sourcing, ~~shrink,~~ private brand, inventory management, ~~distribution and transportation,~~supply chain, store operations, store formats, ~~budgeting and~~ expense reduction, and technology;

●

failure to ~~open, relocate~~timely and ~~remodel stores profitably and on schedule, as well as failure of~~cost-effectively execute our real estate projects or to anticipate or successfully address the challenges imposed by our expansion, including into new ~~store base to achieve sales and operating levels consistent with our expectations;~~

states or metro areas;

●

~~effective response to~~ competitive pressures and changes in the competitive environment and the geographic and product markets where we operate, including, but not limited to, pricing, ~~the creation~~expanded availability of ~~a more convenient customer online~~mobile, web-based and ~~in-store shopping experience,~~other digital technologies, and consolidation;

●

levels of inventory shrinkage;

●

failure to successfully manage inventory balances;

●

failure to maintain the security of information that we hold ~~whether as a result of cybersecurity attacks~~relating to proprietary business information or ~~otherwise;~~

our customers, employees and vendors;

●

~~disruptions, unanticipated~~a significant disruption to our distribution network, to the capacity of our distribution centers or unusual expenses or operational failures in our supply chain including, without limitation, a decrease in transportation capacity for overseas shipments, increases in transportation costs (including increased fuel costs and carrier rates or driver wages), work stoppages or other labor

~~disruptions that could impede~~to the timely receipt of ~~or delivery of merchandise,~~inventory, or delays in constructing or opening new distribution centers;

●

risks and challenges associated with sourcing merchandise from suppliers, including, but not limited to, those related to international trade;

●

~~unfavorable publicity~~product liability, product recall or ~~consumer perception of our products, including, but not limited to, related~~other product ~~liability;~~

safety or labeling claims;

●

~~risks and challenges associated with our private brands, including, but not limited to, our level of success in improving our gross profit rate;~~

the impact of changes in or noncompliance with governmental ~~laws~~regulations and ~~regulations~~requirements (including, but not limited to, those relating to environmental compliance, product ~~safety or labeling,~~and food safety, labeling and sales, information security and privacy, ~~and~~ labor and employment, ~~laws,~~employee wages, and consumer protection, as well as tax laws, the interpretation of existing tax laws, or our failure to sustain our reporting positions negatively affecting our tax rate) and developments in or outcomes of private actions, class actions, multi-district litigation, administrative proceedings, regulatory actions or other litigation;

●

incurrence of material uninsured losses, excessive insurance costs or accident costs;

●

natural disasters, unusual weather conditions (whether or not caused by climate change), pandemic outbreaks, terrorist acts and geo-political events;

●

damage or interruption to our information systems as a result of external factors, staffing shortages or ~~failure of~~challenges in maintaining or updating our existing technology ~~initiatives to deliver desired~~ or ~~timely results;~~

developing or implementing new technology;

●

~~ability~~failure to attract, train and retain qualified employees while controlling labor costs and other labor issues;

●

loss of key personnel or inability to hire additional qualified ~~personnel or disruption~~personnel;

●

risks associated with our private brands, including, but not limited to, our level of ~~executive management as a result of retirements or transitions;~~

success in improving their gross profit rate;

●

seasonality of our business;

●

deterioration in market conditions, including market disruptions, limited liquidity and interest rate fluctuations, or ~~a lowering of~~changes in our credit ~~ratings;~~

profile;

●

new accounting guidance or changes in the interpretation or application of existing ~~guidance, such as changes to guidance related to leases;~~

guidance;

●

factors disclosed under “Risk Factors” in Part I, Item 1A of our Form 10-K for the fiscal year ended February ~~2, 2018;~~1, 2019; and

●

factors disclosed elsewhere in this document (including, without limitation, in conjunction with the forward-looking statements themselves) and other factors.

All forward-looking statements are qualified in their entirety by these and other cautionary statements that we make from time to time in our other Securities and Exchange Commission filings and public communications. You should evaluate forward-looking statements in the context of these risks and uncertainties and are cautioned to not place undue reliance on such forward-looking statements. These factors may not contain all of the material factors that are important to you. We cannot assure you that we will realize the results or developments we anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements in this report are made only as of the date hereof. We undertake no obligation, and specifically disclaim any duty, to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

2726

EXHIBIT INDEX


10.1		~~Employment Agreement, effective June 3, 2018, between~~ Dollar General Corporation ~~and Todd J. Vasos (incorporated by reference to~~Executive Relocation Policy, as amended (effective August 27, 2019)

10.2		Amended Schedule of Senior Vice President-level Executive Officers who have executed a Senior Vice President Employment Agreement in the form filed as Exhibit 9910.1 to Dollar General Corporation’s ~~Current~~Quarterly Report on Form ~~8-K dated~~10-Q for the fiscal quarter ended May ~~31,~~4, 2018, filed with the SEC on May 31, 2018 (incorporated by reference to Exhibit 10.1 to Dollar General Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2019, filed with the SEC on May 30, 2019 (file no. 001-11421))

15		Letter re unaudited interim financial information

31		Certifications of CEO and CFO under Exchange Act Rule 13a-14(a)

32		Certifications of CEO and CFO under 18 U.S.C. 1350

~~101.INS~~101		~~XBRL Instance Document~~Interactive data files for Dollar General Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 2, 2019, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (unaudited); (iii) the Condensed Consolidated Statements of Comprehensive Income (unaudited); (iv) the Condensed Consolidated Statements of Shareholders’ Equity (unaudited); (v) the Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Condensed Consolidated Financial Statements (unaudited)

104
~~101.SCH~~		The cover page from Dollar General Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 2, 2019 (formatted in Inline XBRL ~~Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~and contained in Exhibit 101)

2827

SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, both on behalf of the Registrant and in his capacity as principal financial officer of the Registrant.


		DOLLAR GENERAL CORPORATION


Date:	August ~~30, 2018~~29, 2019	By:	/s/ John W. Garratt
			John W. Garratt
			Executive Vice President & Chief Financial Officer

2928


	For the 13 weeks ended				For the 26 weeks ended
	August 3,		August 4,		August 3,		August 4,
	2018		2017		2018		2017
Net sales	$	6,443,309	$	5,828,305	$	12,557,772	$	11,437,930
Cost of goods sold		4,468,436		4,037,783		8,720,650		7,948,425
Gross profit		1,974,873		1,790,522		3,837,122		3,489,505
Selling, general and administrative expenses		1,429,397		1,297,376		2,801,462		2,522,564
Operating profit		545,476		493,146		1,035,660		966,941
Interest expense		25,451		23,748		50,224		48,752
Other (income) expense		1,019		—		1,019		3,502
Income before income taxes		519,006		469,398		984,417		914,687
Income tax expense		111,769		174,615		212,328		340,415
Net income	$	407,237	$	294,783	$	772,089	$	574,272
Earnings per share:
Basic	$	1.53	$	1.08	$	2.89	$	2.09
Diluted	$	1.52	$	1.08	$	2.88	$	2.09
Weighted average shares outstanding:
Basic		266,457		273,690		267,362		274,191
Diluted		267,226		274,132		268,180		274,674

Dividends per share	$	0.29	$	0.26	$	0.58	$	0.52


	13 Weeks Ended August 3, 2018					13 Weeks Ended August 4, 2017
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	407,237	266,457	$	1.53	$	294,783	273,690	$	1.08
Effect of dilutive share-based awards			769					442
Diluted earnings per share	$	407,237	267,226	$	1.52	$	294,783	274,132	$	1.08


	26 Weeks Ended August 3, 2018					26 Weeks Ended August 4, 2017
			Weighted					Weighted
	Net		Average	Per Share		Net		Average	Per Share
	Income		Shares	Amount		Income		Shares	Amount
Basic earnings per share	$	772,089	267,362	$	2.89	$	574,272	274,191	$	2.09
Effect of dilutive share-based awards			818					483
Diluted earnings per share	$	772,089	268,180	$	2.88	$	574,272	274,674	$	2.09


				Total Number	Approximate
				of Shares	Dollar Value
				Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans or	Under the Plans
Period	Purchased	per Share		Programs(a)	or Programs(a)
05/05/18-05/31/18	—	$	—	—	$	1,203,616,000
06/01/18-06/30/18	1,752,603	$	94.50	1,752,603	$	1,037,998,000
07/01/18-08/03/18	344,045	$	98.59	344,045	$	1,004,079,000
Total	2,096,648	$	95.17	2,096,648	$	1,004,079,000