Rob, Conference Operator: Good morning. My name is Rob, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the Dollar General second quarter 2026 earnings call. Today is Thursday, August 27th, 2026. All lines have been placed on mute to prevent any background noise. This call is being recorded. Instructions for listening to the replay of the call are available in the company’s earnings press release issued this morning. Now, I would like to turn the conference over to Mr. Kevin Walker, Vice President of Investor Relations. Kevin, you may begin your conference.

Kevin Walker, Vice President of Investor Relations, Dollar General: Thank you, and good morning, everyone. On the call with me today are Todd Vasos, our CEO, and Donny Lau, our CFO. After our prepared remarks, we’ll open the call up for your questions, and Emily Taylor, our Chief Operating Officer, will join us for the Q&A session. To allow us to address as many questions as possible in the queue, please limit yourself to one question. Our earnings release issued today can be found on our website at investor.dollargeneral.com under News and Events. Let me caution you that today’s comments include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, such as statements about our financial guidance, long-term financial framework, strategy, initiative, plans, goals, priorities, opportunities, expectations, or beliefs about future matters, and other statements that are not limited to historical fact.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These factors include, but are not limited to, those identified in our earnings release issued this morning under Risk Factors in our 2025 Form 10-K, filed on March 20th, 2026, and any later filed periodic report, and in the comments that are made on this call. You should not unduly rely on forward-looking statements, which speak only as of today’s date. Dollar General disclaims any obligation to update or revise any information discussed on this call unless required by law. Now, it is my pleasure to turn the call over to Todd.

Todd Vasos, Chief Executive Officer, Dollar General: Thank you, Kevin, and welcome to everyone joining our call. I want to begin by thanking our team for their continued dedication to fulfilling our mission of serving others every day in our stores, distribution centers, private fleet, and store support center. We are pleased with our second quarter results, including balanced top-line growth, healthy operating margin expansion, and strong double-digit EPS growth, each of which exceeded our expectations even before considering any impact from tariff refunds. For today’s call, I’ll start by recapping highlights from our second quarter performance. Donny will then walk through our financial results and outlook, and I’ll close with an update on our strategic growth pillars. Turning to our second quarter performance, net sales for the quarter increased by 0.2% to $11.3 billion, compared to net sales of $10.7 billion in last year’s second quarter.

Once again, during the quarter, we grew market share in both dollars and units in highly consumable product sales while also growing market share in non-consumable product sales. We were especially pleased to see our share gains accelerate in the quarter, which we believe demonstrates the strength and broad appeal of our unique combination of value and convenience, particularly in rural communities across America. Same-store sales increased 3.5% during the quarter, driven by customer traffic growth of 2% and average basket growth of 1.5%. Notably, this marks the fifth consecutive quarter of growth in customer traffic as we continue to build on the momentum in our business with both new and existing customers. In addition, all four merchandising categories delivered positive comp sales for the sixth consecutive quarter, with the growth rate in non-consumables once again outpacing consumables.

This broad-based category growth is a testament to the relevance of our offering and our position as America’s neighborhood general store. From a monthly cadence perspective, all three periods of the quarter were strong, led by both June and July. While still early, we are pleased with the strong sales performance to begin Q3 and confident in our plans to drive continued growth in sales, market share, and customer traffic. Moving to an update on our customer. Our core customers continue to be financially constrained, with a variety of factors impacting their budget. Most notably, higher and more volatile fuel prices have forced customers to further prioritize purchases with a focus on value and affordability.

As customers have continued to reduce trips and shop closer to home, Dollar General is uniquely positioned to meet their needs, with more than 21,000 stores located within five miles of approximately 75% of the U.S. population. Our expansive store footprint continues to be a unique competitive strength and is complemented by our growing delivery presence, which contributed an estimated 40 basis points to our comp sales growth in Q2. In addition to our strong convenience offering, we remain committed to delivering exceptional value through our strong everyday low price position, which is within 3-4 percentage points of mass retailers, disciplined and strategic approach to promotional activity, and extensive offering of more than 2,000 items across the store at or below the $1 price point.

Within our $1 price point, we continue to emphasize and strengthen our Value Valley offering, which is now comprised of more than 600 rotating items, each priced at $1. During Q2, we expanded our $1 off-shelf display presence in more than 9,000 stores. We are encouraged by the early results, and these stores are already driving incremental comp sales greater than the rest of the chain. Notably, our Value Valley offering once again significantly outperformed the chain average in Q2 with comp sales increases of more than 16%. Looking ahead, we are excited about our plans for an expanded $1 presence in our fall and holiday set in the back half of the year. We know this price point is important to our customers, and we are excited about the opportunity to continue providing tremendous value through these offerings.

We also received tariff refund payments during the quarter and reinvested a substantial portion, primarily to further enhance the overall value proposition for our customers while helping them save money on everyday necessities. More specifically, we delivered additional savings through both targeted promotional activities, particularly around the important summer holidays, and lower everyday prices. Consistent with our overall approach to pricing, we took these actions strategically to serve customers while targeting sustainable share gains and sales growth over time. In addition, tariff refund reinvestments during the quarter included incremental SG&A spend on customer-facing initiatives, including increased marketing expense as we look to further enhance the customer experience and elevate our brand. For the quarter, we once again experienced strong trade-in across middle and high income cohort, while also driving productivity gains with our low-income customers.

Overall, we are proud of the consistency and balance of our top-line performance, which was enabled by strong execution and further demonstrates the essential role that Dollar General serves as a trusted partner in the communities we call home. Finally, as we continue to invest in the growth and development of our teams, we are pleased to see lower year-over-year turnover collectively in our stores, distribution centers, private fleet, and store support center, all of which is contributing to our improved execution and strong financial results. In summary, we are pleased with our Q2 performance and proud of our team’s strong execution. We are confident in our long-term financial framework and excited about our plans to continue delivering value for our customers, associates, and shareholders. With that, I will now turn the call over to Donnie.

Donny Lau, Chief Financial Officer, Dollar General: Thank you, Todd, and good morning, everyone. Now that Todd has taken you through the top-line results for the quarter, let me take you through some of the other important financial details. Unless we specifically note otherwise, all comparisons are year-over-year, all references to EPS refer to diluted earnings per share, and all years noted refer to the corresponding fiscal year. For Q2, gross profit as a percentage of sales was 32.6%, an increase of 127 basis points. This increase was primarily attributable to the benefit from tariff refunds, a lower LIFO provision, and lower distribution cost, partially offset by increased markdowns and increased transportation costs. We are especially pleased with our gross margin performance during the quarter, even before considering the approximate 81-basis point benefit from tariff refunds after gross margin-related reinvestment.

We were also pleased with the continuing improvement in damages and shrink in Q2, which reflects strong in-store execution by the team. Turning to SG&A, which as a percentage of sales was 25.8% and flat year-over-year. The primary expense that was a higher percentage of sales in the quarter was depreciation and amortization, offset by rent, which was lower as a percentage of sales. Moving down the income statement. Operating profit for the second quarter increased 29.2% to $769 million. As a percentage of sales, operating profit increased 126 basis points to 6.8% and includes an approximate 66-basis point benefit from tariff refunds after related reinvestment. Net interest expense for the quarter decreased to $42.9 million compared to $57.7 million in last year’s second quarter. Our effective tax rate for the quarter was 24.2% and compares to 23.5% in the prior year.

Finally, EPS for the quarter increased 33% to $2.48, including an approximate $0.25 benefit from tariff refunds after related reinvestments. Turning now to our balance sheet and cash flow, where we continue to make significant progress in strengthening our financial position. Merchandise inventories were $6.6 billion at the end of Q2, essentially flat compared to the prior year, and represented a decline of 2.7% on an average per store basis. Importantly, the team has done a terrific job reducing inventory to a level we believe is appropriate to support strong sales growth going forward. Overall, we are pleased with our inventory position and for fiscal 2026, continue to expect inventory to grow at a rate below our sales growth.

Year-to-date through Q2, we generated significant cash flow from operations of $1.5 billion, providing flexibility to reinvest in the business and return meaningful cash to shareholders, all while further strengthening our balance sheet and liquidity position. Our capital allocation priorities continue to serve us well and remain unchanged. Our first priority is investing in the business, including our existing store base, as well as other high return growth opportunities such as new store expansion and our strategic initiatives. Next, we seek to return cash to shareholders through a quarterly dividend payment, and when appropriate, share repurchases. Finally, we remain committed to maintaining our goal of less than 3x adjusted debt to adjusted EBITDA in support of our commitment to middle BBB ratings by S&P and Moody’s.

Now, with regards to shareholder returns and consistent with our capital allocation framework, I am very pleased to note that we plan to resume our share repurchase program in the third quarter. More specifically, we plan to repurchase up to $700 million of our common stock in the second half, funded with cash on hand. This step reflects our strong cash and liquidity position, the progress we are making towards our long-term financial framework targets, and our confidence in the future of the business. Moving to our outlook. Given our strong first half performance and expectations for the balance of the year, we are raising our full year outlook.

We now expect the following for fiscal 2026: net sales growth in the range of 4%-4.3%, same store sales growth in the range of 2.5%-2.9%, and EPS in the range of $7.80-$8, including the approximate $0.25 Q2 benefit from tariff refunds after related reinvestments. Our EPS guidance continues to assume an effective tax rate of approximately 24.5% and now contemplates up to $700 million of share repurchases in the back half of the year. Our expectations for capital spending and real estate projects remain unchanged from our previously stated amounts. In addition, our board of directors recently approved a quarterly cash dividend payment of $0.59 per share for Q2 2026. Let me provide some additional context as it relates to our outlook.

First, our revised outlook reflects the strength of our first half performance, underlying momentum in the business, the anticipated impact of tariff refunds after related reinvestments, and our improved expectations for the remainder of the year. We believe the updated range appropriately balances our confidence in the business while also considering the evolving consumer environment. In addition, despite much higher than anticipated fuel costs, we expect gross margin expansion in the second half, supported by continued progress against our key gross margin initiatives, many of which remain early in their maturity curve. As a reminder, our initiatives include continued improvements in shrink and damages, growth in our DG Media Network, non-consumables merchandising, supply chain productivity, and category management. On the expense side, we continue to expect modest SG&A deleverage in 2026 as we continue to invest in key initiatives to support the long-term growth and productivity of the business.

Finally, with regards to tariff refunds, we received the majority of our anticipated total refund amount in Q2 and do not expect a material impact from tariff refunds after related reinvestments in the second half. In closing, we are pleased with our second quarter results and the momentum we carry through the first half of the year. Looking ahead, we remain confident in our strategy, our business model, and our ability to continue advancing toward the targets outlined in our long-term financial framework. As we move through the back half, our focus remains on disciplined execution and continued progress across the key drivers of profitable sales growth, strong operating cash flow, healthy returns on invested capital, and long-term shareholder value. With that, I will turn the call back to Todd.

Todd Vasos, Chief Executive Officer, Dollar General: Thank you, Donnie. I will take the next few minutes to provide an update on our four strategic growth pillars, which are supported by targeted initiatives to drive long-term sustainable growth and value creation. As a reminder, these pillars include enhancing the customer experience, elevating our brand, driving greater enterprise-wide efficiencies, and extending our reach. First, we remain focused on enhancing the customer experience. We are working to do this in a number of ways, both in our physical stores as well as through our digital initiative. Within our merchandising initiatives, our efforts to improve the non-consumable product offering continues to resonate with the customer, as evidenced by the 4.5% increase in combined non-consumable comp sales during Q2. This performance has continued to drive a positive mix shift impact within our gross margin as well.

Our non-consumable growth was once again led by toys this quarter, as our team continues to do a nice job offering on-trend items and licensed products that are resonating with customers. Our brands and licenses are continuing to enhance the customer experience through a surprise and delight approach that offers exciting products at a compelling value. Looking ahead, we are excited about our extensive plans to drive newness and build on this momentum in the back half of the year. Beyond our in-store initiatives, we are also advancing our digital initiatives as we seek to further enhance the omni-channel customer experience at Dollar General. Our digital ecosystem is an important complement to our expansive physical store network and continues to be a key driver of incremental value and convenience for our customers.

As we look to drive future growth in this area, we are focused on scaling our delivery options, personalizing the customer experience, and growing our DG Media Network. We continue to rapidly grow our delivery business through multiple avenues, including our myDG delivery offering, as well as through third-party partnerships of DoorDash and Uber Eats. These offerings are enhancing the convenient proposition for our existing customers as well as introducing new customers to Dollar General. In fact, we estimate that our collective delivery offerings are generating a strong sales incrementality rate of approximately 80%, along with high customer repeat rate. Our delivery platforms are also becoming a more meaningful sales driver, as digitally engaged and delivery customers are more than twice as productive as our non-digitally engaged customer.

Importantly, we believe we have significant opportunity to continue growing incremental delivery sales while also attracting new customers through digital engagement and ultimately in our stores. In fact, we estimate we have already seen more than 1 million new customers first engage through our delivery and then become an in-store shopper at Dollar General. Looking ahead, we are focused on building the growth within our digital ecosystem while driving sales and customer growth, and also support greater contributions from our DG Media Network. Our DG Media Network strategy is focused on accelerating on-site performance to improve search, sponsor products, and stronger e-commerce experience while expanding our ability to capture off-site spend across social, connected TV, and video.

We are combining this approach with the opportunity for advertisers to participate inside our expansive footprint of physical stores, including our recently expanded in-store radio network, ultimately providing better connection between our digital and physical experiences. Over time, we believe our media network will serve as a strategic lever to drive profitable growth, enhance the customer experience, and strengthen loyalty across our digital ecosystem. Overall, our digital strategy is an important complement to our in-store customer experience and a key driver within our long-term financial framework. Our second strategic growth pillar is elevating our brand. Our mature store base is a unique competitive advantage that enables us to serve customers in smaller, rural communities across the country. We continue to make strategic investments in our store base, particularly through Project Renovate and Elevate remodel programs, which are positively impacting the customer and associate experience.

As a reminder, Project Renovate is our traditional remodel program, which impacts the entire store and includes adding or replacing coolers, as well as upgrading to the latest store format. These projects are focused primarily on stores that are seven or more years removed from opening or their last full remodel. While Project Elevate is designed to further grow sales and market share in portions of our mature store base that are not yet old enough to be part of a full remodel pipeline. These projects include physical asset enhancements, merchandising updates, product adjacency adjustments, and category refreshes, all of which generally impact up to 80% of the total store. We continue to expect to execute a total of 2,000 Project Renovate remodels and 2,250 Project Elevate remodels this year.

We made significant progress on these goals in the second quarter and have now completed 1,324 Project Renovate remodels and 1,422 Project Elevate remodels through the end of Q2. We continue to target annualized comp sales lists of approximately 6% in Project Renovate stores and approximately 3% in Project Elevate stores, as we believe these projects can drive significant sales and profit growth. Our third strategic growth pillar is driving greater enterprise-wide efficiency. We continue to pursue opportunities to drive greater efficiencies while lowering costs across the organization, including increased supply chain productivity, further simplification of our stores, inventory optimization, and increased use of artificial intelligence. By focusing on controlling the things we can control and driving efficiencies, we have been able to mitigate other cost pressures, including higher fuel costs.

Additionally, while we are still early in our AI journey, we are building agentic operating systems for the enterprise, focused on reshaping and optimizing our workflows to improve productivity throughout the organization. Our final strategic growth pillar is expanding our reach. We continue to extend our unique combination of value and convenience to new communities across the country. In turn, this extension is helping attract new customers and support further market share gain. In Q2, we opened 125 new stores in the U.S. as part of our continued plan to open a total of 450 stores in 2026. Importantly, these projects continue to be one of the best uses of capital, delivering healthy returns while also expanding access for new customers and communities. In addition to our new store growth in the U.S., we continue to test, learn, and refine our strategy for incremental growth in Mexico.

As part of our plans to open a total of approximately 10 stores in Mexico in 2026, we opened one Mi Súper Dollar General in Q2, bringing us to a total of 22 stores in Mexico. While our core business proposition of value and convenience continues to resonate with customers in Mexico, we are leveraging our customer, real estate, and merchandising insights to further extend our reach and capture more of these exciting growth opportunities. Overall, we are pleased with the strong and steady progress we are making toward the goals laid out in our long-term financial framework. We are advancing each of our strategic pillars and are confident in our strategy to build on our progress and momentum. In closing, we are proud of our strong Q2 performance and financial results.

The business is performing well, and we are operating from a position of strength as we head into the back half of the year. We recently had approximately 1,800 leaders of the organization in Nashville for our annual field leadership meeting, and I was once again reminded of the talent, passion, and commitment of our team. I want to thank our more than 198,000 employees for the work they do to serve our customers and communities every day. I am looking forward to all they will accomplish together in the second half of the year. With that, operator, we would now like to open the line for questions.

Rob, Conference Operator: Thank you. We will now be conducting a question and answer session. In order to allow as many as possible to ask questions, we ask you please limit yourself to one question. To ask a question at this time, you may press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. The first question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question.

Rupesh Parikh, Analyst, Oppenheimer: Good morning, and thanks for taking my question. Also, congrats on a nice quarter. I want to start with gross margins. I was hoping for more color on back half gross margins, including some of the key puts and takes you guys see out there, and how you are managing through some of the transportation cost headwinds. Then related to that, how is your team thinking about the competitive promotional backdrop as others invest tariff refunds and there is more chatter out there on industry price investments? Thank you.

Donny Lau, Chief Financial Officer, Dollar General: Thanks, Rupesh. This is Donnie. Maybe I will start with your first question, then maybe hand it off to Todd to address your second one. In terms of gross margin, I would start with maybe just providing some color, as it relates to Q2, because I think that does provide a little bit of context as we think about the second half. In terms of Q2 gross margin, what I would say here is very pleased with the gross margin performance that we delivered in Q2. As you saw in the release, 127 basis point improvement. That does include 81 basis point benefit from tariff refunds net of the reinvestment. But even when you set that aside, gross margin performance exceeded our expectations, and that is despite higher than anticipated fuel costs.

When you think about the primary drivers of our expansion during the quarter, obviously, the tariff benefit net of reinvestment played a role. But when you set that aside, really pleased to see nice contributions across many of our gross margin drivers. Whether supply chain efficiencies, which we called out, but also continued improvements in shrink and damages. What I am very pleased with on the shrink side is we are lapping 108 basis points of improvement in Q2 2025. We touched on the transportation. The one thing I will note here is it was higher than anticipated cost in the quarter, because it was more pronounced in Q2, just given as a full quarter impact versus Q1. But overall, building and seeing nice momentum across our gross margin drivers.

When you think about the second half, we do expect gross margin expansion in the back half. Just a couple of things to note. We are lapping over 100 basis points improvement versus the prior year, and fuel costs continue to be a little bit of a pressure point for us in the back half. From a tailwinds perspective, again, continued expectations to drive improvement across a lot of our gross margin drivers. We expect continued improvement in shrink and damages, and we expect continued improvement in growth in our other gross margin drivers, including our DG Media Network, non-consumables merchandising, more supply chain efficiencies and category management, more specifically there, on the Value Valley dollar price point private label side of the house. Again, from a headwinds perspective, just higher fuel costs.

We anticipate fuel costs will remain elevated for the balance of the year. The great news here is the team’s done a great job so far offsetting these pressures within the base business. The other thing I’d probably point out is just the tariff landscape continues to evolve. Our full-year guidance today reflects current tariff levels that are in place today. Like any quarter, lots of puts and takes in any given quarter, and we saw that in Q2 as well. Overall, continue to believe there are more tailwinds than headwinds and feel really good about our ability to drive continued gross margin expansion as we move ahead.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah. Thank you, Donnie. With that, Rupesh, I would tell you that as we exited Q2 from a pricing perspective, we feel very good about where we are on many levels. So we’re in a great position on our everyday pricing position against all classes of trade. We executed, I believe, a very strategic promotional cadence in Q2 and expect that strong offensive execution of promotional cadences to be with us in the back half of the year as well. Of course, a strong and growing $1 price point that you heard in my prepared remarks, both from Value Valley as well as over 2,000 items at or below a dollar. So when you think about where we are, I would say that from a promotional activity and such, pretty close to what Q1 looked like overall, not only at Dollar General, but across all classes of trade.

As we look to the back half of the year, we’re positioned really well and have a lot of dry powder to continue to be there for the consumer, what she needs when she needs it. I think I would also point to you, Rupesh, and I know you know as well, we’ve got a real strong track record of investing in price over time. Including everyday price, our promotional activity. More importantly, we’ve got a real good track record once we do that of keeping that customer engaged at Dollar General, even outside of those promotional timeframes. We saw that in Q2 actually. Even when we didn’t run additional promotional activity in Q2, we saw a very engaged consumer and a very sticky consumer.

Matthew Boss, Analyst, J.P. Morgan: Great. Thank you.

Rob, Conference Operator: Next question’s from the line of Matthew Boss with J.P. Morgan. Please proceed with your question.

Matthew Boss, Analyst, J.P. Morgan: Thanks, and congrats on a nice quarter.

Todd Vasos, Chief Executive Officer, Dollar General: Thank you.

Matthew Boss, Analyst, J.P. Morgan: So, Todd, 3.5% comps in the second quarter. It’s your best two-year stack in three years. Can you speak to the cadence of comps that you saw in the quarter? On the underlying momentum that you cited, where are you seeing the acceleration? If you looked at the sequential trends from your core low-income customer versus trade down from middle and higher income customers. Donnie, can you speak to the reinstatement of share repurchases now for the back half of the year? It’s earlier than your initial 2027 plan. At 2%-3% comps in the model now, how you see annual earnings growth as a go-forward baseline with the return of capital allocation.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, Matt, I’ll start and then Donnie, I’ll pass it over to you. I would tell you, Matt, we’re very pleased with our comp sales of 3.5%. It’s a real testament of the back to basics plan we had put into place a couple of years ago, and now, fast-forwarding all that work. Plus the work that we’re doing around Project Renovate and Project Elevate, and all the work that the team has done on the merchandising side and op side of the business, really all coming together, as we continue to add wins on the consumer side of the equation. The customer is definitely seeing the differences, not only in our stores, our in-stock levels, as well as our pricing activity.

Again, as I mentioned, we are in as good a position as we’ve been in on everyday price against all classes of trade, and feel very good about that momentum leading to the back half of the year. A lot of the momentum you’re seeing is very well-balanced as well. We’re on that sixth consecutive quarter of great momentum in our non-consumable businesses. Again, a real testament to all the work that the teams have done there. When you think about non-consumables for a moment, you can also think about in that second part of your question is where we’re seeing some of these additional gains in trade of the consumer, really coming from that $100,000 and above crowd, if you will, income levels.

As I’ve always said, that cohort of customer brings with them additional discretionary income that she’s able to spend on non-consumables as well as consumable goods. I think the important thing here to look at, Matt, as well, is the sustainability we believe of those comps as we move through the back half of the year. We’re in a real good position, both from pricing as well as promotional cadence, but also from the consumer standpoint. Inflation is still stubbornly high, as well as fuel prices being volatile. With that, the consumer needs us more every day, and we continue to be there for her. So we feel very good about our positioning and being able to deliver a good strong back half.

Donny Lau, Chief Financial Officer, Dollar General: Yep. Matt, to your question on share repurchases, I think what I’d say here is just very pleased with our announcement this morning that we now intend to resume our share repurchase program in the third quarter. Our plans are to repurchase up to $700 million of stock in the second half. Just as a reminder, share repurchases have always been an important component and driver of our long-term financial framework. As you alluded to, the framework did assume we would resume share repurchases at some point during 2027. As we’ve noted for several quarters now, we’re ahead of schedule versus some of the initial goals embedded in our long-term financial framework. That includes progress towards strengthening our balance sheet and enhancing our liquidity position.

Really great to be in a position to restart the program, which is also now ahead of our initial long-term financial framework goals, which is great to see. Importantly, not only is this consistent with our capital allocation framework, but this step really does underscore, I think, the progress we’re making towards our long-term financial framework targets, as well as our confidence in the future of the business. As we look ahead, I tell you, no changes in terms of how we’re thinking about the long-term financial framework.

Matthew Boss, Analyst, J.P. Morgan: It’s a great color. Best of luck.

Todd Vasos, Chief Executive Officer, Dollar General: Thank you.

Donny Lau, Chief Financial Officer, Dollar General: Thank you.

Rob, Conference Operator: Next question’s in the line of Michael Lasser with UBS. Please proceed with your question.

Michael Lasser, Analyst, UBS: Good morning. Thank you so much for taking my question. Has Dollar General entered a new era where it needs to use promotional activities, such as $5 off a $25 purchase or $10 off a $40 purchase, more frequently in order to drive the traffic. This year, there’s obviously going to be a variety of different offsets, like the improvement in shrink and damages, as well as some of the tariff-related ins and outs. As next year approaches, those factors may not be here. To the extent that this lever may need to continue to be utilized, how do you make sure that your growth margin maintains in an upward trajectory? Thank you so much.

Todd Vasos, Chief Executive Officer, Dollar General: Michael, thanks for the question. I would tell you that we feel very good about the positioning of where we are on pricing, as I indicated. Coming out of Q2, obviously the customer is trained. We see that, and the customer obviously is feeling it every day. We’ve always said we reserve the right to go in and do what we believe is necessary for our core consumer, as well as any trade-down consumer that we see coming in. We believe it was very prudent in the activity that we’ve taken. I would tell you that we don’t see meaningful step-up in post-promotional activities. We did anniversary some. We invested appropriately and very much on the offensive around key holiday times during Q2.

Think about Memorial Day, think about 4th of July, where the customer has a little bit more money in their pocket or has the optionality to spend a little bit more. We were there for the consumer during those strong times. But the great thing is, even outside of those promotional times, the consumer hung with us and stuck with us. And we do a really good job on the backside of retaining those customers, and we’ve seen that. The other thing that we don’t spend a lot of time on, and I know that promotional activity gets a lot of airtime, but it’s our strong everyday price that really brings the consumer in and keeps her sticky. And I would tell you that we are as good a price today as we’ve been against all classes of trade and feel very good about our everyday pricing as well.

When you think about that, we actually invested in Q2 in everyday price as well. And keep in mind, that takes a little longer for the customer to realize you’ve lowered an everyday price. And so that should be the gift that keeps on giving into the back half of the year. So, we feel we’re doing the exact right thing for the customer at the right time from a position of strength and on the offense. And we have the ability to flex up and flex down and have enough dry powder in the back half, to be there for the customer every day.

Rob, Conference Operator: The next question is in the line of Seth Sigman with Barclays. Please proceed with your question.

Seth Sigman, Analyst, Barclays: Hey, good morning, everyone. When we look at the refunds this quarter, it looked like it was 81 basis points to the gross margin, equates to about $91 million. I think the math on the operating profit suggests that the net impact was less than that, so perhaps there’s offsets in SG&A. Can you speak to that? Where are you spending within SG&A? And then just related to that, to your credit, SG&A seems quite low, even with those investments up only 3% per store. So just any other color on maybe how you’re changing how you think about cost management and how to think about that in the back half of the year. Thanks so much.

Donny Lau, Chief Financial Officer, Dollar General: Yeah, no, appreciate the question. I think to your point about the tariff refunds, I think you are thinking about it the right way. We did receive and record the vast majority of the anticipated refund amount in Q2, and it did provide us with the opportunity to reinvest heavily, as Todd Vasos mentioned, in enhancing the customer value proposition. Some of that, to your point, was in incremental SG&A spend on customer-facing initiatives. The one thing I would point out is increased marketing spend, which we think is going to pay a lot of dividends as we move ahead. I think, from an SG&A perspective, you are right, in terms of as you think about the quarter, there was a little bit of reinvestment. So about 15 basis points is the way I would think about that math.

It is flat versus year, but when you take that into account, I think it essentially delivered leverage in the quarter, which is great to see.

Rob, Conference Operator: The next question is in the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman, Analyst, Morgan Stanley: Hi, guys. How you doing? Nice quarter. Hey, Todd Vasos, when the going gets tough, I always want to ask you about the consumer as you understand, chi and trade down. Can you talk about what is happening there? I will put the follow-up within it. The incrementality from here for some of the last mile services that you are using, is the incremental benefit building, stable, or beginning to lap or moderate against tougher compares? Thanks.

Todd Vasos, Chief Executive Officer, Dollar General: Great. Thank you for the question. I will take the first half and then Emily, I will pass it over to you. The consumer, obviously, is strained. I mentioned earlier that stubborn inflation that is currently with that consumer hasn’t subsided. Also that volatile fuel prices, we’ve always said here, if you go back years and years, anytime it gets close to that $4 mark or crests $4, it puts an extra strain on the consumer, and we obviously have been there for the better part of Q2 and now as we move into Q3. So that consumer is under a lot of pressure. Our core consumer, especially, as it relates to feeding her family and being there for her family, needs us more than ever. We’re seeing that inside of our numbers as well.

Then that trade-in because of all the pressure that middle and upper middle income consumer is under. That is usually that 100K-plus crowd, if you will, that has been trading in the better part of a year now and has continued to trade in through Q2 and now into Q3. I would tell you, is looking for more and more value as time goes on. She was trading in earlier on, more sporadically, now on a more everyday basis. Not only everyday goods, but as I mentioned earlier, she has been trading in for those non-consumable goods as well. The great thing about that, all put together, is we believe that core consumer will continue to be strained as we move through the back half of the year. We’re in a great position.

Donny Lau, Chief Financial Officer, Dollar General: On pricing, promotional cadences, and our $1 offerings, as well as in my prepared remarks, our seasonal offering for the back half of the year is very strong with a very strong offering increased over last year in the dollar price point as well. So feel very good about where we’re headed in the back half and what’s ahead of us to be able to deliver for the consumer each and every day.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, I will take the delivery question. So from an incrementality perspective, it really is stable. I will give just a little more color on the business overall. We were really happy with the business in the quarter. It was ahead of our internal plan. Delivery for us really is making sure that we are there to meet the convenience needs of the customer, which is, of course, incredibly important. At the same time, we’re using delivery, of course, to reach new customers, and that’s exactly what we’re seeing. You heard earlier on the call that over 1 million customers found and shopped inside our stores for the first time after they first used delivery to find Dollar General. So that’s a really exciting result for us.

Emily Taylor, Chief Operating Officer, Dollar General: When you combine that with the fact that we continue to see a higher average basket from our delivery orders versus what we see inside our stores, it means that we are also seeing delivery broaden the way our customers are able to shop with Dollar General. Of course, delivery supports both traffic and basket growth here at Dollar General. With the high repeat rates that we continue to see, it tells us the customers really value what we are doing in this space, and it really encourages us in terms of potential for additional growth as we move ahead.

Donny Lau, Chief Financial Officer, Dollar General: Okay.

Rob, Conference Operator: Thank you. The next question is from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Chuck Grom, Analyst, Gordon Haskett: Hey, Todd, Donnie. Great quarter. Can we spend some time on Value Valley and the dollar price point, strong comps here, high teens again, back-to-back quarters. I guess, how can you capitalize on this going forward? You have a couple thousand items in stores. Would it make sense to grow this to take advantage of Dollar Tree’s multi-price move? My follow-up is on SG&A. You guys are lapping, I believe, $200 million of higher incentive comp and leverage is essentially neutral here in 2Q despite that 3.5. How do we think about the hurdle rate going forward? Is it still 3%, or have costs in the business need to move higher? Thanks a lot.

Emily Taylor, Chief Operating Officer, Dollar General: Yeah. Hi, Chuck. This is Emily. I will take your Value Valley question. We were really happy with the 16% growth. You heard us talk about the fact that now we are running over 600 items in this particular set inside our stores. That compares to about 500. The team is doing an outstanding job of continuing to expand our assortment, and the breadth of items that customers can get inside our store within that Value Valley space. I think it is really important to call out that Value Valley for us does not just represent all of the dollar items. You heard Todd reference the more than 2,000 items at a dollar and below that we have throughout the store. We are also growing in those areas.

We have off-shelf space in 9,000 stores that we referenced, but working on getting those and see the potential to get those into all stores this year, which will be one source of growth. We talked last quarter about our Dollar Door and frozen food. The customer response there has been very strong. As you’d expect, the team is already looking at rapidly expanding that set as well. From a seasonal perspective, Todd Vasos referenced that just to give you a number, our dollar SKU count in the back half sets is going to be up 40%. We continue to deliver that really important value for our customer and feel like we’ve got plenty of room to continue growing.

Donny Lau, Chief Financial Officer, Dollar General: Yeah. In terms of your questions about SG&A, I guess a couple of things. I think the first thing I’d say is, I think that the number you quoted in terms of the incentive comp, that’s not a number I think we’ve necessarily disclosed. To your point, we are lapping higher incentive comp from prior year. What I would tell you is the business is performing. All right? Incentive comp for this year, the tailwind is going to be lower than we’re anticipating, which is actually a really good thing from our perspective. In terms of the leverage point going forward, as a reminder, the long-term framework always contemplated that we would minimize deleverage at a comp of 2%-3%. That’s still our expectation as we move forward.

The great news here is even with incremental reinvestment that was tariff related during the quarter, SG&A leverage was essentially flat as we talked about leverage when you set that aside. We all feel really well-positioned to really deliver against our target outlined in the long-term framework. I think the couple things I’d point you to that actually give us a lot of confidence is the accelerated remodel program is expected to really mitigate future earning expense, which should help. In the meantime, we expect to drive additional efficiencies through our work simplification efforts. Overall, feel really good about our efforts on this front.

As we’ve alluded to in the past, the long-term framework doesn’t contemplate any potential benefit from AI, and we’re still early days here, but feel really good about what that could mean for us as we move forward.

Chuck Grom, Analyst, Gordon Haskett: Great. Thank you both.

Emily Taylor, Chief Operating Officer, Dollar General: Thank you.

Rob, Conference Operator: The next question is from the line of Jeehon Ma with Bernstein. Please proceed with your question.

Jeehon Ma, Analyst, Bernstein: Great. Thank you so much for taking my question. Circling back on the comp side of things, your full-year guidance does imply some sort of a moderation compared to the really strong trend that we saw in Q2. Is there anything you can point to in terms of the Q2 drivers that’s not sustainable going into the second half? We’re seeing that on the delivery comp contribution side, we have seen some deceleration there from 80 basis points to 70 to 40 this quarter. As you start to lap tougher comps there, are you expecting a smaller contribution from here? Thank you.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, thank you for the question. I would tell you that there really isn’t anything in Q2, from a top-line perspective, that we don’t believe will continue into the back half of the year. One thing to keep in mind, in Q4 last year, we are lapping this year a pretty big benefit as we called out the beginning of this year from the winter storms last year. Q4 has that embedded in it from last year, so the lap is pretty big. Keep that in mind as you think about it. But I would tell you, from our perspective, all of the fundamentals are very much intact on the top line.

Actually, we believe that we have a real opportunity to continue to capitalize and make new friends, if you will, from a customer perspective, that will help propel the back half, but also into 2027. Emily?

Emily Taylor, Chief Operating Officer, Dollar General: Yeah. Just from a delivery perspective, you heard my earlier comments, but just as a reminder, last year, we were scaling delivery to 18,000 stores, which we finished by year-end. I would just say that even with that in Q2, we did see outsized growth out of the delivery business and it was great to see it add to really strong brick and mortar performance.

Jeehon Ma, Analyst, Bernstein: Thank you.

Rob, Conference Operator: The next question is from the line of Spencer Hanus with Wolfe Research. Please proceed with your question.

Spencer Hanus, Analyst, Wolfe Research: Morning. Thanks for the question. I just wanted to ask on tariff refunds and how you’re thinking about the sales lift that you’re going to get from those reinvestments that you’re going to be making in the second half. Given what your peers are doing from a pricing standpoint, do you think it’s going to be harder to see that volume lift from the promos? Then just on Value Valley, as the assortment expands there, have you seen any change in your value scores as people realize you have more of these $1 SKUs in the store?

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, I’ll take that. Real quick, I would say that when you think about where we are on pricing, as I mentioned earlier, we’re in a real good spot. I believe we’re in a real good spot as we move into the back half of the year. What we did in Q2, and where we invested, I believe was from a position of strength and on the offense. That was the idea. It was around these holidays that I mentioned. It was also to continue to help this core consumer and the trade-in consumer bridge the end of the month and, well, quite frankly, all pieces of the month, but definitely bridge where she may fall short throughout the month at times. With that, I think about competitors, and I mentioned earlier, Q2 looked a lot like Q1.

We feel that we’ve got plenty of dry powder in the back half of the year to be able to continue to do whatever we need to do for that consumer from a position of strength. We watch very closely all competitors, no matter what classes of trade, looking at price. Price is paramount for our customer. As you would imagine, it’s paramount for us as we put together our plans. Everything that Donnie Lau laid out from a guidance perspective in the back half of the year contemplates all of those pieces be able to deliver from a customer perspective, no matter what we believe that the competition does. Again, from a position of strength is where we’re jumping into Q3 and 4. Lastly, on the $1 price points and such, we feel, again, very good there, and where we’re headed.

But also where we can leverage that with our consumers. They are giving us credit. We are seeing it in our own data that comes back, where the consumer is relying more and more on that $1 price point. Also, it is that whole halo effect on price, and she is given us credit for that as well. The great thing is, though, as we see the trade-in come in, even in that middle and upper middle, they are actually moving to a lot of these $1 price points, too. We do not like to use the word magical, but it is a magical price point. We know that. We are leveraging that to our benefit, but also and foremost, the benefit of the consumer.

I would tell you that, and you heard from Emily Taylor, as we move into the back half, but even more so into 2027, we have got real plans to expand that $1 price point to offer even more value for the consumer.

Rob, Conference Operator: The next question is from the line of Kate McShane with Goldman Sachs. Please proceed with your question.

Kate McShane, Analyst, Goldman Sachs: Hi, good morning. Thanks for taking our question. Just a quick question from us, just about how we should be thinking about get versus traffic in the second half versus what we have seen so far this year.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, I would tell you look at the traffic numbers and the ticket number, we feel very good about the balance in Q2. We’ve taken all that into account in the back half of the year. We see the momentum in the business, feel good about the traffic number that we’re already seeing here in early Q3. As I mentioned in my prepared remarks, we’re off to a good start. We believe that a real good balance of traffic and ticket will continue into the back half of the year. We don’t take any of that for granted. Obviously, we are from a position of strength, doing a lot of things to ensure that we solidify those traffic and overall sales numbers in the back half of the year.

But the most important thing I think to think about here and the way we always look at it’s really from the consumer lens and where the consumer is today. Being there for her, if we’re there on all of the elements that I talked about earlier, from everyday price to promotional cadence and that $1 price point. We believe that delivering on all three of those promises every day will continue the momentum that we’ve seen. Lastly, I don’t want to minimize also the execution level that this team is performing at, not only in our operating group, in our supply chain, and in our merchandising group back here at our store support centers. We’re hitting on all cylinders, and we’re there for the consumer each and every day.

Rob, Conference Operator: The next question’s from the line of Scot Ciccarelli with Truist. Please proceed with your question.

Scot Ciccarelli, Analyst, Truist: Good morning, guys. I guess my question is, you mentioned that the low-income consumer is increasingly strained and that you’re seeing that in your numbers. Can you give us any data points or examples around that? Secondly, you had expected shrink and damage benefits to ease a bit this year, but I think they continue to outpace previous expectations. How much lower can shrink and damages go from where we are today? Thanks.

Todd Vasos, Chief Executive Officer, Dollar General: Yeah. I will start that and pass it over to Donnie. From our perspective, what we see from our numbers in that core consumer, the low-end consumer is definitely still stretched. Now, I would tell you, and we say this quite often, as long as she is gainfully employed, she has money and can feed her family. But she is still gainfully employed, which is great to see. And she is seeing some gains in her income levels as well. Unfortunately, that has been offset by the stubborn inflation that I mentioned and those volatile gas prices reaching to $4 or even above $4 a gallon, depending on what state you are in. So, excuse me, we believe we see that core consumer continuing to be under a strain. She tells us that in all of our data. We see it very strong. But also, she tells us that she needs us more.

We see that in the traffic number as well. She continues to come. She comes more often, but she buys less on each trip. Again, that is not dissimilar to how we see the core customer in times of distress, because she really is watching every penny. She does not know what the next week is going to hold. So instead of doing even mini stock-up trips, she buys less on each trip, but comes more during the month to ensure she can meet her family’s needs. So we see that playing out. And with that, we are there for the consumer.

Donny Lau, Chief Financial Officer, Dollar General: Yep. So in terms of your question on shrink and damages, obviously really pleased to see continued improvement during the quarter. We continue to expect that shrink and damages will contribute about 50 basis points of incremental gross margin expansion off the 2025 base. Again, that is on top of the over 80 basis points of expansion we have already achieved in 2025. As a reminder, and you touched on this, we were initially targeting 80 basis points from just shrink alone over a two to three-year period. So the takeaway here is shrink is improving at a faster and higher rate than initially anticipated. As I mentioned, we saw continued improvement in Q2, and that is despite lapping 108 basis point improvement from the prior year, which is obviously great to see.

In terms of damages, the improvement in 2025 was pretty much in line with our expectations, and the improvement in the first half is trending better than anticipated. So overall, also feel really good here and pleased with the progress we are making on this front.

Scot Ciccarelli, Analyst, Truist: Thanks a lot, guys.

Donny Lau, Chief Financial Officer, Dollar General: Of course.

Rob, Conference Operator: The next question’s on the line of Corey Tarlowe with Jefferies. Please proceed with your question.

Corey Tarlowe, Analyst, Jefferies: Great. Thanks so much. I wanted to ask about any updates with the DG Media Network. It seems like it could be a very tangible upside driver to the margin profile over the next several years as we march toward that 6%-7% operating margin profile. So I’d be curious if we could maybe share any unique updates or insights as it relates to that. Thanks so much.

Emily Taylor, Chief Operating Officer, Dollar General: Yeah, I am happy to give you a little color there. We are not quantifying the quarter results. We did quantify it at the end of last year as $170 million in annual volume. As you said, we are expecting that to grow meaningfully. A couple things about our media network. Just as a reminder, our network is unique that it offers advertisers access to an unduplicated audience that they otherwise would not be able to reach. We are able to deliver high returns for our advertisers using our network, and that really is helping us to drive growth in this space. As we move ahead, we have a couple of levers that will really accelerate the growth. We are innovating in ways that are meaningful for our advertisers, increasing the number of opportunities that we have for investment.

This is inside our stores as well as in our app and on our website. Importantly, increasing the engagement in our digital platforms. This is an important one, because as we continue to grow engagement, which we are seeing, that will continue to attract more advertisers. Those increases will be accelerated by some of the plans we have in place in our digital area of the business. That includes subscription and loyalty, which we will pilot at the end of this year. Expect to roll that out fully in 2027. So we expect initiatives like that to not just support the growth in digital, but also help support the growth in our media network going forward.

Rob, Conference Operator: Thank you. Our final question will be from the line of Rob Ohmes with Bank of America. Please proceed with your question.

Rob Ohmes, Analyst, Bank of America: Oh, hey. Thanks for squeezing me in. I was hoping, maybe just a little more of an update on the new store format, which you guys have seen this quarter, and opportunities you think it might be opening up in new categories. Just any more color on that would be great. Also remind me, SKU rationalization, is that done, or could you be doing more from here?

Emily Taylor, Chief Operating Officer, Dollar General: Yeah, sure. I’ll take both of those questions. From a new format perspective, you’re exactly right. We started this year rolling out a new format that we call our DGTP ’26, and the work that the merchant team did there really was centered in customer insights to help influence the layout of that store. We opened up the front of the store. We improved sight lines for customers and employees, in this new layout, and we made pretty significant adjustments to adjacencies to drive higher engagement across the store. That’s what we’re seeing. We created clear destinations for food and snacks, for health and beauty, which is generating great results, and our home and seasonal product as well. So excited about what we’re seeing. Early days. It’s rolling out both in the form of new stores as well as part of our Project Renovate as well.

Then-

Todd Vasos, Chief Executive Officer, Dollar General: Yeah, I’ll take the last one then. As you look at SKU rationalization, I first want to step back and say, we’re very pleased with our inventory levels today. We continue to make a lot of progress on inventory per store. Again, growing sales at or below our inventory growth levels, and we delivered again, a very strong performance in Q2. That has also assisted our stores in being more productive. Being more productive there means getting product to the shelf faster, and being there for the consumer with the right amount of items and products that she’s looking for as quickly as we possibly can. As you think about as we go forward, the team is looking at continued SKU rationalization, albeit probably more surgical in nature as we move forward.

We’re already implementing some test and learns even in the back half of this year, around lower volume store type planograms, taking a substantial amount of SKUs out of the mix, where it may not be as productive. Also, again, in some high shrink locations where shrink is still a bit of a headwind in some of these stores and looking at SKU rationalization a little bit differently there. So probably as we move forward, a little bit more surgical than we have been. It is still our ultimate goal to grow sales at or above the rate of inventory growth overall.

Rob Ohmes, Analyst, Bank of America: That sounds great. Thank you both.

Todd Vasos, Chief Executive Officer, Dollar General: Thank you.

Emily Taylor, Chief Operating Officer, Dollar General: Thank you.

Rob, Conference Operator: Thank you. Ladies and gentlemen, this will conclude our question and answer session and also conclude today’s conference. We thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.