ACC202 Assignments Week 5 - Discussion 1

In the year 2018, Dollar General opened 900 stores and intends to open up 975 stores in 2019. In the year 2018, 900 stores represent a percentage increase of 6% up from 14,609 retail stores, and for 2019, it will be 6.3% up from 15,472 retail stores. During the period 2016-2018, Dollar General has expanded the number of stores they operate by 2,887, representing growth of approximately 23% (Dollar General, 2019). Strategic expansion plans of Dollar General are funded as a capital expenditure. Capital expenditures to support store growth include costs for remodel and relocation initiatives, including capital outlays for leases, fixtures and equipment; the construction of new stores.

For the years 2016, 2017,2018 the amount of cash outflows for investing activities for Dollar General are $0.7 billion, $0.6 billion, $0.5 billion respectively. However, the amount of cash outflow for investing activities was not used solely for strategic expansion of retail stores. Part of investing amount as used for strategic distribution centers, renovation of existing retail and distributing facilities, distribution and transport-related activities, Information systems and technology-development. The scope of investing activities is not limited to expansion plans and different organizations will have varied approaches to what they need to invest in.

For the year 2018, Dollar General had cash inflows amounting to approximately $2 billion from operating activities due to its cost-saving operating efficiency. For the period 2016-2018, Dollar General has recorded a total of $5.6 billion and approximately $3 billion has been used as Capital Expenditure over the same period.

Dollar General has more of their sales being in consumables that offer low margins than other product groups. However, Dollar General is also notorious for low pricing that competitors struggle to keep up with. Over and above that, they continuously provide additional value for shareholders annually through repurchase of outstanding common stock and capital dividends. Generally, cash from the operating activities will be used to finance these decisions. A part of the cash from operating activities is combined with borrowed funds to provide capital for strategic expansion plans. Some sources of borrowed funds for Dollar General include debt facilities such as unsecured revolving credit agreements, senior notes, commercial paper program which provide a total outstanding debt of $2.9 billion. Dollar general maintains a debt ceiling of $800 million at any point in time even with access to these facilities.

Peterson, Hayley. “15 Companies That Are Defying the Retail Meltdown by Opening Hundreds of New Stores.” Business Insider, Business Insider, 14 Jan. 2018, https://www.businessinsider.com/retailers-opening-new-stores-this-year-2018-1?international=true&r=US&IR=T Links to an external site.

“SEC Filings.” Dollar General Corporation, https://investor.dollargeneral.com/financial-information/secfilings?field_nir_sec_form_group_target_id[]=471&field_nir_sec_date_filed_value=2019#views-exposed-form-widget-sec-filings-table Links to an external site..