# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	January	28,	2011

# DOLLAR	GENERAL	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

TENNESSEE

(State	or	other	jurisdiction	of incorporation	or	organization)

(I.R.S.	Employer Identification	No.)

100	MISSION	RIDGE GOODLETTSVILLE,	TN		37072

(Address	of	principal	executive	offices,	zip	code)

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

# Title	of	each	class Name	of	the	exchange	on	which	registered

Common	Stock,	par	value	$0.875	per	share New	York	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:		None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in Rule	405	of	the	Securities	Act.		Yes	[X	]			No	[		]

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section 13	or	15(d)	of	the	Act.		Yes	[			]	No	[X]

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	[X]	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	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	registrant's knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of this	Form	10-K	or	any	amendment	to	this	Form	10-K.	[			]

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

Large	accelerated	filer	[X] Accelerated	filer	[			]

# Non-accelerated	filer	[			] Smaller	reporting	company	[		]

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b- 2	of	the	Exchange	Act).		Yes	[		]		No	[X]

The	aggregate	fair	market	value	of	the	registrant's	common	stock	outstanding	and	held by	non-affiliates	as	of	July	30,	2010	was	$2,057,296,011	calculated	using	the	closing	market price	of	our	common	stock	as	reported	on	the	NYSE	on	such	date	($29.18).	For	this	purpose, directors,	executive	officers	and	greater	than	10%	record	shareholders	are	considered	the affiliates	of	the	registrant.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Certain	of	the	information	required	in	Part	III	of	this	Form	10-K	is	incorporated	by reference	to	the	Registrant's	definitive	proxy	statement	to	be	filed	for	the	Annual	Meeting	of Shareholders	to	be	held	on	May	25,	2011.

# INTRODUCTION

# General

This	report	contains	references	to	years	2011,	2010,	2009,	2008,	2007	and	2006,	which represent	fiscal	years	ending	or	ended	February	3,	2012,	January	28,	2011,	January	29,	2010, January	30,	2009,	February	1,	2008	and	February	2,	2007,	respectively.	All	of	the	discussion	and analysis	in	this	report	should	be	read	with,	and	is	qualified	in	its	entirety	by,	the	Consolidated Financial	Statements	and	related	notes.

Solely	for	convenience,	our	trademarks	and	tradenames	referred	to	in	this	document	may appear	without	the	®	or TM 	symbol,	but	such	references	are	not	intended	to	indicate,	in	any	way, that	we	will	not	assert,	to	the	fullest	extent	under	applicable	law,	our	rights	or	the	right	to	these trademarks	and	tradenames.

# Cautionary	Disclosure	Regarding	Forward-Looking	Statements

We	include	"forward-looking	statements"	within	the	meaning	of	the	federal	securities laws	throughout	this	report,	particularly	under	the	headings	"Business,"	"Management's Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations,"	and	"Note	9 Commitments	and	Contingencies,"	among	others.	You	can	identify	these	statements	because they	are	not	limited	to	historical	fact	or	they	use	words	such	as	"may,"	"will,"	"should,"	"could," "believe,"	"anticipate,"	"project,"	"plan,"	"expect,"	"estimate,"	"objective,"	"forecast,"	"goal," "potential,"	"opportunity,"	"intend,"	"will	likely	result,"	or	"will	continue"	and	similar expressions	that	concern	our	strategy,	plans,	intentions	or	beliefs	about	future	occurrences	or results.	For	example,	all	statements	relating	to	our	estimated	and	projected	expenditures,	cash flows,	results	of	operations,	financial	condition	and	liquidity;	our	plans,	objectives	and expectations	for	future	operations,	growth	or	initiatives;	or	the	expected	outcome	or	effect	of pending	or	threatened	litigation	or	audits	are	forward-looking	statements.

All	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	are	disclosed	under	"Risk	Factors"	in	Part	I,	Item 1A	and	elsewhere	in	this	document	(including,	without	limitation,	in	conjunction	with	the forward-looking	statements	themselves	and	under	the	heading	"Critical	Accounting	Policies	and Estimates").	All	written	and	oral	forward-looking	statements	are	expressly	qualified	in	their entirety	by	these	and	other	cautionary	statements	that	we	make	from	time	to	time	in	our	other SEC	filings	and	public	communications.	You	should	evaluate	forward-looking	statements	in	the context	of	these	risks	and	uncertainties.	These	factors	may	not	contain	all	of	the	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	included	in	this	report	are	made	only	as	of	the	date hereof.	We	undertake	no	obligation	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.

# PART	I

# ITEM	1. BUSINESS

We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	9,414 stores	located	in	35	states	as	of	February	25,	2011,	primarily	in	the	southern,	southwestern, midwestern	and	eastern	United	States.	We	offer	a	broad	selection	of	merchandise,	including consumables,	seasonal,	home	products	and	apparel.	Our	merchandise	includes	high	quality national	brands	from	leading	manufacturers,	as	well	as	comparable	quality	private	brand selections	with	prices	at	substantial	discounts	to	national	brands.	We	offer	our	merchandise	at everyday	low	prices	(typically	$10	or	less)	through	our	convenient	small-box	(approximately 7,200	square	feet)	locations.

# Our	History

J.L.	Turner	founded	our	Company	in	1939	as	J.L.	Turner	and	Son,	Wholesale.	We	were incorporated	as	a	Kentucky	corporation	under	the	name	J.L.	Turner	&	Son,	Inc.	in	1955,	when we	opened	our	first	Dollar	General	store.	We	changed	our	name	to	Dollar	General	Corporation	in 1968	and	reincorporated	in	1998	as	a	Tennessee	corporation.	Our	common	stock	was	publicly traded	from	1968	until	July	2007,	when	we	merged	with	an	entity	controlled	by	investment	funds affiliated	with	Kohlberg	Kravis	Roberts	&	Co.	L.P.,	or	KKR.	On	November	13,	2009	our common	stock	again	became	publicly	traded	upon	our	completion	of	an	initial	public	offering	of 39,215,000	shares	of	our	common	stock,	including	22,700,000	newly	issued	shares.	We	are majority	owned	by	Buck	Holdings,	L.P.,	a	Delaware	limited	partnership	controlled	by	KKR, which	beneficially	owns	approximately	71%	of	our	outstanding	common	stock.

# Our	Business	Model

Our	long	history	of	profitable	growth	is	founded	on	a	commitment	to	a	relatively	simple business	model:	providing	a	broad	base	of	customers	with	their	basic	everyday	and	household needs,	supplemented	with	a	variety	of	general	merchandise	items,	at	everyday	low	prices	in conveniently	located,	small-box	stores.

Fiscal	year	2010	represented	our	21st	consecutive	year	of	same-store	sales	growth.	This growth,	regardless	of	economic	conditions,	suggests	that	we	have	a	less	cyclical	model	than	most retailers	and,	we	believe,	is	a	result	of	our	compelling	value	and	convenience	proposition.	Both customer	traffic	and	average	transaction	amount	increased	during	2009	and	2010	despite	a	very difficult	economic	environment.	We	believe	that	our	customers	recognize	our	efforts	to	provide them	with	a	pleasant,	efficient	shopping	experience	along	with	our	ongoing	commitment	to	meet their	everyday	needs,	which	encourages	them	to	continue	to	shop	with	us	in	the	future.

Our	attractive	store	economics,	including	a	relatively	low	initial	investment	and	simple, low	cost	operating	model,	have	allowed	us	to	grow	our	store	base	to	over	9,400	stores	in	35 states,	and	provide	us	significant	opportunities	to	continue	our	strategy	of	profitable	store	growth.

# Compelling	Value	and	Convenience	Proposition.	Our	ability	to	deliver	highly

competitive	prices	on	national	brand	and	quality	private	brand	products	in	convenient	locations and	our	easy	in	and	out	shopping	format	create	a	compelling	shopping	experience	that distinguishes	us	from	other	discount,	convenience	and	drugstore	retailers.	Our	slogan,	"Save time.	Save	money.	Every	day!"	summarizes	our	appeal	to	customers.	We	believe	our	ability	to effectively	deliver	both	value	and	convenience	allows	us	to	succeed	in	small	markets	with	limited shopping	alternatives,	as	well	as	to	profitably	coexist	alongside	larger	retailers	in	more competitive	markets.	Our	compelling	value	and	convenience	proposition	is	evidenced	by	the following	attributes	of	our	business	model:

· Convenient	Locations.	Our	stores	are	conveniently	located	in	a	variety	of	rural, suburban	and	urban	communities,	currently	with	nearly	70%	serving	communities with	populations	of	less	than	20,000.	In	more	densely	populated	areas,	our	small- box	stores	typically	serve	the	closely	surrounding	neighborhoods.	The	majority	of our	customers	live	within	three	to	five	miles,	or	a	10-minute	drive,	of	our	stores. Our	close	proximity	to	customers	drives	customer	loyalty	and	trip	frequency	and makes	us	an	attractive	alternative	to	large	discount	and	other	large-box	retail	and grocery	stores	which	are	often	located	farther	away.	Our	low	cost	economic model	enables	us	to	serve	many	areas	with	fewer	than	1,500	households.

· Time-Saving	Shopping	Experience.	We	also	provide	customers	with	a	highly convenient	shopping	experience.	Our	stores'	smaller	size	allows	us	to	locate parking	near	the	front	entrance	where	shopping	carts	are	located	to	promote efficient	navigation	of	the	store.	Our	product	offering	includes	most	necessities, such	as	basic	packaged	and	refrigerated	food	and	dairy	products,	cleaning supplies,	paper	products,	and	health	and	beauty	care	items,	as	well	as	greeting cards,	party	supplies,	apparel,	housewares,	hardware	and	automotive	supplies, among	others.	Our	typical	store	hours	are	8:00	a.m.	to	9:00	p.m.,	seven	days	per week.	Our	convenient	hours	and	broad	merchandise	offering	allow	our	customers to	fulfill	their	routine	shopping	requirements	and	minimize	their	need	to	shop elsewhere.

· Everyday	Low	Prices	on	Quality	Merchandise.	Our	research	indicates	that	we offer	a	price	advantage	over	most	food	and	drug	retailers	and	that	our	prices	are highly	competitive	with	even	the	largest	discount	retailers.	Our	ability	to	offer everyday	low	prices	on	quality	merchandise	is	supported	by	our	low-cost operating	structure	and	our	strategy	to	maintain	a	limited	number	of	stock	keeping units	("SKUs")	per	category,	which	we	believe	helps	us	maintain	strong purchasing	power.	Most	items	are	priced	below	$10,	with	approximately	24%	at $1	or	less.	We	offer	quality	nationally	advertised	brands	at	these	everyday	low prices	in	addition	to	offering	our	own	comparable	quality	private	brands	at	value prices.

Attractive	Store	Economics.	The	traditional	Dollar	General	store	size,	design	and location	requires	minimal	initial	investment	and	low	maintenance	capital	expenditures.	Our typical	locations	involve	a	modest,	no-frills	building,	which	helps	keep	our	rental	and	other	fixed overhead	costs	relatively	low.	When	coupled	with	our	new	stores'	ability	to	generally	deliver positive	cash	flow	in	the	first	year,	this	low	capital	expenditure	requirement	typically	results	in pay	back	of	capital	in	less	than	two	years.	Our	stringent	market	analysis,	real	estate	site	selection

and	new	store	approval	processes	as	well	as	our	new	store	marketing	programs	help	us	optimize financial	returns	and	minimize	the	risks	of	opening	unprofitable	stores.

Our	lean	store	staffing	model	and	centralized	management	of	utilities,	maintenance	and supplies	procurement	contribute	to	our	relatively	low	operating	costs	and	efficient	store operations.

Substantial	Growth	Opportunities.	We	believe	that	we	have	substantial	growth opportunities	through	both	improved	profitability	of	existing	stores	and	new	store	openings.	We are	pursuing	a	number	of	initiatives	which	we	expect	to	continue	to	improve	the	profitability	of our	existing	store	base.	In	addition,	we	have	identified	significant	opportunities	to	add	new	stores in	both	existing	and	new	markets.	We	believe	we	have	the	long-term	potential	in	the	U.S.	to more	than	double	our	existing	store	base	while	maintaining	strong	returns	on	capital.	See	''Our Growth	Strategy''	for	additional	details.

# Our	Growth	Strategy

We	believe	we	have	the	right	strategy	and	execution	capabilities	to	capitalize	on	the considerable	growth	opportunities	afforded	by	our	business	model.	We	believe	we	continue	to have	significant	opportunities	to	drive	profitable	growth	through	increasing	same-store	sales, expanding	our	operating	profit	rate	and	growing	our	store	base.

Increasing	Same-Store	Sales.	We	believe	the	combination	of	our	necessity-driven product	mix	and	our	attractive	value	proposition,	including	a	well-balanced	merchandising approach,	provides	a	strong	basis	for	increased	sales.	Our	average	sales	per	square	foot	increased to	$201	in	2010	from	$195	in	2009	and	$180	in	2008.	We	believe	we	will	continue	to	have additional	opportunities	to	increase	our	store	productivity	through	improved	in-stock	positions, price	optimization,	continued	improvements	in	space	utilization,	and	additional	operating	and merchandising	initiatives.	Among	numerous	additional	projects	in	2011,	we	plan	to	further expand	our	frozen	and	refrigerated	food	and	health	and	beauty	aids	offerings.	We	will	also continue	to	focus	on	increasing	sales	in	our	home,	apparel	and	seasonal	categories.

In	addition,	we	plan	to	relocate	or	remodel	approximately	550	stores	in	2011,	which	we expect	to	further	drive	same-store	sales	growth.	In	2010,	we	remodeled	or	relocated	504	stores. Remodels	and	relocations	generally	consist	of	updating	the	stores	to	our	new	customer	centric format,	which	we	believe	appeals	to	a	broader	customer	base.	A	relocation	typically	results	in	an improved,	more	visible	and	accessible	location,	and	usually	includes	increased	square	footage. We	continue	to	have	opportunities	for	additional	remodels	and	relocations	beyond	2011.

Expanding	Operating	Profit	Rate.	Another	key	component	of	our	growth	strategy	is improving	our	operating	profit	rate	through	enhanced	gross	profit	and	expense	reduction initiatives.	Our	financial	results	during	2010	and	2009	reflect	the	favorable	impact	of	our	strong category	management	processes	on	gross	margin	improvement	and	our	continued	efforts	to reduce	selling,	general	and	administrative	expenses	as	a	percent	of	sales.

In	recent	months,	we	have	begun	to	see	many	of	our	product	categories	impacted	by increased	costs	of	commodities,	including	cotton,	wheat,	corn,	sugar,	coffee	and	resin,	as	well	as increased	transportation	fuel	costs,	which	have	increased	significantly	in	early	2011.	These

increases	pose	a	challenge	to	our	continued	priority	of	improving	our	gross	profit	rate.	However, we	believe	we	have	options	available	to	mitigate	the	impact	of	these	increases,	including	our price	optimization,	changes	to	our	product	selection,	such	as	alternate	national	brands	and	the expansion	of	our	private	brands,	and	modifications	to	our	packaging	and	product	size,	including items	in	our	planned	expansion	of	merchandise	selections	priced	at	$1.00.	In	addition,	we continue	to	focus	on	reducing	inventory	shrinkage	and	improving	distribution	efficiencies.

We	intend	to	continue	to	drive	our	private	brand	penetration	going	forward.	Our	private brand	program	complements	our	model	of	offering	customers	nationally	branded	consumables merchandise	at	everyday	low	prices.	Generally,	private	brand	items	have	higher	gross	profit margins	than	similar	national	brand	items,	and	in	2010	represented	approximately	22%	of	our consumables	sales.	In	2010,	we	made	significant	progress	in	expanding	our	private	brand	efforts to	our	non-consumable	offerings,	dramatically	improving	the	visual	impact	of	our	many	non- consumables,	including	housewares,	domestics,	lawn	and	garden	tools	and	summer	toys.

We	believe	we	have	the	potential	to	directly	source	a	larger	portion	of	our	products	at significant	savings	to	current	costs.	In	2010,	we	imported	approximately	$750	million	of	goods, or	8%	of	total	purchases,	at	cost.

We	continually	look	for	ways	to	improve	our	cost	structure	and	enhance	efficiencies throughout	the	organization.	In	2010,	we	centralized	our	procurement	system	which	we	expect	to aid	us	in	reducing	the	cost	of	purchases	throughout	the	company	in	2011	and	beyond.	In	addition, we	have	begun	to	implement	a	store	labor	management	and	work	simplification	program,	and	we are	continuing	our	store	rent	reduction	initiative.

Growing	Our	Store	Base.	Based	on	a	detailed,	market-by-market	analysis,	we	believe	we have	the	potential	to	at	least	double	our	current	number	of	stores	through	expansion	in	both existing	and	new	markets.	In	2011,	we	plan	to	enter	three	new	states,	Connecticut,	New Hampshire	and	Nevada.	We	have	confidence	in	our	real	estate	disciplines	and	in	our	ability	to identify,	open	and	operate	successful	new	stores.	As	a	result,	we	believe	that	at	least	our	present level	of	new	store	growth	is	sustainable	for	the	foreseeable	future.	In	addition,	we	continue	to believe	that	in	the	current	real	estate	market	environment	there	may	be	opportunities	to	negotiate lower	rent	than	would	have	previously	been	available,	allowing	us	to	continue	to	improve	the overall	quality	of	our	sites	at	attractive	rental	rates.

# Our	Merchandise

We	offer	a	focused	assortment	of	everyday	necessities,	which	drive	frequent	customer visits,	and	key	items	in	a	broad	range	of	general	merchandise	categories.	Our	product	assortment provides	the	opportunity	for	our	customers	to	address	most	of	their	basic	shopping	needs	with one	trip.	We	sell	high	quality	national	brands	from	leading	manufacturers	such	as	Procter	& Gamble,	Kimberly	Clark,	Unilever,	Kellogg's,	General	Mills,	Nabisco,	Coca-Cola	and	PepsiCo, which	are	typically	found	at	higher	retail	prices	elsewhere.	Additionally,	our	private	brand selections	offer	consumers	even	greater	value	with	options	to	purchase	value	items	and	national brand	equivalent	products	at	substantial	discounts	to	the	national	brand.

Our	stores	generally	offer	approximately	10,000	total	SKUs	per	store.	The	number	of SKUs	in	a	given	store	can	vary	based	upon	the	store's	size,	geographic	location,	merchandising initiatives,	seasonality,	and	other	factors.	Most	of	our	products	are	priced	at	$10	or	less,	with approximately	24%	at	$1	or	less.	We	separate	our	merchandise	into	four	categories:	1) consumables;	2)	seasonal;	3)	home	products;	and	4)	apparel.

Consumables	is	our	largest	category	and	includes	paper	and	cleaning	products	(such	as paper	towels,	bath	tissue,	paper	dinnerware,	trash	and	storage	bags,	laundry	and	other	home cleaning	supplies);	food,	including	packaged	food	and	perishables	(such	as	cereals,	canned	soups and	vegetables,	sugar,	flour,	milk,	eggs	and	bread);	beverages	and	snacks	(including	candy, cookies,	crackers,	salty	snacks	and	carbonated	beverages);	health	and	beauty	(including	over-the- counter	medicines	and	personal	care	products,	such	as	soap,	body	wash,	shampoo,	dental	hygiene and	foot	care	products);	and	pet	(including	pet	supplies	and	pet	food).

Seasonal	products	include	decorations,	toys,	batteries,	small	electronics,	greeting	cards, stationery,	prepaid	cell	phones	and	accessories,	gardening	supplies,	hardware,	automotive	and home	office	supplies.

Home	products	includes	kitchen	supplies,	cookware,	small	appliances,	light	bulbs,	storage containers,	frames,	candles,	craft	supplies	and	kitchen,	bed	and	bath	soft	goods.

Apparel	includes	casual	everyday	apparel	for	infants,	toddlers,	girls,	boys,	women	and men,	as	well	as	socks,	underwear,	disposable	diapers,	shoes	and	accessories.

The	percentage	of	net	sales	of	each	of	our	four	categories	of	merchandise	for	the	fiscal years	indicated	below	was	as	follows:

|  | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Consumables | 71.6% | 70.8% | 69.3% |
| Seasonal | 14.5% | 14.5% | 14.6% |
| Home\tproducts | 7.0% | 7.4% | 8.2% |
| Apparel | 6.9% | 7.3% | 7.9% |

Our	home	products	and	seasonal	categories	typically	account	for	the	highest	gross	profit margins,	and	the	consumables	category	typically	accounts	for	the	lowest	gross	profit	margin.

# The	Dollar	General	Store

The	average	Dollar	General	store	has	approximately	7,200	square	feet	of	selling	space and	is	typically	operated	by	a	manager,	an	assistant	manager	and	three	or	more	sales	clerks. Approximately	58%	of	our	stores	are	in	freestanding	buildings,	41%	in	strip	shopping	centers	and 1%	are	in	downtown	buildings.	Most	of	our	customers	live	within	three	to	five	miles,	or	a	10 minute	drive,	of	our	stores.	Our	store	strategy	features	low	initial	capital	expenditures,	limited maintenance	capital,	low	occupancy	and	operating	costs,	and	a	focused	merchandise	offering within	a	broad	range	of	categories,	allowing	us	to	deliver	low	retail	prices	while	generating strong	cash	flows	and	investment	returns.	In	2010,	the	average	cost	of	equipment	and	fixtures	in our	leased	stores	was	approximately	$165,000.	Initial	inventory,	net	of	payables,	increases	the investment	in	a	new	store	by	approximately	$75,000.

We	generally	have	not	encountered	difficulty	locating	suitable	store	sites	in	the	past. Given	the	size	of	the	communities	that	we	target,	we	believe	that	there	is	ample	opportunity	for new	store	growth	in	existing	and	new	markets.	In	addition,	the	current	real	estate	market	is providing	an	opportunity	for	us	to	access	higher	quality	sites	at	lower	rates	than	in	recent	years. Also,	we	believe	we	have	significant	opportunities	available	for	our	relocation	and	remodel programs.	We	spend	approximately	$75,000	for	equipment	and	fixtures	to	remodel	a	store	and approximately	$140,000	to	relocate	one.	We	remodeled	or	relocated	504	stores	in	2010,	450	in 2009	and	404	in	2008.

Our	recent	store	growth	is	summarized	in	the	following	table:

|  | Stores	at |  |  | Net |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Beginning | Stores | Stores | Store | Stores\tat |
| Year | of\tYear | Opened | Closed | Increase/(Decrease) | End\tof\tYear |
| 2008 | 8,194 | 207 | 39 | 168 | 8,362 |
| 2009 | 8,362 | 500 | 34 | 466 | 8,828 |
| 2010 | 8,828 | 600 | 56 | 544 | 9,372 |

# Our	Customers

Our	customers	seek	value	and	convenience.	Depending	on	their	financial	situation	and geographic	proximity,	customers'	reliance	on	Dollar	General	varies	from	fill-in	shopping	to periodic	routine	trips	in	order	to	stock	up	on	household	items,	to	weekly	or	more	frequent	trips	to meet	most	essential	needs.	We	believe	that	our	value	and	convenience	proposition	attracts customers	from	a	wide	range	of	income	brackets	and	life	stages.	In	the	last	year,	we	have	seen increases	in	the	annual	number	of	shopping	trips	that	our	customers	make	to	Dollar	General	as well	as	the	amount	spent	during	each	trip.

We	continue	to	focus	on	the	quality,	selection	and	pricing	of	our	merchandise,	targeted advertising,	improved	store	standards	and	site	selection	processes,	among	other	initiatives,	to attract	new	and	retain	existing	customers.

# Our	Suppliers

We	purchase	merchandise	from	a	wide	variety	of	suppliers	and	maintain	direct	buying relationships	with	many	producers	of	national	brand	merchandise,	such	as	Procter	&	Gamble, Kimberly	Clark,	Unilever,	Kellogg's,	General	Mills,	Nabisco,	Coca-Cola	and	PepsiCo.	Despite our	broad	offering,	we	maintain	only	a	limited	number	of	SKUs	per	category,	giving	us	a	pricing advantage	in	dealing	with	our	suppliers.	Approximately	9%	and	7%	of	our	purchases	in	2010 were	from	our	largest	and	second	largest	suppliers,	respectively.	Our	private	brands	come	from	a diversified	supplier	base.	We	directly	imported	approximately	8%	of	our	purchases	at	cost	(13% of	our	purchases	at	retail)	in	2010.	Our	vendor	arrangements	generally	provide	for	payment	for such	merchandise	in	U.S.	dollars.

We	have	not	experienced	any	difficulty	in	obtaining	sufficient	quantities	of	core merchandise	and	believe	that,	if	one	or	more	of	our	current	sources	of	supply	became unavailable,	we	would	generally	be	able	to	obtain	alternative	sources	without	experiencing	a substantial	disruption	of	our	business.	However,	such	alternative	sources	could	increase	our

merchandise	costs	or	reduce	the	quality	of	our	merchandise,	and	an	inability	to	obtain	alternative sources	could	adversely	affect	our	sales.

# Distribution,	Transportation	and	Inventory	Management

Our	stores	are	supported	by	nine	distribution	centers	located	strategically	throughout	our geographic	footprint.	Of	these	nine,	we	own	six	and	lease	the	other	three.	We	lease	additional temporary	warehouse	space	as	necessary	to	support	our	distribution	needs.	To	support	our growth,	we	are	in	the	process	of	constructing	our	tenth	distribution	center	near	Birmingham, Alabama.	We	expect	this	new	distribution	center	to	be	operational	in	2012.	Over	the	past	few years	we	have	made	significant	investments	in	facilities,	technological	improvements	and upgrades,	and	we	continue	to	improve	work	processes,	all	of	which	increase	our	efficiency	and ability	to	support	our	merchandising	and	operations	initiatives	as	well	as	our	new	store	growth. We	continually	analyze	and	rebalance	the	network	to	ensure	that	it	remains	efficient	and	provides the	service	our	stores	require.	See	''—Properties''	for	additional	information	pertaining	to	our distribution	centers.

Most	of	our	merchandise	flows	through	our	distributions	centers	and	is	delivered	to	our stores	by	third-party	trucking	firms,	utilizing	our	trailers.	Our	agreements	with	these	trucking firms	are	based	on	estimated	costs	of	diesel	fuel,	with	the	difference	in	estimated	and	current market	fuel	costs	passed	through	to	us.	The	costs	of	diesel	fuel	are	significantly	influenced	by international,	political	and	economic	circumstances,	and	have	risen	in	recent	months,	including considerable	increases	in	early	2011.	If	such	increased	prices	remain	in	effect,	or	if	further	price increases	were	to	arise	for	any	reason,	including	fuel	supply	shortages	or	unusual	price	volatility, the	resulting	higher	fuel	prices	could	materially	increase	our	transportation	costs.

In	addition,	we	believe	that	there	remains	opportunity	to	improve	our	inventory	turns. Initiatives	in	process	include	operational	efforts	to	optimize	presentation	levels	and	decrease excess	quantities	shipped	to	our	stores.	We	continue	to	focus	on	SKU	optimization	in	an	attempt to	ensure	that	we	can	meet	our	customers'	demands	for	our	most	popular	products	as	well	as	for product	assortment.	We	are	also	in	the	early	stages	of	implementing	an	improved	supply	chain solution	to	assist	in	ordering,	monitoring	and	tracking	inventory	from	purchase	order	to	receipt	to maintain	efficient	levels	of	inventory.	We	turned	our	inventory	approximately	5.2	times	over	the most	recent	four	quarters.

# Seasonality

Our	business	is	seasonal	to	a	certain	extent.	Generally,	our	highest	sales	volume	occurs	in the	fourth	quarter,	which	includes	the	Christmas	selling	season,	and	the	lowest	occurs	in	the	first quarter.	In	addition,	our	quarterly	results	can	be	affected	by	the	timing	of	new	store	openings	and store	closings,	the	amount	of	sales	contributed	by	new	and	existing	stores,	as	well	as	the	timing of	certain	holidays.	We	purchase	substantial	amounts	of	inventory	in	the	third	quarter	and	incur higher	shipping	costs	and	higher	payroll	costs	in	anticipation	of	the	increased	sales	activity during	the	fourth	quarter.	In	addition,	we	carry	merchandise	during	our	fourth	quarter	that	we	do not	carry	during	the	rest	of	the	year,	such	as	gift	sets,	holiday	decorations,	certain	baking	items, and	a	broader	assortment	of	toys	and	candy.

The	following	table	reflects	the	seasonality	of	net	sales,	gross	profit,	and	net	income (loss)	by	quarter	for	each	of	the	quarters	of	our	three	most	recent	fiscal	years.	All	of	the	quarters reflected	below	are	comprised	of	13	weeks.

| (in	millions) | Quarter | Quarter | Quarter | Quarter |
| :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tJanuary\t28,\t2011 |  |  |  |  |
| Net\tsales | $3,111.3 | $3,214.2 | $3,223.4 | $3,486.1 |
| Gross\tprofit | 999.8 | 1,036.0 | 1,010.7 | 1,130.2 |
| Net\tincome | 136.0 | 141.2 | 128.1 | 222.5 |
| Year\tEnded\tJanuary\t29,\t2010 |  |  |  |  |
| Net\tsales | $2,779.9 | $2,901.9 | $2,928.8 | $3,185.8 |
| Gross\tprofit | 855.4 | 906.0 | 903.1 | 1,025.4 |
| Net\tincome\t(a) | 83.0 | 93.6 | 75.6 | 87.2 |
| Year\tEnded\tJanuary\t30,\t2009 |  |  |  |  |
| Net\tsales | $2,403.5 | $2,609.4 | $2,598.9 | $2,845.8 |
| Gross\tprofit | 693.1 | 758.0 | 772.3 | 837.7 |
| Net\tincome\t(loss)\t(b) | 5.9 | 27.7 | (7.3) | 81.9 |

(a) Includes	expenses,	net	of	income	taxes,	of	$82.9	million	related	to	our	initial	public	offering	during	the	fourth quarter	of	2009.

(b) Includes	expenses,	net	of	income	taxes,	of	$37.4	million	related	to	the	settlement	of	a	shareholder	lawsuit	during the	third	quarter	of	2008.

# Our	Competition

We	operate	in	the	basic	discount	consumer	goods	market,	which	is	highly	competitive with	respect	to	price,	store	location,	merchandise	quality,	assortment	and	presentation,	in-stock consistency,	and	customer	service.	We	compete	with	discount	stores	and	with	many	other retailers,	including	mass	merchandise,	grocery,	drug,	convenience,	variety	and	other	specialty stores.	These	other	retail	companies	operate	stores	in	many	of	the	areas	where	we	operate,	and many	of	them	engage	in	extensive	advertising	and	marketing	efforts.	Our	direct	competitors include	Family	Dollar,	Dollar	Tree,	Fred's,	99	Cents	Only	and	various	local,	independent operators,	as	well	as	Walmart,	Walgreens,	CVS,	Rite	Aid,	Target	and	Costco,	among	others. Certain	of	our	competitors	have	greater	financial,	distribution,	marketing	and	other	resources than	we	do.

We	differentiate	ourselves	from	other	forms	of	retailing	by	offering	consistently	low prices	in	a	convenient,	small-store	format.	We	believe	that	our	prices	are	competitive	due	in	part to	our	low	cost	operating	structure	and	the	relatively	limited	assortment	of	products	offered. Historically,	we	have	minimized	labor	by	offering	fewer	price	points	and	a	reliance	on	simple merchandise	presentation.	Purchasing	large	volumes	of	merchandise	within	our	focused assortment	in	each	merchandise	category	allows	us	to	keep	our	average	costs	low,	contributing	to our	ability	to	offer	competitive	everyday	low	prices	to	our	customers.	See	"—Our	Business Model"	above	for	further	discussion	of	our	competitive	situation.

# Our	Employees

As	of	February	25,	2011,	we	employed	approximately	85,900	full-time	and	part-time employees,	including	divisional	and	regional	managers,	district	managers,	store	managers,	other store	personnel	and	distribution	center	and	administrative	personnel.	We	have	increasingly focused	on	recruiting,	training,	motivating	and	retaining	employees,	and	we	believe	that	the quality,	performance	and	morale	of	our	employees	have	increased	as	a	result.	We	currently	are not	a	party	to	any	collective	bargaining	agreements.

# Our	Trademarks

We	own	marks	that	are	registered	with	the	United	States	Patent	and	Trademark	Office and	are	protected	under	applicable	intellectual	property	laws,	including	without	limitation	the trademarks	Dollar	General®,	Dollar	General	Market®,	Clover	Valley®,	DG®,	DG	Guarantee®, Smart	&	Simple®,	trueliving®,	Sweet	Smiles®	and	the	Dollar	General	price	point	designs,	along with	variations	and	formatives	of	these	trademarks	as	well	as	certain	other	trademarks.	We attempt	to	obtain	registration	of	our	trademarks	whenever	practicable	and	to	pursue	vigorously any	infringement	of	those	marks.	Our	trademark	registrations	have	various	expiration	dates; however,	assuming	that	the	trademark	registrations	are	properly	renewed,	they	have	a	perpetual duration.

We	also	hold	licenses	to	use	various	trademarks	owned	by	third	parties,	including	an exclusive	license	to	the	Bobbie	Brooks	brand	for	clothing	through	March	31,	2011,	with	the option	to	renew	such	license	on	a	year-to-year	basis,	a	license	to	the	Fisher	Price	brand	for certain	items	of	children's	clothing	through	December	31,	2013,	and	an	exclusive	license	to	the Rexall	brand	through	March	5,	2020.

# Available	Information

Our	Web	site	address	is	www.dollargeneral.com.	We	file	with	or	furnish	to	the	Securities and	Exchange	Commission	(the	"SEC")	annual	reports	on	Form	10-K,	quarterly	reports	on	Form 10-Q,	current	reports	on	Form	8-K,	and	amendments	to	those	reports,	proxy	statements	and annual	reports	to	shareholders,	and,	from	time	to	time,	registration	statements	and	other documents.	These	documents	are	available	free	of	charge	to	investors	on	or	through	the	Investor Information	portion	of	our	Web	site	as	soon	as	reasonably	practicable	after	we	electronically	file them	with	or	furnish	them	to	the	SEC.	In	addition,	the	public	may	read	and	copy	any	of	the materials	we	file	with	the	SEC	at	the	SEC's	Public	Reference	Room	at	100	F	Street,	NE, Washington	DC	20549.	The	public	may	obtain	information	on	the	operation	of	the	Public Reference	Room	by	calling	the	SEC	at	1-800-SEC-0330.	The	SEC	maintains	an	internet	site	that contains	reports,	proxy	and	information	statements	and	other	information	regarding	issuers,	such as	Dollar	General,	that	file	electronically	with	the	SEC.	The	address	of	that	Web	site	is http://www.sec.gov.

# ITEM	1A. RISK	FACTORS

You	should	carefully	consider	the	risks	described	below	and	the	other	information contained	in	this	report	and	other	filings	that	we	make	from	time	to	time	with	the	SEC,	including our	consolidated	financial	statements	and	accompanying	notes.	Any	of	the	following	risks	could materially	and	adversely	affect	our	business,	financial	condition,	results	of	operations	or liquidity.	In	addition,	the	risks	described	below	are	not	the	only	risks	we	face.	Our	business, financial	condition,	results	of	operations	or	liquidity	could	also	be	adversely	affected	by additional	factors	that	apply	to	all	companies	generally,	as	well	as	other	risks	that	are	not currently	known	to	us	or	that	we	currently	view	to	be	immaterial.	While	we	attempt	to	mitigate known	risks	to	the	extent	we	believe	to	be	practicable	and	reasonable,	we	can	provide	no assurance,	and	we	make	no	representation,	that	our	mitigation	efforts	will	be	successful.

# Current	economic	conditions	and	other	economic	factors	may	adversely	affect	our financial	performance	and	other	aspects	of	our	business.

We	believe	that	many	of	our	customers	are	on	fixed	or	low	incomes	and	generally	have limited	discretionary	spending	dollars.	A	further	slowdown	in	the	economy,	or	a	delayed recovery,	or	other	economic	conditions	affecting	disposable	consumer	income,	such	as	increased unemployment	or	underemployment	levels,	inflation,	increases	in	fuel	or	other	energy	costs	and interest	rates,	lack	of	available	credit,	consumer	debt	levels,	higher	tax	rates	and	other	changes	in tax	laws,	and	further	erosion	in	consumer	confidence,	may	adversely	affect	our	business	by reducing	our	customers'	spending	or	by	causing	them	to	shift	their	spending	to	products	other than	those	sold	by	us	or	to	products	sold	by	us	that	are	less	profitable	than	other	product	choices, all	of	which	could	result	in	lower	net	sales,	decreases	in	inventory	turnover,	greater	markdowns on	inventory,	and	a	reduction	in	profitability	due	to	lower	margins.	Many	of	those	factors,	as	well as	commodity	rates,	transportation	costs	(including	the	costs	of	diesel	fuel),	costs	of	labor, insurance	and	healthcare,	foreign	exchange	rate	fluctuations,	lease	costs,	measures	that	create barriers	to	or	increase	the	costs	associated	with	international	trade,	changes	in	other	laws	and regulations	and	other	economic	factors,	also	affect	our	cost	of	goods	sold	and	our	selling,	general and	administrative	expenses,	which	may	adversely	affect	our	sales	or	profitability.	We	have limited	or	no	ability	to	control	many	of	these	factors.	We	saw	product	costs	begin	to	escalate	in our	2010	fourth	quarter	as	a	result	of	increases	in	the	costs	of	certain	commodities	(including cotton,	wheat,	corn,	sugar,	coffee,	resin),	and	increasing	diesel	fuel	costs.	We	will	be	diligent	in our	efforts	to	keep	product	costs	as	low	as	possible	in	the	face	of	these	increases	while	still working	to	optimize	gross	profit	and	meet	the	needs	of	our	customers.

In	addition,	many	of	the	factors	discussed	above,	along	with	current	global	economic conditions	and	uncertainties,	the	potential	for	additional	failures	or	realignments	of	financial institutions,	and	the	related	impact	on	available	credit	may	affect	us	and	our	suppliers	and	other business	partners,	landlords	and	service	providers	in	an	adverse	manner	including,	but	not	limited to,	reducing	access	to	liquid	funds	or	credit,	increasing	the	cost	of	credit,	limiting	our	ability	to manage	interest	rate	risk,	increasing	the	risk	of	bankruptcy	of	our	suppliers,	landlords	or counterparties	to	or	other	financial	institutions	involved	in	our	credit	facilities	and	our	derivative and	other	contracts,	increasing	the	cost	of	goods	to	us,	and	other	adverse	consequences	which	we are	unable	to	fully	anticipate	or	control.

# Our	plans	depend	significantly	on	initiatives	designed	to	increase	sales	and	improve

# the	efficiencies,	costs	and	effectiveness	of	our	operations,	and	failure	to	achieve	or	sustain

# these	plans	could	affect	our	performance	adversely.

We	have	initiatives	(such	as	those	relating	to	marketing,	merchandising,	promotions, sourcing,	shrink,	private	brand,	store	operations	and	real	estate)	in	various	stages	of	testing, evaluation,	and	implementation,	upon	which	we	expect	to	rely	to	continue	to	improve	our	results of	operations	and	financial	condition	and	to	achieve	our	financial	plans.	These	initiatives	are inherently	risky	and	uncertain,	even	when	tested	successfully,	in	their	application	to	our	business in	general.	It	is	possible	that	successful	testing	can	result	partially	from	resources	and	attention that	cannot	be	duplicated	in	broader	implementation,	particularly	in	light	of	the	diverse geographic	locations	of	our	stores	and	the	fact	that	our	field	management	is	so	decentralized. General	implementation	also	may	be	negatively	affected	by	other	risk	factors	described	herein. Successful	systemwide	implementation	relies	on	consistency	of	training,	stability	of	workforce, ease	of	execution,	and	the	absence	of	offsetting	factors	that	can	influence	results	adversely. Failure	to	achieve	successful	implementation	of	our	initiatives	or	the	cost	of	these	initiatives exceeding	management's	estimates	could	adversely	affect	our	results	of	operations	and	financial condition.

In	addition,	the	success	of	our	merchandising	initiatives,	particularly	those	with	respect	to non-consumable	merchandise,	depends	in	part	upon	our	ability	to	predict	consistently	and successfully	the	products	our	customers	will	demand	and	to	identify	and	timely	respond	to evolving	trends	in	demographics	and	consumer	preferences,	expectations	and	needs.	If	we	are unable	to	select	products	that	are	attractive	to	customers,	to	obtain	such	products	at	costs	that allow	us	to	sell	them	at	a	profit,	or	to	effectively	market	such	products,	our	sales,	market	share and	profitability	could	be	adversely	affected.	If	our	merchandising	efforts	in	the	non- consumables	area	are	unsuccessful,	we	could	be	further	adversely	affected	by	our	inability	to offset	the	lower	margins	associated	with	our	consumables	business.

# We	face	intense	competition	that	could	limit	our	growth	opportunities	and adversely	impact	our	financial	performance.

The	retail	business	is	highly	competitive.	We	operate	in	the	basic	discount	consumer goods	market,	which	is	competitive	with	respect	to	price,	store	location,	merchandise	quality, assortment	and	presentation,	in-stock	consistency,	and	customer	service.	This	competitive environment	subjects	us	to	the	risk	of	adverse	impact	to	our	financial	performance	because	of	the lower	prices,	and	thus	the	lower	margins,	required	to	maintain	our	competitive	position.	Also, companies	like	ours	operating	in	the	basic	discount	consumer	goods	market	(due	to	customer demographics	and	other	factors)	may	have	limited	ability	to	increase	prices	in	response	to increased	costs	without	losing	competitive	position.	This	limitation	may	adversely	affect	our margins	and	financial	performance.	We	compete	for	customers,	employees,	store	sites,	products and	services	and	in	other	important	aspects	of	our	business	with	many	other	local,	regional	and national	retailers.	We	compete	with	retailers	operating	discount,	mass	merchandise,	outlet, warehouse	club,	grocery,	drug,	convenience,	variety	and	other	specialty	stores.	Certain	of	our competitors	have	greater	financial,	distribution,	marketing	and	other	resources	than	we	do	and may	be	able	to	secure	better	arrangements	with	suppliers	than	we	can.	These	other	competitors

compete	in	a	variety	of	other	ways,	including	aggressive	promotional	activities,	merchandise selection	and	availability,	services	offered	to	customers,	location,	store	hours,	in-store	amenities and	price.	If	we	fail	to	respond	effectively	to	competitive	pressures	and	changes	in	the	retail markets,	it	could	adversely	affect	our	financial	performance.

Competition	for	customers	has	intensified	in	recent	years	as	larger	competitors	have moved	into,	or	increased	their	presence	in,	our	geographic	markets.	In	addition,	some	of	our	large box	competitors	are	or	may	be	developing	small	box	formats	which	may	produce	more competition.	We	remain	vulnerable	to	the	marketing	power	and	high	level	of	consumer recognition	of	these	larger	competitors	and	to	the	risk	that	these	competitors	or	others	could venture	into	our	industry	in	a	significant	way.	Generally,	we	expect	an	increase	in	competition.

# Our	private	brands	may	not	achieve	or	maintain	broad	market	acceptance	and increase	the	risks	we	face.

We	have	substantially	increased	the	number	of	our	private	brand	items,	and	the	program is	a	sizable	part	of	our	future	growth	plans.	We	believe	that	our	success	in	gaining	and maintaining	broad	market	acceptance	of	our	private	brands	depends	on	many	factors,	including pricing,	our	costs,	quality	and	customer	perception.	We	may	not	achieve	or	maintain	our expected	sales	for	our	private	brands.	As	a	result,	our	business,	financial	condition	and	results	of operations	could	be	materially	and	adversely	affected.

# A	significant	disruption	to	our	distribution	network	or	to	the	timely	receipt	of inventory	could	adversely	impact	sales	or	increase	our	transportation	costs,	which	would decrease	our	profits.

We	rely	on	our	distribution	and	transportation	network	to	provide	goods	to	our	stores	in	a timely	and	cost-effective	manner	through	deliveries	to	our	distribution	centers	from	vendors	and then	from	the	distribution	centers	or	direct	ship	vendors	to	our	stores	by	various	means	of transportation,	including	shipments	by	sea	and	truck.	Any	disruption,	unanticipated	expense	or operational	failure	related	to	this	process	could	affect	store	operations	negatively.	For	example, unexpected	delivery	delays	or	increases	in	transportation	costs	(including	through	increased	fuel costs	or	a	decrease	in	transportation	capacity	for	overseas	shipments)	could	significantly	decrease our	ability	to	make	sales	and	earn	profits.	In	addition,	labor	shortages	or	work	stoppages	in	the transportation	industry	or	long-term	disruptions	to	the	national	and	international	transportation infrastructure	that	lead	to	delays	or	interruptions	of	deliveries	could	negatively	affect	our business.

We	maintain	a	network	of	distribution	facilities	and	have	plans	to	build	new	facilities	to support	our	growth	objectives.	Delays	in	opening	distribution	centers	could	adversely	affect	our future	operations	by	slowing	store	growth,	which	may	in	turn	reduce	revenue	growth.	In addition,	the	planned	construction	of	a	new	distribution	center	in	2011,	and	any	future distribution-related	construction	or	expansion	projects,	entail	risks	which	could	cause	delays	and cost	overruns,	such	as:	shortages	of	materials;	shortages	of	skilled	labor	or	work	stoppages; unforeseen	construction,	scheduling,	engineering,	environmental	or	geological	problems;	weather interference;	fires	or	other	casualty	losses;	and	unanticipated	cost	increases.	The

completion	date	and	ultimate	cost	of	this	or	future	projects	could	differ	significantly	from	initial expectations	due	to	construction-related	or	other	reasons.	We	cannot	guarantee	that	any	project will	be	completed	on	time	or	within	established	budgets.

# Rising	fuel	costs	could	materially	adversely	affect	our	business.

Fuel	prices	have	risen	considerably	in	recent	months	and	are	significantly	influenced	by international,	political	and	economic	circumstances.	These	increases	pose	a	challenge	to	our continued	priority	of	improving	our	gross	profit	rate.	If	such	increased	prices	remain	in	effect,	or if	further	price	increases	were	to	arise	for	any	reason,	including	fuel	supply	shortages	or	unusual price	volatility,	the	resulting	higher	fuel	prices	could	materially	increase	our	transportation	costs, adversely	affecting	our	gross	profit	and	results	of	operations.	In	addition,	competitive	pressures in	our	industry	may	have	the	effect	of	inhibiting	our	ability	to	reflect	these	increased	costs	in	the prices	of	our	products.	We	will	be	diligent	in	our	efforts	to	keep	product	costs	as	low	as	possible in	the	face	of	these	increases	while	still	working	to	optimize	gross	profit	and	meet	the	needs	of our	customers.

# Risks	associated	with	or	faced	by	the	domestic	and	foreign	suppliers	from	whom	our products	are	sourced	could	adversely	affect	our	financial	performance.

The	products	we	sell	are	sourced	from	a	wide	variety	of	domestic	and	international suppliers.	In	fact,	our	largest	supplier	accounted	for	9%	of	our	purchases	in	2010,	and	our	next largest	supplier	accounted	for	approximately	7%	of	such	purchases.	We	have	not	experienced any	difficulty	in	obtaining	sufficient	quantities	of	core	merchandise	and	believe	that,	if	one	or more	of	our	current	sources	of	supply	became	unavailable,	we	would	generally	be	able	to	obtain alternative	sources	without	experiencing	a	substantial	disruption	of	our	business.	However,	such alternative	sources	could	increase	our	merchandise	costs	and	reduce	the	quality	of	our merchandise,	and	an	inability	to	obtain	alternative	sources	could	adversely	affect	our	sales.

We	directly	imported	approximately	8%	of	our	purchases	(measured	at	cost)	in	2010,	but many	of	our	domestic	vendors	directly	import	their	products	or	components	of	their	products. Changes	to	the	prices	and	flow	of	these	goods	for	any	reason,	such	as	political	and	economic instability	in	the	countries	in	which	foreign	suppliers	are	located,	the	financial	instability	of suppliers,	suppliers'	failure	to	meet	our	standards,	issues	with	labor	practices	of	our	suppliers	or labor	problems	they	may	experience	(such	as	strikes),	the	availability	and	cost	of	raw	materials to	suppliers,	merchandise	quality	or	safety	issues,	currency	exchange	rates,	transport	availability and	cost,	inflation,	and	other	factors	relating	to	the	suppliers	and	the	countries	in	which	they	are located	or	from	which	they	import,	are	beyond	our	control	and	could	adversely	affect	our operations	and	profitability.	Because	a	substantial	amount	of	our	imported	merchandise	comes from	China,	a	change	in	the	Chinese	currency	or	other	policies	could	negatively	impact	our merchandise	costs.	In	addition,	the	United	States'	foreign	trade	policies,	tariffs	and	other impositions	on	imported	goods,	trade	sanctions	imposed	on	certain	countries,	the	limitation	on the	importation	of	certain	types	of	goods	or	of	goods	containing	certain	materials	from	other countries	and	other	factors	relating	to	foreign	trade	are	beyond	our	control.	Disruptions	due	to labor	stoppages,	strikes	or	slowdowns,	or	other	disruptions	involving	our	vendors	or	the transportation	and	handling	industries	also	may	negatively	affect	our	ability	to	receive

merchandise	and	thus	may	negatively	affect	sales.	These	and	other	factors	affecting	our	suppliers and	our	access	to	products	could	adversely	affect	our	financial	performance.	As	we	increase	our imports	of	merchandise	from	foreign	vendors,	the	risks	associated	with	foreign	imports	will increase.

# Product	liability	and	food	safety	claims	could	adversely	affect	our	business, reputation	and	financial	performance.

Despite	our	best	efforts	to	ensure	the	quality	and	safety	of	the	products	we	sell,	we	may be	subject	to	product	liability	claims	from	customers	or	penalties	from	government	agencies relating	to	products,	including	food	products,	that	are	recalled,	defective	or	otherwise	alleged	to be	harmful.	Such	claims	may	result	from	tampering	by	unauthorized	third	parties,	product contamination	or	spoilage,	including	the	presence	of	foreign	objects,	substances,	chemicals,	other agents,	or	residues	introduced	during	the	growing,	storage,	handling	and	transportation	phases. All	of	our	vendors	and	their	products	must	comply	with	applicable	product	and	food	safety	laws. We	generally	seek	contractual	indemnification	and	insurance	coverage	from	our	suppliers. However,	if	we	do	not	have	adequate	contractual	indemnification	and/or	insurance	available, such	claims	could	have	a	material	adverse	effect	on	our	business,	financial	condition	and	results of	operations.	Our	ability	to	obtain	indemnification	from	foreign	suppliers	may	be	hindered	by the	manufacturers'	lack	of	understanding	of	U.S.	product	liability	or	other	laws,	which	may make	it	more	likely	that	we	be	required	to	respond	to	claims	or	complaints	from	customers	as	if we	were	the	manufacturer	of	the	products.	Even	with	adequate	insurance	and	indemnification, such	claims	could	significantly	damage	our	reputation	and	consumer	confidence	in	our	products. Our	litigation	expenses	could	increase	as	well,	which	also	could	have	a	materially	negative impact	on	our	results	of	operations	even	if	a	product	liability	claim	is	unsuccessful	or	is	not	fully pursued.

# We	are	subject	to	governmental	regulations,	procedures	and	requirements.	A significant	change	in,	or	noncompliance	with,	these	regulations	could	have	a	material adverse	effect	on	our	financial	performance.

Our	business	is	subject	to	numerous	federal,	state	and	local	laws	and	regulations.	We routinely	incur	costs	in	complying	with	these	regulations.	New	laws	or	regulations,	particularly those	dealing	with	healthcare	reform,	product	safety,	and	labor	and	employment,	among	others, or	changes	in	existing	laws	and	regulations,	particularly	those	governing	the	sale	of	products, may	result	in	significant	added	expenses	or	may	require	extensive	system	and	operating	changes that	may	be	difficult	to	implement	and/or	could	materially	increase	our	cost	of	doing	business.	In addition,	such	changes	or	new	laws	may	require	the	write	off	and	disposal	of	existing	product inventory,	resulting	in	significant	adverse	financial	impact	to	us.	Untimely	compliance	or noncompliance	with	applicable	regulations	or	untimely	or	incomplete	execution	of	a	required product	recall	can	result	in	the	imposition	of	penalties,	including	loss	of	licenses	or	significant fines	or	monetary	penalties,	in	addition	to	reputational	damage.

# Litigation	may	adversely	affect	our	business,	financial	condition	and	results	of

# operations.

Our	business	is	subject	to	the	risk	of	litigation	by	employees,	consumers,	suppliers, competitors,	shareholders,	government	agencies	and	others	through	private	actions,	class	actions, administrative	proceedings,	regulatory	actions	or	other	litigation.	The	number	of	employment- related	class	actions	filed	each	year	has	continued	to	increase,	and	recent	changes	and	proposed changes	in	Federal	and	state	laws	may	cause	claims	to	rise	even	more.	The	outcome	of	litigation, particularly	class	action	lawsuits,	regulatory	actions	and	intellectual	property	claims,	is	difficult to	assess	or	quantify.	Plaintiffs	in	these	types	of	lawsuits	may	seek	recovery	of	very	large	or indeterminate	amounts,	and	the	magnitude	of	the	potential	loss	relating	to	these	lawsuits	may remain	unknown	for	substantial	periods	of	time.	In	addition,	certain	of	these	lawsuits,	if	decided adversely	to	us	or	settled	by	us,	may	result	in	liability	material	to	our	financial	statements	as	a whole	or	may	negatively	affect	our	operating	results	if	changes	to	our	business	operation	are required.	The	cost	to	defend	future	litigation	may	be	significant.	There	also	may	be	adverse publicity	associated	with	litigation	that	could	negatively	affect	customer	perception	of	our business,	regardless	of	whether	the	allegations	are	valid	or	whether	we	are	ultimately	found liable.	As	a	result,	litigation	may	adversely	affect	our	business,	financial	condition	and	results	of operations.	See	Note	9	to	the	consolidated	financial	statements	for	further	details	regarding certain	of	these	pending	matters.

# If	we	cannot	open	new	stores	profitably	and	on	schedule,	our	planned	future	growth will	be	impeded,	which	would	adversely	affect	sales.

Our	ability	to	open	profitable	new	stores	is	a	key	component	of	our	planned	future growth.	Our	ability	to	timely	open	such	stores	and	to	expand	into	additional	market	areas	depends in	part	on	the	following	factors:	the	availability	of	attractive	store	locations;	the	absence	of occupancy	delays;	the	ability	to	negotiate	acceptable	lease	and	development	terms;	the	ability	to hire	and	train	new	personnel,	especially	store	managers,	in	a	cost	effective	manner;	the	ability	to identify	customer	demand	in	different	geographic	areas;	general	economic	conditions;	and	the availability	of	sufficient	funds	for	expansion.	Many	of	these	factors	affect	our	ability	to successfully	relocate	stores,	and	many	of	them	are	beyond	our	control.	In	addition,	our	credit ratings,	combined	with	tighter	lending	practices,	have	made	financing	more	challenging	for	our real	estate	developers	in	today's	market.	These	unfavorable	lending	trends	could	potentially impact	the	timing	of	our	store	openings	and	build-to-suit	program.

Delays	or	failures	in	opening	new	stores,	or	achieving	lower	than	expected	sales	in	new stores,	or	drawing	a	greater	than	expected	proportion	of	sales	in	new	stores	away	from	existing stores,	could	materially	adversely	affect	our	growth	and/or	profitability.	In	addition,	we	may	not anticipate	all	of	the	challenges	imposed	by	the	expansion	of	our	operations	and,	as	a	result,	may not	meet	our	targets	for	opening	new	stores,	remodeling	or	relocating	stores	or	expanding profitably.

Some	of	our	new	stores	may	be	located	in	areas	where	we	have	little	or	no	meaningful experience	or	brand	recognition.	Those	markets	may	have	different	competitive	conditions, market	conditions,	consumer	tastes	and	discretionary	spending	patterns	than	our	existing

markets,	which	may	cause	our	new	stores	to	be	less	successful	than	stores	in	our	existing markets.

Many	of	our	new	stores	will	be	located	in	areas	where	we	have	existing	units.	Although we	have	experience	in	these	markets,	increasing	the	number	of	locations	in	these	markets	may result	in	inadvertent	over-saturation	of	markets	and	temporarily	or	permanently	divert	customers and	sales	from	our	existing	stores,	thereby	adversely	affecting	our	overall	financial	performance.

Natural	disasters	(whether	or	not	caused	by	climate	change),	unusual	weather conditions,	pandemic	outbreaks,	terrorist	acts,	and	global	political	events	could	cause permanent	or	temporary	distribution	center	or	store	closures,	impair	our	ability	to purchase,	receive	or	replenish	inventory,	or	decrease	customer	traffic,	all	of	which	could result	in	lost	sales	and	otherwise	adversely	affect	our	financial	performance.

The	occurrence	of	one	or	more	natural	disasters,	such	as	hurricanes,	fires,	floods,	and earthquakes	(whether	or	not	caused	by	climate	change),	unusual	weather	conditions,	pandemic outbreaks,	terrorist	acts	or	disruptive	global	political	events,	such	as	civil	unrest	in	countries	in which	our	suppliers	are	located,	or	similar	disruptions	could	adversely	affect	our	operations	and financial	performance.	To	the	extent	these	events	result	in	the	closure	of	one	or	more	of	our distribution	centers,	a	significant	number	of	stores,	or	our	corporate	headquarters	or	impact	one or	more	of	our	key	suppliers,	our	operations	and	financial	performance	could	be	materially adversely	affected	through	an	inability	to	make	deliveries	or	provide	other	support	functions	to our	stores	and	through	lost	sales.	In	addition,	these	events	could	result	in	increases	in	fuel	(or other	energy)	prices	or	a	fuel	shortage,	delays	in	opening	new	stores,	the	temporary	lack	of	an adequate	work	force	in	a	market,	the	temporary	or	long-term	disruption	in	the	supply	of	products from	some	domestic	and	overseas	suppliers,	the	temporary	disruption	in	the	transport	of	goods from	overseas,	delay	in	the	delivery	of	goods	to	our	distribution	centers	or	stores,	the	temporary reduction	in	the	availability	of	products	in	our	stores	and	disruption	of	our	utility	services	or	to our	information	systems.	These	events	also	can	have	indirect	consequences	such	as	increases	in the	costs	of	insurance	if	they	result	in	significant	loss	of	property	or	other	insurable	damage.

Material	damage	to,	or	interruptions	to,	our	information	systems	as	a	result	of external	factors,	staffing	shortages	and	difficulties	in	updating	our	existing	technology	or developing	or	implementing	new	technology	could	have	a	material	adverse	effect	on	our business	or	results	of	operations.

We	depend	on	a	variety	of	information	technology	systems	for	the	efficient	functioning of	our	business.	Such	systems	are	subject	to	damage	or	interruption	from	power	outages, computer	and	telecommunications	failures,	computer	viruses,	security	breaches	and	natural disasters.	Damage	or	interruption	to	these	systems	may	require	a	significant	investment	to	fix	or replace	them,	and	we	may	suffer	interruptions	in	our	operations	in	the	interim.	Any	material interruptions	may	have	a	material	adverse	effect	on	our	business	or	results	of	operations.

We	also	rely	heavily	on	our	information	technology	staff.	Failure	to	meet	these	staffing needs	may	negatively	affect	our	ability	to	fulfill	our	technology	initiatives	while	continuing	to provide	maintenance	on	existing	systems.	We	rely	on	certain	vendors	to	maintain	and

periodically	upgrade	many	of	these	systems	so	that	they	can	continue	to	support	our	business. The	software	programs	supporting	many	of	our	systems	were	licensed	to	us	by	independent software	developers.	The	inability	of	these	developers	or	us	to	continue	to	maintain	and	upgrade these	information	systems	and	software	programs	would	disrupt	or	reduce	the	efficiency	of	our operations	if	we	were	unable	to	convert	to	alternate	systems	in	an	efficient	and	timely	manner.	In addition,	costs	and	potential	problems	and	interruptions	associated	with	the	implementation	of new	or	upgraded	systems	and	technology,	such	as	the	implementation	of	our	new	supply	chain solution,	or	with	maintenance	or	adequate	support	of	existing	systems	could	also	disrupt	or reduce	the	efficiency	of	our	operations.

# Failure	to	attract	and	retain	qualified	employees,	particularly	field,	store	and distribution	center	managers,	and	to	control	labor	costs,	as	well	as	other	labor	issues,	could adversely	affect	our	financial	performance.

Our	future	growth	and	performance	depends	on	our	ability	to	attract,	retain	and	motivate qualified	employees,	many	of	whom	are	in	positions	with	historically	high	rates	of	turnover	such as	field	managers	and	distribution	center	managers.	Our	ability	to	meet	our	labor	needs,	while controlling	our	labor	costs,	is	subject	to	many	external	factors,	including	competition	for	and availability	of	qualified	personnel	in	a	given	market,	unemployment	levels	within	those	markets, prevailing	wage	rates,	minimum	wage	laws,	health	and	other	insurance	costs,	and	changes	in employment	and	labor	laws	(including	changes	in	the	process	for	our	employees	to	join	a	union) or	other	workplace	regulation	(including	changes	in	entitlement	programs	such	as	health insurance	and	paid	leave	programs).	To	the	extent	a	significant	portion	of	our	employee	base unionizes,	or	attempts	to	unionize,	our	labor	costs	could	increase.	In	addition,	we	are	evaluating the	potential	future	impact	of	recently	enacted	comprehensive	healthcare	reform	legislation, which	will	likely	cause	our	healthcare	costs	to	increase.	While	the	significant	costs	of	the healthcare	reform	legislation	will	occur	after	2013	due	to	provisions	of	the	legislation	being phased	in	over	time,	changes	to	our	healthcare	costs	structure	could	have	a	significant	negative effect	on	our	business.	Our	ability	to	pass	along	labor	costs	to	our	customers	is	constrained	by our	low	price	model.

# Our	profitability	may	be	negatively	affected	by	inventory	shrinkage.

We	are	subject	to	the	risk	of	inventory	loss	and	theft.	We	experience	significant	inventory shrinkage,	and	we	cannot	assure	you	that	incidences	of	inventory	loss	and	theft	will	decrease	in the	future	or	that	the	measures	we	are	taking	will	effectively	address	the	problem	of	inventory shrinkage.	Although	some	level	of	inventory	shrinkage	is	an	unavoidable	cost	of	doing	business, if	we	were	to	experience	higher	rates	of	inventory	shrinkage	or	incur	increased	security	costs	to combat	inventory	theft,	our	financial	condition	could	be	affected	adversely.

# Our	cash	flows	from	operations	may	be	negatively	affected	if	we	are	not	successful in	managing	our	inventory	balances.

Our	inventory	balance	represented	approximately	45%	of	our	total	assets	exclusive	of goodwill	and	other	intangible	assets	as	of	January	28,	2011.	Efficient	inventory	management	is	a key	component	of	our	business	success	and	profitability.	To	be	successful,	we	must	maintain sufficient	inventory	levels	to	meet	our	customers'	demands	without	allowing	those	levels	to

increase	to	such	an	extent	that	the	costs	to	store	and	hold	the	goods	unduly	impacts	our	financial results.	If	our	buying	decisions	do	not	accurately	predict	customer	trends	or	purchasing	actions, we	may	have	to	take	unanticipated	markdowns	to	dispose	of	the	excess	inventory,	which	also	can adversely	impact	our	financial	results.	We	continue	to	focus	on	ways	to	reduce	these	risks,	but we	cannot	assure	you	that	we	will	be	successful	in	our	inventory	management.	If	we	are	not successful	in	managing	our	inventory	balances,	our	cash	flows	from	operations	may	be negatively	affected.

# Because	our	business	is	seasonal	to	a	certain	extent,	with	the	highest	volume	of	net sales	during	the	fourth	quarter,	adverse	events	during	the	fourth	quarter	could	materially affect	our	financial	statements	as	a	whole.

We	generally	recognize	our	highest	volume	of	net	sales	during	the	Christmas	selling season,	which	occurs	in	the	fourth	quarter	of	our	fiscal	year.	In	anticipation	of	this	holiday,	we purchase	substantial	amounts	of	seasonal	inventory	and	hire	many	temporary	employees.	An excess	of	seasonal	merchandise	inventory	could	result	if	our	net	sales	during	the	Christmas selling	season	were	to	fall	below	either	seasonal	norms	or	expectations.	If	our	fourth	quarter	sales results	were	substantially	below	expectations,	our	financial	performance	and	operating	results could	be	adversely	affected	by	unanticipated	markdowns,	especially	in	seasonal	merchandise. Lower	than	anticipated	sales	in	the	Christmas	selling	season	would	also	negatively	affect	our ability	to	absorb	the	increased	seasonal	labor	costs.

# Our	current	insurance	program	may	expose	us	to	unexpected	costs	and	negatively affect	our	financial	performance.

Our	insurance	coverage	reflects	deductibles,	self-insured	retentions,	limits	of	liability	and similar	provisions	that	we	believe	are	prudent	based	on	the	dispersion	of	our	operations. However,	there	are	types	of	losses	we	may	incur	but	against	which	we	cannot	be	insured	or which	we	believe	are	not	economically	reasonable	to	insure,	such	as	losses	due	to	acts	of	war, employee	and	certain	other	crime	and	some	natural	disasters.	If	we	incur	these	losses	and	they are	material,	our	business	could	suffer.	Certain	material	events	may	result	in	sizable	losses	for the	insurance	industry	and	adversely	impact	the	availability	of	adequate	insurance	coverage	or result	in	excessive	premium	increases.	To	offset	negative	insurance	market	trends,	we	may	elect to	self-insure,	accept	higher	deductibles	or	reduce	the	amount	of	coverage	in	response	to	these market	changes.	In	addition,	we	self-insure	a	significant	portion	of	expected	losses	under	our workers'	compensation,	automobile	liability,	general	liability	and	group	health	insurance programs.	Unanticipated	changes	in	any	applicable	actuarial	assumptions	and	management estimates	underlying	our	recorded	liabilities	for	these	losses,	including	expected	increases	in medical	and	indemnity	costs,	could	result	in	materially	different	expenses	than	expected	under these	programs,	which	could	have	a	material	adverse	effect	on	our	financial	condition	and	results of	operations.	In	addition,	we	are	evaluating	the	potential	future	impact	of	recently	enacted comprehensive	healthcare	reform	legislation,	which	may	cause	our	healthcare	costs	to	increase. Although	we	continue	to	maintain	property	insurance	for	catastrophic	events	at	our	store	support center	and	distribution	centers,	we	are	effectively	self-insured	for	other	property	losses.	If	we experience	a	greater	number	of	these	losses	than	we	anticipate,	our	financial	performance	could be	adversely	affected.

# If	we	fail	to	protect	our	brand	name,	competitors	may	adopt	tradenames	that	dilute the	value	of	our	brand	name.

We	may	be	unable	or	unwilling	to	strictly	enforce	our	trademarks	in	each	jurisdiction	in which	we	do	business.	Also,	we	may	not	always	be	able	to	successfully	enforce	our	trademarks against	competitors,	or	against	challenges	by	others.	Our	failure	to	successfully	protect	our trademarks	could	diminish	the	value	and	efficacy	of	our	brand	recognition,	and	could	cause customer	confusion,	which	could,	in	turn,	adversely	affect	our	sales	and	profitability.

# Our	success	depends	on	our	executive	officers	and	other	key	personnel.	If	we	lose key	personnel	or	are	unable	to	hire	additional	qualified	personnel,	our	business	may	be harmed.

Our	future	success	depends	to	a	significant	degree	on	the	skills,	experience	and	efforts	of our	executive	officers	and	other	key	personnel.	The	loss	of	the	services	of	any	of	our	executive officers,	particularly	Richard	W.	Dreiling,	our	Chief	Executive	Officer,	could	have	a	material adverse	effect	on	our	operations.	Our	future	success	will	also	depend	on	our	ability	to	attract	and retain	qualified	personnel	and	a	failure	to	attract	and	retain	new	qualified	personnel	could	have an	adverse	effect	on	our	operations.	We	do	not	currently	maintain	key	person	life	insurance policies	with	respect	to	our	executive	officers	or	key	personnel.

# We	face	risks	related	to	protection	of	customers'	credit	and	debt	card	data	and private	data	relating	to	us	or	our	customers	or	employees.

In	connection	with	credit	card	sales,	we	transmit	confidential	credit	and	debit	card information.	We	also	have	access	to,	collect	or	maintain	private	or	confidential	information regarding	our	customers	and	employees,	as	well	as	our	business.	We	have	procedures	and technology	in	place	to	safeguard	our	customers'	debit	and	credit	card	information,	our employees'	private	data,	and	our	confidential	business	information.	However,	third	parties	may have	the	technology	or	know-how	to	breach	the	security	of	this	information,	and	our	security measures	and	those	of	our	technology	vendors	may	not	effectively	prohibit	others	from	obtaining improper	access	to	this	information.	A	security	breach	of	any	kind	could	expose	us	to	risks	of data	loss,	litigation,	government	enforcement	actions	and	costly	response	measures,	and	could seriously	disrupt	our	operations.	Any	resulting	negative	publicity	could	significantly	harm	our reputation	which	could	cause	us	to	lose	market	share	and	have	an	adverse	effect	in	our	financial results.

While	we	have	reduced	our	debt	levels	since	2007,	we	continue	to	have	substantial debt	that	will	need	to	be	repaid	or	refinanced	at	or	prior	to	applicable	maturity	dates	which could	adversely	affect	our	ability	to	raise	additional	capital	to	fund	our	operations	and	limit our	ability	to	pursue	our	growth	strategy	or	other	opportunities	or	to	react	to	changes	in the	economy	or	our	industry.

At	January	28,	2011,	we	had	total	outstanding	debt	(including	the	current	portion	of	long- term	obligations)	of	$3.29	billion,	including	a	$1.964	billion	senior	secured	term	loan	facility which	matures	on	July	6,	2014,	$864.3	million	aggregate	principal	amount	of	10.625%	senior notes	due	2015	and	$450.7	million	aggregate	principal	amount	of	11.875%	/	12.625%	senior

subordinated	toggle	notes	due	2017.	We	also	had	an	additional	$959.3	million	available	for borrowing	under	our	senior	secured	asset-based	revolving	credit	facility	of	up	to	$1.031	billion, which	matures	July	6,	2013.	This	level	of	debt	and	our	ability	to	repay	or	refinance	this	debt	prior to	maturity	could	have	important	negative	consequences	to	our	business,	including:

· increasing	our	vulnerability	to	general	economic	and	industry	conditions	because	our debt	payment	obligations	may	limit	our	ability	to	use	our	cash	to	respond	to	or defend	against	changes	in	the	industry	or	the	economy;

· requiring	a	substantial	portion	of	our	cash	flow	from	operations	to	be	dedicated	to	the payment	of	principal	and	interest	on	our	indebtedness,	therefore	reducing	our	ability to	use	our	cash	flow	to	fund	our	operations,	capital	expenditures	and	future	business opportunities	or	pay	dividends;

· limiting	our	ability	to	pursue	our	growth	strategy;

· placing	us	at	a	disadvantage	compared	to	our	competitors	who	are	less	highly leveraged	and	may	be	better	able	to	use	their	cash	flow	to	fund	competitive	responses to	changing	industry,	market	or	economic	conditions;

· limiting	our	ability	to	obtain	additional	financing	for	working	capital,	capital

expenditures,	debt	service	requirements,	acquisitions	and	general	corporate	or	other purposes;	and

· increasing	the	difficulty	of	our	ability	to	make	payments	on	our	outstanding	debt.

# Our	variable	rate	debt	exposes	us	to	interest	rate	risk	which	could	adversely	affect our	cash	flow.

The	borrowings	under	the	term	loan	facility	and	the	senior	secured	asset-based	revolving credit	facility	comprise	our	credit	facilities	and	bear	interest	at	variable	rates.	Other	debt	we	incur also	could	be	variable	rate	debt.	If	market	interest	rates	increase,	variable	rate	debt	will	create higher	debt	service	requirements,	which	could	adversely	affect	our	cash	flow.	While	we	have entered	and	may	in	the	future	enter	into	agreements	limiting	our	exposure	to	higher	interest	rates, any	such	agreements	may	not	offer	complete	protection	from	this	risk.

# Our	debt	agreements	contain	restrictions	that	could	limit	our	flexibility	in	operating our	business.

Our	credit	facilities	and	the	indentures	governing	our	notes	contain	various	covenants	that could	limit	our	ability	to	engage	in	specified	types	of	transactions.	These	covenants	limit	our	and our	restricted	subsidiaries'	ability	to,	among	other	things:

· incur	additional	indebtedness,	issue	disqualified	stock	or	issue	certain	preferred stock;

· pay	dividends	and	make	certain	distributions,	investments	and	other	restricted payments;

· create	certain	liens	or	encumbrances;

· sell	assets;

· enter	into	transactions	with	our	affiliates;

· allow	payments	to	us	by	our	restricted	subsidiaries;

· merge,	consolidate,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets; and

· designate	our	subsidiaries	as	unrestricted	subsidiaries.

A	breach	of	any	of	these	covenants	could	result	in	a	default	under	the	agreement governing	such	indebtedness.	Upon	our	failure	to	maintain	compliance	with	these	covenants,	the lenders	could	elect	to	declare	all	amounts	outstanding	thereunder	to	be	immediately	due	and payable	and	terminate	all	commitments	to	extend	further	credit	thereunder.	If	the	lenders	under such	indebtedness	accelerate	the	repayment	of	borrowings,	we	cannot	assure	you	that	we	will have	sufficient	assets	to	repay	those	borrowings,	as	well	as	our	other	indebtedness,	including	our outstanding	notes.	We	have	pledged	a	significant	portion	of	our	assets	as	collateral	under	our credit	facilities.	If	we	were	unable	to	repay	those	amounts,	the	lenders	under	our	credit	facilities could	proceed	against	the	collateral	granted	to	them	to	secure	that	indebtedness.	Additional borrowings	under	the	senior	secured	asset-based	revolving	credit	facility	will,	if	excess availability	under	that	facility	is	less	than	a	certain	amount,	be	subject	to	the	satisfaction	of	a specified	financial	ratio.	Accordingly,	our	ability	to	access	the	full	availability	under	our	senior secured	asset-based	revolving	credit	facility	may	be	constrained.	Our	ability	to	meet	this	financial ratio	can	be	affected	by	events	beyond	our	control,	and	we	cannot	assure	you	that	we	will	meet this	ratio,	if	applicable,	and	other	covenants.

# New	accounting	guidance	or	changes	in	the	interpretation	or	application	of	existing accounting	guidance	could	adversely	affect	our	financial	performance.

The	implementation	of	proposed	new	accounting	standards	may	require	extensive systems,	internal	process	and	other	changes	that	could	increase	our	operating	costs,	and	may	also result	in	changes	to	our	financial	statements.	In	particular,	the	implementation	of	expected	future accounting	standards	related	to	leases,	as	currently	being	contemplated	by	the	convergence project	between	the	Financial	Accounting	Standards	Board	("FASB")	and	the	International Accounting	Standards	Board	("IASB"),	as	well	as	the	possible	adoption	of	international	financial reporting	standards	by	U.S.	registrants,	could	require	us	to	make	significant	changes	to	our	lease management,	fixed	asset,	and	other	accounting	systems,	and	in	all	likelihood	would	result	in changes	to	our	financial	statements.

U.S.	generally	accepted	accounting	principles	and	related	accounting	pronouncements, implementation	guidelines	and	interpretations	with	regard	to	a	wide	range	of	matters	that	are relevant	to	our	business	involve	many	subjective	assumptions,	estimates	and	judgments	by	our management.	Changes	in	these	rules	or	their	interpretation	or	changes	in	underlying	assumptions, estimates	or	judgments	by	our	management	could	significantly	change	our	reported	or	expected financial	performance.	The	outcome	of	such	changes	could	include	litigation	or	regulatory actions	which	could	have	an	adverse	effect	on	our	financial	condition	and	results	of	operations.

Kohlberg	Kravis	Roberts	&	Co.	L.P.	("KKR"),	certain	affiliates	of	Goldman,	Sachs &	Co.	(the	"GS	Investors"),	and	other	equity	co-investors	(collectively,	the	"Investors") have	significant	influence	over	us,	including	control	over	decisions	that	require	the approval	of	shareholders,	which	could	limit	your	ability	to	influence	the	outcome	of	key transactions,	including	a	change	of	control.

We	are	controlled	by	the	Investors.	The	Investors	have	an	indirect	interest	in approximately	71%	of	our	outstanding	common	stock	through	their	investment	in	Buck

Holdings,	L.P.	In	addition,	the	Investors	have	the	ability	to	elect	our	entire	Board	of	Directors. As	a	result,	the	Investors	have	control	over	our	decisions	to	enter	into	any	corporate	transaction and	the	ability	to	prevent	any	transaction	that	requires	shareholder	approval	regardless	of whether	others	believe	that	the	transaction	is	in	our	best	interests.	As	long	as	the	Investors continue	to	have	an	indirect	interest	in	a	majority	of	our	outstanding	common	stock,	they	will have	the	ability	to	control	the	vote	in	any	election	of	directors.	In	addition,	pursuant	to	a shareholders'	agreement	that	we	entered	into	with	Buck	Holdings,	L.P.,	KKR	and	the GS	Investors,	KKR	has	a	consent	right	over	certain	significant	corporate	actions	and	KKR	and the	GS	Investors	have	certain	rights	to	appoint	directors	to	our	Board	and	its	committees.

The	Investors	are	also	in	the	business	of	making	investments	in	companies	and	may	from time	to	time	acquire	and	hold	interests	in	businesses	that	compete	directly	or	indirectly	with	us. The	Investors	may	also	pursue	acquisition	opportunities	that	are	complementary	to	our	business, and,	as	a	result,	those	acquisition	opportunities	may	not	be	available	to	us.	So	long	as	the Investors,	or	other	funds	controlled	by	or	associated	with	the	Investors,	continue	to	indirectly own	a	significant	amount	of	our	outstanding	common	stock,	even	if	such	amount	is	less	than 50%,	the	Investors	will	continue	to	be	able	to	strongly	influence	or	effectively	control	our decisions.	The	concentration	of	ownership	may	have	the	effect	of	delaying,	preventing	or deterring	a	change	of	control	of	our	company,	could	deprive	shareholders	of	an	opportunity	to receive	a	premium	for	their	common	stock	as	part	of	a	sale	of	our	company	and	might	ultimately affect	the	market	price	of	our	common	stock.

# If	we,	the	Investors	or	other	significant	shareholders	sell	shares	of	our	common stock,	the	market	price	of	our	common	stock	could	decline.

The	market	price	of	our	common	stock	could	decline	as	a	result	of	sales	of	a	large	number of	shares	of	common	stock	in	the	market,	or	the	perception	that	such	sales	could	occur.	These sales,	or	the	possibility	that	these	sales	may	occur,	also	might	make	it	more	difficult	for	us	to issue	equity	securities	in	the	future	at	a	time	and	at	a	price	that	we	deem	appropriate.	As	of January	28,	2011,	we	had	approximately	341.5	million	shares	of	common	stock	outstanding,	of which	less	than	29%	were	freely	tradable	on	the	New	York	Stock	Exchange.

Pursuant	to	shareholders	agreements,	we	have	granted	the	Investors	the	right	to	cause	us, in	certain	instances,	at	our	expense,	to	file	registration	statements	under	the	Securities	Act	of 1933,	as	amended,	covering	resales	of	our	common	stock	held	by	them	or	to	piggyback	on	a registration	statement	in	certain	circumstances.	Certain	members	of	management	hold	similar piggyback	registration	rights.	Collectively,	these	shares	represent	approximately	71%	of	our outstanding	common	stock.	To	the	extent	that	such	registration	rights	are	exercised,	the	resulting sale	of	a	substantial	number	of	shares	of	our	common	stock	into	the	market	could	cause	the market	price	of	our	common	stock	to	decline.	These	shares	also	may	be	sold	pursuant	to Rule	144	under	the	Securities	Act,	depending	on	their	holding	period	and	subject	to	restrictions in	the	case	of	shares	held	by	persons	deemed	to	be	our	affiliates.

# ITEM	1B. UNRESOLVED	STAFF	COMMENTS

None.

# ITEM	2. PROPERTIES

As	of	February	25,	2011,	we	operated	9,414	retail	stores	located	in	35	states	as	follows:

Most	of	our	stores	are	located	in	leased	premises.	Individual	store	leases	vary	as	to	their terms,	rental	provisions	and	expiration	dates.	Many	stores	are	subject	to	build-to-suit arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	10-15	years	with multiple	renewal	options.	We	also	have	stores	subject	to	shorter-term	leases	(usually	with	initial or	current	terms	of	three	to	five	years),	and	many	of	these	leases	have	multiple	renewal	options	as well.	In	recent	years,	an	increasing	percentage	of	our	new	stores	have	been	subject	to	build-to- suit	arrangements,	including	approximately	72%	of	our	new	stores	in	2010.

As	of	February	25,	2011,	we	operated	nine	distribution	centers,	as	described	in	the following	table:

|  | Year | Approximate	Square | Approximate	Number |
| :--- | :--- | :--- | :--- |
| Location | Opened | Footage | of\tStores\tServed |
| Scottsville,\tKY | 1959 | 720,000 | 949 |
| Ardmore,\tOK | 1994 | 1,310,000 | 1,402 |
| South\tBoston,\tVA | 1997 | 1,250,000 | 895 |
| Indianola,\tMS | 1998 | 820,000 | 809 |
| Fulton,\tMO | 1999 | 1,150,000 | 1,273 |
| Alachua,\tFL | 2000 | 980,000 | 876 |
| Zanesville,\tOH | 2001 | 1,170,000 | 1,229 |
| Jonesville,\tSC | 2005 | 1,120,000 | 981 |
| Marion,\tIN | 2006 | 1,110,000 | 1,000 |

We	lease	the	distribution	centers	located	in	Oklahoma,	Mississippi	and	Missouri	and	own the	other	six	distribution	centers.	Approximately	7.25	acres	of	the	land	on	which	our	Kentucky distribution	center	is	located	is	subject	to	a	ground	lease.	As	of	January	28,	2011,	we	leased

approximately	600,000	square	feet	of	additional	temporary	warehouse	space	to	support	our distribution	needs.

Our	executive	offices	are	located	in	approximately	302,000	square	feet	of	buildings	in Goodlettsville,	Tennessee	which	are	owned	by	us.

# ITEM	3. LEGAL	PROCEEDINGS

The	information	contained	in	Note	9	to	the	consolidated	financial	statements	under	the heading	"Legal	proceedings"	contained	in	Part	II,	Item	8	of	this	report	is	incorporated	herein	by this	reference.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

Information	regarding	our	current	executive	officers	as	of	March	22,	2011	is	set	forth below.	Each	of	our	executive	officers	serves	at	the	discretion	of	our	Board	of	Directors	and	is elected	annually	by	the	Board	to	serve	until	a	successor	is	duly	elected.	There	are	no	familial relationships	between	any	of	our	directors	or	executive	officers.

Mr.	Dreiling	joined	Dollar	General	in	January	2008	as	Chief	Executive	Officer	and	a member	of	our	Board.	He	was	appointed	Chairman	of	the	Board	on	December	2,	2008.	Prior	to joining	Dollar	General,	Mr.	Dreiling	served	as	Chief	Executive	Officer,	President	and	a	director of	Duane	Reade	Holdings,	Inc.	and	Duane	Reade	Inc.,	the	largest	drugstore	chain	in	New	York City,	from	November	2005	until	January	2008	and	as	Chairman	of	the	Board	of	Duane	Reade from	March	2007	until	January	2008.	Prior	to	that,	Mr.	Dreiling,	beginning	in	March	2005, served	as	Executive	Vice	President—Chief	Operating	Officer	of	Longs	Drug	Stores	Corporation, an	operator	of	a	chain	of	retail	drug	stores	on	the	West	Coast	and	Hawaii,	after	having	joined Longs	in	July	2003	as	Executive	Vice	President	and	Chief	Operations	Officer.	From	2000	to 2003,	Mr.	Dreiling	served	as	Executive	Vice	President—Marketing,	Manufacturing	and Distribution	at	Safeway,	Inc.,	a	food	and	drug	retailer.	Prior	to	that,	Mr.	Dreiling	served	from 1998	to	2000	as	President	of	Vons,	a	Southern	California	food	and	drug	division	of	Safeway.

Mr.	Tehle	joined	Dollar	General	in	June	2004	as	Executive	Vice	President	and	Chief Financial	Officer.	He	served	from	1997	to	June	2004	as	Executive	Vice	President	and	Chief Financial	Officer	of	Haggar	Corporation,	a	manufacturing,	marketing	and	retail	corporation. From	1996	to	1997,	he	was	Vice	President	of	Finance	for	a	division	of	The	Stanley	Works,	one of	the	world's	largest	manufacturers	of	tools,	and	from	1993	to	1996,	he	was	Vice	President	and Chief	Financial	Officer	of	Hat	Brands,	Inc.,	a	hat	manufacturer.	Earlier	in	his	career,	Mr.	Tehle served	in	a	variety	of	financial-related	roles	at	Ryder	System,	Inc.	and	Texas	Instruments.	Mr. Tehle	currently	serves	as	a	director	of	Jack	in	the	Box,	Inc.

Ms.	Guion	joined	Dollar	General	in	October	2003	as	Executive	Vice	President,	Store Operations.	She	was	named	Executive	Vice	President,	Store	Operations	and	Store	Development in	February	2005,	and	was	promoted	to	Executive	Vice	President,	Division	President,	Store

Operations	and	Store	Development	in	November	2005.	From	2000	until	joining	Dollar	General, Ms.	Guion	served	as	President	and	Chief	Executive	Officer	of	Duke	and	Long	Distributing Company.	Prior	to	that	time,	she	served	as	an	operating	partner	for	Devon	Partners	(1999-2000), where	she	developed	operating	plans	and	assisted	in	the	identification	of	acquisition	targets	in	the convenience	store	industry,	and	as	President	and	Chief	Operating	Officer	of	E-Z	Serve Corporation	(1997-1998),	an	owner/operator	of	convenience	stores,	mini-marts	and	gas	marts. From	1987	to	1997,	Ms.	Guion	served	as	the	Vice	President	and	General	Manager	of	the	largest division	(Chesapeake	Division)	of	company-owned	stores	at	7-Eleven,	Inc.,	a	convenience	store chain.	Other	positions	held	by	Ms.	Guion	during	her	tenure	at	7-Eleven	include	District	Manager, Zone	Manager,	Operations	Manager,	and	Division	Manager	(Midwest	Division).

Mr.	Vasos	joined	Dollar	General	in	December	2008	as	Executive	Vice	President, Division	President	and	Chief	Merchandising	Officer.	Prior	to	joining	Dollar	General,	Mr.	Vasos served	in	executive	positions	with	Longs	Drug	Stores	Corporation	for	7	years,	including Executive	Vice	President	and	Chief	Operating	Officer	(February	2008	through	November	2008) and	Senior	Vice	President	and	Chief	Merchandising	Officer	(2001-2008),	where	he	was responsible	for	all	pharmacy	and	front-end	marketing,	merchandising,	procurement,	supply chain,	advertising,	store	development,	store	layout	and	space	allocation,	and	the	operation	of three	distribution	centers.	He	also	previously	served	in	leadership	positions	at	Phar-Mor	Food and	Drug	Inc.	and	Eckerd	Drug	Corp.

Mr.	Flanigan	joined	Dollar	General	as	Senior	Vice	President,	Global	Supply	Chain,	in May	2008.	He	was	promoted	to	Executive	Vice	President	in	March	2010.	He	has	25	years	of management	experience	in	retail	logistics.	Prior	to	joining	Dollar	General,	he	was	group	vice president	of	logistics	and	distribution	for	Longs	Drug	Stores	Corporation	from	October	2005	to April	2008.	In	this	role,	he	was	responsible	for	overseeing	warehousing,	inbound	and	outbound transportation	and	facility	maintenance	to	service	over	500	retail	outlets.	From	September	2001 to	October	2005	he	served	as	the	Vice	President	of	Logistics	for	Safeway	Inc.	where	he	oversaw distribution	of	food	products	from	Safeway	distribution	centers	to	all	retail	outlets,	inbound traffic	and	transportation.	He	also	held	distribution	and	logistics	leadership	positions	at	Vons—a Safeway	company,	Specialized	Distribution	Management	Inc.,	and	Crum	&	Crum	Logistics.

Ms.	Lanigan	joined	Dollar	General	in	July	2002	as	Vice	President,	General	Counsel	and Corporate	Secretary.	She	was	promoted	to	Senior	Vice	President	in	October	2003	and	to Executive	Vice	President	in	March	2005.	Prior	to	joining	Dollar	General,	Ms.	Lanigan	served	as Senior	Vice	President,	General	Counsel	and	Secretary	at	Zale	Corporation,	a	specialty	retailer	of fine	jewelry.	During	her	six	years	with	Zale,	Ms.	Lanigan	held	various	positions,	including Associate	General	Counsel.	Prior	to	that,	she	held	legal	positions	with	both	Turner	Broadcasting System,	Inc.	and	the	law	firm	of	Troutman	Sanders	LLP.

Mr.	Ravener	joined	Dollar	General	as	Senior	Vice	President	and	Chief	People	Officer	in August	2008.	He	was	promoted	to	Executive	Vice	President	in	March	2010.	Prior	to	joining Dollar	General,	he	served	in	human	resources	executive	roles	with	Starbucks	Coffee	Company from	September	2005	until	August	2008	as	both	Senior	Vice	President	of	U.S.	Partner	Resources and	as	the	Vice	President,	Partner	Resources—Eastern	Division.	As	the	Senior	Vice	President	of U.S.	Partner	Resources	at	Starbucks,	Mr.	Ravener	oversaw	all	aspects	of	human	resources

activity	for	more	than	10,000	stores.	Prior	to	serving	at	Starbucks,	Mr.	Ravener	held	Vice President	of	Human	Resources	roles	for	The	Home	Depot's	Store	Support	Center	and	a	domestic field	division	from	April	2003	to	September	2005.	Mr.	Ravener	also	served	in	executive	roles	in both	human	resources	and	operations	at	Footstar,	Inc.	and	roles	of	increasing	leadership	at PepsiCo.

Ms.	Elliott	joined	Dollar	General	as	Senior	Vice	President	and	Controller	in	August 2005.	Prior	to	joining	Dollar	General,	she	served	as	Vice	President	and	Controller	of	Big	Lots, Inc.,	a	closeout	retailer,	from	May	2001	to	August	2005.	Overseeing	a	staff	of	140	employees	at Big	Lots,	she	was	responsible	for	accounting	operations,	financial	reporting	and	internal	audit. Prior	to	serving	at	Big	Lots,	she	served	as	Vice	President	and	Controller	for	Jitney-Jungle	Stores of	America,	Inc.,	a	grocery	retailer,	from	April	1998	to	March	2001.	At	Jitney-Jungle,	Ms.	Elliott was	responsible	for	the	accounting	operations	and	the	internal	and	external	financial	reporting functions.	Prior	to	serving	at	Jitney-Jungle,	she	practiced	public	accounting	for	12	years,	6	of which	were	with	Ernst	&	Young	LLP.

# PART	II

# ITEM	5. MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES	OF	EQUITY

# SECURITIES

# Market	Information

Our	common	stock	is	traded	on	the	New	York	Stock	Exchange	under	the	symbol	"DG." There	was	no	established	public	trading	market	for	our	common	stock	after	our	merger	that occurred	on	July	6,	2007	until	our	initial	public	offering	of	our	common	stock	("IPO")	on November	13,	2009.	The	range	of	the	high	and	low	sales	prices	of	our	common	stock	during	our fourth	quarter	of	fiscal	2009,	as	reported	in	the	consolidated	transaction	reporting	system,	were $24.90	(high)	and	$21.75	(low).	The	high	and	low	sales	prices	during	fiscal	2010	were	as follows:

| 2010 | First<br>Quarter | Second<br>Quarter | Third<br>Quarter | Fourth<br>Quarter |
| :--- | :--- | :--- | :--- | :--- |
| High | $29.91 | $31.41 | $30.20 | $33.73 |
| Low | $21.30 | $26.61 | $26.64 | $27.29 |

Our	stock	price	at	the	close	of	the	market	on	March	16,	2011,	was	$29.78.	There	were approximately	1,044	shareholders	of	record	of	our	common	stock	as	of	March	16,	2011.

# Dividends

We	have	not	declared	or	paid	recurring	dividends	since	prior	to	our	2007	merger. However,	prior	to	our	IPO,	on	September	8,	2009,	our	Board	of	Directors	declared	a	special dividend	on	our	outstanding	common	stock	of	approximately	$239.3	million	in	the	aggregate. The	special	dividend	was	paid	on	September	11,	2009	to	shareholders	of	record	on	September	8,

2009	with	cash	generated	from	operations.	We	have	no	current	plans	to	pay	any	cash	dividends on	our	common	stock	and	instead	may	retain	earnings,	if	any,	for	future	operation	and	expansion and	debt	repayment.	Any	decision	to	declare	and	pay	dividends	in	the	future	will	be	made	at	the discretion	of	our	Board	of	Directors	and	will	depend	on,	among	other	things,	our	results	of operations,	cash	requirements,	financial	condition,	contractual	restrictions	and	other	factors	that our	Board	of	Directors	may	deem	relevant.	In	addition,	our	ability	to	pay	dividends	is	limited	by covenants	in	our	Credit	Facilities	and	in	the	indentures	governing	our	outstanding	10.625% senior	notes	due	2015	(the	"Senior	Notes")	and	11.875%/12.625%	senior	subordinated	toggle notes	due	2017	(the	"Senior	Subordinated	Notes"	and,	collectively	with	the	Senior	Notes,	the "Notes").	See	"Liquidity	and	Capital	Resources"	in	the	Management's	Discussion	and	Analysis of	Financial	Condition	and	Results	of	Operations	section	of	this	report	for	a	description	of restrictions	on	our	ability	to	pay	dividends.

# Issuer	Purchases	of	Equity	Securities

The	following	table	contains	information	regarding	purchases	of	our	common	stock	made during	the	quarter	ended	January	28,	2011	by	or	on	behalf	of	Dollar	General	or	any	"affiliated purchaser,"	as	defined	by	Rule	10b-18(a)(3)	of	the	Securities	Exchange	Act	of	1934:

| Period | Total	Number<br>of	Shares<br>Purchased	(a) | Average<br>Price	Paid<br>per	Share | Total	Number<br>of	Shares	Purchased<br>as	Part	of	Publicly<br>Announced	Plans	or<br>Programs | Maximum	Number<br>of	Shares	that	May<br>Yet	Be	Purchased<br>Under	the	Plans	or<br>Programs |
| :--- | :--- | :--- | :--- | :--- |
| 10/30/10-11/30/10 | - | $- | - | - |
| 12/01/10-12/31/10 | 11,270 | $29.34 | - | - |
| 1/1/11-1/28/11 | - | $- | - | - |
| Total | 11,270 | $29.34 | - | - |

(a)		Represents	shares	repurchased	from	employees	pursuant	to	the	terms	of	management	stockholder's	agreements.

# ITEM	6. SELECTED	FINANCIAL	DATA

The	following	table	sets	forth	selected	consolidated	financial	information	of	Dollar General	Corporation	as	of	the	dates	and	for	the	periods	indicated.	The	selected	historical statement	of	operations	data	and	statement	of	cash	flows	data	for	the	fiscal	years	ended	January 28,	2011,	January	29,	2010	and	January	30,	2009,	and	balance	sheet	data	as	of	January	28,	2011 and	January	29,	2010,	have	been	derived	from	our	historical	audited	consolidated	financial statements	included	elsewhere	in	this	report.	The	selected	historical	statement	of	operations	data and	statement	of	cash	flows	data	for	the	fiscal	years	or	periods,	as	applicable,	ended	February	1, 2008,	July	6,	2007	and	February	2,	2007	and	balance	sheet	data	as	of	January	30,	2009,	February 1,	2008	and	February	2,	2007	presented	in	this	table	have	been	derived	from	audited	consolidated financial	statements	not	included	in	this	report.

We	completed	a	merger	with	Buck	Acquisition	Corp.	("BAC")	on	July	6,	2007,	and,	as	a result,	we	are	majority	owned	by	a	Delaware	limited	partnership	controlled	by	investment	funds affiliated	with	Kohlberg	Kravis	Roberts	&	Co.	L.P.	As	a	result	of	the	merger,	the	related purchase	accounting	adjustments,	and	a	new	basis	of	accounting	beginning	on	July	7,	2007,	the 2007	financial	reporting	periods	presented	below	include	the	Predecessor	period	of	the	Company reflecting	22	weeks	of	operating	results	from	February	3,	2007	to	July	6,	2007	and	30	weeks	of operating	results	for	the	Successor	period,	reflecting	the	merger	from	July	7,	2007	to	February	1, 2008.	BAC's	results	of	operations	for	the	period	from	March	6,	2007	to	July	6,	2007	(prior	to	the merger	on	July	6,	2007)	are	also	included	in	the	consolidated	financial	statements	for	the	2007 Successor	period	described	above,	as	a	result	of	certain	derivative	financial	instruments	entered into	by	BAC	prior	to	the	merger.	Other	than	these	financial	instruments,	BAC	had	no	assets, liabilities,	or	operations	prior	to	the	merger.	The	2006	fiscal	year	presented	reflects	the Predecessor.

Due	to	the	significance	of	the	merger	and	related	transactions	that	occurred	in	2007,	the 2010,	2009,	2008	and	2007	Successor	financial	information	is	not	comparable	to	that	of	the Predecessor	periods	presented	in	the	accompanying	table.

The	information	set	forth	below	should	be	read	in	conjunction	with,	and	is	qualified	by reference	to,	the	Consolidated	Financial	Statements	and	related	notes	included	in	Part	II,	Item	8 of	this	report	and	the	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	Operations	included	in	Part	II,	Item	7	of	this	report.

|  | Successor<br>Year	Ended | Successor<br>Year	Ended | Successor<br>Year	Ended | Successor<br>Year	Ended | Predecessor | Year	Ended |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Amounts\tin\tmillions,\texcluding\tper |  |  |  | March\t6, | February\t3, |  |
| share\tdata,\tnumber\tof\tstores,\tselling |  |  |  | 2007 | 2007 |  |
| square\tfeet,\tand\tnet\tsales\tper\tsquare |  |  |  | through | through |  |
| foot) | January\t28, | January\t29, | January\t30, | February\t1, | July\t6, | February\t2, |
|  | 2011 | 2010 | 2009 | 2008(1)(2) | 2007(2) | 2007(2) |
| Statement\tof\tOperations\tData: |  |  |  |  |  |  |
| Net\tsales | $13,035.0 | $11,796.4 | $10,457.7 | $5,571.5 | $3,923.8 | $9,169.8 |
| Cost\tof\tgoods\tsold | 8,858.4 | 8,106.5 | 7,396.6 | 3,999.6 | 2,852.2 | 6,801.6 |
| Gross\tprofit | 4,176.6 | 3,689.9 | 3,061.1 | 1,571.9 | 1,071.6 | 2,368.2 |
| Selling,\tgeneral\tand |  |  |  |  |  |  |
| administrative\texpenses | 2,902.5 | 2,736.6 | 2,448.6 | 1,324.5 | 960.9 | 2,119.9 |
| Litigation\tsettlement\tand\trelated\tcosts, |  |  |  |  |  |  |
| net | - | - | 32.0 | - | - | - |
| Transaction\tand\trelated\tcosts | - | - | - | 1.2 | 101.4 | - |
| Operating\tprofit | 1,274.1 | 953.3 | 580.5 | 246.1 | 9.2 | 248.3 |
| Interest\tincome | (0.2) | (0.1) | (3.1) | (3.8) | (5.0) | (7.0) |
| Interest\texpense | 274.2 | 345.7 | 391.9 | 252.9 | 10.3 | 34.9 |
| Other\t(income)\texpense | 15.1 | 55.5 | (2.8) | 3.6 | - | - |
| Income\t(loss)\tbefore\tincome\ttaxes | 985.0 | 552.1 | 194.4 | (6.6) | 4.0 | 220.4 |
| Income\ttax\texpense\t(benefit) | 357.1 | 212.7 | 86.2 | (1.8) | 12.0 | 82.4 |
| Net\tincome\t(loss) | $627.9 | $339.4 | $108.2 | $(4.8) | $(8.0) | $137.9 |
| Earnings\t(loss)\tper\tshare\t–\tbasic | $1.84 | $1.05 | $0.34 | $(0.02) |  |  |
| Earnings\t(loss)\tper\tshare\t-\tdiluted | 1.82 | 1.04 | 0.34 | (0.02) |  |  |
| Dividends\tper\tshare | - | 0.7525 | - | - |  |  |
| Statement\tof\tCash\tFlows\tData: |  |  |  |  |  |  |
| Net\tcash\tprovided\tby\t(used\tin): |  |  |  |  |  |  |
| Operating\tactivities | $824.7 | $672.8 | $575.2 | $239.6 | $201.9 | $405.4 |
| Investing\tactivities | (418.9) | (248.0) | (152.6) | (6,848.4) | (66.9) | (282.0) |
| Financing\tactivities | (130.4) | (580.7) | (144.8) | 6,709.0 | 25.3 | (134.7) |
| Total\tcapital\texpenditures | (420.4) | (250.7) | (205.5) | (83.6) | (56.2) | (261.5) |
| Other\tFinancial\tand\tOperating\tData: |  |  |  |  |  |  |
| Same\tstore\tsales\tgrowth\t(3) | 4.9% | 9.5% | 9.0% | 1.9% | 2.6% | 3.3% |
| Same\tstore\tsales\t(3) | $12,227.1 | $11,356.5 | $10,118.5 | $5,264.2 | $3,656.6 | $8,327.2 |
| Number\tof\tstores\tincluded\tin\tsame |  |  |  |  |  |  |
| store\tsales\tcalculation | 8,712 | 8,324 | 8,153 | 7,735 | 7,655 | 7,627 |
| Number\tof\tstores\t(at\tperiod\tend) | 9,372 | 8,828 | 8,362 | 8,194 | 8,205 | 8,229 |
| Selling\tsquare\tfeet\t(in\tthousands\tat |  |  |  |  |  |  |
| period\tend) | 67,094 | 62,494 | 58,803 | 57,376 | 57,379 | 57,299 |
| Net\tsales\tper\tsquare\tfoot\t(4) | $201 | $195 | $180 | $165 | $164 | $163 |
| Consumables\tsales | 71.6% | 70.8% | 69.3% | 66.4% | 66.7% | 65.7% |
| Seasonal\tsales | 14.5% | 14.5% | 14.6% | 16.3% | 15.4% | 16.4% |
| Home\tproducts\tsales | 7.0% | 7.4% | 8.2% | 9.1% | 9.2% | 10.0% |
| Apparel\tsales | 6.9% | 7.3% | 7.9% | 8.2% | 8.7% | 7.9% |
| Rent\texpense | $489.3 | $428.6 | $389.6 | $214.5 | $150.2 | $343.9 |
| Balance\tSheet\tData\t(at\tperiod\tend): |  |  |  |  |  |  |
| Cash\tand\tcash\tequivalents\tand\tshort- |  |  |  |  |  |  |
| term\tinvestments | $497.4 | $222.1 | $378.0 | $119.8 |  | $219.2 |
| Total\tassets | 9,546.2 | 8,863.5 | 8,889.2 | 8,656.4 |  | 3,040.5 |
| Total\tdebt | 3,288.2 | 3,403.4 | 4,137.1 | 4,282.0 |  | 270.0 |
| Total\tshareholders'\tequity | 4,054.5 | 3,390.3 | 2,831.7 | 2,703.9 |  | 1,745.7 |

(1) Includes	the	results	of	BAC	for	the	period	prior	to	its	merger	with	and	into	Dollar	General	Corporation	from	March	6,	2007 (the	date	of	BAC's	formation)	through	July	6,	2007	and	the	post-merger	results	of	Dollar	General	Corporation	for	the	period from	July	7,	2007	through	February	1,	2008.

(2) Includes	the	effects	of	certain	strategic	merchandising	and	real	estate	initiatives	that	resulted	in	the	closing	of	approximately 460	stores	and	changes	in	our	inventory	management	model	which	resulted	in	greater	inventory	markdowns	than	in	previous years.

(3) Same-store	sales	are	calculated	based	upon	stores	that	were	open	at	least	13	full	fiscal	months	and	remain	open	at	the	end	of the	reporting	period.	When	applicable,	we	exclude	the	sales	in	the	53rd	week	of	a	53-week	year	from	the	same-store	sales calculation.

(4) Net	sales	per	square	foot	was	calculated	based	on	total	sales	for	the	preceding	12	months	as	of	the	ending	date	of	the reporting	period	divided	by	the	average	selling	square	footage	during	the	period,	including	the	end	of	the	fiscal	year,	the beginning	of	the	fiscal	year,	and	the	end	of	each	of	our	three	interim	fiscal	quarters.	For	the	period	from	February	3,	2007 through	July	6,	2007,	average	selling	square	footage	was	calculated	using	the	average	square	footage	as	of	July	6,	2007	and as	of	the	end	of	each	of	the	four	preceding	quarters.

| Successor<br>Year	Ended | Successor<br>Year	Ended | Successor<br>Year	Ended | Successor<br>Year	Ended | Predecessor | Year	Ended |
| :--- | :--- | :--- | :--- | :--- | :--- |
| January\t28,\n2011 | January\t29,\n2010 | January\t30,\n2009 | March\t6,\n2007\nthrough\nFebruary\t1,\n2008 | February\t3,\n2007\nthrough\nJuly\t6,\n2007 | February\t2,\n2007 |
| 3.1x | 2.1x | 1.4x | (2) | 1.1x | 2.5x |

(1) For	purposes	of	computing	the	ratio	of	earnings	to	fixed	charges,	(a)	earnings	consist	of	income	(loss)	before	income	taxes,	plus	fixed charges	less	capitalized	expenses	related	to	indebtedness	(amortization	expense	for	capitalized	interest	is	not	significant)	and	(b)	fixed

charges	consist	of	interest	expense	(whether	expensed	or	capitalized),	the	amortization	of	debt	issuance	costs	and	discounts	related	to indebtedness,	and	the	interest	portion	of	rent	expense.

(2) For	the	Successor	period	from	March	6,	2007	through	February	1,	2008,	fixed	charges	exceeded	earnings	by	$6.6	million.

# ITEM	7. MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL

# CONDITION	AND	RESULTS	OF	OPERATIONS

# This	discussion	and	analysis	should	be	read	with,	and	is	qualified	in	its	entirety	by,	the

Consolidated	Financial	Statements	and	the	notes	thereto.	It	also	should	be	read	in	conjunction with	the	Cautionary	Disclosure	Regarding	Forward-Looking	Statements	and	the	Risk	Factors disclosures	set	forth	in	the	Introduction	and	in	Item	1A	of	this	report,	respectively.

# Executive	Overview

We	are	the	largest	discount	retailer	in	the	United	States	by	number	of	stores,	with	9,414 stores	located	in	35	states	as	of	February	25,	2011,	primarily	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	apparel.	Our	merchandise	includes	high	quality	national	brands	from	leading manufacturers,	as	well	as	comparable	quality	private	brand	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	(small	store) locations.

On	July	6,	2007,	we	completed	a	merger	and,	as	a	result,	we	are	majority	owned	by	Buck Holdings,	L.P.	("Buck"),	a	Delaware	limited	partnership	controlled	by	investment	funds affiliated	with	Kohlberg	Kravis	Roberts	&	Co.	L.P.	(collectively,	"KKR").	The	membership interests	of	Buck	and	Buck	Holdings,	LLC	("Buck	LLC"),	the	general	partner	of	Buck,	are	held by	a	private	investor	group,	including	affiliates	of	each	of	KKR	and	Goldman,	Sachs	&	Co.	and other	equity	investors	(collectively,	the	"Investors").	The	merger	consideration	was	funded through	the	use	of	our	available	cash,	cash	equity	contributions	from	the	Investors,	equity contributions	of	certain	members	of	our	management	and	certain	debt	financings	discussed	below under	"Liquidity	and	Capital	Resources."	In	November	2009,	we	completed	an	initial	public offering	of	approximately	39.2	million	shares,	including	22.7	million	newly	issued	shares	and approximately	16.5	million	outstanding	shares	sold	by	Buck.	In	April	and	December	of	2010,	we completed	secondary	offerings	of	approximately	29.9	million	and	28.8	million	shares,

respectively,	all	of	which	were	sold	by	selling	shareholders.	We	did	not	receive	any	proceeds from	either	of	the	secondary	offerings	in	2010.

The	customers	we	serve	are	value-conscious,	and	Dollar	General	has	always	been intensely	focused	on	helping	our	customers	make	the	most	of	their	spending	dollars.	We	believe our	convenient	store	format	and	broad	selection	of	high	quality	products	at	compelling	values have	driven	our	substantial	growth	and	financial	success	over	the	years.	Like	other	companies, we	have	been	operating	in	an	environment	with	heightened	economic	challenges	and uncertainties.	Consumers	are	facing	very	high	rates	of	unemployment,	fluctuating	food,	gasoline and	energy	costs,	rising	medical	costs,	and	a	continued	weakness	in	housing	and	credit	markets, and	the	timetable	for	economic	recovery	is	uncertain.	Nonetheless,	as	a	result	of	our	long-term mission	of	serving	the	value-conscious	customer,	coupled	with	a	vigorous	focus	on	improving our	operating	and	financial	performance,	our	2010	and	2009	financial	results	were	strong,	and	we remain	optimistic	with	regard	to	executing	our	operating	priorities	in	2011.

At	the	beginning	of	2008,	we	defined	four	operating	priorities,	which	we	remain	keenly focused	on	executing.	These	priorities	are:	1)	drive	productive	sales	growth,	2)	increase	our	gross margins,	3)	leverage	process	improvements	and	information	technology	to	reduce	costs,	and	4) strengthen	and	expand	Dollar	General's	culture	of	serving	others.

Our	first	priority	is	driving	productive	sales	growth	by	increasing	shopper	frequency	and transaction	amount	and	maximizing	sales	per	square	foot.	Our	category	management	processes allow	us	to	identify	opportunities	to	add	more	productive	items	and	remove	unproductive	items in	a	timely	manner	and	have	allowed	us	to	continue	expanding	our	consumables	offerings	while also	improving	profitability.	We	raised	the	shelf	height	in	our	stores	in	three	phases	from	2008 through	2010	in	order	to	utilize	the	space	in	our	stores	more	productively.	We	are	adding	a	fourth phase	in	2011.	In	addition,	we	believe	we	have	significant	potential	to	grow	sales	through	new store	growth	in	both	existing	and	new	markets.	We	opened	600	new	stores	in	2010	and	plan	to open	approximately	625	new	stores	in	2011.

Our	second	priority	is	to	increase	gross	profit	through	effective	category	management, the	expansion	of	private	brand	offerings	and	increased	foreign	sourcing,	shrink	reduction, distribution	efficiencies	and	improvements	to	our	pricing	and	markdown	model,	while	remaining committed	to	our	everyday	low	price	strategy.	We	constantly	review	our	pricing	strategy	and work	diligently	to	minimize	vendor	cost	increases	as	we	focus	on	providing	our	customers quality	merchandise	at	great	values.	In	our	consumables	category,	we	strive	to	offer	the	optimal balance	of	the	most	popular	nationally	advertised	brands	and	our	own	private	brands,	which generally	have	higher	gross	profit	rates	than	national	brands.	In	2011,	we	expect	increased product	costs.	We	saw	the	costs	of	certain	commodities	(including	cotton,	wheat,	corn,	sugar, coffee,	resin)	and	the	costs	of	diesel	fuel	begin	to	escalate	in	our	2010	fourth	quarter.	The	market prices	of	these	commodities,	including	the	cost	of	diesel	fuel,	are	outside	of	our	control. However,	we	will	be	diligent	in	our	efforts	to	keep	product	costs	as	low	as	possible	in	the	face	of these	increases	while	still	working	to	optimize	gross	profit	and	meet	the	needs	of	our	customers.

Our	third	priority	is	leveraging	process	improvements	and	information	technology	to reduce	costs.	We	are	committed	as	an	organization	to	extract	costs	that	do	not	affect	the	customer experience.	Examples	of	ongoing	cost	reduction	initiatives	include	the	installation	of

energy	management	systems,	continued	preventive	maintenance	with	the	goal	of	reducing overall	repairs	and	maintenance	costs,	and	recycling	of	cardboard	to	reduce	waste	management costs.	Our	real	estate	team	continues	to	seek	out	opportunities	to	negotiate	favorable	lease renewals.	We	are	focusing	our	information	technology	resources	on	improving	systems	to	create greater	efficiencies	in	merchandising	and	retail	store	operations,	evidenced	by	our	intention	to implement	a	new	store	staffing	module	in	2011	to	better	align	store	labor	hours	with	our customer's	shopping	needs.	In	2010,	we	centralized	our	procurement	system	which	we	expect	to aid	us	in	reducing	the	cost	of	purchases	throughout	the	company	in	2011	and	beyond.	We	plan	to continue	our	diligent	efforts	with	regard	to	our	cost	reduction	initiatives	in	2011.

Our	fourth	priority	is	to	strengthen	and	expand	Dollar	General's	culture	of	serving	others. For	customers	this	means	helping	them	"Save	time.	Save	money.	Every	day!"	by	providing clean,	well-stocked	stores	with	quality	products	at	low	prices.	For	employees,	this	means	creating an	environment	that	attracts	and	retains	key	employees	throughout	the	organization.	For	the public,	this	means	giving	back	to	our	store	communities.	For	shareholders,	this	means	meeting their	expectations	of	an	efficiently	and	profitably	run	organization	that	operates	with	compassion and	integrity.

For	the	year	ended	January	28,	2011,	our	continued	focus	on	our	four	priorities	resulted in	improved	financial	performance	over	the	year	ended	January	29,	2010	in	each	of	our	key financial	metrics,	as	follows.	Basis	points,	as	referred	to	below,	are	equal	to	0.01	percent	of	total sales.

· Total	sales	in	fiscal	2010	increased	10.5	percent	over	2009.	Sales	in	same-stores increased	4.9	percent,	following	a	strong	9.5	percent	increase	in	2009.	Customer traffic	and	average	transaction	amount	increased	in	both	2010	and	2009.	Average sales	per	square	foot	in	2010	were	$201,	up	from	$195	in	2009.

· Gross	profit,	as	a	percentage	of	sales,	was	32.0	percent	in	2010,	an	increase	of	76	basis points	over	2009.	This	improvement	was	primarily	attributable	to	increased	purchase markups,	net	of	increased	markdowns,	resulting	from	increased	volume,	which enabled	us	to	lower	our	average	costs	from	vendors.	The	improvement	also	reflected the	continued	impact	of	our	comprehensive	category	management	enhancements.

· SG&A,	as	a	percentage	of	sales,	for	fiscal	2010	was	22.3	percent	compared	to	23.2 percent	in	2009.	SG&A	in	2009	included	incremental	expenses	of	$68.3	million,	or	58 basis	points,	resulting	from	the	termination	of	our	sponsor	advisory	agreement	and the	accelerated	vesting	of	certain	equity-based	compensation	related	to	our	initial public	offering.	SG&A	in	2010	included	incremental	expenses	of	$19.7	million,	or	15 basis	points,	resulting	from	costs	related	to	two	secondary	offerings	of	our	common stock	during	the	year	by	certain	of	our	shareholders.	Excluding	the	impact	of	these costs,	SG&A,	as	a	percentage	of	sales	declined	primarily	due	to	lower	employee incentive	compensation,	which	is	based	on	financial	targets	set	at	the	beginning	of each	fiscal	year	(our	results	exceeded	those	targets	in	2010	but	not	to	the	same	degree as	in	2009),	lower	healthcare	expense,	and	the	impact	of	other	cost	reduction	and

productivity	initiatives	which	resulted	in	various	expenses	decreasing	or	increasing	at a	rate	lower	than	the	10.5	percent	increase	in	sales.

· Interest	expense	decreased	by	$71.5	million	in	2010	to	$274.2	million,	primarily	as the	result	of	lower	average	outstanding	long-term	obligations.	Net	proceeds	from	our initial	public	offering	and	excess	cash	were	utilized	in	our	fiscal	2009	fourth	quarter to	voluntarily	reduce	long-term	obligations	by	$725.9	million,	and	in	2010	we repurchased	an	additional	$115.0	million	of	long-term	obligations	utilizing	operating cash	flow.	Other	non-operating	expenses	include	charges	totaling	$14.7	million	in 2010	and	$55.3	million	in	2009	resulting	from	these	repurchases.

· We	reported	net	income	of	$627.9	million,	or	$1.82	per	diluted	share,	for	fiscal	2010, compared	to	net	income	of	$339.4	million,	or	$1.04	per	diluted	share,	in	2009. Charges	relating	to	secondary	stock	offerings	by	certain	of	our	shareholders,	including the	acceleration	of	certain	equity	appreciation	rights,	and	losses	from	the	repurchase of	long-term	obligations,	reduced	2010	net	income	by	$21.3	million,	or	$0.06	per diluted	share.	In	2009,	charges	resulting	from	the	termination	of	our	sponsor	advisory agreement,	the	acceleration	of	certain	equity-based	compensation	and	the	repurchase of	long-term	obligations,	related	to	or	resulting	from	our	initial	public	offering, reduced	net	income	by	$82.9	million,	or	$0.26	per	diluted	share.

· We	generated	approximately	$825	million	of	cash	flows	from	operating	activities	in 2010,	an	increase	of	over	22	percent	compared	to	2009.	Cash	flow	was	primarily utilized	to	support	our	capital	expenditures	and	repurchase	long-term	obligations.

As	discussed	in	more	detail	below,	in	recent	years,	we	have	generated	significant	cash flows	from	operating	activities.	We	have	used	a	portion	of	these	cash	flows	to	pay	down	debt	and to	invest	in	new	store	growth	through	our	traditional	leased	stores.	During	2010	we	made	a strategic	decision	to	purchase	certain	of	our	leased	stores.	We	believe	that	the	current environment	in	the	real	estate	markets	provides	an	opportunity	to	make	these	investments	at levels	which	are	expected	to	result	in	favorable	returns	and	positively	impact	our	operating results.	We	initiated	the	store	purchase	program	in	the	second	half	of	2010	and	have	plans	to purchase	additional	stores	during	2011.

Like	other	companies,	we	face	uncertainties	with	regard	to	the	future	impact	of	healthcare reform	legislation,	including	the	Patient	Protection	and	Affordable	Care	Act	and	the	HealthCare and	Education	Reconciliation	Act	of	2010,	signed	into	law	in	March	2010,	which	will	likely affect	the	cost	associated	with	employer-sponsored	medical	plans.	Specifically,	this	legislation requires	that	employers	provide	a	minimum	level	of	coverage	for	full-time	employees	or	pay penalties.	Some	of	the	plan	coverage	requirements	may	have	an	impact	on	our	costs	such	as	bans on	exclusions	for	pre-existing	conditions,	extension	of	dependent	coverage	to	age	26,	and	caps on	employee	premium	sharing	costs.	Certain	coverage	provisions	do	not	go	into	effect	until 2014,	but	there	are	a	number	of	dependent	coverage	and	insurance	market	reforms	that	took

effect	immediately.	Although	this	legislation	did	not	have	a	material	effect	on	our	consolidated financial	statements	in	2010,	we	continue	to	evaluate	the	impact	it	will	have	on	our	costs	in future	years,	and	those	costs	could	be	material.	Due	to	the	breadth	and	complexity	of	the healthcare	reform	legislation,	the	current	lack	of	implementing	regulations	and	interpretive guidance,	the	phased-in	nature	of	the	implementation,	and	uncertainty	with	respect	to	the outcome	of	pending	litigation	with	respect	to	the	legislation,	it	is	difficult	to	predict	its	overall impact	on	our	business	in	the	coming	years.

In	2011,	we	plan	to	continue	to	focus	on	our	four	key	operating	priorities.	We	will continue	to	refine	and	improve	our	store	standards	in	order	to	increase	sales,	focusing	on achieving	a	consistent	look	and	feel	across	the	chain.	We	have	begun	and	will	continue	to measure	customer	satisfaction	which	will	allow	us	to	identify	areas	needing	improvement.	We expect	to	continue	the	process	of	raising	the	height	of	certain	merchandise	fixtures,	allowing	us to	better	utilize	our	store	square	footage.	As	part	of	our	overall	category	management	processes, we	plan	to	further	expand	our	private	brand	consumables	offerings	and	to	continue	to	upgrade the	selection,	quality	and	presentation	of	our	private	brand	offerings	in	our	apparel,	seasonal	and home	categories,	and	we	expect	a	greater	impact	on	gross	margin	from	our	foreign	sourcing efforts	in	2011.	As	noted	above,	we	expect	cost	increases	in	certain	commodities,	including diesel	fuel,	to	present	a	challenge	as	we	focus	on	improving	our	gross	profit	rate,	while	managing our	everyday	low	prices.

We	now	have	improved	processes	and	tools	in	place	to	assist	us	in	our	ongoing	inventory shrink	reduction	efforts.	Our	work	on	shrink	remains	a	high	priority,	and	we	plan	to	use	the information	supplied	by	these	analytical	and	monitoring	tools	to	help	improve	on	our	recent successes.

With	regard	to	leveraging	information	technology	and	process	improvements	to	reduce costs,	we	will	continue	to	focus	on	making	improvements	that	benefit	our	merchandising	and operations	efforts,	including	item	profitability	analysis,	merchandise	selection	and	allocation	and labor	scheduling.	In	2010,	we	completed	the	installation	of	back	office	computers	in	all	of	our stores,	which	we	will	utilize	to	improve	reporting	and	communications	with	the	stores	and, consequently,	we	believe	will	assist	in	improving	store	productivity.	Also	in	2010,	we	completed the	rollout	of	a	new	voice	pick	system	in	our	distribution	centers,	allowing	our	distribution associates	to	communicate	with	warehouse	software	systems	using	speech	recognition.

Finally,	we	are	very	pleased	with	the	performance	of	our	2010	new	stores,	remodels	and relocations,	and	in	2011	we	plan	to	increase	our	new	store	openings	to	625	stores	within	the	35 states	in	which	we	currently	operate	as	well	as	three	new	states,	Connecticut,	Nevada	and	New Hampshire,	and	to	increase	our	number	of	remodels	or	relocations	to	an	additional	550	stores. With	regard	to	planned	new	store	openings,	our	criteria	are	based	on	numerous	factors	including, among	other	things,	availability	of	appropriate	sites,	expected	sales,	lease	terms,	population demographics,	competition,	and	the	employment	environment.	We	use	various	real	estate	site selection	tools	to	determine	target	markets	and	optimum	site	locations	within	those	markets. With	respect	to	store	relocations,	we	begin	to	evaluate	a	store	for	relocation	opportunities approximately	18	months	prior	to	the	store's	lease	expiration	using	the	same	basic	tools	and criteria	as	those	used	for	new	stores.	Remodels,	which	require	a	much	smaller	investment,	are

determined	based	on	the	need,	the	opportunity	for	sales	improvement	at	the	location	and	an expectation	of	a	desirable	return	on	investment.

Key	Financial	Metrics.	We	have	identified	the	following	as	our	most	critical	financial metrics	for	2011:

· Same-store	sales	growth;

· Sales	per	square	foot;

· Operating	profit;

· Inventory	turnover;

· Cash	flow;

· Net	income;

· Earnings	per	share;

· Earnings	before	interest,	income	taxes,	depreciation	and	amortization;	and

· Return	on	invested	capital.

Readers	should	refer	to	the	detailed	discussion	of	our	operating	results	below	for additional	comments	on	financial	performance	in	the	current	year	periods	as	compared	with	the prior	year	periods.

# Results	of	Operations

Accounting	Periods.	The	following	text	contains	references	to	years	2010,	2009	and 2008,	which	represent	fiscal	years	ended	January	28,	2011,	January	29,	2010	and	January	30, 2009,	respectively.	Our	fiscal	year	ends	on	the	Friday	closest	to	January	31.	Fiscal	years	2010, 2009	and	2008	were	52-week	accounting	periods.

Seasonality.	The	nature	of	our	business	is	seasonal	to	a	certain	extent.	Primarily	because of	sales	of	holiday-related	merchandise,	sales	in	our	fourth	quarter	(November,	December	and January)	have	historically	been	higher	than	sales	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	fiscal	years	2010,	2009	and

2008,	and	the	dollar	and	percentage	variances	among	those	years.

|  |  |  |  | 2010	vs.	2009 | 2010	vs.	2009 | 2009	vs.	2008 | 2009	vs.	2008 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (amounts\tin\tmillions,\texcept\nper\tshare\tamounts) | 2010 | 2009 | 2008 | Amount\nChange | %\tChange | Amount\nChange | %\nChange |
| Net\tsales\tby\tcategory: |  |  |  |  |  |  |  |
| Consumables | $9,332.1 | $8,356.4 | $7,248.4 | $975.7 | 11.7\t% | $1,108.0 | 15.3\t% |
| %\tof\tnet\tsales | 71.59% | 70.84% | 69.31% |  |  |  |  |
| Seasonal | 1,887.9 | 1,711.5 | 1,521.5 | 176.4 | 10.3 | 190.0 | 12.5 |
| %\tof\tnet\tsales | 14.48% | 14.51% | 14.55% |  |  |  |  |
| Home\tproducts | 917.6 | 869.8 | 862.2 | 47.9 | 5.5 | 7.5 | 0.9 |
| %\tof\tnet\tsales | 7.04% | 7.37% | 8.24% |  |  |  |  |
| Apparel | 897.3 | 858.8 | 825.6 | 38.6 | 4.5 | 33.2 | 4.0 |
| %\tof\tnet\tsales | 6.88% | 7.28% | 7.89% |  |  |  |  |
| Net\tsales | $13,035.0 | $11,796.4 | $10,457.7 | $1,238.6 | 10.5\t% | $1,338.7 | 12.8\t% |
| Cost\tof\tgoods\tsold | 8,858.4 | 8,106.5 | 7,396.6 | 751.9 | 9.3 | 709.9 | 9.6 |
| %\tof\tnet\tsales | 67.96% | 68.72% | 70.73% |  |  |  |  |
| Gross\tprofit | 4,176.6 | 3,689.9 | 3,061.1 | 486.7 | 13.2 | 628.8 | 20.5 |
| %\tof\tnet\tsales | 32.04% | 31.28% | 29.27% |  |  |  |  |
| Selling,\tgeneral\tand |  |  |  |  |  |  |  |
| administrative\texpenses | 2,902.5 | 2,736.6 | 2,448.6 | 165.9 | 6.1 | 288.0 | 11.8 |
| %\tof\tnet\tsales | 22.27% | 23.20% | 23.41% |  |  |  |  |
| Litigation\tsettlement\tand |  |  |  |  |  |  |  |
| related\tcosts,\tnet | - | - | 32.0 | - | - | (32.0) | - |
| %\tof\tnet\tsales | - | - | 0.31% |  |  |  |  |
| Operating\tprofit | 1,274.1 | 953.3 | 580.5 | 320.8 | 33.7 | 372.8 | 64.2 |
| %\tof\tnet\tsales | 9.77% | 8.08% | 5.55% |  |  |  |  |
| Interest\tincome | (0.2) | (0.1) | (3.1) | (0.1) | 52.8 | 2.9 | (95.3) |
| %\tof\tnet\tsales | (0.00)% | (0.00)% | (0.03)% |  |  |  |  |
| Interest\texpense | 274.2 | 345.7 | 391.9 | (71.5) | (20.7) | (46.2) | (11.8) |
| %\tof\tnet\tsales | 2.10% | 2.93% | 3.75% |  |  |  |  |
| Other\t(income)\texpense | 15.1 | 55.5 | (2.8) | (40.4) | (72.8) | 58.3 | - |
| %\tof\tnet\tsales | 0.12% | 0.47% | (0.03)% |  |  |  |  |
| Income\tbefore\tincome\ttaxes | 985.0 | 552.1 | 194.4 | 432.9 | 78.4 | 357.7 | 184.0 |
| %\tof\tnet\tsales | 7.56% | 4.68% | 1.86% |  |  |  |  |
| Income\ttaxes | 357.1 | 212.7 | 86.2 | 144.4 | 67.9 | 126.5 | 146.7 |
| %\tof\tnet\tsales | 2.74% | 1.80% | 0.82% |  |  |  |  |
| Net\tincome | $627.9 | $339.4 | $108.2 | $288.4 | 85.0\t% | $231.3 | 213.8\t% |
| %\tof\tnet\tsales | 4.82% | 2.88% | 1.03% |  |  |  |  |
| Diluted\tearnings\tper\tshare | $1.82 | $1.04 | $0.34 | $0.78 | 75.0\t% | $0.70 | 205.9\t% |

Net	Sales.	The	net	sales	increase	in	2010	reflects	a	same-store	sales	increase	of	4.9% compared	to	2009.	Same-stores	include	stores	that	have	been	open	for	13	months	and	remain open	at	the	end	of	the	reporting	period.	For	2010,	there	were	8,712	same-stores	which	accounted for	sales	of	$12.23	billion.	The	remainder	of	the	increase	in	sales	in	2010	was	attributable	to	new stores,	partially	offset	by	sales	from	closed	stores.	The	increase	in	sales	reflects	the	continued refinement	of	our	merchandise	offerings,	the	optimization	of	our	category	management processes,	further	improvement	in	store	standards,	and	increased	utilization	of	square	footage	in our	stores.

The	net	sales	increase	in	2009	reflects	a	same-store	sales	increase	of	9.5%	compared	to 2008.	For	2009,	there	were	8,324	same-stores	which	accounted	for	sales	of	$11.36	billion.	The

remainder	of	the	increase	in	sales	in	2009	was	attributable	to	new	stores,	partially	offset	by	sales from	closed	stores.	The	strong	increase	in	sales	reflects	the	results	of	our	various	initiatives implemented	throughout	2008	and	2009,	including	the	impact	of	improved	store	standards,	the expansion	of	our	merchandise	offerings,	including	significant	enhancements	to	our	convenience food	and	beverages	and	health	and	beauty	products,	in	addition	to	improved	utilization	of	square footage,	extended	store	hours	and	improved	marketing	efforts.

Of	our	four	major	merchandise	categories,	the	consumables	category	has	grown	most significantly	over	the	past	several	years.	Although	this	category	generally	has	a	lower	gross	profit rate	than	the	other	three	categories,	as	discussed	below,	we	were	able	to	increase	our	overall gross	profit	rate	in	both	2010	and	2009	as	compared	to	the	previous	year.	Because	of	the	impact of	sales	mix	on	gross	profit,	we	continually	review	our	merchandise	mix	and	strive	to	adjust	it when	appropriate.	Maintaining	an	appropriate	sales	mix	is	an	integral	part	of	achieving	our	gross profit	and	sales	goals.	Both	the	number	of	customer	transactions	and	average	transaction	amount increased	in	2010	and	2009,	and	we	believe	that	our	stores	have	benefited	to	some	degree	from attracting	new	customers	who	are	seeking	value	as	a	result	of	the	recent	economic	environment.

Gross	Profit.	The	gross	profit	rate	as	a	percentage	of	sales	was	32.0%	in	2010	compared to	31.3%	in	2009.	Factors	contributing	to	the	increase	in	the	2010	gross	profit	rate	include increased	markups	resulting	primarily	from	higher	purchase	markups,	partially	offset	by increased	markdowns,	as	well	as	our	category	management	efforts	and	increased	sales	volumes which	have	contributed	to	our	ability	to	reduce	purchase	costs	from	our	vendors.	Our merchandising	team	continues	to	work	closely	with	our	vendors	to	provide	quality	merchandise at	value	prices	to	meet	our	customers'	demands.	In	2010	we	recorded	a	LIFO	provision	of	$5.3 million,	reflecting	an	increase	in	certain	merchandise	costs,	the	most	significant	of	which occurred	in	the	2010	fourth	quarter,	compared	to	a	LIFO	benefit	of	$2.5	million	in	2009.

The	gross	profit	rate	as	a	percentage	of	sales	was	31.3%	in	2009	compared	to	29.3%	in 2008.	Factors	contributing	to	the	increase	in	the	2009	gross	profit	rate	include	increased	markups resulting	primarily	from	higher	purchase	markups,	partially	offset	by	increased	markdowns.	In addition,	our	increased	sales	volumes	have	contributed	to	our	ability	to	reduce	purchase	costs from	our	vendors.	Transportation	and	distribution	costs	decreased	for	the	year	driven	by	lower fuel	costs	as	well	as	the	impact	of	cost	reduction	initiatives.	Higher	sales	volumes	and productivity	initiatives	also	contributed	to	improved	leverage	of	our	distribution	costs.	In addition,	inventory	shrinkage	as	a	percentage	of	sales	declined	in	2009	from	2008,	contributing	to our	gross	profit	rate	improvement.	In	2009	we	recorded	a	LIFO	benefit	of	$2.5	million,	reflecting a	flattening	of	merchandise	costs	in	2009,	compared	to	a	LIFO	provision	of	$43.9	million	in 2008,	when	we	faced	increased	commodity	cost	pressures	mainly	related	to	food	and	pet products	which	were	driven	by	rising	fruit	and	vegetable	prices	and	freight	costs.	Increases	in petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity	driven	costs	also	resulted	in multiple	product	cost	increases	in	2008.	Also	in	2008,	we	marked	down	merchandise	as	the result	of	our	interpretation	of	the	phthalates	provision	of	the	Consumer	Product	Safety Improvement	Act	of	2008,	resulting	in	a	charge	of	$8.6	million.

Selling,	General	and	Administrative	("SG&A")	Expense.	SG&A	expense	was	22.3%	as	a percentage	of	sales	in	2010	compared	to	23.2%	in	2009,	a	decrease	of	93	basis	points.	SG&A	in

2010	included	expenses	totaling	$19.7	million,	or	15	basis	points,	relating	to	two	secondary offerings	of	our	common	stock,	consisting	of	$1.1	million	of	legal	and	other	transaction	expenses and	$18.6	million	relating	to	the	acceleration	of	certain	equity	appreciation	rights.	SG&A	in	2009 included	expenses	totaling	$68.3	million,	or	58	basis	points,	including	$58.8	million	relating	to the	termination	of	an	advisory	agreement	among	us,	KKR	and	Goldman,	Sachs	&	Co.	and	$9.4 million	resulting	from	the	acceleration	of	certain	equity	based	compensation	related	to	the completion	of	our	initial	public	offering.	Decreases	in	incentive	compensation,	the	cost	of	health benefits,	consulting	fees	and	severance	costs	contributed	to	the	overall	decrease	in	SG&A	as	a percentage	of	sales,	as	did	other	cost	reduction	and	productivity	initiatives.	Other	costs	increasing at	a	rate	lower	than	our	10.5%	increase	in	sales	include	utilities,	which	reflect	lower	waste management	costs	resulting	from	our	recycling	efforts,	as	well	as	repairs	and	maintenance.	Our increased	sales	levels	in	2010	also	favorably	impacted	SG&A,	as	a	percentage	of	sales.	Debit card	fees	increased	at	a	higher	rate	than	the	increase	in	sales,	primarily	as	a	result	of	increased usage.

SG&A,	as	a	percentage	of	sales,	was	23.2%	in	2009	compared	to	23.4%	in	2008, representing	an	improvement	of	21	basis	points	before	taking	into	account	the	impact	of	our initial	public	offering	as	discussed	above.	Our	increased	sales	levels	in	2009	favorably	impacted SG&A,	as	a	percentage	of	sales,	with	the	most	significant	impact	on	store	occupancy	costs, including	rent	and	utilities.	Our	cost	of	utilities,	as	a	percentage	of	sales,	was	further	reduced	by energy	savings	resulting	from	our	store	energy	management	initiatives,	including	forward purchase	contracts,	increased	preventive	maintenance	and	the	installation	of	energy	management systems	in	substantially	all	of	our	new	and	relocated	stores.	In	addition,	we	continued	to significantly	reduce	our	workers'	compensation	expense	through	safety	initiatives	implemented over	the	last	several	years,	and	legal	expenses	were	lower	in	2009	than	2008,	which	included expenses	incurred	in	connection	with	a	shareholder	litigation	settlement	in	2008	relating	to	our 2007	merger.	Also	during	2008,	we	recorded	a	$5.0	million	gain	relating	to	potential	losses	on distribution	center	leases	indirectly	related	to	our	2007	merger.

Litigation	Settlement	and	Related	Costs,	Net.	Expenses	in	2008	included	$32.0	million which	represents	the	settlement	of	a	class	action	lawsuit	filed	in	response	to	our	2007	merger,	and includes	a	$40.0	million	settlement	plus	related	expenses	of	$2.0	million,	net	of	$10.0	million	of insurance	proceeds	received	in	the	fourth	quarter	of	2008.

Interest	Expense.		The	decrease	in	interest	expense	in	2010	compared	to	2009	was primarily	the	result	of	lower	average	outstanding	long-term	obligations.	The	decrease	in	interest expense	in	2009	compared	to	2008	was	primarily	the	result	of	lower	average	outstanding	long- term	obligations	and	lower	interest	rates	on	our	term	loan.

We	had	outstanding	variable-rate	debt	of	$931	million	and	$560	million	as	of	January	28, 2011	and	January	29,	2010,	respectively,	after	taking	into	consideration	the	impact	of	interest rate	swaps.	The	remainder	of	our	outstanding	indebtedness	at	January	28,	2011	and	January	29, 2010	was	fixed	rate	debt.

See	the	detailed	discussion	under	"Liquidity	and	Capital	Resources"	regarding indebtedness	incurred	to	finance	our	2007	merger	along	with	subsequent	repurchases	of	various long-term	obligations	and	the	related	effect	on	interest	expense	in	the	periods	presented.

Other	(Income)	Expense.	In	2010,	we	recorded	pretax	losses	of	$14.7	million	resulting from	the	repurchase	in	the	open	market	of	$115.0	million	aggregate	principal	amount	of	our Senior	Notes	plus	accrued	and	unpaid	interest.

In	2009,	we	recorded	charges	totaling	$55.5	million,	which	primarily	represents	losses	on debt	retirement	totaling	$55.3	million,	and	also	includes	expense	of	$0.6	million	related	to	hedge ineffectiveness	on	certain	of	our	interest	rate	swaps.

In	2008,	we	recorded	a	gain	of	$3.8	million	resulting	from	the	repurchase	of	$44.1 million	of	our	senior	subordinated	notes,	offset	by	expense	of	$1.0	million	related	to	hedge ineffectiveness	on	certain	of	our	interest	rate	swaps.

The	2010	effective	tax	rate	is	greater	than	the	expected	tax	rate	of	35%	due	primarily	to the	inclusion	of	state	income	taxes	in	the	total	effective	tax	rate.	The	2010	effective	rate	is	less than	the	2009	rate	due	principally	to	reductions	in	state	income	tax	expense,	income	tax	related interest	expense	and	other	expense	items.	The	2010	effective	resolution	of	various	examinations by	the	taxing	authorities,	when	combined	with	unfavorable	examination	results	in	2009,	resulted in	a	decrease	in	the	year-to-year	state	income	tax	expense	rate.	This	decrease	in	state	income	tax expense	was	partially	offset	by	an	increase	in	state	income	tax	expense	due	to	a	shift	in	income	to companies	within	the	group	that	have	a	higher	effective	state	income	tax	rate.	In	addition, decreases	also	occurred	due	to	favorable	outcomes	in	2010	associated	with	reductions	in	income tax	related	interest	accruals	and	income	tax	related	penalty	accruals	due	to	favorable	income	tax examination	results,	the	completion	of	a	federal	income	tax	examination,	and	reductions	in expense	associated	with	uncertain	tax	benefit	accruals.

The	2009	effective	tax	rate	is	greater	than	the	expected	tax	rate	of	35%	due	primarily	to the	inclusion	of	state	income	taxes	in	the	total	effective	tax	rate.	The	2009	effective	tax	rate	is less	than	the	2008	rate	due	principally	to	the	unfavorable	impact	that	the	non-deductible,	merger- related	lawsuit	settlement	had	on	the	2008	rate.	This	reduction	in	the	effective	tax	rate	was partially	offset	by	a	decrease	in	the	tax	rate	benefit	related	to	federal	jobs	credits.	While	the	total amount	of	jobs	credits	earned	in	2009	was	similar	to	the	amount	earned	in	2008,	the	impact	of this	benefit	on	the	effective	tax	rate	was	reduced	due	to	the	2009	increase	in	income	before	tax. The	2009	rate	was	also	increased	by	accruals	associated	with	uncertain	tax	benefits.

The	2008	effective	income	tax	rate	was	greater	than	the	expected	tax	rate	of	35% principally	due	to	the	non-deductibility	of	the	settlement	and	related	expenses	associated	with	the shareholder	lawsuit	related	to	our	2007	merger.

# Off	Balance	Sheet	Arrangements

We	lease	three	of	our	distribution	centers.	The	entities	involved	in	the	ownership structure	underlying	these	leases	meet	the	accounting	definition	of	a	Variable	Interest	Entity (''VIE'').	One	of	these	distribution	centers	has	been	recorded	as	a	financing	obligation	whereby its	property	and	equipment	are	reflected	in	our	consolidated	balance	sheets.	The	land	and

buildings	of	the	other	two	distribution	centers	have	been	recorded	as	operating	leases.	We	are	not the	primary	beneficiary	of	these	VIEs	and,	accordingly,	have	not	included	these	entities	in	our consolidated	financial	statements.	Other	than	the	foregoing,	we	are	not	party	to	any	off	balance sheet	arrangements.

# Effects	of	Inflation

In	2008,	increased	commodity	cost	pressures	mainly	related	to	food	and	pet	products, which	were	driven	by	fruit	and	vegetable	prices	and	rising	freight	costs,	increased	the	costs	of certain	products.	Increases	in	petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity driven	costs	also	resulted	in	multiple	product	cost	increases.	We	believe	that	our	ability	to increase	selling	prices	in	response	to	cost	increases	largely	mitigated	the	effect	of	these	cost increases	on	our	overall	results	of	operations.	These	2008	trends	generally	reversed	or	stabilized in	2009	and	2010.

# Liquidity	and	Capital	Resources

# Current	Financial	Condition	and	Recent	Developments

During	the	past	three	years,	we	have	generated	an	aggregate	of	approximately	$2.07 billion	in	cash	flows	from	operating	activities.	During	that	period,	we	expanded	the	number	of stores	we	operate	by	1,178,	or	over	14%,	remodeled	or	relocated	1,358	stores,	or	approximately 14%	of	stores	we	operated	as	of	February	25,	2011,	and	incurred	approximately	$877	million	in capital	expenditures.	We	made	certain	strategic	decisions	which	slowed	our	store	growth	in	2007 and	2008,	but	we	reaccelerated	store	growth	beginning	in	2009	and	currently	plan	to	continue that	strategy	in	2011	and	beyond.

At	January	28,	2011,	we	had	total	outstanding	debt	(including	the	current	portion	of	long- term	obligations)	of	$3.29	billion.	We	also	had	an	additional	$959.3	million	available	for borrowing	under	our	senior	secured	asset-based	revolving	credit	facility	("ABL	Facility"	and, together	with	the	Term	Loan	Facility,	the	"Credit	Facilities")	at	that	date.	Our	liquidity	needs	are significant,	primarily	due	to	our	debt	service	and	other	obligations.	Our	substantial	debt	could adversely	affect	our	ability	to	raise	additional	capital	to	fund	our	operations,	limit	our	ability	to react	to	changes	in	the	economy	or	our	industry	or	to	pursue	our	growth	strategy,	expose	us	to interest	rate	risk	to	the	extent	of	our	variable	rate	debt,	and	increase	the	difficulty	of	our	ability	to make	payments	on	our	outstanding	debt	securities.

Nevertheless,	management	believes	our	cash	flow	from	operations	and	existing	cash balances,	combined	with	availability	under	the	Credit	Facilities	(described	below),	will	provide sufficient	liquidity	to	fund	our	current	obligations,	projected	working	capital	requirements	and capital	spending	for	a	period	that	includes	the	next	twelve	months	and	the	next	several	years.

# Credit	Facilities

Overview.	We	have	two	senior	secured	credit	facilities	which	provide	financing	of	up	to $2.995	billion	as	of	January	28,	2011.	The	Credit	Facilities	consist	of	the	$1.964	billion	Term Loan	Facility	and	the	$1.031	billion	ABL	Facility	(of	which	up	to	$350.0	million	is	available	for

letters	of	credit),	subject	to	borrowing	base	availability.	The	ABL	Facility	includes	borrowing capacity	available	for	letters	of	credit	and	for	short-term	borrowings	referred	to	as	swingline loans.

The	amount	available	under	the	ABL	Facility	(including	letters	of	credit)	shall	not	exceed the	sum	of	the	tranche	A	borrowing	base	and	the	tranche	A-1	borrowing	base.	The	tranche	A borrowing	base	equals	the	sum	of	(i)	85%	of	the	net	orderly	liquidation	value	of	all	our	eligible inventory	and	that	of	each	guarantor	thereunder	and	(ii)	90%	of	all	our	accounts	receivable	and credit/debit	card	receivables	and	that	of	each	guarantor	thereunder,	in	each	case,	subject	to customary	reserves	and	eligibility	criteria.	An	additional	10%	of	the	net	orderly	liquidation	value of	all	of	our	eligible	inventory	and	that	of	each	guarantor	thereunder	is	made	available	to	us	in	the form	of	a	"last	out"	tranche	under	which	we	may	borrow	up	to	a	maximum	amount	of	$101.0 million.	Borrowings	under	the	ABL	Facility	will	be	incurred	first	under	the	last	out	tranche,	and no	borrowings	will	be	permitted	under	any	other	tranche	until	the	last	out	tranche	is	fully	utilized. Repayments	of	the	ABL	Facility	will	be	applied	to	the	last	out	tranche	only	after	all	other tranches	have	been	fully	paid	down.

Interest	Rates	and	Fees.	Borrowings	under	the	Credit	Facilities	bear	interest	at	a	rate equal	to	an	applicable	margin	plus,	at	our	option,	either	(a)	LIBOR	or	(b)	a	base	rate	(which	is usually	equal	to	the	prime	rate).	The	applicable	margin	for	borrowings	is	(i)	under	the	Term Loan	Facility,	2.75%	for	LIBOR	borrowings	and	1.75%	for	base-rate	borrowings	(ii)	under	the ABL	Facility	(except	in	the	last	out	tranche	described	above)	as	of	January	28,	2011	and	January 29,	2010,	1.25%	for	LIBOR	borrowings;	0.25%	for	base-rate	borrowings	and	for	any	last	out borrowings,	2.25%	for	LIBOR	borrowings	and	1.25%	for	base-rate	borrowings.	The	applicable margins	for	borrowings	under	the	ABL	Facility	(except	in	the	case	of	last	out	borrowings)	are subject	to	adjustment	each	quarter	based	on	average	daily	excess	availability	under	the	ABL Facility.	The	interest	rate	for	borrowings	under	the	Term	Loan	Facility	was	3.0%	(without	giving effect	to	the	market	rate	swaps	discussed	below)	as	of	both	January	28,	2011	and	January	29, 2010,	respectively.	We	are	also	required	to	pay	a	commitment	fee	to	the	lenders	under	the	ABL Facility	for	any	unutilized	commitments	at	a	rate	of	0.375%	per	annum.	We	also	must	pay customary	letter	of	credit	fees.	See	Item	7A.	"Quantitative	and	Qualitative	Disclosures	About Market	Risk"	below	for	a	discussion	of	our	use	of	interest	rate	swaps	to	manage	our	interest	rate risk.

Prepayments.	The	senior	secured	credit	agreement	for	the	Term	Loan	Facility	requires	us to	prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with:

· 50%	of	our	annual	excess	cash	flow	(as	defined	in	the	credit	agreement)	which	will	be reduced	to	25%	and	0%	if	we	achieve	and	maintain	a	total	net	leverage	ratio	of	6.0	to 1.0	and	5.0	to	1.0,	respectively;

· 100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other dispositions	of	property	in	excess	of	$25.0	million	in	the	aggregate	and	subject	to	our right	to	reinvest	the	proceeds;	and

· 100%	of	the	net	cash	proceeds	of	any	incurrence	of	debt,	other	than	proceeds	from debt	permitted	under	the	senior	secured	credit	agreement.

The	mandatory	prepayments	discussed	above	will	be	applied	to	the	Term	Loan	Facility	as directed	by	the	senior	secured	credit	agreement.	Through	January	28,	2011,	no	prepayments	have been	required	under	the	prepayment	provisions	listed	above.	The	Term	Loan	Facility	can	be prepaid	in	whole	or	in	part	at	any	time.

In	addition,	the	senior	secured	credit	agreement	for	the	ABL	Facility	requires	us	to prepay	the	ABL	Facility,	subject	to	certain	exceptions,	as	follows:

· With	100%	of	the	net	cash	proceeds	of	all	non-ordinary	course	asset	sales	or	other dispositions	of	Revolving	Facility	Collateral	(as	defined	below)	in	excess	of	$1.0 million	in	the	aggregate	and	subject	to	our	right	to	reinvest	the	proceeds;	and

· To	the	extent	such	extensions	of	credit	exceed	the	then	current	borrowing	base	(as defined	in	the	senior	secured	credit	agreement	for	the	ABL	Facility).

The	mandatory	prepayments	discussed	above	will	be	applied	to	the	ABL	Facility	as directed	by	the	senior	secured	credit	agreement	for	the	ABL	Facility.	Through	January	28,	2011, no	prepayments	have	been	required	under	the	prepayment	provisions	listed	above.

An	event	of	default	under	the	senior	secured	credit	agreements	will	occur	upon	a	change of	control	as	defined	in	the	senior	secured	credit	agreements	governing	our	Credit	Facilities. Upon	an	event	of	default,	indebtedness	under	the	Credit	Facilities	may	be	accelerated,	in	which case	we	will	be	required	to	repay	all	outstanding	loans	plus	accrued	and	unpaid	interest	and	all other	amounts	outstanding	under	the	Credit	Facilities.

Amortization.	The	original	terms	of	the	Term	Loan	Facility	required	quarterly	payments of	principal	beginning	September	30,	2009.	As	a	result	of	voluntary	prepayments	under	the	Term Loan	Facility,	no	further	quarterly	principal	installments	will	be	required	prior	to	maturity	of	the Term	Loan	on	July	6,	2014.	There	is	no	amortization	under	the	ABL	Facility.	The	entire principal	amounts	(if	any)	outstanding	under	the	ABL	Facility	are	due	and	payable	in	full	at maturity,	on	July	6,	2013,	on	which	day	the	commitments	thereunder	will	terminate.

Guarantee	and	Security.	All	obligations	under	the	Credit	Facilities	are	unconditionally guaranteed	by	substantially	all	of	our	existing	and	future	domestic	subsidiaries	(excluding	certain immaterial	subsidiaries	and	certain	subsidiaries	designated	by	us	under	our	senior	secured	credit agreements	as	"unrestricted	subsidiaries"),	referred	to,	collectively,	as	U.S.	Guarantors.

All	obligations	and	related	guarantees	under	the	Term	Loan	Facility	are	secured	by:

· a	second-priority	security	interest	in	all	existing	and	after-acquired	inventory, accounts	receivable,	and	other	assets	arising	from	such	inventory	and	accounts receivable,	of	our	company	and	each	U.S.	Guarantor	(the	"Revolving	Facility Collateral"),	subject	to	certain	exceptions;

· a	first-priority	security	interest	in,	and	mortgages	on,	substantially	all	of	our	and	each U.S.	Guarantor's	tangible	and	intangible	assets	(other	than	the	Revolving	Facility Collateral);	and

· a	first-priority	pledge	of	100%	of	the	capital	stock	held	by	us,	or	any	of	our	domestic subsidiaries	that	are	directly	owned	by	us	or	one	of	the	U.S.	Guarantors	and	65%	of the	voting	capital	stock	of	each	of	our	existing	and	future	foreign	subsidiaries	that	are directly	owned	by	us	or	one	of	the	U.S.	Guarantors.

All	obligations	and	related	guarantees	under	the	ABL	Facility	are	secured	by	the Revolving	Facility	Collateral,	subject	to	certain	exceptions.

Certain	Covenants	and	Events	of	Default.	The	senior	secured	credit	agreements	contain	a number	of	covenants	that,	among	other	things,	restrict,	subject	to	certain	exceptions,	our	ability to:

· incur	additional	indebtedness;

· pay	dividends	and	distributions	or	repurchase	our	capital	stock;

· make	investments	or	acquisitions;

· repay	or	repurchase	subordinated	indebtedness	(including	the	Senior	Subordinated Notes	discussed	below)	and	the	Senior	Notes	discussed	below;

· amend	material	agreements	governing	our	subordinated	indebtedness	(including	the Senior	Subordinated	Notes	discussed	below)	or	our	Senior	Notes	discussed	below;

· change	our	lines	of	business.

The	senior	secured	credit	agreements	also	contain	certain	customary	affirmative covenants	and	events	of	default.

At	January	28,	2011,	we	had	no	borrowings,	$52.7	million	of	standby	letters	of	credit, and	$19.1	million	of	commercial	letters	of	credit,	outstanding	under	our	ABL	Facility.

# Senior	Notes	due	2015	and	Senior	Subordinated	Toggle	Notes	due	2017

Overview.	As	of	January	28,	2011,	we	have	$864.3	million	aggregate	principal	amount	of 10.625%	senior	notes	due	2015	(the	"Senior	Notes")	outstanding	(reflected	in	our	consolidated balance	sheet	net	of	a	$11.2	million	discount),	which	mature	on	July	15,	2015,	pursuant	to	an indenture	dated	as	of	July	6,	2007	(the	"senior	indenture"),	and	$450.7	million	aggregate principal	amount	of	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the	"Senior Subordinated	Notes")	outstanding,	which	mature	on	July	15,	2017,	pursuant	to	an	indenture dated	as	of	July	6,	2007	(the	"senior	subordinated	indenture").	The	Senior	Notes	and	the	Senior Subordinated	Notes	are	collectively	referred	to	herein	as	the	"Notes."	The	senior	indenture	and the	senior	subordinated	indenture	are	collectively	referred	to	herein	as	the	"indentures."

Interest	on	the	Notes	is	payable	on	January	15	and	July	15	of	each	year.	Interest	on	the Senior	Notes	is	payable	in	cash.	Cash	interest	on	the	Senior	Subordinated	Notes	accrues	at	a	rate of	11.875%	per	annum.	For	the	Senior	Subordinated	Notes,	we	previously	had	the	ability	to	elect to	pay	interest	by	increasing	the	principal	amount	of	the	Senior	Subordinated	Notes	or	issuing new	Senior	Subordinated	Notes	("PIK	interest")	instead	of	paying	cash	interest.	Due	to	the

expiration	of	the	notification	period	for	such	option,	all	interest	on	the	Notes	has	been	and	will	be paid	in	cash.

The	Notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the	obligations	under	our Credit	Facilities.

We	intend	to	redeem	some	or	all	of	the	Senior	Notes	at	the	first	scheduled	call	date	in July	2011	or	later.	We	may	redeem	some	or	all	of	the	Notes	at	any	time	at	redemption	prices described	or	set	forth	in	the	indentures.	We	also	may	seek,	from	time	to	time,	to	retire	some	or	all of	the	Notes	through	cash	purchases	on	the	open	market,	in	privately	negotiated	transactions	or otherwise.	Such	repurchases,	if	any,	will	depend	on	prevailing	market	conditions,	our	liquidity requirements,	contractual	restrictions	and	other	factors.	The	amounts	involved	may	be	material. We	repurchased	$115.0	million	aggregate	principal	amount	of	outstanding	Senior	Notes	during 2010.	In	connection	with	our	initial	public	offering	in	2009,	we	redeemed	$195.7	million principal	amount	of	outstanding	Senior	Notes	and	$205.2	million	principal	amount	of outstanding	Senior	Subordinated	Notes.	We	repurchased	$44.1	million	and	$25.0	million	of Senior	Subordinated	Notes	in	2008	and	2007,	respectively.

Change	of	Control.	Upon	the	occurrence	of	a	change	of	control,	which	is	defined	in	the indentures,	each	holder	of	the	Notes	has	the	right	to	require	us	to	repurchase	some	or	all	of	such holder's	Notes	at	a	purchase	price	in	cash	equal	to	101%	of	the	principal	amount	thereof,	plus accrued	and	unpaid	interest,	if	any,	to	the	repurchase	date.

Covenants.	The	indentures	contain	covenants	limiting,	among	other	things,	our	ability and	the	ability	of	our	restricted	subsidiaries	to	(subject	to	certain	exceptions):

· incur	additional	debt,	issue	disqualified	stock	or	issue	certain	preferred	stock;

· pay	dividends	and	or	make	certain	distributions,	investments	and	other	restricted payments;

· consolidate,	merge,	sell	or	otherwise	dispose	of	all	or	substantially	all	of	our	assets; and

Events	of	Default.	The	indentures	also	provide	for	events	of	default	which,	if	any	of	them occurs,	would	permit	or	require	the	principal	of	and	accrued	interest	on	the	Notes	to	become	or	to be	declared	due	and	payable.

# Adjusted	EBITDA

Under	the	agreements	governing	the	Credit	Facilities	and	the	indentures,	certain limitations	and	restrictions	could	arise	if	we	are	not	able	to	satisfy	and	remain	in	compliance	with specified	financial	ratios.	Management	believes	the	most	significant	of	such	ratios	is	the	senior secured	incurrence	test	under	the	Credit	Facilities.	This	test	measures	the	ratio	of	the	senior secured	debt	to	Adjusted	EBITDA.	This	ratio	would	need	to	be	no	greater	than	4.25	to	1	to	avoid such	limitations	and	restrictions.	As	of	January	28,	2011,	this	ratio	was	1.0	to	1.	Senior	secured debt	is	defined	as	our	total	debt	secured	by	liens	or	similar	encumbrances	less	cash	and	cash equivalents.	EBITDA	is	defined	as	income	(loss)	from	continuing	operations	before	cumulative effect	of	change	in	accounting	principle	plus	interest	and	other	financing	costs,	net,	provision	for income	taxes,	and	depreciation	and	amortization.	Adjusted	EBITDA	is	defined	as	EBITDA, further	adjusted	to	give	effect	to	adjustments	required	in	calculating	this	covenant	ratio	under	our Credit	Facilities.	EBITDA	and	Adjusted	EBITDA	are	not	presentations	made	in	accordance	with generally	accepted	accounting	principles	in	the	United	States	("U.S.	GAAP"),	are	not	measures of	financial	performance	or	condition,	liquidity	or	profitability,	and	should	not	be	considered	as an	alternative	to	(i)	net	income,	operating	income	or	any	other	performance	measures	determined in	accordance	with	U.S.	GAAP	or	(ii)	operating	cash	flows	determined	in	accordance	with	U.S. GAAP.	Additionally,	EBITDA	and	Adjusted	EBITDA	are	not	intended	to	be	measures	of	free cash	flow	for	management's	discretionary	use,	as	they	do	not	consider	certain	cash	requirements such	as	interest	payments,	tax	payments	and	debt	service	requirements	and	replacements	of	fixed assets.

Our	presentation	of	EBITDA	and	Adjusted	EBITDA	has	limitations	as	an	analytical	tool, and	should	not	be	considered	in	isolation	or	as	a	substitute	for	analysis	of	our	results	as	reported under	U.S.	GAAP.	Because	not	all	companies	use	identical	calculations,	these	presentations	of EBITDA	and	Adjusted	EBITDA	may	not	be	comparable	to	other	similarly	titled	measures	of other	companies.	We	believe	that	the	presentation	of	EBITDA	and	Adjusted	EBITDA	is appropriate	to	provide	additional	information	about	the	calculation	of	this	financial	ratio	in	the Credit	Facilities.	Adjusted	EBITDA	is	a	material	component	of	this	ratio.	Specifically,	non- compliance	with	the	senior	secured	indebtedness	ratio	contained	in	our	Credit	Facilities	could prohibit	us,	subject	to	specified	exceptions,	from	making	investments,	incurring	liens,	making certain	restricted	payments	and	incurring	additional	secured	indebtedness	(other	than	the additional	funding	provided	for	under	the	senior	secured	credit	agreement).

The	calculation	of	Adjusted	EBITDA	under	the	Credit	Facilities	is	as	follows:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (in\tmillions) | 2011 | 2010 |
| Net\tincome | $627.9 | $339.4 |
| Add\t(subtract): |  |  |
| Interest\tincome | (0.2) | (0.1) |
| Interest\texpense | 274.1 | 345.6 |
| Depreciation\tand\tamortization | 242.3 | 241.7 |
| Income\ttaxes | 357.1 | 212.7 |
| EBITDA | 1,501.2 | 1,139.3 |
| Adjustments: |  |  |
| Loss\ton\tdebt\tretirements | 14.6 | 55.3 |
| Loss\ton\thedging\tinstruments | 0.4 | 0.5 |
| Impact\tof\tmarkdowns\trelated\tto\tinventory\tclearance |  |  |
| activities,\tnet\tof\tpurchase\taccounting\tadjustments | - | (7.3) |
| Advisory\tand\tconsulting\tfees\tto\taffiliates | 0.1 | 63.5 |
| Non-cash\texpense\tfor\tshare-based\tawards | 16.0 | 18.7 |
| Indirect\tmerger-related\tcosts | 1.3 | 10.6 |
| Other\tnon-cash\tcharges\t(including\tLIFO) | 11.5 | 6.6 |
| Total\tAdjustments | 43.9 | 147.9 |
| Adjusted\tEBITDA | $1,545.1 | $1,287.2 |

# Interest	Rate	Swaps

We	use	interest	rate	swaps	to	minimize	the	risk	of	adverse	changes	in	interest	rates.	These swaps	are	intended	to	reduce	risk	by	hedging	an	underlying	economic	exposure.	Because	of	high correlation	between	the	derivative	financial	instrument	and	the	underlying	exposure	being hedged,	fluctuations	in	the	value	of	the	financial	instruments	are	generally	offset	by	reciprocal changes	in	the	value	of	the	underlying	economic	exposure.	Our	principal	interest	rate	exposure relates	to	outstanding	amounts	under	our	Credit	Facilities.	At	January	28,	2011,	we	had	interest rate	swaps	with	a	total	notional	amount	of	approximately	$1.05	billion.	For	more	information	see Item	7A	"Quantitative	and	Qualitative	Disclosures	about	Market	Risk"	below.

# Fair	Value	Accounting

We	have	classified	our	interest	rate	swaps,	as	further	discussed	in	Item	7A.	below,	in Level	2	of	the	fair	value	hierarchy,	as	the	significant	inputs	to	the	overall	valuations	are	based	on market-observable	data	or	information	derived	from	or	corroborated	by	market-observable	data, including	market-based	inputs	to	models,	model	calibration	to	market-clearing	transactions, broker	or	dealer	quotations,	or	alternative	pricing	sources	with	reasonable	levels	of	price transparency.	Where	models	are	used,	the	selection	of	a	particular	model	to	value	a	derivative depends	upon	the	contractual	terms	of,	and	specific	risks	inherent	in,	the	instrument	as	well	as the	availability	of	pricing	information	in	the	market.	We	use	similar	models	to	value	similar instruments.	Valuation	models	require	a	variety	of	inputs,	including	contractual	terms,	market prices,	yield	curves,	credit	curves,	measures	of	volatility,	and	correlations	of	such	inputs.	For	our

derivatives,	all	of	which	trade	in	liquid	markets,	model	inputs	can	generally	be	verified	and model	selection	does	not	involve	significant	management	judgment.

We	incorporate	credit	valuation	adjustments	to	appropriately	reflect	both	our	own nonperformance	risk	and	the	respective	counterparty's	nonperformance	risk	in	the	fair	value measurements	of	our	derivatives.	The	credit	valuation	adjustments	are	calculated	by	determining the	total	expected	exposure	of	the	derivatives	(which	incorporates	both	the	current	and	potential future	exposure)	and	then	applying	each	counterparty's	credit	spread	to	the	applicable	exposure. For	derivatives	with	two-way	exposure,	such	as	interest	rate	swaps,	the	counterparty's	credit spread	is	applied	to	our	exposure	to	the	counterparty,	and	our	own	credit	spread	is	applied	to	the counterparty's	exposure	to	us,	and	the	net	credit	valuation	adjustment	is	reflected	in	our derivative	valuations.	The	total	expected	exposure	of	a	derivative	is	derived	using	market- observable	inputs,	such	as	yield	curves	and	volatilities.	The	inputs	utilized	for	our	own	credit spread	are	based	on	implied	spreads	from	our	publicly-traded	debt.	For	counterparties	with publicly	available	credit	information,	the	credit	spreads	over	LIBOR	used	in	the	calculations represent	implied	credit	default	swap	spreads	obtained	from	a	third	party	credit	data	provider.	In adjusting	the	fair	value	of	our	derivative	contracts	for	the	effect	of	nonperformance	risk,	we	have considered	the	impact	of	netting	and	any	applicable	credit	enhancements,	such	as	collateral postings,	thresholds,	mutual	puts,	and	guarantees.	Additionally,	we	actively	monitor	counterparty credit	ratings	for	any	significant	changes.

As	of	January	28,	2011,	the	net	credit	valuation	adjustments	reduced	the	settlement values	of	our	derivative	liabilities	by	$0.7	million.	Various	factors	impact	changes	in	the	credit valuation	adjustments	over	time,	including	changes	in	the	credit	spreads	of	the	parties	to	the contracts,	as	well	as	changes	in	market	rates	and	volatilities,	which	affect	the	total	expected exposure	of	the	derivative	instruments.	When	appropriate,	valuations	are	also	adjusted	for various	factors	such	as	liquidity	and	bid/offer	spreads,	which	factors	we	deemed	to	be	immaterial as	of	January	28,	2011.

# Contractual	Obligations

The	following	table	summarizes	our	significant	contractual	obligations	and	commercial commitments	as	of	January	28,	2011	(in	thousands):

(a) Represents	obligations	for	interest	payments	on	long-term	debt	and	capital	lease	obligations,	and	includes	projected interest	on	variable	rate	long-term	debt,	using	2010	year	end	rates.

(b) We	retain	a	significant	portion	of	the	risk	for	our	workers'	compensation,	employee	health	insurance,	general liability,	property	loss	and	automobile	insurance.	As	these	obligations	do	not	have	scheduled	maturities,	these amounts	represent	undiscounted	estimates	based	upon	actuarial	assumptions.	Reserves	for	workers'	compensation and	general	liability	which	existed	as	of	the	date	of	our	2007	merger	were	discounted	in	order	to	arrive	at	estimated fair	value.	All	other	amounts	are	reflected	on	an	undiscounted	basis	in	our	consolidated	balance	sheets.

(c) Operating	lease	obligations	are	inclusive	of	amounts	included	in	deferred	rent	and	closed	store	obligations	in	our consolidated	balance	sheets.

(d) Commercial	commitments	include	information	technology	license	and	support	agreements,	supplies,	fixtures, letters	of	credit	for	import	merchandise,	and	other	inventory	purchase	obligations.

(e) Purchase	obligations	include	legally	binding	agreements	for	software	licenses	and	support,	supplies,	fixtures,	and merchandise	purchases	(excluding	such	purchases	subject	to	letters	of	credit).

(f) We	have	potential	payment	obligations	associated	with	uncertain	tax	positions	that	are	not	reflected	in	these	totals. We	anticipate	that	approximately	$0.2	million	of	such	amounts	will	be	paid	in	the	coming	year.	We	are	currently unable	to	make	reasonably	reliable	estimates	of	the	period	of	cash	settlement	with	the	taxing	authorities	for	our remaining	$27.3	million	of	reserves	for	uncertain	tax	positions.

# Other	Considerations

We	have	no	current	plans	to	pay	any	cash	dividends	on	our	common	stock	and	instead may	retain	earnings,	if	any,	for	future	operation	and	expansion	and	debt	repayment.	Any	decision to	declare	and	pay	dividends	in	the	future	will	be	made	at	the	discretion	of	our	Board	of Directors,	subject	to	certain	limitations	found	in	covenants	in	our	Credit	Facilities	and	in	the indentures	governing	the	Notes	as	discussed	in	more	detail	above,	and	will	depend	on,	among other	things,	our	results	of	operations,	cash	requirements,	financial	condition,	contractual restrictions	and	other	factors	that	our	Board	of	Directors	may	deem	relevant.

Our	inventory	balance	represented	approximately	45%	of	our	total	assets	exclusive	of goodwill	and	other	intangible	assets	as	of	January	28,	2011.	Our	proficiency	in	managing	our inventory	balances	can	have	a	significant	impact	on	our	cash	flows	from	operations	during	a given	fiscal	year.	As	a	result,	efficient	inventory	management	has	been	and	continues	to	be	an area	of	focus	for	us.

As	described	in	Note	9	to	the	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.	As	discussed	in	Note	6	to	the	Consolidated	Financial	Statements,	we	also	have	certain income	tax-related	contingencies.	Future	negative	developments	could	have	a	material	adverse effect	on	our	liquidity.

In	June	2010,	Standard	&	Poor's	upgraded	our	long-term	debt	rating	to	BB	from	BB- with	a	stable	outlook	and	in	November	2010,	Moody's	upgraded	our	long-term	debt	rating	to Ba3	from	B1	with	a	positive	outlook.	These	current	ratings	are	considered	non-investment	grade. Our	current	credit	ratings,	as	well	as	future	rating	agency	actions,	could	(i)	impact	our	ability	to obtain	financings	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.

# Cash	flows

Cash	flows	from	operating	activities. A	significant	component	of	our	increase	in	cash flows	from	operating	activities	in	2010	compared	to	2009	was	the	increase	in	net	income	due	to greater	sales,	higher	gross	margins	and	lower	SG&A	expenses	as	a	percentage	of	sales,	as described	in	more	detail	above	under	"Results	of	Operations."	Partially	offsetting	this	increase	in cash	flows	were	changes	in	inventory	balances,	which	increased	by	16%	in	2010	compared	to	an increase	of	7%	in	2009.	Although	we	continue	to	closely	monitor	our	inventory	balances,	they often	fluctuate	from	period	to	period	and	from	year	to	year	based	on	new	store	openings,	the timing	of	purchases,	merchandising	initiatives	and	other	factors.	Inventory	levels	in	the consumables	category	increased	by	$133.9	million,	or	16%,	in	2010	compared	to	an	increase	of $111.4	million,	or	15%,	in	2009.	The	seasonal	category	increased	by	$55.2	million,	or	18%,	in 2010	compared	to	an	increase	of	$25.3	million,	or	9%,	in	2009.	The	home	products	category increased	$25.2	million,	or	17%,	in	2010	compared	to	a	decline	of	$9.1	million,	or	6%,	in	2009. The	apparel	category	increased	by	$32.3	million,	or	15%,	in	2010	compared	to	a	decline	of	$22.9 million,	or	10%,	in	2009.	In	addition,	increased	net	income	resulted	in	an	increase	in	income taxes	paid	in	2010	compared	to	2009.	Changes	in	Accrued	expenses	and	other	were	affected	in part	by	reductions	of	income	tax	reserves	and	reduced	accruals	for	incentive	compensation, partially	offset	by	the	timing	of	payments	related	to	a	litigation	settlement	in	prior	years	(as discussed	in	more	detail	below)	and	by	lower	accruals	for	interest	on	long-term	debt.

Our	increase	in	cash	flows	from	operating	activities	in	2009	compared	to	2008	was	also driven	by	an	increase	in	net	income	due	to	greater	sales,	higher	gross	margins	and	lower	SG&A expenses	as	a	percentage	of	sales.	In	addition,	we	experienced	increased	inventory	turns	in	2009 as	compared	to	2008.	Changes	in	inventory	balances	increased	by	7%	in	2009	compared	to	an increase	of	10%	in	2008.	Inventory	levels	in	the	consumables	category	increased	by	$111.4

million,	or	15%,	in	2009	compared	to	an	increase	of	$77.8	million,	or	12%,	in	2008.	The	seasonal category	increased	by	$25.3	million,	or	9%,	in	2009	compared	to	an	increase	of	$20.9	million,	or 8%,	in	2008.	The	home	products	category	declined	$9.1	million,	or	6%,	in	2009	compared	to	a decline	of	$2.6	million,	or	2%,	in	2008.	The	apparel	category	declined	by	$22.9	million,	or	10%, in	2009	compared	to	an	increase	of	$30.2	million,	or	15%,	in	2008.	In	addition,	increased	net income	in	2009	compared	to	2008	was	a	principal	factor	in	the	increase	in	income	taxes	paid	in 2009	compared	to	2008.	Changes	in	Accrued	expenses	and	other	were	affected	in	part	by	the timing	of	the	payments	related	to	the	Litigation	settlement	and	related	costs	discussed	above under	"Results	of	Operations,"	as	the	associated	insurance	proceeds	of	$10.0	million	were received	at	the	end	of	2008	while	the	payment	of	the	$40.0	million	settlement	occurred	at	the beginning	of	2009.

Cash	flows	from	investing	activities.	Cash	flows	used	in	investing	activities	totaling $418.9	million	in	2010	were	primarily	related	to	capital	expenditures.	Significant	components	of our	property	and	equipment	purchases	in	2010	included	the	following	approximate	amounts: $156	million	for	improvements,	upgrades,	remodels	and	relocations	of	existing	stores;	$100 million	for	new	leased	stores;	$91	million	for	stores	purchased	or	built	by	us;	$45	million	for distribution	and	transportation-related	capital	expenditures;	and	$22	million	for	information systems	upgrades	and	technology-related	projects.	During	2010	we	opened	600	new	stores	and remodeled	or	relocated	504	stores.

Cash	flows	used	in	investing	activities	totaling	$248.0	million	in	2009	were	also primarily	related	to	capital	expenditures.	Significant	components	of	our	property	and	equipment purchases	in	2009	included	the	following	approximate	amounts:	$114	million	for	improvements, upgrades,	remodels	and	relocations	of	existing	stores;	$69	million	for	new	leased	stores;	$28 million	for	distribution	and	transportation-related	capital	expenditures;	$24	million	for	various administrative	capital	costs;	and	$11	million	for	information	systems	upgrades	and	technology- related	projects.	During	2009	we	opened	500	new	stores	and	remodeled	or	relocated	450	stores.

Cash	flows	used	in	investing	activities	totaling	$152.6	million	in	2008	were	primarily related	to	capital	expenditures,	offset	by	sales	of	investments.	Significant	components	of	our property	and	equipment	purchases	in	2008	included	the	following	approximate	amounts:	$149 million	for	improvements,	upgrades,	remodels	and	relocations	of	existing	stores;	$22	million	for new	leased	stores;	$17	million	for	distribution	and	transportation-related	capital	expenditures; and	$13	million	for	information	systems	upgrades	and	technology-related	projects.	During	2008 we	opened	207	new	stores	and	remodeled	or	relocated	404	stores.

Purchases	and	sales	of	short-term	investments	equal	to	net	sales	of	$51.6	million	in	2008 primarily	reflected	investment	activities	in	our	captive	insurance	subsidiary.

Capital	expenditures	during	2011	are	projected	to	be	in	the	range	of	$550-$600	million. We	anticipate	funding	2011	capital	requirements	with	cash	flows	from	operations,	and	if necessary,	we	also	have	significant	availability	under	our	ABL	Facility.	Significant	components of	the	2011	capital	plan	include	growth	initiatives,	such	as	approximately	625	new	stores including	the	purchase	of	existing	stores	and	the	construction	of	new	stores;	costs	related	to	new leased	stores	including	leasehold	improvements,	fixtures	and	equipment;	continued	investment	in our	existing	store	base	with	plans	for	remodeling	and	relocating	approximately	550	stores;	the

construction	of	a	new	distribution	center	in	Alabama;	as	well	as	additional	investments	in	our supply	chain	and	information	technology.	We	plan	to	undertake	these	expenditures	as	part	of	our efforts	to	improve	our	infrastructure	and	increase	our	cash	generated	from	operating	activities.

Cash	flows	from	financing	activities.	During	2010,	we	repurchased	$115.0	million outstanding	principal	amount	of	our	outstanding	Senior	Notes	at	a	total	cost	of	$127.5	million including	associated	premiums.	We	had	no	borrowings	or	repayments	under	the	ABL	Facility	in 2010.

In	2009,	we	had	cash	inflows	from	the	issuance	of	equity	of	$443.8	million	primarily	due to	our	initial	public	offering	of	22.7	million	shares	of	common	stock.	We	used	the	proceeds	from the	offering	to	redeem	outstanding	Notes	with	a	total	principal	amount	of	$400.9	million	at	a premium,	and	used	cash	generated	from	operations	to	repay	$336.5	million	outstanding	principal amount	on	our	Term	Loan	Facility.	We	had	no	borrowings	or	repayments	under	the	ABL	Facility in	2009.	In	addition,	we	paid	a	dividend	and	related	amounts	totaling	$239.7	million	using	cash generated	from	operations.

In	February	2008,	we	repaid	outstanding	borrowings	of	$102.5	million	under	our	ABL Facility,	and	have	had	no	borrowings	outstanding	under	the	ABL	facility	since	that	time.	Also during	2008,	we	repurchased	$44.1	million	principal	amount	of	our	outstanding	Senior Subordinated	Notes.

# Critical	Accounting	Policies	and	Estimates

The	preparation	of	financial	statements	in	accordance	with	U.S.	GAAP	requires management	to	make	estimates	and	assumptions	that	affect	reported	amounts	and	related disclosures.	In	addition	to	the	estimates	presented	below,	there	are	other	items	within	our financial	statements	that	require	estimation,	but	are	not	deemed	critical	as	defined	below.	We believe	these	estimates	are	reasonable	and	appropriate.	However,	if	actual	experience	differs from	the	assumptions	and	other	considerations	used,	the	resulting	changes	could	have	a	material effect	on	the	financial	statements	taken	as	a	whole.

Management	believes	the	following	policies	and	estimates	are	critical	because	they involve	significant	judgments,	assumptions,	and	estimates.	Management	has	discussed	the development	and	selection	of	the	critical	accounting	estimates	with	the	Audit	Committee	of	our Board	of	Directors,	and	the	Audit	Committee	has	reviewed	the	disclosures	presented	below relating	to	those	policies	and	estimates.

Merchandise	Inventories.	Merchandise	inventories	are	stated	at	the	lower	of	cost	or market	with	cost	determined	using	the	retail	last-in,	first-out	("LIFO")	method.	Under	our	retail inventory	method	("RIM"),	the	calculation	of	gross	profit	and	the	resulting	valuation	of inventories	at	cost	are	computed	by	applying	a	calculated	cost-to-retail	inventory	ratio	to	the retail	value	of	sales	at	a	department	level.	The	RIM	is	an	averaging	method	that	has	been	widely used	in	the	retail	industry	due	to	its	practicality.	Also,	it	is	recognized	that	the	use	of	the	RIM will	result	in	valuing	inventories	at	the	lower	of	cost	or	market	("LCM")	if	markdowns	are currently	taken	as	a	reduction	of	the	retail	value	of	inventories.

Inherent	in	the	RIM	calculation	are	certain	significant	management	judgments	and estimates	including,	among	others,	initial	markups,	markdowns,	and	shrinkage,	which significantly	impact	the	gross	profit	calculation	as	well	as	the	ending	inventory	valuation	at	cost. These	significant	estimates,	coupled	with	the	fact	that	the	RIM	is	an	averaging	process,	can, under	certain	circumstances,	produce	distorted	cost	figures.	Factors	that	can	lead	to	distortion	in the	calculation	of	the	inventory	balance	include:

· applying	the	RIM	to	a	group	of	products	that	is	not	fairly	uniform	in	terms	of	its	cost and	selling	price	relationship	and	turnover;

· applying	the	RIM	to	transactions	over	a	period	of	time	that	include	different	rates	of gross	profit,	such	as	those	relating	to	seasonal	merchandise;

· inaccurate	estimates	of	inventory	shrinkage	between	the	date	of	the	last	physical inventory	at	a	store	and	the	financial	statement	date;	and

· inaccurate	estimates	of	LCM	and/or	LIFO	reserves.

Factors	that	reduce	potential	distortion	include	the	use	of	historical	experience	in estimating	the	shrink	provision	(see	discussion	below)	and	an	annual	LIFO	analysis	whereby	all SKUs	are	considered	in	the	index	formulation.	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/deflation	for	the	year and	are	thus	subject	to	adjustment	in	the	final	year-end	LIFO	inventory	valuation.	We	also perform	interim	inventory	analysis	for	determining	obsolete	inventory.	Our	policy	is	to	write down	inventory	to	an	LCM	value	based	on	various	management	assumptions	including	estimated markdowns	and	sales	required	to	liquidate	such	inventory	in	future	periods.	Inventory	is reviewed	on	a	quarterly	basis	and	adjusted	as	appropriate	to	reflect	write-downs	determined	to	be necessary.

Factors	such	as	slower	inventory	turnover	due	to	changes	in	competitors'	practices, consumer	preferences,	consumer	spending	and	unseasonable	weather	patterns,	among	other factors,	could	cause	excess	inventory	requiring	greater	than	estimated	markdowns	to	entice consumer	purchases,	resulting	in	an	unfavorable	impact	on	our	consolidated	financial	statements. Sales	shortfalls	due	to	the	above	factors	could	cause	reduced	purchases	from	vendors	and associated	vendor	allowances	that	would	also	result	in	an	unfavorable	impact	on	our	consolidated financial	statements.

We	calculate	our	shrink	provision	based	on	actual	physical	inventory	results	during	the fiscal	period	and	an	accrual	for	estimated	shrink	occurring	subsequent	to	a	physical	inventory through	the	end	of	the	fiscal	reporting	period.	This	accrual	is	calculated	as	a	percentage	of	sales at	each	retail	store,	at	a	department	level,	and	is	determined	by	dividing	the	book-to-physical inventory	adjustments	recorded	during	the	previous	twelve	months	by	the	related	sales	for	the same	period	for	each	store.	To	the	extent	that	subsequent	physical	inventories	yield	different results	than	this	estimated	accrual,	our	effective	shrink	rate	for	a	given	reporting	period	will

include	the	impact	of	adjusting	the	estimated	results	to	the	actual	results.	Although	we	perform physical	inventories	in	virtually	all	of	our	stores	on	an	annual	basis,	the	same	stores	do	not necessarily	get	counted	in	the	same	reporting	periods	from	year	to	year,	which	could	impact comparability	in	a	given	reporting	period.

We	believe	our	estimates	and	assumptions	related	to	merchandise	inventories	have generally	been	accurate	in	recent	years	and	we	do	not	currently	anticipate	material	changes	in these	estimates	and	assumptions.

Goodwill	and	Other	Intangible	Assets.	We	amortize	intangible	assets	over	their	estimated useful	lives	unless	such	lives	are	deemed	indefinite.	If	impairment	indicators	are	noted, amortizable	intangible	assets	are	tested	for	impairment	based	on	projected	undiscounted	cash flows,	and,	if	impaired,	written	down	to	fair	value	based	on	either	discounted	projected	cash flows	or	appraised	values.	Future	cash	flow	projections	are	based	on	management's	projections. Significant	judgments	required	in	this	testing	process	may	include	projecting	future	cash	flows, determining	appropriate	discount	rates	and	other	assumptions.	Projections	are	based	on management's	best	estimates	given	recent	financial	performance,	market	trends,	strategic	plans and	other	available	information	which	in	recent	years	have	been	materially	accurate.	Although not	currently	anticipated,	changes	in	these	estimates	and	assumptions	could	materially	affect	the determination	of	fair	value	or	impairment.	Future	indicators	of	impairment	could	result	in	an asset	impairment	charge.

Under	accounting	standards	for	goodwill	and	other	intangible	assets,	we	are	required	to test	such	assets	with	indefinite	lives	for	impairment	annually,	or	more	frequently	if	impairment indicators	occur.	The	goodwill	impairment	test	is	a	two-step	process	that	requires	management	to make	judgments	in	determining	what	assumptions	to	use	in	the	calculation.	The	first	step	of	the process	consists	of	estimating	the	fair	value	of	our	reporting	unit	based	on	valuation	techniques (including	a	discounted	cash	flow	model	using	revenue	and	profit	forecasts)	and	comparing	that estimated	fair	value	with	the	recorded	carrying	value,	which	includes	goodwill.	If	the	estimated fair	value	is	less	than	the	carrying	value,	a	second	step	is	performed	to	compute	the	amount	of the	impairment	by	determining	an	"implied	fair	value"	of	goodwill.	The	determination	of	the implied	fair	value	of	goodwill	would	require	us	to	allocate	the	estimated	fair	value	of	our reporting	unit	to	its	assets	and	liabilities.	Any	unallocated	fair	value	represents	the	implied	fair value	of	goodwill,	which	would	be	compared	to	its	corresponding	carrying	value.

The	impairment	test	for	indefinite-lived	intangible	assets	consists	of	a	comparison	of	the fair	value	of	the	intangible	asset	with	its	carrying	amount.	If	the	carrying	amount	of	an	indefinite- lived	intangible	asset	exceeds	its	fair	value,	an	impairment	loss	is	recognized	in	an	amount	equal to	that	excess.

We	performed	our	annual	impairment	tests	of	goodwill	and	indefinite-lived	intangible assets	during	the	third	quarter	of	2010	based	on	conditions	as	of	the	end	of	the	second	quarter	of 2010.	The	tests	indicated	that	no	impairment	charge	was	necessary.	We	are	not	currently projecting	a	decline	in	cash	flows	that	could	be	expected	to	have	an	adverse	effect	such	as	a violation	of	debt	covenants	or	future	impairment	charges.

Property	and	Equipment.	Property	and	equipment	are	recorded	at	cost.	We	group	our assets	into	relatively	homogeneous	classes	and	generally	provide	for	depreciation	on	a	straight- line	basis	over	the	estimated	average	useful	life	of	each	asset	class,	except	for	leasehold improvements,	which	are	amortized	over	the	lesser	of	the	applicable	lease	term	or	the	estimated useful	life	of	the	asset.	Certain	store	and	warehouse	fixtures,	when	fully	depreciated,	are removed	from	the	cost	and	related	accumulated	depreciation	and	amortization	accounts.	The valuation	and	classification	of	these	assets	and	the	assignment	of	depreciable	lives	involves significant	judgments	and	the	use	of	estimates,	which	we	believe	have	been	materially	accurate	in recent	years.

Impairment	of	Long-lived	Assets.	We	review	the	carrying	value	of	all	long-lived	assets for	impairment	at	least	annually,	and	whenever	events	or	changes	in	circumstances	indicate	that the	carrying	value	of	an	asset	may	not	be	recoverable.	In	accordance	with	accounting	standards for	impairment	or	disposal	of	long-lived	assets,	we	review	for	impairment	stores	open	for approximately	two	years	or	more	for	which	recent	cash	flows	from	operations	are	negative. Impairment	results	when	the	carrying	value	of	the	assets	exceeds	the	estimated	undiscounted future	cash	flows	over	the	life	of	the	lease.	Our	estimate	of	undiscounted	future	cash	flows	over the	lease	term	is	based	upon	historical	operations	of	the	stores	and	estimates	of	future	store profitability	which	encompasses	many	factors	that	are	subject	to	variability	and	are	difficult	to predict.	If	a	long-lived	asset	is	found	to	be	impaired,	the	amount	recognized	for	impairment	is equal	to	the	difference	between	the	carrying	value	and	the	asset's	estimated	fair	value.	The	fair value	is	estimated	based	primarily	upon	projected	future	cash	flows	(discounted	at	our	credit adjusted	risk-free	rate)	or	other	reasonable	estimates	of	fair	market	value	in	accordance	with	U.S. GAAP.	During	2010,	2009	and	2008	we	recorded	pre-tax	impairment	charges	of	$1.7	million, $5.0	million	and	$4.0	million,	respectively,	for	certain	store	assets	that	we	deemed	to	be impaired.

Insurance	Liabilities.	We	retain	a	significant	portion	of	the	risk	for	our	workers' compensation,	employee	health,	property	loss,	automobile	and	general	liability.	These	represent significant	costs	primarily	due	to	the	large	employee	base	and	number	of	stores.	Provisions	are made	to	these	liabilities	on	an	undiscounted	basis	based	on	actual	claim	data	and	estimates	of incurred	but	not	reported	claims	developed	using	actuarial	methodologies	based	on	historical claim	trends,	which	have	been	and	are	anticipated	to	continue	to	be	materially	accurate.	If	future claim	trends	deviate	from	recent	historical	patterns,	we	may	be	required	to	record	additional expenses	or	expense	reductions,	which	could	be	material	to	our	future	financial	results.

Contingent	Liabilities	–	Income	Taxes.	Income	tax	reserves	are	determined	using	the methodology	established	by	accounting	standards	relating	to	uncertainty	in	income	taxes.	These standards	require	companies	to	assess	each	income	tax	position	taken	using	a	two	step	process.	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.	Uncertain	tax	positions	require	determinations	and estimated	liabilities	to	be	made	based	on	provisions	of	the	tax	law	which	may	be	subject	to

change	or	varying	interpretation.	If	our	determinations	and	estimates	prove	to	be	inaccurate,	the resulting	adjustments	could	be	material	to	our	future	financial	results.

Contingent	Liabilities	-	Legal	Matters.	We	are	subject	to	legal,	regulatory	and	other proceedings	and	claims.	We	establish	liabilities	as	appropriate	for	these	claims	and	proceedings based	upon	the	probability	and	estimability	of	losses	and	to	fairly	present,	in	conjunction	with	the disclosures	of	these	matters	in	our	financial	statements	and	SEC	filings,	management's	view	of our	exposure.	We	review	outstanding	claims	and	proceedings	with	external	counsel	to	assess probability	and	estimates	of	loss.	We	re-evaluate	these	assessments	on	a	quarterly	basis	or	as	new and	significant	information	becomes	available	to	determine	whether	a	liability	should	be established	or	if	any	existing	liability	should	be	adjusted.	The	actual	cost	of	resolving	a	claim	or proceeding	ultimately	may	be	substantially	different	than	the	amount	of	the	recorded	liability.	In addition,	because	it	is	not	permissible	under	U.S.	GAAP	to	establish	a	litigation	liability	until	the loss	is	both	probable	and	estimable,	in	some	cases	there	may	be	insufficient	time	to	establish	a liability	prior	to	the	actual	incurrence	of	the	loss	(upon	verdict	and	judgment	at	trial,	for	example, or	in	the	case	of	a	quickly	negotiated	settlement).

Lease	Accounting	and	Excess	Facilities.	Many	of	our	stores	are	subject	to	build-to-suit arrangements	with	landlords,	which	typically	carry	a	primary	lease	term	of	10-15	years	with multiple	renewal	options.	We	also	have	stores	subject	to	shorter-term	leases	(usually	with	initial or	current	terms	of	3	to	5	years),	and	many	of	these	leases	have	multiple	renewal	options.	As	of January	28,	2011,	approximately	35%	of	our	stores	had	provisions	for	contingent	rentals	based upon	a	percentage	of	defined	sales	volume.	We	recognize	contingent	rental	expense	when	the achievement	of	specified	sales	targets	is	considered	probable.	We	recognize	rent	expense	over the	term	of	the	lease.	We	record	minimum	rental	expense	on	a	straight-line	basis	over	the	base, non-cancelable	lease	term	commencing	on	the	date	that	we	take	physical	possession	of	the property	from	the	landlord,	which	normally	includes	a	period	prior	to	store	opening	to	make necessary	leasehold	improvements	and	install	store	fixtures.	When	a	lease	contains	a predetermined	fixed	escalation	of	the	minimum	rent,	we	recognize	the	related	rent	expense	on	a straight-line	basis	and	record	the	difference	between	the	recognized	rental	expense	and	the amounts	payable	under	the	lease	as	deferred	rent.	Tenant	allowances,	to	the	extent	received,	are recorded	as	deferred	incentive	rent	and	amortized	as	a	reduction	to	rent	expense	over	the	term	of the	lease.	We	reflect	as	a	liability	any	difference	between	the	calculated	expense	and	the	amounts actually	paid.	Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the applicable	lease	term	or	the	estimated	useful	life	of	the	asset.

For	store	closures	(excluding	those	associated	with	a	business	combination)	where	a	lease obligation	still	exists,	we	record	the	estimated	future	liability	associated	with	the	rental obligation	on	the	date	the	store	is	closed	in	accordance	with	accounting	standards	for	costs associated	with	exit	or	disposal	activities.	Based	on	an	overall	analysis	of	store	performance	and expected	trends,	management	periodically	evaluates	the	need	to	close	underperforming	stores. Liabilities	are	established	at	the	point	of	closure	for	the	present	value	of	any	remaining	operating lease	obligations,	net	of	estimated	sublease	income,	and	at	the	communication	date	for	severance and	other	exit	costs.	Key	assumptions	in	calculating	the	liability	include	the	timeframe	expected to	terminate	lease	agreements,	estimates	related	to	the	sublease	potential	of	closed	locations,	and estimation	of	other	related	exit	costs.	Historically,	these	estimates	have	not	been	materially inaccurate;	however,	if	actual	timing	and	potential	termination	costs	or	realization	of	sublease

income	differ	from	our	estimates,	the	resulting	liabilities	could	vary	from	recorded	amounts. These	liabilities	are	reviewed	periodically	and	adjusted	when	necessary.

Share-Based	Payments.	Our	share-based	stock	option	awards	are	valued	on	an	individual grant	basis	using	the	Black-Scholes-Merton	closed	form	option	pricing	model.	We	believe	that this	model	fairly	estimates	the	value	of	our	share-based	awards.	The	application	of	this	valuation model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	valuation	of	stock options,	which	affects	compensation	expense	related	to	these	options.	These	assumptions	include an	estimate	of	the	fair	value	of	our	common	stock,	the	term	that	the	options	are	expected	to	be outstanding,	an	estimate	of	the	volatility	of	our	stock	price	(which	is	based	on	a	peer	group	of publicly	traded	companies),	applicable	interest	rates	and	the	dividend	yield	of	our	stock.	Our volatility	estimates	are	based	on	a	peer	group	due	to	the	fact	that	our	stock	has	been	publicly traded	for	a	relatively	short	period	of	time	in	relation	to	the	expected	term	of	outstanding	options. Other	factors	involving	judgments	that	affect	the	expensing	of	share-based	payments	include estimated	forfeiture	rates	of	share-based	awards.	Historically,	these	estimates	have	not	been materially	inaccurate;	however,	if	our	estimates	differ	materially	from	actual	experience,	we	may be	required	to	record	additional	expense	or	reductions	of	expense,	which	could	be	material	to	our future	financial	results.

Fair	Value	Measurements.	We	measure	fair	value	of	assets	and	liabilities	in	accordance with	applicable	accounting	standards,	which	require	that	fair	values	be	determined	based	on	the assumptions	that	market	participants	would	use	in	pricing	the	asset	or	liability.	These	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).	Therefore,	Level	3	inputs	are	typically	based	on	an	entity's	own	assumptions,	as	there is	little,	if	any,	related	market	activity,	and	thus	require	the	use	of	significant	judgment	and estimates.	Currently,	we	have	no	assets	or	liabilities	that	are	valued	based	solely	on	Level	3 inputs.

Our	fair	value	measurements	are	primarily	associated	with	our	derivative	financial instruments,	intangible	assets,	property	and	equipment,	and	to	a	lesser	degree	our	investments. The	values	of	our	derivative	financial	instruments	are	determined	using	widely	accepted valuation	techniques,	including	discounted	cash	flow	analysis	on	the	expected	cash	flows	of	each derivative.	This	analysis	reflects	the	contractual	terms	of	the	derivatives,	including	the	period	to maturity,	and	uses	observable	market-based	inputs,	including	interest	rate	curves.	The	fair	values of	interest	rate	swaps	are	determined	using	the	market	standard	methodology	of	netting	the discounted	future	fixed	cash	payments	(or	receipts)	and	the	discounted	expected	variable	cash receipts	(or	payments).	The	variable	cash	receipts	(or	payments)	are	based	on	an	expectation	of future	interest	rates	(forward	curves)	derived	from	observable	market	interest	rate	curves.	In recent	years,	these	methodologies	have	produced	materially	accurate	valuations.

Derivative	Financial	Instruments.	We	account	for	our	derivative	instruments	in accordance	with	accounting	standards	for	derivative	instruments	(including	certain	derivative instruments	embedded	in	other	contracts)	and	hedging	activities,	as	amended	and	interpreted,

which	establish	accounting	and	reporting	requirements	for	such	instruments	and	activities.	These standards	require	that	every	derivative	instrument	be	recorded	in	the	balance	sheet	as	either	an asset	or	liability	measured	at	its	fair	value,	and	that	changes	in	the	derivative's	fair	value	be recognized	currently	in	earnings	unless	specific	hedge	accounting	criteria	are	met.	See	"Fair Value	Measurements"	above	for	a	discussion	of	derivative	valuations.	Special	accounting	for qualifying	hedges	allows	a	derivative's	gains	and	losses	to	either	offset	related	results	on	the hedged	item	in	the	statement	of	operations	or	be	accumulated	in	other	comprehensive	income, and	requires	that	a	company	formally	document,	designate,	and	assess	the	effectiveness	of transactions	that	receive	hedge	accounting.	We	use	derivative	instruments	to	manage	our exposure	to	changing	interest	rates,	primarily	with	interest	rate	swaps.

In	addition	to	making	valuation	estimates,	we	also	bear	the	risk	that	certain	derivative instruments	that	have	been	designated	as	hedges	and	currently	meet	the	strict	hedge	accounting requirements	may	not	qualify	in	the	future	as	"highly	effective,"	as	defined,	as	well	as	the	risk that	hedged	transactions	in	cash	flow	hedging	relationships	may	no	longer	be	considered probable	to	occur.	Further,	new	interpretations	and	guidance	related	to	these	instruments	may	be issued	in	the	future,	and	we	cannot	predict	the	possible	impact	that	such	guidance	may	have	on our	use	of	derivative	instruments	going	forward.

# ITEM	7A. QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT

# MARKET	RISK

# Financial	Risk	Management

We	are	exposed	to	market	risk	primarily	from	adverse	changes	in	interest	rates,	and	to	a lesser	degree	commodity	prices.	To	minimize	this	risk,	we	may	periodically	use	financial instruments,	including	derivatives.	As	a	matter	of	policy,	we	do	not	buy	or	sell	financial instruments	for	speculative	or	trading	purposes	and	all	derivative	financial	instrument transactions	must	be	authorized	and	executed	pursuant	to	approval	by	the	Board	of	Directors.	All financial	instrument	positions	taken	by	us	are	intended	to	be	used	to	reduce	risk	by	hedging	an underlying	economic	exposure.	Because	of	high	correlation	between	the	derivative	financial instrument	and	the	underlying	exposure	being	hedged,	fluctuations	in	the	value	of	the	financial instruments	are	generally	offset	by	reciprocal	changes	in	the	value	of	the	underlying	economic exposure.

# Interest	Rate	Risk

We	manage	our	interest	rate	risk	through	the	strategic	use	of	fixed	and	variable	interest rate	debt	and,	from	time	to	time,	derivative	financial	instruments.	Our	principal	interest	rate exposure	relates	to	outstanding	amounts	under	our	Credit	Facilities.	As	of	January	28,	2011,	our Credit	Facilities	provide	for	variable	rate	borrowings	of	up	to	$2.995	billion	including availability	of	up	to	$1.031	billion	under	our	ABL	Facility,	subject	to	the	borrowing	base.	In order	to	mitigate	a	portion	of	the	variable	rate	interest	exposure	under	the	Credit	Facilities,	we entered	into	certain	interest	rate	swaps	which	became	effective	on	July	31,	2007.	Pursuant	to these	swaps,	we	swapped	three	month	LIBOR	rates	for	fixed	interest	rates,	resulting	in	the payment	of	an	all-in	fixed	rate	of	7.68%	on	an	original	notional	amount	of	$2.0	billion	originally scheduled	to	amortize	on	a	quarterly	basis	until	maturity	at	July	31,	2012.

In	October	2008,	a	counterparty	to	one	of	our	2007	swap	agreements	defaulted.	We terminated	this	agreement	and	in	November	2008	we	subsequently	cash	settled	the	swap. Representatives	of	the	counterparty	have	challenged	our	calculation	of	the	cash	settlement.	See "Legal	Proceedings"	under	Note	9	of	the	footnotes	to	the	consolidated	financial	statements.	As	of January	28,	2011,	the	notional	amount	under	the	remaining	2007	swaps	is	$646.7	million.

Effective	December	31,	2008,	we	entered	into	a	$475.0	million	interest	rate	swap	in	order to	mitigate	an	additional	portion	of	the	variable	rate	interest	exposure	under	the	Credit	Facilities. This	swap	is	scheduled	to	mature	on	January	31,	2013.	Under	the	terms	of	this	agreement	we swapped	one	month	LIBOR	rates	for	fixed	interest	rates,	resulting	in	the	payment	of	a	fixed	rate of	5.06%	on	a	notional	amount	of	$475.0	million	through	April	2010,	$400.0	million	from	May 2010	through	October	2011,	and	$300.0	million	to	maturity.

A	change	in	interest	rates	on	variable	rate	debt	impacts	our	pre-tax	earnings	and	cash flows;	whereas	a	change	in	interest	rates	on	fixed	rate	debt	impacts	the	economic	fair	value	of debt	but	not	our	pre-tax	earnings	and	cash	flows.	Our	interest	rate	swaps	qualify	for	hedge accounting	as	cash	flow	hedges.	Therefore,	changes	in	market	fluctuations	related	to	the

effective	portion	of	these	cash	flow	hedges	do	not	impact	our	pre-tax	earnings	until	the	accrued interest	is	recognized	on	the	derivatives	and	the	associated	hedged	debt.	Based	on	our	variable rate	borrowing	levels	and	interest	rate	swaps	outstanding	during	2010	and	2009,	the	annualized effect	of	a	one	percentage	point	change	in	variable	interest	rates	would	have	resulted	in	a	pretax reduction	of	our	earnings	and	cash	flows	of	approximately	$9.3	million	in	2010	and	$5.6	million in	2009.

The	conditions	and	uncertainties	in	the	global	credit	markets	have	increased	the	credit risk	of	other	counterparties	to	our	swap	agreements.	In	the	event	such	counterparties	fail	to perform	under	our	swap	agreements	and	we	are	unable	to	enter	into	new	swap	agreements	on terms	favorable	to	us,	our	ability	to	effectively	manage	our	interest	rate	risk	may	be	materially impaired.	We	attempt	to	manage	counterparty	credit	risk	by	periodically	evaluating	the	financial position	and	creditworthiness	of	such	counterparties,	monitoring	the	amount	for	which	we	are	at risk	with	each	counterparty,	and	where	possible,	dispersing	the	risk	among	multiple counterparties.	There	can	be	no	assurance	that	we	will	manage	or	mitigate	our	counterparty	credit risk	effectively.

# ITEM	8. FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

# Report	of	Independent	Registered	Public	Accounting	Firm

# The	Board	of	Directors	and	Shareholders	of

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Dollar	General Corporation	and	subsidiaries	as	of	January	28,	2011	and	January	29,	2010,	and	the	related consolidated	statements	of	income,	shareholders'	equity,	and	cash	flows	for	the	years	ended January	28,	2011,	January	29,	2010	and	January	30,	2009.	These	financial	statements	are	the responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on these	financial	statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and	perform the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of material	misstatement.	An	audit	includes	examining,	on	a	test	basis,	evidence	supporting	the amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes,	assessing	the accounting	principles	used	and	significant	estimates	made	by	management,	as	well	as	evaluating the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis for	our	opinion.

In	our	opinion,	the	financial	statements	referred	to	above	present	fairly,	in	all	material respects,	the	consolidated	financial	position	of	Dollar	General	Corporation	and	subsidiaries	at January	28,	2011	and	January	29,	2010,	and	the	consolidated	results	of	their	operations	and	their cash	flows	for	the	years	ended	January	28,	2011,	January	29,	2010	and	January	30,	2009,	in conformity	with	U.S.	generally	accepted	accounting	principles.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company Accounting	Oversight	Board	(United	States),	Dollar	General	Corporation's	internal	control	over financial	reporting	as	of	January	28,	2011,	based	on	criteria	established	in	Internal	Control- Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	and	our	report	dated	March	22,	2011	expressed	an	unqualified	opinion	thereon.

# /s/	Ernst	&	Young	LLP

Nashville,	Tennessee

# DOLLAR	GENERAL	CORPORATION	AND	SUBSIDIARIES

# CONSOLIDATED	BALANCE	SHEETS

# (In	thousands,	except	per	share	amounts)

|  | January	28,<br>2011 | January	29,<br>2010 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $497,446 | $222,076 |
| Merchandise\tinventories | 1,765,433 | 1,519,578 |
| Income\ttaxes\treceivable | - | 7,543 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 104,946 | 96,252 |
| Total\tcurrent\tassets | 2,367,825 | 1,845,449 |
| Net\tproperty\tand\tequipment | 1,524,575 | 1,328,386 |
| Goodwill | 4,338,589 | 4,338,589 |
| Intangible\tassets,\tnet | 1,256,922 | 1,284,283 |
| Other\tassets,\tnet | 58,311 | 66,812 |
| Total\tassets | $9,546,222 | $8,863,519 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Current\tportion\tof\tlong-term\tobligations | $1,157 | $3,671 |
| Accounts\tpayable | 953,641 | 830,953 |
| Accrued\texpenses\tand\tother | 347,741 | 342,290 |
| Income\ttaxes\tpayable | 25,980 | 4,525 |
| Deferred\tincome\ttaxes\tpayable | 36,854 | 25,061 |
| Total\tcurrent\tliabilities | 1,365,373 | 1,206,500 |
| Long-term\tobligations | 3,287,070 | 3,399,715 |
| Deferred\tincome\ttaxes\tpayable | 598,565 | 546,172 |
| Other\tliabilities | 231,582 | 302,348 |
| Commitments\tand\tcontingencies |  |  |
| Redeemable\tcommon\tstock | 9,153 | 18,486 |
| Shareholders'\tequity: |  |  |
| Preferred\tstock,\t1,000\tshares\tauthorized | - | - |
| Common\tstock;\t$0.875\tpar\tvalue,\t1,000,000\tshares\tauthorized,\t341,507 |  |  |
| and\t340,586\tshares\tissued\tand\toutstanding\tat |  |  |
| January\t28,\t2011\tand\tJanuary\t29,\t2010,\trespectively | 298,819 | 298,013 |
| Additional\tpaid-in\tcapital | 2,945,024 | 2,923,377 |
| Retained\tearnings | 830,932 | 203,075 |
| Accumulated\tother\tcomprehensive\tloss | (20,296) | (34,167) |
| Total\tshareholders'\tequity | 4,054,479 | 3,390,298 |
| Total\tliabilities\tand\tshareholders'\tequity | $9,546,222 | $8,863,519 |

# The	accompanying	notes	are	an	integral	part	of	the	consolidated	financial	statements.

# CONSOLIDATED	STATEMENTS	OF	INCOME

|  | January	28,<br>2011 | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- | :--- |
| Net\tsales | $13,035,000 | $11,796,380 | $10,457,668 |
| Cost\tof\tgoods\tsold | 8,858,444 | 8,106,509 | 7,396,571 |
| Gross\tprofit | 4,176,556 | 3,689,871 | 3,061,097 |
| Selling,\tgeneral\tand\tadministrative\texpenses | 2,902,491 | 2,736,613 | 2,448,611 |
| Litigation\tsettlement\tand\trelated\tcosts,\tnet | - | - | 32,000 |
| Operating\tprofit | 1,274,065 | 953,258 | 580,486 |
| Interest\tincome | (220) | (144) | (3,061) |
| Interest\texpense | 274,212 | 345,744 | 391,932 |
| Other\t(income)\texpense | 15,101 | 55,542 | (2,788) |
| Income\tbefore\tincome\ttaxes | 984,972 | 552,116 | 194,403 |
| Income\ttax\texpense | 357,115 | 212,674 | 86,221 |
| Net\tincome | $627,857 | $339,442 | $108,182 |
| Earnings\tper\tshare: |  |  |  |
| Basic | $1.84 | $1.05 | $0.34 |
| Diluted | $1.82 | $1.04 | $0.34 |
| Weighted\taverage\tshares: |  |  |  |
| Basic | 341,047 | 322,778 | 317,024 |
| Diluted | 344,800 | 324,836 | 317,503 |

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  |  |  |  | Retained | Accumulated |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Common |  | Additional | Earnings | Other |  |
|  | Stock | Common | Paid-in | (Accumulated | Comprehensive |  |
|  | Shares | Stock | Capital | Deficit) | Loss | Total |
| Balances,\tFebruary\t1,\t2008 | 317,418 | $277,741 | $2,480,062 | $(4,818) | $(49,112) | $2,703,873 |
| Comprehensive\tincome: |  |  |  |  |  |  |
| Net\tincome | - | - | - | 108,182 | - | 108,182 |
| Unrealized\tnet\tgain\ton\thedged\ttransactions,\tnet |  |  |  |  |  |  |
| of\tincome\ttax\texpense\tof\t$4,518 | - | - | - | - | 9,682 | 9,682 |
| Comprehensive\tincome |  |  |  |  |  | 117,864 |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive |  |  |  |  |  |  |
| plans | 484 | 423 | (423) | - | - | - |
| Repurchases\tof\tcommon\tstock | (57) | (50) | 50 | - | - | - |
| Share-based\tcompensation\texpense | - | - | 9,958 | - | - | 9,958 |
| Balances,\tJanuary\t30,\t2009 | 317,845 | $278,114 | $2,489,647 | $103,364 | $(39,430) | $2,831,695 |
| Comprehensive\tincome: |  |  |  |  |  |  |
| Net\tincome | - | - | - | 339,442 | - | 339,442 |
| Unrealized\tnet\tgain\ton\thedged\ttransactions,\tnet |  |  |  |  |  |  |
| of\tincome\ttax\texpense\tof\t$2,553 | - | - | - | - | 5,263 | 5,263 |
| Comprehensive\tincome |  |  |  |  |  | 344,705 |
| Issuance\tof\tcommon\tstock | 22,700 | 19,863 | 421,299 | - | - | 441,162 |
| Cash\tdividends,\t$0.7525\tper\tcommon\tshare,\tand |  |  |  |  |  |  |
| related\tamounts | - | - | - | (239,731) | - | (239,731) |
| Share-based\tcompensation\texpense | - | - | 15,009 | - | - | 15,009 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | - | - | 3,072 | - | - | 3,072 |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive |  |  |  |  |  |  |
| plans | 304 | 266 | 2,020 | - | - | 2,286 |
| Equity\tsettlements\tunder\tstock\tincentive\tplans | (263) | (230) | (7,670) | - | - | (7,900) |
| Balances,\tJanuary\t29,\t2010 | 340,586 | $298,013 | $2,923,377 | $203,075 | $(34,167) | $3,390,298 |
| Comprehensive\tincome: |  |  |  |  |  |  |
| Net\tincome | - | - | - | 627,857 | - | 627,857 |
| Unrealized\tnet\tgain\ton\thedged\ttransactions,\tnet\tof |  |  |  |  |  |  |
| income\ttax\texpense\tof\t$9,406 | - | - | - | - | 13,871 | 13,871 |
| Comprehensive\tincome |  |  |  |  |  | 641,728 |
| Share-based\tcompensation\texpense | - | - | 12,805 | - | - | 12,805 |
| Tax\tbenefit\tfrom\tstock\toption\texercises | - | - | 10,110 | - | - | 10,110 |
| Issuance\tof\tcommon\tstock\tunder\tstock\tincentive |  |  |  |  |  |  |
| plans | 93 | 82 | 1,943 | - | - | 2,025 |
| Exercise\tof\tstock\toptions | 872 | 763 | (8,399) | - | - | (7,636) |
| Other\tequity\tsettlements\tunder\tstock\tincentive |  |  |  |  |  |  |
| plans | (44) | (39) | 5,188 | - | - | 5,149 |
| Balances,\tJanuary\t28,\t2011 | 341,507 | $298,819 | $2,945,024 | $830,932 | $(20,296) | $4,054,479 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

# (In	thousands)

|  | January	28,<br>2011 | January	29,<br>2010 | January	30,<br>2009 |
| :--- | :--- | :--- | :--- |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |
| Net\tincome | $627,857 | $339,442 | $108,182 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby |  |  |  |
| operating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 254,927 | 256,771 | 247,899 |
| Deferred\tincome\ttaxes | 50,985 | 14,860 | 73,434 |
| Tax\tbenefit\tof\tstock\toptions | (13,905) | (5,390) | (950) |
| Loss\t(gain)\ton\tdebt\tretirement | 14,576 | 55,265 | (3,818) |
| Noncash\tshare-based\tcompensation | 15,956 | 17,295 | 9,958 |
| Noncash\tinventory\tadjustments\tand\tasset\timpairments | 7,607 | 647 | 50,671 |
| Other\tnoncash\tgains\tand\tlosses | 5,942 | 7,920 | 6,252 |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |
| Merchandise\tinventories | (251,809) | (100,248) | (173,014) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | (10,157) | (7,298) | (598) |
| Accounts\tpayable | 123,424 | 106,049 | 140,356 |
| Accrued\texpenses\tand\tother\tliabilities | (42,428) | (12,643) | 68,736 |
| Income\ttaxes | 42,903 | 1,153 | 33,986 |
| Other | (1,194) | (1,000) | 14,084 |
| Net\tcash\tprovided\tby\toperating\tactivities | 824,684 | 672,823 | 575,178 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (420,395) | (250,747) | (205,546) |
| Purchases\tof\tshort-term\tinvestments | - | - | (9,903) |
| Sales\tof\tshort-term\tinvestments | - | - | 61,547 |
| Sales\tof\tproperty\tand\tequipment | 1,448 | 2,701 | 1,266 |
| Net\tcash\tused\tin\tinvesting\tactivities | (418,947) | (248,046) | (152,636) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |
| Issuance\tof\tcommon\tstock | 631 | 443,753 | 4,228 |
| Repayments\tunder\trevolving\tcredit\tfacility | - | - | (102,500) |
| Issuance\tof\tlong-term\tobligations | - | 1,080 | - |
| Repayments\tof\tlong-term\tobligations | (131,180) | (785,260) | (44,425) |
| Payment\tof\tcash\tdividends\tand\trelated\tamounts | - | (239,731) | - |
| Repurchases\tof\tcommon\tstock\tand\tsettlement\tof\tequity\tawards, |  |  |  |
| net\tof\temployee\ttaxes\tpaid | (13,723) | (5,928) | (3,009) |
| Tax\tbenefit\tof\tstock\toptions | 13,905 | 5,390 | 950 |
| Net\tcash\tused\tin\tfinancing\tactivities | (130,367) | (580,696) | (144,756) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash\tequivalents | 275,370 | (155,919) | 277,786 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 222,076 | 377,995 | 100,209 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $497,446 | $222,076 | $377,995 |

| Interest | $244,752 | $328,433 | $377,022 |
| :--- | :--- | :--- | :--- |
| Income\ttaxes | 314,123 | 187,983 | 7,091 |
| Supplemental\tschedule\tof\tnoncash\tinvesting\tand\tfinancing |  |  |  |
| activities: |  |  |  |
| Purchases\tof\tproperty\tand\tequipment\tawaiting\tprocessing\tfor |  |  |  |
| payment,\tincluded\tin\tAccounts\tpayable | $29,658 | $30,393 | $7,474 |
| Purchases\tof\tproperty\tand\tequipment\tunder\tcapital\tlease |  |  |  |
| obligations | - | 50 | 3,806 |
| Expiration\tof\tequity\trepurchase\trights | - | - | 2,548 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1. Basis	of	presentation	and	accounting	policies

# Basis	of	presentation

These	notes	contain	references	to	the	years	2010,	2009	and	2008,	which	represent	fiscal years	ended	January	28,	2011,	January	29,	2010	and	January	30,	2009,	respectively,	each	of which	were	52-week	accounting	periods.	The	Company's	fiscal	year	ends	on	the	Friday	closest to	January	31.	The	consolidated	financial	statements	include	all	subsidiaries	of	the	Company, except	for	its	not-for-profit	subsidiary	which	the	Company	does	not	control.	Intercompany transactions	have	been	eliminated.

# Business	description

The	Company	sells	general	merchandise	on	a	retail	basis	through	9,372	stores	(as	of January	28,	2011)	in	35	states	covering	most	of	the	southern,	southwestern,	midwestern	and eastern	United	States.	The	Company	has	distribution	centers	("DCs")	in	Scottsville,	Kentucky; Ardmore,	Oklahoma;	South	Boston,	Virginia;	Indianola,	Mississippi;	Fulton,	Missouri;	Alachua, Florida;	Zanesville,	Ohio;	Jonesville,	South	Carolina	and	Marion,	Indiana.

The	Company	purchases	its	merchandise	from	a	wide	variety	of	suppliers.	Approximately 9%	and	7%	of	the	Company's	purchases	in	2010	were	made	from	the	Company's	largest	and second	largest	suppliers,	respectively.

# Cash	and	cash	equivalents

Cash	and	cash	equivalents	include	highly	liquid	investments	with	insignificant	interest rate	risk	and	original	maturities	of	three	months	or	less	when	purchased.	Such	investments primarily	consist	of	money	market	funds,	bank	deposits,	certificates	of	deposit	(which	may include	foreign	time	deposits),	and	commercial	paper.	The	carrying	amounts	of	these	items	are	a reasonable	estimate	of	their	fair	value	due	to	the	short	maturity	of	these	investments.

Payments	due	from	processors	for	electronic	tender	transactions	classified	as	cash	and cash	equivalents	totaled	approximately	$26.1	million	and	$23.2	million	at	January	28,	2011	and January	29,	2010,	respectively.

The	Company's	cash	management	system	provides	for	daily	investment	of	available balances	and	the	funding	of	outstanding	checks	when	presented	for	payment.	Outstanding	but unpresented	checks	totaling	approximately	$153.6	million	and	$159.6	million	at	January	28, 2011	and	January	29,	2010,	respectively,	have	been	included	in	Accounts	payable	in	the consolidated	balance	sheets.	Upon	presentation	for	payment,	these	checks	are	funded	through available	cash	balances	or	the	Company's	credit	facilities.

At	January	28,	2011,	the	Company	maintained	cash	balances	to	meet	a	$20	million minimum	threshold	set	by	insurance	regulators,	as	further	described	below	under	"Insurance liabilities."

# Investments	in	debt	and	equity	securities

The	Company	accounts	for	its	investments	in	debt	and	marketable	equity	securities	as held-to-maturity,	available-for-sale,	or	trading,	depending	on	their	classification.	Debt	securities categorized	as	held-to-maturity	are	stated	at	amortized	cost.	Debt	and	equity	securities categorized	as	available-for-sale	are	stated	at	fair	value,	with	any	unrealized	gains	and	losses,	net of	deferred	income	taxes,	reported	as	a	component	of	Accumulated	other	comprehensive	loss. Trading	securities	(primarily	mutual	funds	held	pursuant	to	deferred	compensation	and supplemental	retirement	plans,	as	further	discussed	in	Note	10)	are	stated	at	fair	value,	with changes	in	fair	value	recorded	as	a	component	of	Selling,	general	and	administrative	("SG&A") expense.

As	of	January	28,	2011	and	January	29,	2010,	the	Company	had	investments	in	trading securities	of	$8.3	million	and	$8.8	million,	respectively,	$2.2	million	and	$1.6	million	of	which were	classified	as	Prepaid	expenses	and	other	current	assets,	respectively,	and	$6.1	million	and $7.2	million	of	which	were	classified	as	Other	assets,	net,	respectively,	in	the	consolidated balance	sheets.	Historical	cost	information	pertaining	to	these	investments	in	mutual	funds	by participants	in	the	Company's	supplemental	retirement	and	compensation	deferral	plans	is	not readily	available	to	the	Company.

During	2008,	the	Company's	South	Carolina-based	wholly	owned	captive	insurance subsidiary,	Ashley	River	Insurance	Company	("ARIC"),	had	investments	in	various	debt securities.	These	investments	were	held	pursuant	to	South	Carolina	regulatory	requirements	to maintain	certain	asset	balances	related	to	ARIC's	liability	and	equity	balances,	which	could	have limited	the	Company's	ability	to	use	these	assets	for	general	corporate	purposes.	In	May	2008, the	state	of	South	Carolina	made	certain	changes	to	these	regulations,	which	in	turn	changed	the Company's	investment	requirements.	As	a	result,	the	Company	reclassified	certain	investments held	by	ARIC	from	held-to-maturity	to	available-for-sale,	and	ARIC	subsequently	liquidated certain	investments	totaling	$48.6	million	during	2008.

For	the	years	ended	January	28,	2011,	January	29,	2010	and	January	30,	2009,	gross realized	gains	and	losses	on	the	sales	of	available-for-sale	securities	were	not	material.	The	cost of	securities	sold	is	based	upon	the	specific	identification	method.

# Merchandise	inventories

Inventories	are	stated	at	the	lower	of	cost	or	market	with	cost	determined	using	the	retail last-in,	first-out	("LIFO")	method	as	this	method	results	in	a	better	matching	of	costs	and revenues.	Under	the	Company's	retail	inventory	method	("RIM"),	the	calculation	of	gross	profit and	the	resulting	valuation	of	inventories	at	cost	are	computed	by	applying	a	calculated	cost-to- retail	inventory	ratio	to	the	retail	value	of	sales	at	a	department	level.	Costs	directly	associated with	warehousing	and	distribution	are	capitalized	into	inventory.	The	excess	of	current	cost	over LIFO	cost	was	approximately	$52.8	million	and	$47.5	million	at	January	28,	2011	and	January

29,	2010,	respectively.	Current	cost	is	determined	using	the	RIM	on	a	first-in,	first-out	basis. Under	the	LIFO	inventory	method,	the	impacts	of	rising	or	falling	market	price	changes	increase or	decrease	cost	of	sales	(the	LIFO	provision	or	benefit).	The	Company	recorded	a	LIFO provision	of	$5.3	million	in	2010,	a	LIFO	benefit	of	$2.5	million	in	2009,	and	a	LIFO	provision of	$43.9	million	in	2008.

The	2008	LIFO	provision	was	impacted	by	increased	commodity	costs	related	to	food and	pet	products	which	were	driven	by	fruit	and	vegetable	prices	and	rising	freight	costs.	In addition,	increases	in	petroleum,	resin,	metals,	pulp	and	other	raw	material	commodity	costs	also resulted	in	multiple	product	cost	increases.	These	trends	generally	stabilized	or	reversed	in	2009 and	2010.

# Vendor	rebates

The	Company	accounts	for	all	cash	consideration	received	from	vendors	in	accordance with	applicable	accounting	standards	pertaining	to	such	arrangements.	Cash	consideration received	from	a	vendor	is	generally	presumed	to	be	a	rebate	or	an	allowance	and	is	accounted	for as	a	reduction	of	merchandise	purchase	costs	as	earned.	However,	certain	specific,	incremental and	otherwise	qualifying	SG&A	expenses	related	to	the	promotion	or	sale	of	vendor	products may	be	offset	by	cash	consideration	received	from	vendors,	in	accordance	with	arrangements such	as	cooperative	advertising,	when	earned	for	dollar	amounts	up	to	but	not	exceeding	actual incremental	costs.	The	Company	recognizes	amounts	received	for	cooperative	advertising	on performance,	"first	showing"	or	distribution,	consistent	with	its	policy	for	advertising	expense	in accordance	with	applicable	accounting	standards	for	reporting	on	advertising	costs.

# Prepaid	expenses	and	other	current	assets

Prepaid	expenses	and	other	current	assets	include	prepaid	amounts	for	rent,	maintenance, advertising,	and	insurance,	as	well	as	amounts	receivable	for	certain	vendor	rebates	(primarily those	expected	to	be	collected	in	cash),	coupons,	and	other	items.

# Property	and	equipment

Property	and	equipment	are	recorded	at	cost.	The	Company	provides	for	depreciation	and amortization	on	a	straight-line	basis	over	the	following	estimated	useful	lives:

| Land	improvements | 20 |
| :--- | :--- |
| Buildings | 39-40 |
| Furniture,\tfixtures\tand\tequipment | 3-10 |

Improvements	of	leased	properties	are	amortized	over	the	shorter	of	the	life	of	the applicable	lease	term	or	the	estimated	useful	life	of	the	asset.

# Impairment	of	long-lived	assets

When	indicators	of	impairment	are	present,	the	Company	evaluates	the	carrying	value	of long-lived	assets,	other	than	goodwill,	in	relation	to	the	operating	performance	and	future	cash

flows	or	the	appraised	values	of	the	underlying	assets.	In	accordance	with	accounting	standards for	long-lived	assets,	the	Company	reviews	for	impairment	stores	open	more	than	two	years	for which	current	cash	flows	from	operations	are	negative.	Impairment	results	when	the	carrying value	of	the	assets	exceeds	the	undiscounted	future	cash	flows	over	the	life	of	the	lease.	The Company's	estimate	of	undiscounted	future	cash	flows	over	the	lease	term	is	based	upon historical	operations	of	the	stores	and	estimates	of	future	store	profitability	which	encompasses many	factors	that	are	subject	to	variability	and	difficult	to	predict.	If	a	long-lived	asset	is	found to	be	impaired,	the	amount	recognized	for	impairment	is	equal	to	the	difference	between	the carrying	value	and	the	asset's	estimated	fair	value.	The	fair	value	is	estimated	based	primarily upon	estimated	future	cash	flows	(discounted	at	the	Company's	credit	adjusted	risk-free	rate)	or other	reasonable	estimates	of	fair	market	value.	Assets	to	be	disposed	of	are	adjusted	to	the	fair value	less	the	cost	to	sell	if	less	than	the	book	value.

The	Company	recorded	impairment	charges	included	in	SG&A	expense	of	approximately $1.7	million	in	2010,	$5.0	million	in	2009	and	$4.0	million	in	2008,	to	reduce	the	carrying	value of	certain	of	its	stores'	assets.	Such	action	was	deemed	necessary	based	on	the	Company's evaluation	that	such	amounts	would	not	be	recoverable	primarily	due	to	insufficient	sales	or excessive	costs	resulting	in	negative	current	and	projected	future	cash	flows	at	these	locations.

# Capitalized	interest

To	assure	that	interest	costs	properly	reflect	only	that	portion	relating	to	current operations,	interest	on	borrowed	funds	during	the	construction	of	property	and	equipment	is capitalized	where	applicable.	No	interest	costs	were	capitalized	in	2010,	2009	or	2008.

# Goodwill	and	other	intangible	assets

The	Company	amortizes	intangible	assets	over	their	estimated	useful	lives	unless	such lives	are	deemed	indefinite.	Amortizable	intangible	assets	are	tested	for	impairment	when indicators	of	impairment	are	present,	based	on	undiscounted	cash	flows,	and	if	impaired,	written down	to	fair	value	based	on	either	discounted	cash	flows	or	appraised	values.

Goodwill	and	intangible	assets	with	indefinite	lives	are	tested	for	impairment	annually	or more	frequently	if	indicators	of	impairment	are	present	and	written	down	to	fair	value	as required.	No	impairment	of	intangible	assets	has	been	identified	during	any	of	the	periods presented.

The	goodwill	impairment	test	is	a	two-step	process	that	requires	management	to	make judgments	in	determining	what	assumptions	to	use	in	the	calculation.	The	first	step	of	the	process consists	of	estimating	the	fair	value	of	the	Company's	reporting	unit	based	on	valuation techniques	(including	a	discounted	cash	flow	model	using	revenue	and	profit	forecasts)	and comparing	that	estimated	fair	value	with	the	recorded	carrying	value,	which	includes	goodwill.	If the	estimated	fair	value	is	less	than	the	carrying	value,	a	second	step	is	performed	to	compute	the amount	of	the	impairment	by	determining	an	"implied	fair	value"	of	goodwill.	The	determination of	the	implied	fair	value	of	goodwill	would	require	the	Company	to	allocate	the	estimated	fair value	of	its	reporting	unit	to	its	assets	and	liabilities.	Any	unallocated	fair	value	would	represent the	implied	fair	value	of	goodwill,	which	would	be	compared	to	its	corresponding	carrying	value.

# Other	assets

Non-current	Other	assets	consist	primarily	of	qualifying	prepaid	expenses,	debt	issuance costs	which	are	amortized	over	the	life	of	the	related	obligations,	and	utility	and	security deposits.

# Accrued	expenses	and	other	liabilities

Accrued	expenses	and	other	consist	of	the	following:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (In\tthousands) | 2011 | 2010 |
| Compensation\tand\tbenefits | $81,786 | $100,843 |
| Insurance | 76,372 | 65,408 |
| Taxes\t(other\tthan\ttaxes\ton\tincome) | 74,900 | 72,902 |
| Other | 114,683 | 103,137 |
|  | $347,741 | $342,290 |

Other	accrued	expenses	primarily	include	the	current	portion	of	liabilities	for	legal settlements,	freight	expense,	contingent	rent	expense,	interest,	utilities,	common	area	and	other maintenance	charges,	and	income	tax	related	reserves.

# Insurance	liabilities

The	Company	retains	a	significant	portion	of	risk	for	its	workers'	compensation, employee	health,	general	liability,	property	and	automobile	claim	exposures.	Accordingly, provisions	are	made	for	the	Company's	estimates	of	such	risks.	The	undiscounted	future	claim costs	for	the	workers'	compensation,	general	liability,	and	health	claim	risks	are	derived	using actuarial	methods.	To	the	extent	that	subsequent	claim	costs	vary	from	those	estimates,	future results	of	operations	will	be	affected.	Ashley	River	Insurance	Company	(or	ARIC,	as	defined above),	a	South	Carolina-based	wholly	owned	captive	insurance	subsidiary	of	the	Company, charges	the	operating	subsidiary	companies	premiums	to	insure	the	retained	workers' compensation	and	non-property	general	liability	exposures.	Pursuant	to	South	Carolina	insurance regulations,	ARIC	is	required	to	maintain	certain	levels	of	cash	and	cash	equivalents	related	to	its self	insured	exposures.	ARIC	currently	insures	no	unrelated	third-party	risk.

As	a	result	of	the	Merger	discussed	in	Note	3,	the	Company	recorded	its	assumed	self- insurance	reserves	as	of	the	Merger	date	at	their	present	value	in	accordance	with	applicable accounting	standards	for	business	combinations,	using	a	discount	rate	of	5.4%.	The	balance	of the	resulting	discount	was	$4.8	million	and	$7.4	million	at	January	28,	2011	and	January	29, 2010,	respectively.	Other	than	for	reserves	assumed	in	a	business	combination,	the	Company's policy	is	to	record	self-insurance	reserves	on	an	undiscounted	basis.

# Operating	leases	and	related	liabilities

Rent	expense	is	recognized	over	the	term	of	the	lease.	The	Company	records	minimum rental	expense	on	a	straight-line	basis	over	the	base,	non-cancelable	lease	term	commencing	on the	date	that	the	Company	takes	physical	possession	of	the	property	from	the	landlord,	which

normally	includes	a	period	prior	to	the	store	opening	to	make	necessary	leasehold	improvements and	install	store	fixtures.	When	a	lease	contains	a	predetermined	fixed	escalation	of	the	minimum rent,	the	Company	recognizes	the	related	rent	expense	on	a	straight-line	basis	and	records	the difference	between	the	recognized	rental	expense	and	the	amounts	payable	under	the	lease	as deferred	rent.	Tenant	allowances,	to	the	extent	received,	are	recorded	as	deferred	incentive	rent and	are	amortized	as	a	reduction	to	rent	expense	over	the	term	of	the	lease.	Any	difference between	the	calculated	expense	and	the	amounts	actually	paid	are	reflected	as	a	liability,	with	the current	portion	in	Accrued	expenses	and	other	and	the	long-term	portion	in	Other	liabilities	in	the consolidated	balance	sheets,	and	totaled	approximately	$23.2	million	and	$14.5	million	at January	28,	2011	and	January	29,	2010,	respectively.

The	Company	recognizes	contingent	rental	expense	when	the	achievement	of	specified sales	targets	are	considered	probable,	in	accordance	with	applicable	accounting	standards	for contingent	rent.	The	amount	expensed	but	not	paid	as	of	January	28,	2011	and	January	29,	2010 was	approximately	$9.2	million	and	$10.8	million,	respectively,	and	is	included	in	Accrued expenses	and	other	in	the	consolidated	balance	sheets	(See	Note	9).

In	the	normal	course	of	business,	based	on	an	overall	analysis	of	store	performance	and expected	trends,	management	periodically	evaluates	the	need	to	close	underperforming	stores. Generally,	for	store	closures	where	a	lease	obligation	still	exists,	the	Company	records	the estimated	future	liability	associated	with	the	rental	obligation	on	the	date	the	store	is	closed	in accordance	with	applicable	accounting	standards	for	costs	associated	with	exit	or	disposal activities.	Key	assumptions	in	calculating	the	liability	include	the	timeframe	expected	to terminate	lease	agreements,	estimates	related	to	the	sublease	potential	of	closed	locations,	and estimation	of	other	related	exit	costs.	Liabilities	are	reviewed	periodically	and	adjusted	when necessary.	The	current	portion	of	the	closed	store	rent	liability	is	reflected	in	Accrued	expenses and	other	and	the	long-term	portion	in	Other	liabilities	in	the	consolidated	balance	sheets,	and totaled	approximately	$7.0	million	and	$7.6	million	at	January	28,	2011	and	January	29,	2010, respectively.

# Other	liabilities

Non-current	Other	liabilities	consist	of	the	following:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (In\tthousands) | 2011 | 2010 |
| Compensation\tand\tbenefits | $14,531 | $12,441 |
| Insurance | 131,912 | 140,633 |
| Income\ttax\trelated\treserves | 27,255 | 68,021 |
| Derivatives | 34,923 | 57,058 |
| Other | 22,961 | 24,195 |
|  | $231,582 | $302,348 |

Amounts	reflected	as	"other"	in	the	table	above	consist	primarily	of	deferred	rent,	lease contract	termination	liabilities	for	closed	stores,	and	rebate	obligations.

The	Company	utilizes	accounting	standards	for	fair	value,	which	include	the	definition	of fair	value,	the	framework	for	measuring	fair	value,	and	disclosures	about	fair	value measurements.	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).

Level	1	inputs	utilize	quoted	prices	(unadjusted)	in	active	markets	for	identical	assets	or liabilities	that	the	Company	has	the	ability	to	access.	Level	2	inputs	are	inputs	other	than	quoted prices	included	in	Level	1	that	are	directly	or	indirectly	observable	for	the	asset	or	liability.	Level 2	inputs	may	include	quoted	prices	for	similar	assets	and	liabilities	in	active	markets,	as	well	as inputs	that	are	observable	for	the	asset	or	liability	(other	than	quoted	prices),	such	as	interest rates,	foreign	exchange	rates,	and	yield	curves	that	are	observable	at	commonly	quoted	intervals. Level	3	inputs	are	unobservable	inputs	for	the	asset	or	liability,	which	are	based	on	an	entity's own	assumptions,	as	there	is	little,	if	any,	related	market	activity.	In	instances	where	the determination	of	the	fair	value	measurement	is	based	on	inputs	from	different	levels	of	the	fair value	hierarchy,	the	level	in	the	fair	value	hierarchy	within	which	the	entire	fair	value measurement	falls	is	based	on	the	lowest	level	input	that	is	significant	to	the	fair	value measurement	in	its	entirety.	The	Company's	assessment	of	the	significance	of	a	particular	input to	the	fair	value	measurement	in	its	entirety	requires	judgment	and	considers	factors	specific	to the	asset	or	liability.

The	valuation	of	the	Company's	derivative	financial	instruments	is	determined	using widely	accepted	valuation	techniques,	including	discounted	cash	flow	analysis	on	the	expected cash	flows	of	each	derivative.	This	analysis	reflects	the	contractual	terms	of	the	derivatives, including	the	period	to	maturity,	and	uses	observable	market-based	inputs,	including	interest	rate curves.	The	fair	values	of	interest	rate	swaps	are	determined	using	the	market	standard methodology	of	netting	the	discounted	future	fixed	cash	payments	(or	receipts)	and	the discounted	expected	variable	cash	receipts	(or	payments).	The	variable	cash	receipts	(or payments)	are	based	on	an	expectation	of	future	interest	rates	(forward	curves)	derived	from observable	market	interest	rate	curves.

The	Company	incorporates	credit	valuation	adjustments	(CVAs)	to	appropriately	reflect both	its	own	nonperformance	risk	and	the	respective	counterparty's	nonperformance	risk	in	the fair	value	measurements.	In	adjusting	the	fair	value	of	its	derivative	contracts	for	the	effect	of nonperformance	risk,	the	Company	has	considered	the	impact	of	netting	and	any	applicable credit	enhancements,	such	as	collateral	postings,	thresholds,	mutual	puts,	and	guarantees.

The	Company	has	determined	that	the	majority	of	the	inputs	used	to	value	its	derivatives fall	within	Level	2	of	the	fair	value	hierarchy.	However,	the	CVAs	associated	with	its	derivatives

utilize	Level	3	inputs,	such	as	estimates	of	current	credit	spreads	to	evaluate	the	likelihood	of default	by	itself	and	its	counterparties.	As	of	January	28,	2011,	the	Company	has	assessed	the significance	of	the	impact	of	the	CVAs	on	the	overall	valuation	of	its	derivative	positions	and has	determined	that	the	CVAs	are	not	significant	to	the	overall	valuation	of	its	derivatives.	Based on	the	Company's	review	of	the	CVAs	by	counterparty	portfolio,	the	Company	has	determined that	the	CVAs	are	not	significant	to	the	overall	portfolio	valuations,	as	the	CVAs	are	deemed	to be	immaterial	in	terms	of	basis	points	and	are	a	very	small	percentage	of	the	aggregate	notional value.	Although	some	of	the	CVAs	as	a	percentage	of	termination	value	appear	to	be	more significant,	primary	emphasis	was	placed	on	a	review	of	the	CVA	in	basis	points	and	the percentage	of	the	notional	value.	As	a	result,	the	Company	has	determined	that	its	derivative valuations	in	their	entirety	are	classified	in	Level	2	of	the	fair	value	hierarchy.

The	following	table	presents	the	Company's	assets	and	liabilities	measured	at	fair	value on	a	recurring	basis	as	of	January	28,	2011,	aggregated	by	the	level	in	the	fair	value	hierarchy within	which	those	measurements	fall.

|  | Quoted	Prices |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | in\tActive |  |  |  |
|  | Markets | Significant |  |  |
|  | for\tIdentical | Other | Significant |  |
|  | Assets\tand | Observable | Unobservable | Balance\tat |
|  | Liabilities | Inputs | Inputs | January\t28, |
| (In\tthousands) | (Level\t1) | (Level\t2) | (Level\t3) | 2011 |
| Assets: |  |  |  |  |
| Trading\tsecurities\t(a) | $8,289 | $- | $- | $8,289 |
| Liabilities: |  |  |  |  |
| Long-term\tobligations\t(b) | 3,450,812 | 20,858 | - | 3,471,670 |
| Derivative\tfinancial\tinstruments\t(c) | - | 34,923 | - | 34,923 |
| Deferred\tcompensation\t(d) | 16,710 | - | - | 16,710 |

(b) Reflected	at	book	value	in	the	consolidated	balance	sheet	as	Current	portion	of	long-term	obligations	of	$1,157	and Long-term	obligations	of	$3,287,070.

(c) Reflected	at	fair	value	in	the	consolidated	balance	sheet	as	noncurrent	Other	liabilities.

(d) Reflected	at	fair	value	in	the	condensed	consolidated	balance	sheet	as	Accrued	expenses	and	other	current	liabilities of	$2,179	and	non-current	Other	liabilities	of	$14,531.

The	carrying	amounts	reflected	in	the	consolidated	balance	sheets	for	cash,	cash equivalents,	short-term	investments,	receivables	and	payables	approximate	their	respective	fair values.	The	Company	does	not	have	any	fair	value	measurements	using	significant	unobservable inputs	(Level	3)	as	of	January	28,	2011.

# Derivative	financial	instruments

The	Company	accounts	for	derivative	financial	instruments	in	accordance	with accounting	standards	for	derivative	instruments	and	hedging	activities.	All	financial	instrument positions	taken	by	the	Company	are	intended	to	be	used	to	reduce	risk	by	hedging	an	underlying economic	exposure.

The	Company	records	all	derivatives	on	the	balance	sheet	at	fair	value.	The	accounting for	changes	in	the	fair	value	of	derivatives	depends	on	the	intended	use	of	the	derivative,	whether the	Company	has	elected	to	designate	a	derivative	in	a	hedging	relationship	and	apply	hedge accounting	and	whether	the	hedging	relationship	has	satisfied	the	criteria	necessary	to	apply hedge	accounting.	Derivatives	designated	and	qualifying	as	a	hedge	of	the	exposure	to	changes	in the	fair	value	of	an	asset,	liability,	or	firm	commitment	attributable	to	a	particular	risk,	such	as interest	rate	risk,	are	considered	fair	value	hedges.	Derivatives	designated	and	qualifying	as	a hedge	of	the	exposure	to	variability	in	expected	future	cash	flows,	or	other	types	of	forecasted transactions,	are	considered	cash	flow	hedges.	Derivatives	may	also	be	designated	as	hedges	of the	foreign	currency	exposure	of	a	net	investment	in	a	foreign	operation.	Hedge	accounting generally	provides	for	the	matching	of	the	timing	of	gain	or	loss	recognition	on	the	hedging instrument	with	the	recognition	of	the	changes	in	the	fair	value	of	the	hedged	asset	or	liability that	are	attributable	to	the	hedged	risk	in	a	fair	value	hedge	or	the	earnings	effect	of	the	hedged forecasted	transactions	in	a	cash	flow	hedge.	The	Company	may	enter	into	derivative	contracts that	are	intended	to	economically	hedge	a	certain	portion	of	its	risk,	even	though	hedge accounting	does	not	apply	or	the	Company	elects	not	to	apply	the	hedge	accounting	standards.

The	Company's	derivative	financial	instruments,	in	the	form	of	interest	rate	swaps	at January	28,	2011,	are	related	to	variable	interest	rate	risk	exposures	associated	with	the Company's	long-term	debt	and	were	entered	into	in	an	effort	to	manage	that	risk.	The counterparties	to	the	Company's	derivative	agreements	are	all	major	international	financial institutions.	The	Company	continually	monitors	its	position	and	the	credit	ratings	of	its counterparties	and	does	not	anticipate	nonperformance	by	the	counterparties;	however,	there	can be	no	assurance	that	such	nonperformance	will	not	occur.

# Revenue	and	gain	recognition

The	Company	recognizes	retail	sales	in	its	stores	at	the	time	the	customer	takes possession	of	merchandise.	All	sales	are	net	of	discounts	and	estimated	returns	and	are	presented net	of	taxes	assessed	by	governmental	authorities	that	are	imposed	concurrent	with	those	sales. The	liability	for	retail	merchandise	returns	is	based	on	the	Company's	prior	experience.	The Company	records	gain	contingencies	when	realized.

The	Company	recognizes	gift	card	sales	revenue	at	the	time	of	redemption.	The	liability for	the	gift	cards	is	established	for	the	cash	value	at	the	time	of	purchase.	The	liability	for outstanding	gift	cards	was	approximately	$2.4	million	and	$1.9	million	at	January	28,	2011	and January	29,	2010,	respectively,	and	is	recorded	in	Accrued	expenses	and	other	liabilities. Through	January	28,	2011,	the	Company	has	not	recorded	any	breakage	income	related	to	its	gift card	program.

# Advertising	costs

Advertising	costs	are	expensed	upon	performance,	"first	showing"	or	distribution,	and are	reflected	net	of	qualifying	cooperative	advertising	funds	provided	by	vendors	in	SG&A expenses.	Advertising	costs	were	$46.9	million,	$41.5	million	and	$27.8	million	in	2010,	2009 and	2008,	respectively.	These	costs	primarily	include	promotional	circulars,	targeted	circulars supporting	new	stores,	television	and	radio	advertising,	in-store	signage,	and	costs	associated

with	the	sponsorships	of	certain	automobile	racing	activities.	Vendor	funding	for	cooperative advertising	offset	reported	expenses	by	$14.2	million,	$9.0	million	and	$7.8	million	in	2010, 2009	and	2008,	respectively.

# Share-based	payments

The	Company	recognizes	compensation	expense	for	share-based	compensation	based	on the	fair	value	of	the	awards	on	the	grant	date.	Forfeitures	are	estimated	at	the	time	of	valuation and	reduce	expense	ratably	over	the	vesting	period.	This	estimate	is	adjusted	periodically	based on	the	extent	to	which	actual	forfeitures	differ,	or	are	expected	to	differ,	from	the	prior	estimate. The	forfeiture	rate	is	the	estimated	percentage	of	options	granted	that	are	expected	to	be	forfeited or	canceled	before	becoming	fully	vested.	The	Company	bases	this	estimate	on	historical experience	or	estimates	of	future	trends,	as	applicable.	An	increase	in	the	forfeiture	rate	will decrease	compensation	expense.

The	fair	value	of	each	option	grant	is	separately	estimated	and	amortized	into compensation	expense	on	a	straight-line	basis	between	the	applicable	grant	date	and	each	vesting date.	The	Company	has	estimated	the	fair	value	of	all	stock	option	awards	as	of	the	grant	date	by applying	the	Black-Scholes-Merton	option	pricing	valuation	model.	The	application	of	this valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the determination	of	compensation	expense.

The	Company	calculates	compensation	expense	for	nonvested	restricted	stock	and	similar awards	as	the	difference	between	the	market	price	of	the	underlying	stock	on	the	grant	date	and the	purchase	price,	if	any,	and	recognizes	such	amount	on	a	straight-line	basis	over	the	period	in which	the	recipient	earns	the	nonvested	restricted	stock	and	similar	awards.

# Store	pre-opening	costs

Pre-opening	costs	related	to	new	store	openings	and	the	related	construction	periods	are expensed	as	incurred.

# 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.	Deferred	income	tax expense	or	benefit	is	the	net	change	during	the	year	in	the	Company's	deferred	income	tax	assets and	liabilities.

The	Company	includes	income	tax	related	interest	and	penalties	as	a	component	of	the provision	for	income	tax	expense.

Income	tax	reserves	are	determined	using	a	methodology	which	requires	companies	to assess	each	income	tax	position	taken	using	a	two	step	process.	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.	Uncertain	tax	positions	require	determinations	and	estimated	liabilities	to	be	made based	on	provisions	of	the	tax	law	which	may	be	subject	to	change	or	varying	interpretation.	If the	Company's	determinations	and	estimates	prove	to	be	inaccurate,	the	resulting	adjustments could	be	material	to	the	Company's	future	financial	results.

# Management	estimates

The	preparation	of	financial	statements	and	related	disclosures	in	conformity	with accounting	principles	generally	accepted	in	the	United	States	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	consolidated	financial	statements	and	the reported	amounts	of	revenues	and	expenses	during	the	reporting	periods.	Actual	results	could differ	from	those	estimates.

# Accounting	standards

In	June	2009	the	FASB	issued	a	new	accounting	standard	relating	to	variable	interest entities.	This	standard	amends	previous	standards	and	requires	an	enterprise	to	perform	an analysis	to	determine	whether	the	enterprise's	variable	interest	or	interests	give	it	a	controlling financial	interest	in	a	variable	interest	entity,	specifies	updated	criteria	for	determining	the primary	beneficiary,	requires	ongoing	reassessments	of	whether	an	enterprise	is	the	primary beneficiary	of	a	variable	interest	entity,	eliminates	the	quantitative	approach	previously	required for	determining	the	primary	beneficiary	of	a	variable	interest	entity,	amends	certain	guidance	for determining	whether	an	entity	is	a	variable	interest	entity,	requires	enhanced	disclosures	about	an enterprise's	involvement	in	a	variable	interest	entity,	among	other	provisions.	This	standard	was effective	as	of	the	beginning	of	the	Company's	2010	reporting	periods.	The	adoption	of	this standard	did	not	have	a	material	effect	on	the	Company's	consolidated	financial	statements.

# Reclassifications

Certain	reclassifications	of	the	2008	and	2009	amounts	have	been	made	to	conform	to	the 2010	presentation.

# 2. Initial	public	offering	and	special	dividend

On	November	18,	2009,	the	Company	completed	the	initial	public	offering	of	its common	stock.	The	Company	issued	22,700,000	shares	in	the	offering,	and	an	existing shareholder	sold	an	additional	16,515,000	outstanding	shares.	Net	proceeds	to	the	Company from	the	offering	of	$446.0	million	were	used	to	redeem	outstanding	debt,	as	discussed	in	more detail	in	Note	7	below.	The	Company	paid	a	$4.8	million	transaction	fee	to	Kohlberg	Kravis Roberts	&	Co.,	L.P.	("KKR")	and	Goldman,	Sachs	&	Co.	in	connection	with	the	offering. Although	this	transaction	fee	was	not	paid	from	the	net	proceeds	of	the	offering,	it	was	directly related	to	the	offering	and	accounted	for	as	a	cost	of	raising	equity.

Upon	the	completion	of	the	offering,	the	Company	incurred	additional	charges	of	$58.8 million	for	fees	paid	to	terminate	its	advisory	agreement	with	KKR	and	Goldman,	Sachs	&	Co. The	transaction	and	termination	fees	paid	to	such	parties	are	discussed	in	more	detail	in	Note	12 below.	The	Company	also	incurred	charges	of	$9.4	million	for	the	accelerated	vesting	of	certain share-based	awards	as	discussed	in	more	detail	in	Note	11	below.

On	September	8,	2009,	the	Company's	Board	of	Directors	declared	a	special	dividend	on the	Company's	outstanding	common	stock	(including	shares	of	restricted	stock)	of	$0.7525	per share,	or	approximately	$239.3	million	in	the	aggregate,	which	was	paid	on	September	11,	2009 to	shareholders	of	record	on	September	8,	2009.	The	special	dividend	was	paid	with	cash generated	from	operations.	Pursuant	to	the	terms	of	the	Company's	stock	option	plans,	holders	of stock	options	received	either	a	pro-rata	adjustment	to	the	terms	of	their	share-based	awards	or	a cash	payment	(totaling	approximately	$0.5	million	for	all	such	grantees)	in	substitution	for	such adjustment	as	a	result	of	the	dividend.

# 3. Merger

On	July	6,	2007,	the	Company	consummated	a	merger	transaction	(the	"Merger"),	and	as a	result,	the	Company	is	a	subsidiary	of	an	entity	controlled	by	investment	funds	affiliated	with KKR.	The	aggregate	purchase	price	was	approximately	$7.1	billion,	including	direct	costs	of	the Merger,	and	was	funded	primarily	through	debt	financings	as	described	more	fully	below	in	Note 7	and	cash	equity	contributions	from	KKR,	GS	Capital	Partners	VI	Fund,	L.P.	and	affiliated funds	(affiliates	of	Goldman,	Sachs	&	Co.),	and	other	equity	co-investors	(collectively,	the "Investors").

The	Merger	was	accounted	for	as	a	reverse	acquisition	in	accordance	with	applicable purchase	accounting	provisions.	Because	of	this	accounting	treatment,	the	Company's	assets	and liabilities	were	properly	accounted	for	at	their	estimated	fair	values	as	of	the	Merger	date.	The purchase	price	allocation	included	approximately	$4.34	billion	of	goodwill,	none	of	which	is expected	to	be	deductible	for	tax	purposes.

The	purchase	price	allocation	as	of	the	Merger	date	also	included	approximately	$1.4 billion	of	other	intangible	assets.	As	of	January	28,	2011	and	January	29,	2010,	these	balances were	as	follows:

|  | Estimated |  | Accumulated |  |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Useful\tLife | Amount | Amortization | Net |
| Leasehold\tinterests | 2\tto\t17.5\tyears | $141,180 | $83,458 | $57,722 |
| Trade\tnames\tand\ttrademarks | Indefinite | 1,199,200 | - | 1,199,200 |
|  |  | $1,340,380 | $83,458 | $1,256,922 |

|  |  |  | As	of	January	29,	2010 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Estimated |  | Accumulated |  |
| (In\tthousands) | Useful\tLife | Amount | Amortization | Net |
| Leasehold\tinterests | 2\tto\t17.5\tyears | $184,168 | $100,793 | $83,375 |
| Internally\tdeveloped\tsoftware | 3\tyears | 12,300 | 10,592 | 1,708 |
|  |  | 196,468 | 111,385 | 85,083 |
| Trade\tnames\tand\ttrademarks | Indefinite | 1,199,200 | - | 1,199,200 |
|  |  | $1,395,668 | $111,385 | $1,284,283 |

The	Company	recorded	amortization	expense	related	to	amortizable	intangible	assets	for 2010,	2009	and	2008	of	$27.4	million,	$41.3	million	and	$45.0	million,	respectively,	($25.7 million,	$37.2	million	and	$40.9	million,	respectively,	of	which	is	included	in	rent	expense). Expected	future	cash	flows	associated	with	the	Company's	intangible	assets	are	not	expected	to be	materially	affected	by	the	Company's	intent	or	ability	to	renew	or	extend	the	arrangements.

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

|  | Net | Weighted	Average | Per	Share |
| :--- | :--- | :--- | :--- |
|  | Income | Shares | Amount |
| Basic\tearnings\tper\tshare | $627,857 | 341,047 | $1.84 |
| Effect\tof\tdilutive\tshare-based\tawards |  | 3,753 |  |
| Diluted\tearnings\tper\tshare | $627,857 | 344,800 | $1.82 |

|  |  | 2009 |  |
| :--- | :--- | :--- | :--- |
|  | Net | Weighted\tAverage | Per\tShare |
|  | Income | Shares | Amount |
| Basic\tearnings\tper\tshare | $339,442 | 322,778 | $1.05 |
| Effect\tof\tdilutive\tshare-based\tawards |  | 2,058 |  |
| Diluted\tearnings\tper\tshare | $339,442 | 324,836 | $1.04 |

|  |  | 2008 |  |
| :--- | :--- | :--- | :--- |
|  | Net | Weighted\tAverage | Per\tShare |
|  | Income | Shares | Amount |
| Basic\tearnings\tper\tshare | $108,182 | 317,024 | $0.34 |
| Effect\tof\tdilutive\tshare-based\tawards |  | 479 |  |
| Diluted\tearnings\tper\tshare | $108,182 | 317,503 | $0.34 |

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

Options	to	purchase	shares	of	common	stock	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	options	would	be	antidilutive,	were	0.4	million,	0.2	million and	12.1	million	in	2010,	2009	and	2008,	respectively.

Property	and	equipment	is	recorded	at	cost	and	summarized	as	follows:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (In\tthousands) | 2011 | 2010 |
| Land\tand\tland\timprovements | $174,439 | $137,903 |
| Buildings | 575,305 | 520,867 |
| Leasehold\timprovements | 173,836 | 130,774 |
| Furniture,\tfixtures\tand\tequipment | 1,235,756 | 992,423 |
| Construction\tin\tprogress | 17,933 | 10,406 |
|  | 2,177,269 | 1,792,373 |
| Less\taccumulated\tdepreciation\tand\tamortization | 652,694 | 463,987 |
| Net\tproperty\tand\tequipment | $1,524,575 | $1,328,386 |

Depreciation	expense	related	to	property	and	equipment	was	approximately	$215.7 million,	$201.1	million	and	$190.5	million	for	2010,	2009	and	2008.	Amortization	of	capital lease	assets	is	included	in	depreciation	expense.

The	provision	(benefit)	for	income	taxes	consists	of	the	following:

| (In	thousands) | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Current: |  |  |  |
| Federal | $273,005 | $173,027 | $10,489 |
| Foreign | 1,269 | 1,465 | 1,084 |
| State | 28,062 | 21,002 | 1,214 |
|  | 302,336 | 195,494 | 12,787 |
| Deferred: |  |  |  |
| Federal | 42,024 | 12,412 | 64,403 |
| Foreign | - | (49) | (3) |
| State | 12,755 | 4,817 | 9,034 |
|  | 54,779 | 17,180 | 73,434 |
|  | $357,115 | $212,674 | $86,221 |

A	reconciliation	between	actual	income	taxes	and	amounts	computed	by	applying	the federal	statutory	rate	to	income	before	income	taxes	is	summarized	as	follows:

| (Dollars	in	thousands) | 2010 | 2010 | 2009 | 2009 | 2008 | 2008 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| U.S.\tfederal\tstatutory\trate\ton\tearnings |  |  |  |  |  |  |
| before\tincome\ttaxes | $\t344,740 | 35.0\t% | $\t193,241 | 35.0\t% | $68,041 | 35.0\t% |
| State\tincome\ttaxes,\tnet\tof\tfederal |  |  |  |  |  |  |
| income\ttax\tbenefit | \t\t\t26,877 | 2.7 | \t\t18,375 | 3.3 | 5,361 | 2.8 |
| Jobs\tcredits,\tnet\tof\tfederal\tincome |  |  |  |  |  |  |
| taxes | \t\t\t(8,845) | (0.9) | \t\t(8,590) | (1.6) | (9,149) | (4.7) |
| Increase\t(decrease)\tin\tvaluation |  |  |  |  |  |  |
| allowances | \t\t\t(1,003) | (0.1) | \t\t(1,722) | (0.3) | 3,038 | 1.6 |
| Income\ttax\trelated\tinterest\texpense |  |  |  |  |  |  |
| (benefit),\tnet\tof\tfederal\tincome\ttaxes | \t\t\t(5,004) | (0.5) | \t\t\t\t1,289 | 0.2 | (2,015) | (1.0) |
| Nondeductible\tMerger-related\tlawsuit |  |  |  |  |  |  |
| settlement | \t\t\t\t\t\t\t\t\t- | - | \t\t\t\t\t(366) | (0.1) | 18,130 | 9.3 |
| Other,\tnet | \t\t\t\t\t\t\t350 | 0.1 | \t\t10,447 | 2.0 | 2,815 | 1.4 |
|  | $357,115 | 36.3\t% | $212,674 | 38.5\t% | $86,221 | 44.4\t% |

The	2010	effective	tax	rate	is	an	expense	of	36.3%.	This	expense	is	greater	than	the expected	tax	rate	of	35%	due	primarily	to	the	inclusion	of	state	income	taxes	in	the	total	effective tax	rate.	The	2010	effective	rate	is	less	than	the	2009	rate	of	38.5%	due	principally	to	reductions in	state	income	tax	expense,	income	tax	related	interest	expense	and	other	expense	items.	The 2010	effective	resolution	of	various	examinations	by	the	taxing	authorities,	when	combined	with unfavorable	examination	results	in	2009,	resulted	in	a	decrease	in	the	year-to-year	state	income tax	expense	rate	(net	of	federal	income	tax	expense)	of	approximately	1.8%.	This	decrease	in state	income	tax	expense	was	partially	offset	by	an	increase	in	state	income	tax	expense	due	to	a shift	in	income	to	companies	within	the	group	that	have	a	higher	effective	state	income	tax	rate. In	addition,	income	tax	related	interest	accruals	and	income	tax	related	penalty	accruals	(with	the penalty	accruals	being	included	in	Other,	net)	were	also	reduced	due	to	favorable	income	tax examination	results,	thereby	resulting	in	a	decrease	in	income	tax	related	interest	expense	and	a decrease	in	Other	income	tax	expense.	Additional	decreases	in	Other,	net	items	occurred	due	to favorable	outcomes	in	2010	associated	with	the	completion	of	a	federal	income	tax	examination and	reductions	in	expense	associated	with	uncertain	tax	benefit	accruals.

The	2009	effective	tax	rate	is	an	expense	of	38.5%.	This	expense	is	greater	than	the expected	tax	rate	of	35%	due	primarily	to	the	inclusion	of	state	income	taxes	in	the	total	effective tax	rate.	The	2009	effective	tax	rate	is	less	than	the	2008	rate	of	44.4%	due	principally	to	the unfavorable	impact	that	the	non-deductible,	Merger-related	lawsuit	settlement	had	on	the	2008 rate.	This	reduction	in	the	effective	tax	rate	was	partially	offset	by	a	decrease	in	the	tax	rate benefit	related	to	federal	jobs	credits.	While	the	total	amount	of	jobs	credits	earned	in	2009	was similar	to	the	amount	earned	in	2008,	the	impact	of	this	benefit	on	the	effective	tax	rate	was reduced	due	to	the	2009	increase	in	income	before	tax.	The	2009	rate	was	also	increased	by accruals	associated	with	uncertain	tax	benefits,	which	are	included	in	Other,	net.

The	2008	effective	income	tax	rate	is	an	expense	of	44.4%.	This	expense	is	greater	than the	expected	U.S.	statutory	tax	rate	of	35%	principally	due	to	the	non-deductibility	of	the settlement	and	related	expenses	associated	with	the	Merger-related	shareholder	lawsuit.

Deferred	taxes	reflect	the	effects	of	temporary	differences	between	carrying	amounts	of assets	and	liabilities	for	financial	reporting	purposes	and	the	amounts	used	for	income	tax purposes.	Significant	components	of	the	Company's	deferred	tax	assets	and	liabilities	are	as follows:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (In\tthousands) | 2011 | 2010 |
| Deferred\ttax\tassets: |  |  |
| Deferred\tcompensation\texpense | $6,653 | $7,214 |
| Accrued\texpenses\tand\tother | 4,798 | 4,223 |
| Accrued\trent | 8,581 | 5,329 |
| Accrued\tinsurance | 67,634 | 67,124 |
| Accrued\tbonuses | 20,116 | 26,112 |
| Interest\trate\thedges | 13,650 | 22,249 |
| Tax\tbenefit\tof\tincome\ttax\tand\tinterest\treserves\trelated\tto |  |  |
| uncertain\ttax\tpositions | 2,520 | 9,498 |
| Other | 16,321 | 15,399 |
| State\ttax\tnet\toperating\tloss\tcarryforwards,\tnet\tof\tfederal\ttax | 4,697 | 7,000 |
| State\ttax\tcredit\tcarryforwards,\tnet\tof\tfederal\ttax | 12,511 | 15,696 |
|  | 157,481 | 179,844 |
| Less\tvaluation\tallowances | (7,083) | (8,086) |
| Total\tdeferred\ttax\tassets | 150,398 | 171,758 |
| Deferred\ttax\tliabilities: |  |  |
| Property\tand\tequipment | (222,757) | (177,171) |
| Inventories | (68,314) | (66,002) |
| Trademarks | (435,543) | (435,336) |
| Amortizable\tassets | (21,288) | (31,724) |
| Insurance\trelated\ttax\tmethod\tchange | (14,844) | (30,059) |
| Bonus\trelated\ttax\tmethod\tchange | (19,520) | - |
| Other | (3,551) | (2,699) |
| Total\tdeferred\ttax\tliabilities | (785,817) | (742,991) |
| Net\tdeferred\ttax\tliabilities | $(635,419) | $(571,233) |

Net	deferred	tax	liabilities	are	reflected	separately	on	the	consolidated	balance	sheets	as current	and	noncurrent	deferred	income	taxes.	The	following	table	summarizes	net	deferred	tax liabilities	as	recorded	in	the	consolidated	balance	sheets:

|  | January	28, | January	29, |
| :--- | :--- | :--- |
| (In\tthousands) | 2011 | 2010 |
| Current\tdeferred\tincome\ttax\tliabilities,\tnet | $(36,854) | $(25,061) |
| Noncurrent\tdeferred\tincome\ttax\tliabilities,\tnet | (598,565) | (546,172) |
| Net\tdeferred\ttax\tliabilities | $(635,419) | $(571,233) |

The	Company	has	state	net	operating	loss	carryforwards	as	of	January	28,	2011	that	total approximately	$136.7	million	which	will	expire	in	2022	through	2029.	The	Company	also	has state	tax	credit	carryforwards	of	approximately	$19.2	million	that	will	expire	beginning	in	2011 through	2025.

The	valuation	allowance	has	been	provided	for	state	tax	credit	carryforwards	and	federal capital	losses.	The	2010	and	2009	decreases	of	$1.0	and	$1.7	million,	respectively,	were	recorded as	a	reduction	in	income	tax	expense.	The	2008	increase	of	$8.2	million	was	recorded

as	income	tax	expense	of	$3.0	million	and	an	adjustment	to	goodwill	of	$5.2	million.	Based	upon expected	future	income,	management	believes	that	it	is	more	likely	than	not	that	the	results	of operations	will	generate	sufficient	taxable	income	to	realize	the	deferred	tax	assets	after	giving consideration	to	the	valuation	allowance.

The	Internal	Revenue	Service	("IRS")	is	examining	the	Company's	federal	income	tax returns	for	fiscal	years	2006,	2007	and	2008.	The	2005	and	earlier	years	are	not	open	for examination.	The	2009	and	2010	fiscal	years,	while	not	currently	under	examination,	are	subject to	examination	at	the	discretion	of	the	IRS.	The	Company	has	various	state	income	tax examinations	that	are	currently	in	progress.	The	estimated	liability	related	to	these	state	income tax	examinations	is	included	in	the	Company's	reserve	for	uncertain	tax	positions.	Generally,	the Company's	tax	years	ended	in	2007	and	forward	remain	open	for	examination	by	the	various state	taxing	authorities.

As	of	January	28,	2011,	accruals	for	uncertain	tax	benefits,	interest	expense	related	to income	taxes	and	potential	income	tax	penalties	were	$26.4	million,	$1.9	million	and	$0.5 million,	respectively,	for	a	total	of	$28.8	million.	Of	this	amount,	$0.2	million	and	$27.3	million are	reflected	in	current	liabilities	as	Accrued	expenses	and	other	and	in	noncurrent	Other liabilities,	respectively,	in	the	consolidated	balance	sheet	with	the	remaining	$1.3	million reducing	deferred	tax	assets	related	to	net	operating	loss	carry	forwards.

As	of	January	29,	2010,	accruals	for	uncertain	tax	benefits,	interest	expense	related	to income	taxes	and	potential	income	tax	penalties	were	$67.6	million,	$8.8	million	and	$1.7 million,	respectively,	for	a	total	of	$78.1	million.	Of	this	amount,	$8.5	million	and	$68.0	million are	reflected	in	current	liabilities	as	Accrued	expenses	and	other	and	in	noncurrent	Other liabilities,	respectively,	in	the	consolidated	balance	sheet	with	the	remaining	$1.6	million reducing	deferred	tax	assets	related	to	net	operating	loss	carry	forwards.

The	Company	believes	that	it	is	reasonably	possible	that	the	reserve	for	uncertain	tax positions	may	be	reduced	by	approximately	$1.4	million	in	the	coming	twelve	months principally	as	a	result	of	the	settlement	of	currently	ongoing	income	tax	examinations.	The reasonably	possible	change	of	$1.4	million	is	included	in	current	liabilities	in	Accrued	expenses and	other	($0.2	million)	and	in	noncurrent	Other	liabilities	($1.2	million)	in	the	consolidated balance	sheet	as	of	January	28,	2011.	Also,	as	of	January	28,	2011,	approximately	$26.4	million of	the	uncertain	tax	positions	would	impact	the	Company's	effective	income	tax	rate	if	the Company	were	to	recognize	the	tax	benefit	for	these	positions.

The	consolidated	statements	of	income	for	the	respective	years	reflected	below	include the	following	amounts:

| (In	thousands) | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\t(benefit) | $(12,000) | $11,900 | $800 |
| Income\ttax\trelated\tinterest\texpense\t(benefit) | (5,800) | 2,300 | (1,000) |
| Income\ttax\trelated\tpenalty\texpense\t(benefit) | (700) | 400 | 300 |

A	reconciliation	of	the	uncertain	income	tax	positions	from	February	1,	2008	through January	28,	2011	is	as	follows:

| (In	thousands) | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Beginning\tbalance | $67,636 | $59,057 | $96,600 |
| Increases\t–\ttax\tpositions\ttaken\tin\tthe\tcurrent\tyear | 125 | 13,701 | 25,977 |
| Decreases\t–\ttax\tpositions\ttaken\tin\tthe\tcurrent\tyear | - | - | (2,250) |
| Increases\t–\ttax\tpositions\ttaken\tin\tprior\tyears | - | 4,039 | 3,271 |
| Decreases\t–\ttax\tpositions\ttaken\tin\tprior\tyears | (36,973) | (1,111) | (58,607) |
| Statute\texpirations | (1,570) | - | (1,955) |
| Settlements | (2,789) | (8,050) | (3,979) |
| Ending\tbalance | $26,429 | $67,636 | $59,057 |

# 7. Current	and	long-term	obligations

Current	and	long-term	obligations	consist	of	the	following:

| (In	thousands) | January	28,	2011 | January	29,	2010 |
| :--- | :--- | :--- |
| Senior\tsecured\tterm\tloan\tfacility | $1,963,500 | $1,963,500 |
| ABL\tFacility | - | - |
| 10\t5/8%\tSenior\tNotes\tdue\tJuly\t15,\t2015,\tnet\tof\tdiscount\tof |  |  |
| $11,161\tand\t$14,788,\trespectively | 853,172 | 964,545 |
| 11\t7/8/12\t5/8%\tSenior\tSubordinated\tNotes\tdue\tJuly\t15,\t2017 | 450,697 | 450,697 |
| 8\t5/8%\tNotes\tdue\tJune\t15,\t2010 | - | 1,822 |
| Capital\tlease\tobligations | 6,363 | 8,327 |
| Tax\tincrement\tfinancing\tdue\tFebruary\t1,\t2035 | 14,495 | 14,495 |
|  | 3,288,227 | 3,403,386 |
| Less:\tcurrent\tportion | (1,157) | (3,671) |
| Long-term\tportion | $3,287,070 | $3,399,715 |

The	Company	entered	into	two	senior	secured	credit	agreements	(the	"Credit	Facilities") at	the	time	of	the	Merger.	As	of	January	28,	2011,	the	Credit	Facilities	provide	total	financing	of $2.995	billion,	consisting	of	$1.964	billion	in	a	senior	secured	term	loan	facility	("Term	Loan Facility")	which	matures	on	July	6,	2014,	and	a	senior	secured	asset-based	revolving	credit facility	("ABL	Facility")	of	up	to	$1.031	billion,	subject	to	borrowing	base	availability,	which matures	on	July	6,	2013.

The	amount	available	under	the	ABL	Facility	(including	up	to	$350.0	million	for	letters of	credit)	may	not	exceed	the	borrowing	base	(consisting	of	specified	percentages	of	eligible inventory	and	credit	card	receivables	less	any	applicable	availability	reserves).	The	ABL	Facility includes	a	$930.0	million	tranche	and	a	$101.0	million	("last	out")	tranche.	Repayments	of	the ABL	Facility	will	be	applied	to	the	$101.0	million	tranche	only	after	all	other	tranches	have	been fully	paid	down.

Borrowings	under	the	Credit	Facilities	bear	interest	at	a	rate	equal	to	an	applicable 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	margin	for	borrowings	is	(i)	under	the	Term	Loan,	2.75%	for LIBOR	borrowings	and	1.75%	for	base-rate	borrowings	(ii)	under	the	ABL	Facility	(except	in the	last	out	tranche	described	above)	as	of	January	28,	2011	and	January	29,	2010,	1.25%	for

LIBOR	borrowings	and	0.25%	for	base-rate	borrowings	and	for	any	last	out	borrowings,	2.25% for	LIBOR	borrowings	and	1.25%	for	base-rate	borrowings.	The	applicable	margins	for borrowings	under	the	ABL	Facility	(except	in	the	case	of	last	out	borrowings)	are	subject	to adjustment	each	quarter	based	on	average	daily	excess	availability	under	the	ABL	Facility.	The interest	rate	for	borrowings	under	the	Term	Loan	Facility	was	3.0%	(without	giving	effect	to	the interest	rate	swaps	discussed	in	Note	8)	as	of	both	January	28,	2011	and	January	29,	2010, respectively.

In	addition	to	paying	interest	on	outstanding	principal	under	the	Credit	Facilities,	the Company	is	required	to	pay	a	commitment	fee	to	the	lenders	under	the	ABL	Facility	for	any unutilized	commitments.	The	commitment	fee	rate	is	0.375%	per	annum.	The	commitment	fee rate	will	be	reduced	(except	with	regard	to	the	last	out	tranche)	to	0.25%	per	annum	at	any	time that	the	unutilized	commitments	under	the	ABL	Facility	are	equal	to	or	less	than	50%	of	the aggregate	commitments	under	the	ABL	Facility.	The	Company	also	must	pay	customary	letter	of credit	fees.

The	senior	secured	credit	agreement	for	the	Term	Loan	Facility	requires	the	Company	to prepay	outstanding	term	loans,	subject	to	certain	exceptions,	with	percentages	of	excess	cash flow,	proceeds	of	non-ordinary	course	asset	sales	or	dispositions	of	property,	and	proceeds	of incurrences	of	certain	debt.	In	addition,	the	senior	secured	credit	agreement	for	the	ABL	Facility requires	the	Company	to	prepay	the	ABL	Facility,	subject	to	certain	exceptions,	with	proceeds	of non-ordinary	course	asset	sales	or	dispositions	of	property	and	any	borrowings	in	excess	of	the then	current	borrowing	base.	The	Term	Loan	Facility	can	be	prepaid	in	whole	or	in	part	at	any time.

Beginning	September	30,	2009,	the	Company	was	required	to	repay	installments	on	the loans	under	the	Term	Loan	Facility	in	equal	quarterly	principal	amounts	in	an	aggregate	amount per	annum	equal	to	1%	of	the	total	funded	principal	amount	at	July	6,	2007.	During	2009,	the Company	paid	two	such	quarterly	installments	totaling	$11.5	million.	In	addition,	in	January 2010	the	Company	voluntarily	prepaid	$325	million	of	the	principal	balance	of	the	Term	Loan Facility,	and	as	a	result,	no	further	quarterly	principal	installments	will	be	required	prior	to maturity	of	the	Term	Loan	Facility	on	July	6,	2014.	The	Company	incurred	a	pretax	loss	of	$4.7 million	in	2009	for	the	write	off	of	debt	issuance	costs	associated	with	this	prepayment.

All	obligations	under	the	Credit	Facilities	are	unconditionally	guaranteed	by	substantially all	of	the	Company's	existing	and	future	domestic	subsidiaries	(excluding	certain	immaterial subsidiaries	and	certain	subsidiaries	designated	by	the	Company	under	the	Credit	Facilities	as "unrestricted	subsidiaries").

All	obligations	and	guarantees	of	those	obligations	under	the	Term	Loan	Facility	are secured	by,	subject	to	certain	exceptions,	a	second-priority	security	interest	in	all	existing	and after-acquired	inventory	and	accounts	receivable;	a	first	priority	security	interest	in	substantially all	of	the	Company's	and	the	guarantors'	tangible	and	intangible	assets	(other	than	the	inventory and	accounts	receivable	collateral);	and	a	first-priority	pledge	of	the	capital	stock	held	by	the Company.	All	obligations	under	the	ABL	Facility	are	secured	by	all	existing	and	after-acquired inventory	and	accounts	receivable,	subject	to	certain	exceptions.

The	Credit	Facilities	contain	certain	covenants,	including,	among	other	things,	covenants that	limit	the	Company's	ability	to	incur	additional	indebtedness,	sell	assets,	incur	additional liens,	pay	dividends,	make	investments	or	acquisitions,	or	repay	certain	indebtedness.

Under	the	ABL	facility,	for	the	years	ended	January	28,	2011	and	January	29,	2010,	the Company	had	no	borrowings	or	repayments;	for	the	year	ended	January	30,	2009,	the	Company had	no	borrowings	and	repayments	of	$102.5	million.	As	of	January	28,	2011	and	January	29, 2010,	respectively,	amounts	outstanding	under	the	ABL	Facility	included	$52.7	million	and $85.1	million	of	standby	letters	of	credit,	and	$19.1	million	and	$15.4	million	of	commercial letters	of	credit,	while	excess	availability	under	the	ABL	Facility	was	$959.3	million	and	$930.6 million,	respectively.

On	July	6,	2007,	in	conjunction	with	the	Merger,	the	Company	issued	$1.175	billion aggregate	principal	amount	of	10.625%	senior	notes	due	2015	(the	"Senior	Notes")	which	were issued	net	of	a	discount	of	$23.2	million	and	which	mature	on	July	15,	2015	pursuant	to	an indenture,	dated	as	of	July	6,	2007	(the	"senior	indenture"),	and	$725	million	aggregate	principal amount	of	11.875%/12.625%	senior	subordinated	toggle	notes	due	2017	(the	"Senior Subordinated	Notes"),	which	mature	on	July	15,	2017,	pursuant	to	an	indenture,	dated	as	of	July 6,	2007	(the	"senior	subordinated	indenture").	The	Senior	Notes	and	the	Senior	Subordinated Notes	are	collectively	referred	to	herein	as	the	"Notes".	The	senior	indenture	and	the	senior subordinated	indenture	are	collectively	referred	to	herein	as	the	"indentures."

Interest	on	the	Notes	is	payable	on	January	15	and	July	15	of	each	year.	Interest	on	the Senior	Notes	and	Senior	Subordinated	Notes	is	payable	in	cash.	Cash	interest	on	the	Senior Subordinated	Notes	accrues	at	a	rate	of	11.875%	per	annum.	For	certain	interest	periods,	the Company	previously	had	the	ability	to	elect	to	pay	interest	on	the	Senior	Subordinated	Notes	by increasing	the	principal	amount	of	the	Senior	Subordinated	Notes	or	issuing	new	senior subordinated	notes	("PIK	interest"),	instead	of	paying	interest	in	cash.	This	election	was	never utilized	by	the	Company	and	due	to	the	expiration	of	the	notification	period	for	such	option,	all interest	on	the	Notes	has	been	paid	in	cash.

The	Notes	are	fully	and	unconditionally	guaranteed	by	each	of	the	existing	and	future direct	or	indirect	wholly	owned	domestic	subsidiaries	that	guarantee	the	obligations	under	the Company's	Credit	Facilities.

The	Company	may	redeem	some	or	all	of	the	Notes	at	any	time	at	redemption	prices described	or	set	forth	in	the	indentures.	In	addition,	the	holders	of	the	Notes	can	require	the Company	to	redeem	the	Notes	at	101%	of	the	aggregate	principal	amount	outstanding	in	the event	of	certain	change	in	control	events.

In	May	2010,	the	Company	repurchased	in	the	open	market	$50.0	million	aggregate principal	amount	of	10.625%	senior	notes	due	2015	at	a	price	of	111.0%	plus	accrued	and	unpaid interest.	In	September	2010,	the	Company	repurchased	in	the	open	market	$65.0	million aggregate	principal	amount	of	10.625%	senior	notes	due	2015	at	a	price	of	110.75%	plus	accrued and	unpaid	interest.	The	2010	repurchases	resulted	in	pretax	losses	totaling	$14.7	million.	In connection	with	the	Company's	November	2009	initial	public	offering,	as	further	discussed	in Note	2,	the	Company	repurchased	$195.7	million	of	the	Senior	Notes	and	$205.2	million	of	the

Senior	Subordinated	Notes	at	redemption	prices	of	110.625%	and	111.875%,	respectively,	plus accrued	and	unpaid	interest,	resulting	in	pretax	losses	totaling	$50.6	million.	In	January	2009,	the Company	repurchased	$44.1	million	of	the	Senior	Subordinated	Notes,	resulting	in	a	pretax	gain of	$3.8	million.	Pretax	gains	and	losses	associated	with	the	redemption	of	the	Notes	are	reflected in	Other	(income)	expense	in	the	consolidated	statements	of	operations.

The	indentures	contain	certain	covenants,	including,	among	other	things,	covenants	that limit	the	Company's	ability	to	incur	additional	indebtedness,	create	liens,	sell	assets,	enter	into transactions	with	affiliates,	or	consolidate	or	dispose	of	all	of	its	assets.

The	Company	is	exposed	to	certain	risks	arising	from	both	its	business	operations	and economic	conditions.	The	Company	principally	manages	its	exposures	to	a	wide	variety	of business	and	operational	risks	through	management	of	its	core	business	activities.	The	Company manages	economic	risks,	including	interest	rate,	liquidity,	and	credit	risk,	primarily	by	managing the	amount,	sources,	and	duration	of	its	debt	funding	and	the	use	of	derivative	financial instruments.	Specifically,	the	Company	enters	into	derivative	financial	instruments	to	manage exposures	that	arise	from	business	activities	that	result	in	the	receipt	or	payment	of	future	known and	uncertain	cash	amounts,	the	value	of	which	are	determined	primarily	by	interest	rates.	The Company's	derivative	financial	instruments	are	used	to	manage	differences	in	the	amount, timing,	and	duration	of	the	Company's	known	or	expected	cash	receipts	and	its	known	or expected	cash	payments	principally	related	to	the	Company's	borrowings.

In	addition,	the	Company	is	exposed	to	certain	risks	arising	from	uncertainties	of	future market	values	caused	by	the	fluctuation	in	the	prices	of	commodities.	From	time	to	time	the Company	has	entered	into	derivative	financial	instruments	to	protect	against	future	price	changes related	to	transportation	costs	associated	with	forecasted	distribution	of	inventory.

# Cash	flow	hedges	of	interest	rate	risk

The	Company's	objectives	in	using	interest	rate	derivatives	are	to	add	stability	to	interest expense	and	to	manage	its	exposure	to	interest	rate	changes.	To	accomplish	this	objective,	the Company	primarily	uses	interest	rate	swaps	as	part	of	its	interest	rate	risk	management	strategy. Interest	rate	swaps	designated	as	cash	flow	hedges	involve	the	receipt	of	variable-rate	amounts from	a	counterparty	in	exchange	for	the	Company	making	fixed-rate	payments	over	the	life	of the	agreements	without	exchange	of	the	underlying	notional	amount.

The	effective	portion	of	changes	in	the	fair	value	of	derivatives	designated	and	that qualify	as	cash	flow	hedges	is	recorded	in	Accumulated	other	comprehensive	income	(loss)	(also referred	to	as	"OCI")	and	is	subsequently	reclassified	into	earnings	in	the	period	that	the	hedged forecasted	transaction	affects	earnings.	Subsequent	to	the	Merger,	these	transactions	represent the	only	amounts	reflected	in	Accumulated	other	comprehensive	income	(loss)	in	the

consolidated	statements	of	shareholders'	equity.	During	the	year	ended	January	28,	2011,	such derivatives	were	used	to	hedge	the	variable	cash	flows	associated	with	existing	variable-rate debt.	The	ineffective	portion	of	the	change	in	fair	value	of	the	derivatives	is	recognized	directly in	earnings.

As	of	January	28,	2011,	the	Company	had	three	interest	rate	swaps	with	a	combined notional	value	of	$1.05	billion	that	were	designated	as	cash	flow	hedges	of	interest	rate	risk. Amounts	reported	in	Accumulated	other	comprehensive	income	(loss)	related	to	derivatives	will be	reclassified	to	interest	expense	as	interest	payments	are	made	on	the	Company's	variable-rate debt.	The	Company	terminated	an	interest	rate	swap	in	October	2008	due	to	the	bankruptcy declaration	of	the	counterparty	bank.	The	Company	continues	to	report	the	net	gain	or	loss related	to	the	discontinued	cash	flow	hedge	in	OCI	and	such	net	gain	or	loss	is	being	reclassified into	earnings	during	the	original	contractual	terms	of	the	swap	agreement	as	the	hedged	interest payments	are	expected	to	occur	as	forecasted.	During	the	next	52-week	period,	the	Company estimates	that	an	additional	$27.2	million	will	be	reclassified	as	an	increase	to	interest	expense for	all	of	its	interest	rate	swaps.

# Non-designated	hedges	of	commodity	risk

Derivatives	not	designated	as	hedges	are	not	speculative	and	are	used	to	manage	the Company's	exposure	to	commodity	price	risk	but	do	not	meet	strict	hedge	accounting requirements.	In	February	2009,	the	Company	entered	into	a	commodity	hedge	related	to	diesel fuel	to	limit	its	exposure	to	variability	in	diesel	fuel	prices	and	their	effect	on	transportation	costs. Changes	in	the	fair	value	of	derivatives	not	designated	in	hedging	relationships	are	recorded directly	in	earnings.	As	of	January	28,	2011,	the	Company	had	no	outstanding	commodity hedges.	During	2009,	the	Company	entered	into	one	diesel	fuel	commodity	swap	hedging monthly	usage	of	diesel	fuel	that	was	not	designated	as	a	hedge	in	a	qualifying	hedging relationship,	which	expired	prior	to	January	29,	2010.

The	table	below	presents	the	fair	value	of	the	Company's	derivative	financial	instruments as	well	as	their	classification	on	the	consolidated	balance	sheets	as	of	January	28,	2011	and January	29,	2010	(in	thousands):

# Tabular	Disclosure	of	Fair	Values	of	Derivative	Instruments

|  | Balance	Sheet<br>Classification | Fair	Value | Balance	Sheet<br>Classification | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
| Derivatives\tdesignated\tas\thedging\ninstruments |  |  |  |  |
| Interest\trate\tswaps: |  |  |  |  |
| As\tof\tJanuary\t28,\t2011 |  |  | Other\tliabilities | $34,923 |
| As\tof\tJanuary\t29,\t2010 |  |  | Other\tliabilities | $57,058 |

The	tables	below	present	the	pre-tax	effect	of	the	Company's	derivative	financial instruments	on	the	consolidated	statement	of	operations	(including	OCI)	for	the	years	ended January	28,	2011	and	January	29,	2010:

# Tabular	Disclosure	of	the	Effect	of	Derivative	Instruments	on	the	Consolidated	Statement	of	Operations For	the	year	ended	January	28,	2011

|  | Amount	of |  | Reclassified | Income	on | in	Income	on |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | (Gain)\tor\tLoss |  | from | Derivative | Derivative |
|  | Recognized\tin | Location\tof\tGain\tor | Accumulated | (Ineffective\tPortion | (Ineffective\tPortion |
| Derivatives\tin | OCI\ton | Loss\tReclassified | OCI\tinto | and\tAmount | and\tAmount |
| Cash\tFlow | Derivative | from\tAccumulated | Income | Excluded\tfrom | Excluded\tfrom |
| Hedging | (Effective | OCI\tinto\tIncome | (Effective | Effectiveness | Effectiveness |
| Relationships | Portion) | (Effective\tPortion) | Portion) | Testing) | Testing) |

# Tabular	Disclosure	of	the	Effect	of	Derivative	Instruments	on	the	Consolidated	Statement	of	Operations

|  | Amount	of |  | Reclassified | Income	on | in	Income	on |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | (Gain)\tor\tLoss |  | from | Derivative | Derivative |
|  | Recognized\tin | Location\tof\tGain\tor | Accumulated | (Ineffective\tPortion | (Ineffective\tPortion |
| Derivatives\tin | OCI\ton | Loss\tReclassified | OCI\tinto | and\tAmount | and\tAmount |
| Cash\tFlow | Derivative | from\tAccumulated | Income | Excluded\tfrom | Excluded\tfrom |
| Hedging | (Effective | OCI\tinto\tIncome | (Effective | Effectiveness | Effectiveness |
| Relationships | Portion) | (Effective\tPortion) | Portion) | Testing) | Testing) |

# Credit-risk-related	contingent	features

The	Company	has	agreements	with	all	of	its	interest	rate	swap	counterparties	that	contain a	provision	providing	that	the	Company	could	be	declared	in	default	on	its	derivative	obligations if	repayment	of	the	underlying	indebtedness	is	accelerated	by	the	lender	due	to	the	Company's default	on	such	indebtedness.

As	of	January	28,	2011,	the	fair	value	of	interest	rate	swaps	in	a	net	liability	position, which	includes	accrued	interest	but	excludes	any	adjustment	for	nonperformance	risk	related	to these	agreements,	was	$44.0	million.	If	the	Company	had	breached	any	of	these	provisions	at January	28,	2011,	it	could	have	been	required	to	post	full	collateral	or	settle	its	obligations	under the	agreements	at	an	estimated	termination	value	equal	to	the	fair	value	of	$44.0	million.	As	of January	28,	2011,	the	Company	had	not	breached	any	of	these	provisions	or	posted	any	collateral related	to	these	agreements.

# 9. Commitments	and	contingencies

# Leases

As	of	January	28,	2011,	the	Company	was	committed	under	operating	lease	agreements for	most	of	its	retail	stores.	Many	of	the	Company's	stores	are	subject	to	build-to-suit arrangements	with	landlords	which	typically	carry	a	primary	lease	term	of	10-15	years	with multiple	renewal	options.	The	Company	also	has	stores	subject	to	shorter-term	leases	(usually with	initial	or	current	terms	of	three	to	five	years),	and	many	of	these	leases	have	multiple renewal	options.	Approximately	35%	of	the	leased	stores	have	provisions	for	contingent	rentals based	upon	a	specified	percentage	of	defined	sales	volume.	The	Company	leases	three	of	its	DCs. The	land	and	buildings	of	two	of	the	DCs	are	subject	to	operating	lease	agreements	and	the	third DC	is	subject	to	a	financing	arrangement.	The	entities	involved	in	the	ownership	structure underlying	these	leases	meet	the	accounting	definition	of	a	Variable	Interest	Entity	("VIE").	The Company	is	not	the	primary	beneficiary	of	these	VIEs	and,	accordingly,	has	not	included	these entities	in	its	consolidated	financial	statements.	Certain	leases	contain	restrictive	covenants.	As	of January	28,	2011,	the	Company	is	not	aware	of	any	material	violations	of	such	covenants.

In	January	1999,	the	Company	sold	its	DC	located	in	Ardmore,	Oklahoma	for	100%	cash consideration.	Concurrent	with	the	sale	transaction,	the	Company	leased	the	property	back	for	a period	of	23	years.	The	transaction	was	recorded	as	a	financing	obligation	rather	than	a	sale	as	a result	of,	among	other	things,	the	lessor's	ability	to	put	the	property	back	to	the	Company	under certain	circumstances.	The	property	and	equipment,	along	with	the	related	lease	obligation associated	with	this	transaction	are	recorded	in	the	consolidated	balance	sheets.	In	August	2007, the	Company	purchased	a	secured	promissory	note	(the	"Ardmore	Note")	from	an	unrelated	third party	with	a	face	value	of	$34.3	million	at	the	date	of	purchase	which	approximated	the remaining	financing	obligation.	The	Ardmore	Note	represents	debt	issued	by	the	third	party entity	from	which	the	Company	leases	the	Ardmore	DC	and	therefore	the	Company	holds	the debt	instrument	pertaining	to	its	lease	financing	obligation.	Because	a	legal	right	of	offset	exists, the	Company	is	accounting	for	the	Ardmore	Note	as	a	reduction	of	its	outstanding	financing obligation	in	its	consolidated	balance	sheets.

# Future	minimum	payments	as	of	January	28,	2011	for	capital	and	operating	leases	are	as

# follows:

Capital	leases	were	discounted	at	an	effective	interest	rate	of	approximately	6.3%	at January	28,	2011.	The	gross	amount	of	property	and	equipment	recorded	under	capital	leases	and financing	obligations	at	January	28,	2011	and	at	January	29,	2010,	was	$31.0	million	and	$34.8 million,	respectively.	Accumulated	depreciation	on	property	and	equipment	under	capital	leases and	financing	obligations	at	January	28,	2011	and	January	29,	2010,	was	$7.4	million	and	$6.9 million,	respectively.

Rent	expense	under	all	operating	leases	is	as	follows:

| (In	thousands) | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Minimum\trentals\t(a) | $471,402 | $407,379 | $370,827 |
| Contingent\trentals | 17,882 | 21,248 | 18,796 |
|  | $489,284 | $428,627 | $389,623 |

(a) Excludes	amortization	of	leasehold	interests	of	$25.7	million,	$37.2	million	and	$40.9	million	included	in	rent expense	for	the	years	ended	January	28,	2011,	January	29,	2010	and	January	30,	2009,	respectively.

# Legal	proceedings

On	August	7,	2006,	a	lawsuit	entitled	Cynthia	Richter,	et	al.	v.	Dolgencorp,	Inc.,	et	al. was	filed	in	the	United	States	District	Court	for	the	Northern	District	of	Alabama	(Case No.	7:06-cv-01537-LSC)	("Richter")	in	which	the	plaintiff	alleges	that	she	and	other	current	and former	Dollar	General	store	managers	were	improperly	classified	as	exempt	executive	employees under	the	Fair	Labor	Standards	Act	("FLSA")	and	seeks	to	recover	overtime	pay,	liquidated damages,	and	attorneys'	fees	and	costs.	On	August	15,	2006,	the	Richter	plaintiff	filed	a	motion in	which	she	asked	the	court	to	certify	a	nationwide	class	of	current	and	former	store	managers. The	Company	opposed	the	plaintiff's	motion.	On	March	23,	2007,	the	court	conditionally certified	a	nationwide	class.	On	December	2,	2009,	notice	was	mailed	to	over	28,000	current	or former	Dollar	General	store	managers,	and	approximately	3,860	individuals

opted	into	the	lawsuit.	In	September	2010,	the	court	entered	a	scheduling	order	that	governs, among	other	things,	deadlines	for	fact	discovery	(September	30,	2011)	and	the	Company's anticipated	decertification	motion	(August	15,	2011).	The	court's	scheduling	order	establishes	a trial	date	of	February	12,	2012.

On	July	20,	2010,	a	lawsuit	was	filed	in	the	judicial	district	in	which	the	Richter	matter	is pending	in	which	a	former	store	manager	made	allegations	substantially	similar	to	those	raised	in Richter	and	sought	to	represent	a	nationwide	class	of	current	and	former	store	managers	(Lisa Beard	v.	Dollar	General	Corporation,	et	al.,	Case	No.	7:10-cv-01956-SLB).	The	plaintiff	in Beard	seeks	to	recover	overtime	pay,	liquidated	damages,	and	attorneys'	fees	and	costs.	On March	4,	2011,	the	Beard	plaintiff	moved	to	amend	her	complaint	to	strike	all	class	allegations and	notified	the	court	of	her	withdrawal	of	the	consent	forms	previously	filed	by	approximately 95	opt-in	plaintiffs.	The	plaintiff's	motion	to	amend	was	granted	on	March	7,	2011,	which	had the	effect	of	rendering	the	Beard	action	a	single-plaintiff	case.	If	the	case	remains	a	single- plaintiff	case,	it	is	extremely	unlikely	that	the	case	could	have	a	material	impact	on	the Company's	financial	statements	as	a	whole.

The	Company	believes	that	its	store	managers	are	and	have	been	properly	classified	as exempt	employees	under	the	FLSA	and	that	the	Richter	action	is	not	appropriate	for	collective action	treatment.	The	Company	has	obtained	summary	judgment	in	some,	although	not	all,	of	its pending	individual	or	single-plaintiff	store	manager	exemption	cases	in	which	it	has	filed	such	a motion.

The	Company	intends	to	vigorously	defend	the	Richter	and	Beard	matters.	However,	at this	time,	it	is	not	possible	to	predict	whether	Richter	ultimately	will	be	permitted	to	proceed collectively,	and	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense of	either	action	on	the	merits	or	otherwise.	Similarly,	at	this	time	the	Company	cannot	estimate either	the	size	of	any	potential	class	or	the	value	of	the	claims	asserted	in	Richter.	For	these reasons,	the	Company	is	unable	to	estimate	any	potential	loss	or	range	of	loss	in	that	action; however,	if	the	Company	is	not	successful	in	its	defense	efforts,	the	resolution	of	the	Richter action	could	have	a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

On	May	18,	2006,	the	Company	was	served	with	a	lawsuit	entitled	Tammy	Brickey, Becky	Norman,	Rose	Rochow,	Sandra	Cogswell	and	Melinda	Sappington	v.	Dolgencorp,	Inc. and	Dollar	General	Corporation	(Western	District	of	New	York,	Case	No.	6:06-cv-06084-DGL, originally	filed	on	February	9,	2006	and	amended	on	May	12,	2006	("Brickey")).	The	Brickey plaintiffs	seek	to	proceed	collectively	under	the	FLSA	and	as	a	class	under	New	York,	Ohio, Maryland	and	North	Carolina	wage	and	hour	statutes	on	behalf	of,	among	others,	assistant	store managers	who	claim	to	be	owed	wages	(including	overtime	wages)	under	those	statutes.	On February	22,	2011,	the	court	denied	the	plaintiffs'	class	certification	motion	in	its	entirety	and ordered	that	the	matter	proceed	only	as	to	the	named	plaintiffs.	To	date,	the	plaintiffs	have	not appealed	that	order.	If	the	case	proceeds	only	as	to	the	named	plaintiffs,	the	Company	does	not expect	the	outcome	to	be	material	to	its	financial	statements	as	a	whole.

On	March	7,	2006,	a	complaint	was	filed	in	the	United	States	District	Court	for	the Northern	District	of	Alabama	(Janet	Calvert	v.	Dolgencorp,	Inc.,	Case	No.	2:06-cv-00465-VEH

("Calvert")),	in	which	the	plaintiff,	a	former	store	manager,	alleged	that	she	was	paid	less	than male	store	managers	because	of	her	sex,	in	violation	of	the	Equal	Pay	Act	and	Title	VII	of	the Civil	Rights	Act	of	1964,	as	amended	("Title	VII").	The	complaint	subsequently	was	amended	to include	additional	plaintiffs,	who	also	allege	to	have	been	paid	less	than	males	because	of	their sex,	and	to	add	allegations	that	the	Company's	compensation	practices	disparately	impact females.	Under	the	amended	complaint,	Plaintiffs	seek	to	proceed	collectively	under	the	Equal Pay	Act	and	as	a	class	under	Title	VII,	and	request	back	wages,	injunctive	and	declaratory	relief, liquidated	damages,	punitive	damages	and	attorneys'	fees	and	costs.

On	July	9,	2007,	the	plaintiffs	filed	a	motion	in	which	they	asked	the	court	to	approve	the issuance	of	notice	to	a	class	of	current	and	former	female	store	managers	under	the	Equal	Pay Act.	The	Company	opposed	plaintiffs'	motion.	On	November	30,	2007,	the	court	conditionally certified	a	nationwide	class	of	females	under	the	Equal	Pay	Act	who	worked	for	Dollar	General as	store	managers	between	November	30,	2004	and	November	30,	2007.	The	notice	was	issued on	January	11,	2008,	and	persons	to	whom	the	notice	was	sent	were	required	to	opt	into	the	suit by	March	11,	2008.	Approximately	2,100	individuals	have	opted	into	the	lawsuit.

On	April	19,	2010,	the	plaintiffs	moved	for	class	certification	relating	to	their	Title	VII claims.	The	Company	filed	its	response	to	the	certification	motion	in	June	2010.	Briefing	has closed,	and	the	parties	are	awaiting	a	ruling.	The	Company's	motion	to	decertify	the	Equal	Pay Act	class	was	denied	as	premature.	The	Company	expects	to	file	a	similar	motion	in	due	course.

The	parties	have	agreed	to	mediate	this	action,	and	the	mediation	is	scheduled	to	begin	on March	24,	2011.	The	court	has	stayed	the	action	during	the	period	in	which	the	parties	attempt	to resolve	the	matter.

The	Company	has	tendered	the	matter	to	its	Employment	Practices	Liability	Insurance ("EPLI")	carrier	for	coverage	under	its	EPLI	policy.	At	this	time,	the	Company	expects	that	the EPLI	carrier	will	participate	in	any	resolution	of	some	or	all	of	the	plaintiffs'	claims.

At	this	time,	it	is	not	possible	to	predict	whether	the	court	ultimately	will	permit	the Calvert	action	to	proceed	collectively	under	the	Equal	Pay	Act	or	as	a	class	under	Title	VII. Although	the	Company	intends	to	vigorously	defend	the	action,	no	assurances	can	be	given	that it	will	be	successful	in	the	defense	on	the	merits	or	otherwise.	Similarly,	at	this	time	the Company	cannot	estimate	either	the	size	of	any	potential	class	or	the	value	of	the	claims	raised	in this	action.	For	these	reasons,	the	Company	is	unable	to	estimate	any	potential	loss	or	range	of loss;	however,	if	the	Company	is	not	successful	in	defending	this	action,	its	resolution	could	have a	material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

On	June	16,	2010,	a	lawsuit	entitled	Shaleka	Gross,	et	al	v.	Dollar	General	Corporation was	filed	in	the	United	States	District	Court	for	the	Southern	District	of	Mississippi	(Civil	Action No.	3:10CV340WHB-LR)	in	which	three	former	non-exempt	store	employees,	on	behalf	of themselves	and	certain	other	non-exempt	Dollar	General	store	employees,	alleged	that	they	were not	paid	for	all	hours	worked	in	violation	of	the	FLSA.	Specifically,	plaintiffs	alleged	that	they were	not	properly	paid	for	certain	breaks	and	sought	back	wages	(including	overtime	wages), liquidated	damages	and	attorneys'	fees	and	costs.

Before	the	Company	was	served	with	the	Gross	complaint,	the	plaintiffs	dismissed	the action	and	re-filed	it	in	the	United	States	District	Court	for	the	Northern	District	of	Mississippi, now	captioned	as	Cynthia	Walker,	et	al.	v.	Dollar	General	Corporation,	et	al.	(Civil	Action	No. 4:10-CV119-P-S).	The	Walker	complaint	was	filed	on	September	16,	2010,	and	although	it	adds approximately	eight	additional	plaintiffs,	it	adds	no	substantive	allegations	beyond	those	alleged in	the	Gross	complaint.	The	Company	filed	a	motion	to	transfer	the	case	back	to	the	Southern District	of	Mississippi	and	a	motion	to	dismiss	for	lack	of	personal	jurisdiction	over	two corporate	defendants	and	for	failure	to	state	a	claim	as	to	Dollar	General	Corporation,	all	of which	are	pending.	The	court	stayed	the	matter	pending	resolution	of	the	motion	to	dismiss.	To date,	no	other	individuals	have	opted	into	the	Walker	matter,	and	the	plaintiffs	have	not	asked	the court	to	certify	any	class.

On	August	26,	2010,	a	lawsuit	containing	allegations	substantially	similar	to	those	raised in	the	Walker	matter	was	filed	by	a	single	plaintiff	in	the	United	States	District	Court	for	the Eastern	District	of	Kentucky	(Brenda	McCown	v.	Dollar	General	Corporation,	Case	No.	210- 297	(WOB)).	On	December	22,	2010,	the	court	entered	an	order	establishing	certain	deadlines, including	the	deadline	for	discovery	related	to	certification	issues	(June	1,	2011)	and	for plaintiff's	certification	motion,	if	any	(June	30,	2011).	No	trial	date	has	been	set.	To	date, approximately	three	other	individuals	have	opted	into	the	McCown	matter.	The	plaintiff	has	not asked	the	court	to	certify	any	class.

At	this	time,	it	is	not	possible	to	predict	whether	the	courts	will	permit	the	Walker	or McCown	actions	to	proceed	collectively.	However,	the	Company	believes	that	those	actions	are not	appropriate	for	collective	treatment	and	that	its	wage	and	hour	policies	and	practices	comply with	both	federal	and	state	law.	Although	the	Company	plans	to	vigorously	defend	Walker	and McCown,	no	assurances	can	be	given	that	the	Company	will	be	successful	in	the	defense	on	the merits	or	otherwise.	Similarly,	at	this	time	the	Company	cannot	estimate	either	the	size	of	any potential	class	or	the	value	of	the	claims	raised	in	these	actions.	For	these	reasons,	the	Company is	unable	to	estimate	any	potential	loss	or	range	of	loss;	however	if	the	Company	is	not successful	in	its	defense	efforts,	the	resolution	of	either	or	both	of	these	actions	could	have	a material	adverse	effect	on	the	Company's	financial	statements	as	a	whole.

In	October	2008,	the	Company	terminated	an	interest	rate	swap	as	a	result	of	the counterparty's	declaration	of	bankruptcy.	This	declaration	of	bankruptcy	constituted	a	default under	the	contract	governing	the	swap,	giving	the	Company	the	right	to	terminate.	The	Company subsequently	settled	the	swap	in	November	2008	for	approximately	$7.6	million,	including interest	accrued	to	the	date	of	termination.	On	May	14,	2010,	the	Company	received	a	demand from	the	counterparty	for	an	additional	payment	of	approximately	$19	million	plus	interest, claiming	that	the	valuation	used	to	calculate	the	$7.6	million	was	commercially	unreasonable, and	seeking	to	invoke	the	alternative	dispute	resolution	procedures	established	by	the	bankruptcy court.	The	Company	is	participating	in	the	alternative	dispute	resolution	procedures	because	it believes	a	reasonable	settlement	would	be	in	the	best	interest	of	the	Company	to	avoid	the substantial	risk	and	costs	of	litigation,	but	does	not	believe	that	additional	payment	is	owed.	The Company	believes	the	methodology	it	used	to	calculate	the	settlement	amount	was	commercially reasonable	and	appropriate;	however,	no	assurances	can	be	given	that	the	Company	will	be successful	in	its	defense	on	the	merits	or	otherwise.	If	the	Company	is	successful	in	its	defense,

no	loss	will	occur.	If	the	Company	is	not	successful	or	it	deems	it	advisable	to	resolve	the	matter prior	to	trial	through	the	continuing	mediation,	the	resolution	of	this	action	could	result	in	a	loss up	to	the	claimed	$19	million	plus	interest.

From	time	to	time,	the	Company	is	a	party	to	various	other	legal	actions	involving	claims incidental	to	the	conduct	of	its	business,	including	actions	by	employees,	consumers,	suppliers, government	agencies,	or	others	through	private	actions,	class	actions,	administrative	proceedings, regulatory	actions	or	other	litigation,	including	without	limitation	under	federal	and	state employment	laws	and	wage	and	hour	laws.	The	Company	believes,	based	upon	information currently	available,	that	such	other	litigation	and	claims,	both	individually	and	in	the	aggregate, will	be	resolved	without	a	material	adverse	effect	on	the	Company's	financial	statements	as	a whole.	However,	litigation	involves	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	lawsuits,	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	if	changes	to	the	Company's	business operation	are	required.

# 10. Benefit	plans

The	Dollar	General	Corporation	401(k)	Savings	and	Retirement	Plan,	which	became effective	on	January	1,	1998,	is	a	safe	harbor	defined	contribution	plan	and	is	subject	to	the Employee	Retirement	and	Income	Security	Act	("ERISA").

Participants	are	permitted	to	contribute	between	1%	and	25%	of	their	pre-tax	annual eligible	compensation	as	defined	in	the	401(k)	plan	document,	subject	to	certain	limitations	under the	Internal	Revenue	Code.	Employees	who	are	over	age	50	are	permitted	to	contribute additional	amounts	on	a	pre-tax	basis	under	the	catch-up	provision	of	the	401(k)	plan	subject	to Internal	Revenue	Code	limitations.	The	Company	currently	matches	employee	contributions, including	catch-up	contributions,	at	a	rate	of	100%	of	employee	contributions	up	to	5%	of	annual eligible	salary,	after	an	employee	has	been	employed	for	over	one	year	and	has	completed	a minimum	of	1,000	hours	of	service.

A	participant's	right	to	claim	a	distribution	of	his	or	her	account	balance	is	dependent	on the	plan,	ERISA	guidelines	and	Internal	Revenue	Service	regulations.	All	active	participants	are fully	vested	in	all	contributions	to	the	401(k)	plan.	During	2010,	2009	and	2008,	the	Company expensed	approximately	$9.5	million,	$8.4	million	and	$8.0	million,	respectively,	for	matching contributions.

The	Company	also	has	a	nonqualified	supplemental	retirement	plan	("SERP")	and compensation	deferral	plan	("CDP"),	known	as	the	Dollar	General	Corporation	CDP/SERP	Plan, for	a	select	group	of	management	and	highly	compensated	employees.	The	SERP	is	a noncontributory	defined	contribution	plan	with	annual	Company	contributions	ranging	from	2% to	10%	of	base	pay	plus	bonus	depending	upon	age,	years	of	service	and	job	grade.	Under	the CDP,	participants	may	defer	up	to	65%	of	base	pay	and	up	to	100%	of	bonus	pay.	An	employee may	be	designated	for	participation	in	one	or	both	of	the	plans,	according	to	the	eligibility

requirements	of	the	plans.	The	Company	matches	base	pay	deferrals	at	a	rate	of	100%	of	base pay	deferral,	up	to	5%	of	annual	salary,	with	annual	salary	offset	by	the	amount	of	match-eligible salary	in	the	401(k)	plan.	All	participants	are	100%	vested	in	their	CDP	accounts.	The	Company incurred	compensation	expense	for	these	plans	of	approximately	$1.7	million,	$1.9	million	and $1.2	million	in	2010,	2009	and	2008,	respectively.

The	CDP/SERP	Plan	assets	are	invested	in	accounts	selected	by	the	Company's Compensation	Committee	or	its	delegate.	Effective	August	2,	2008,	the	deemed	fund	options under	the	CDP/SERP	Plan	were	changed	to	mirror	the	same	fund	options	offered	under	the 401(k)	plan	which	include	a	combination	of	registered	mutual	funds	and	a	collective	trust	fund.

Vested	amounts	are	payable	at	the	time	designated	by	the	plan	upon	the	participant's termination	of	employment,	disability,	death	or	retirement,	except	that	participants	may	elect	to receive	an	in-service	distribution	or	an	"unforeseeable	emergency	hardship"	distribution	of vested	amounts	credited	to	the	CDP	account.	Account	balances	are	payable	in	cash.

Asset	balances	in	the	fund	options	that	mirror	the	registered	mutual	funds	are	stated	at fair	value,	which	is	based	on	quoted	market	prices.	Asset	balances	in	the	collective	trust	fund	are stated	at	contract	value	of	the	underlying	fund	assets.	These	investments	are	classified	as	trading securities	in	the	consolidated	balance	sheets	as	further	discussed	in	Note	1.	The	deferred compensation	liability	related	to	the	fund	options	is	recorded	at	the	fair	value	of	the	investment options	for	the	registered	mutual	funds	and	at	contract	value	for	the	collective	trust	fund.	See Note	1	for	additional	discussion.

The	Company	accounts	for	share-based	payments	in	accordance	with	applicable accounting	standards.	Under	these	standards,	the	fair	value	of	each	award	is	separately	estimated and	amortized	into	compensation	expense	over	the	service	period.	The	fair	value	of	the Company's	stock	option	grants	are	estimated	on	the	grant	date	using	the	Black-Scholes-Merton valuation	model.	Forfeitures	are	estimated	at	the	time	of	valuation	and	reduce	expense	ratably over	the	vesting	period.	The	application	of	this	valuation	model	involves	assumptions	that	are judgmental	and	highly	sensitive	in	the	determination	of	compensation	expense.

Prior	to	the	Merger,	the	Company	maintained	various	share-based	compensation programs	which	included	options,	restricted	stock	and	restricted	stock	units.	In	connection	with the	Merger,	the	Company's	outstanding	stock	options,	restricted	stock	and	restricted	stock	units became	fully	vested	immediately	prior	to	the	closing	of	the	Merger	and	were	settled	in	cash, canceled	or,	in	limited	circumstances,	certain	stock	options	held	by	Company	management	were exchanged	for	new	options	to	purchase	common	stock	in	the	Company	(the	"Rollover	Options"). The	exercise	price	of	the	Rollover	Options	and	the	number	of	shares	of	Company	common	stock underlying	the	Rollover	Options	were	adjusted	as	a	result	of	the	Merger.	The	Rollover	Options otherwise	continue	under	the	terms	of	the	equity	plan	under	which	the	original	options	were issued.

On	July	6,	2007,	the	Company's	Board	of	Directors	adopted	the	2007	Stock	Incentive Plan	for	Key	Employees,	which	plan	was	subsequently	amended	(as	so	amended,	the	"Plan").

The	Plan	provides	for	the	granting	of	stock	options,	stock	appreciation	rights,	and	other	stock- based	awards	or	dividend	equivalent	rights	to	key	employees,	directors,	consultants	or	other persons	having	a	service	relationship	with	the	Company,	its	subsidiaries	and	certain	of	its affiliates.	The	number	of	shares	of	Company	common	stock	authorized	for	grant	under	the	Plan is	31,142,858.	No	more	than	4.5	million	shares	may	be	granted	to	any	one	Plan	participant	in	the form	of	stock	options	and	stock	appreciation	rights	in	any	given	fiscal	year	of	the	Company,	and no	more	than	1.5	million	shares	may	be	granted	to	any	one	Plan	participant	in	the	form	of	other stock-based	awards	in	any	given	fiscal	year	of	the	Company.	As	of	January	28,	2011,	17,837,497 of	such	shares	are	available	for	future	grants.

Since	the	Merger,	the	Company	has	granted	options	under	the	Plan	that	vest	solely	upon the	continued	employment	of	the	recipient	("Time	Options")	as	well	as	options	that	vest	upon	the achievement	of	predetermined	annual	or	cumulative	financial-based	targets	("Performance Options").	Through	November	2009,	20%	of	each	of	the	Time	Options	and	Performance	Options generally	vest	annually	over	a	five-year	period.	Beginning	in	December	2009,	the	Company began	granting	awards	whereby	25%	of	each	of	the	Time	Options	and	Performance	Options generally	vest	annually	over	a	four-year	period.	Assuming	the	financial	targets	are	met,	the Performance	Options	vest	as	of	the	Company's	fiscal	year	end,	and	as	a	result	the	initial	and final	tranche	of	each	Performance	Option	grant	is	prorated	based	upon	the	date	of	grant.	In	the event	the	performance	target	is	not	achieved	in	any	given	annual	performance	period,	the Performance	Options	for	that	period	may	still	subsequently	vest,	provided	that	a	cumulative performance	target	is	achieved.	Vesting	of	the	Time	Options	and	Performance	Options	is	also subject	to	acceleration	in	the	event	of	an	earlier	change	in	control	or	certain	public	offerings	of the	Company's	common	stock.	Each	of	these	options,	whether	Time	Options	or	Performance Options	have	a	contractual	term	of	10	years	and	an	exercise	price	equal	to	the	fair	value	of	the underlying	common	stock	on	the	date	of	grant.

Both	the	Time	Options	and	the	Performance	Options	are	subject	to	various	provisions	set forth	in	a	management	stockholder's	agreement	entered	into	with	each	option	holder	by	which the	Company	may	require	the	employee,	upon	termination,	to	sell	to	the	Company	any	vested options	or	shares	received	upon	exercise	of	the	Time	Options	or	Performance	Options	at	amounts that	differ	based	upon	the	reason	for	the	termination.	In	particular,	in	the	event	that	the	employee resigns	"without	good	reason"	(as	defined	in	the	management	stockholder's	agreement),	then	any options	whether	or	not	then	exercisable	are	forfeited	and	any	shares	received	upon	prior	exercise of	such	options	are	callable	at	the	Company's	option	at	an	amount	equal	to	the	lesser	of	fair value	or	the	amount	paid	for	the	shares	(i.e.,	the	exercise	price).	In	such	cases,	because	the employee	would	not	benefit	in	any	share	appreciation	over	the	exercise	price,	for	accounting purposes	such	options	are	not	considered	vested	until	the	expiration	of	the	Company's	call option,	which	is	generally	five	years	subsequent	to	the	date	of	grant.	Accordingly,	all	references to	the	vesting	provisions	or	vested	status	of	the	options	discussed	in	this	note	give	effect	to	the vesting	pursuant	to	these	accounting	provisions	and	may	differ	from	descriptions	of	the	vesting status	of	the	Time	Options	and	Performance	Options	located	elsewhere	in	this	report	or	the Company's	other	SEC	filings.	The	Company	records	expense	for	Time	Options	on	a	straight-line basis	over	the	term	of	the	management	stockholder's	agreement	(generally	five	years).

Each	of	the	Company's	management-owned	shares,	Rollover	Options,	and	vested	new options	include	certain	provisions	by	which	the	holder	of	such	shares,	Rollover	Options,	or

vested	new	options	may	require	the	Company	to	repurchase	such	instruments	in	limited circumstances.	Specifically,	each	such	instrument	is	subject	to	a	put	right	for	a	period	of	365	days after	termination	due	to	the	death	or	disability	of	the	holder	of	the	instrument	that	occurs generally	within	five	years	from	the	date	of	grant.	In	such	circumstances,	the	holder	of	such instruments	may	require	the	Company	to	repurchase	any	shares	at	the	fair	market	value	of	such shares	and	any	Rollover	Options	or	vested	new	options	at	a	price	equal	to	the	intrinsic	value	of such	Rollover	or	vested	new	options.	Because	the	Company	does	not	have	control	over	the circumstances	in	which	it	may	be	required	to	repurchase	the	outstanding	shares	or	Rollover Options,	such	shares	and	Rollover	Options,	valued	at	$8.8	million	and	$0.4	million,	respectively, at	January	28,	2011,	and	$14.4	million	and	$4.1	million,	respectively,	at	January	29,	2010,	have been	classified	as	Redeemable	common	stock	in	the	accompanying	consolidated	balance	sheets as	of	these	dates.	The	values	of	these	equity	instruments	are	based	upon	the	fair	value	and intrinsic	value,	respectively,	of	the	underlying	stock	and	Rollover	Options	at	the	date	of	issuance. Because	redemption	of	such	shares	is	uncertain,	such	shares	are	not	subject	to	re-measurement until	their	redemption	becomes	probable.

Subsequent	to	the	Merger,	the	Company's	Board	of	Directors	adopted	an	Equity Appreciation	Rights	Plan,	which	plan	was	later	amended	and	restated	(as	amended	and	restated, the	"Rights	Plan").	The	Rights	Plan	provides	for	the	granting	of	equity	appreciation	rights	to nonexecutive	managerial	employees.	In	2009,	the	Rights	Plan	was	modified	such	that	certain equity	appreciation	rights	vested	as	a	result	of	the	Company's	initial	public	offering	discussed	in Note	2	that	otherwise	would	not	have	vested.	At	January	29,	2010,	697,762	equity	appreciation rights	were	outstanding.	During	2010,	783,322	equity	appreciation	rights	were	granted, 1,406,237	of	such	rights,	affecting	1,028	employees,	vested	in	conjunction	with	the	Company stock	offerings,	21,557	of	such	rights	vested	as	a	result	of	other	provisions	of	the	Rights	Plan, 53,290	of	such	rights	were	cancelled	and	no	such	rights	remain	outstanding	at	January	28,	2011.

For	the	year	ended	January	28,	2011,	the	fair	value	method	of	accounting	for	share-based awards	resulted	in	share-based	compensation	expense	(a	component	of	SG&A	expenses)	and	a corresponding	reduction	in	net	income	before	income	taxes	in	the	amount	of	$30.2	million	($18.4 million	net	of	tax)	of	which	$12.7	million	($7.8	million	net	of	tax)	was	related	to	stock	options, $17.4	million	($10.6	million	net	of	tax)	was	related	to	equity	appreciation	rights	and	less	than $0.1	million	was	related	to	restricted	stock	units	as	discussed	in	more	detail	below.

For	the	year	ended	January	29,	2010,	the	fair	value	method	of	accounting	for	share-based awards	resulted	in	share-based	compensation	expense	(a	component	of	SG&A	expenses)	and	a corresponding	reduction	in	net	income	before	income	taxes	in	the	amount	of	$22.2	million	($13.6 million	net	of	tax)	of	which	$11.7	million	($7.1	million	net	of	tax)	was	related	to	stock	options, $7.2	million	($4.4	million	net	of	tax)	was	related	to	equity	appreciation	rights	and	$3.3	million ($2.0	million	net	of	tax)	was	related	to	restricted	stock	as	discussed	in	more	detail	below.	Of these	amounts,	$6.9	million	of	the	expense	for	equity	appreciation	rights	and	$2.5	million	of	the expense	for	restricted	stock	was	attributable	to	the	vesting	of	certain	awards	in	conjunction	with the	Company's	initial	public	offering.

For	the	year	ended	January	30,	2009,	the	Company	recorded	share-based	compensation expense	and	a	corresponding	reduction	in	net	income	before	income	taxes	in	the	amount	of	$10.0

million	($6.1	million	net	of	tax)	of	which	$8.9	million	($5.4	million	net	of	tax)	was	related	to stock	options	and	$1.1	million	($0.7	million	net	of	tax)	was	related	to	restricted	stock.

The	fair	value	of	each	option	grant	is	separately	estimated	by	applying	the	Black- Scholes-Merton	option	pricing	valuation	model.	The	weighted	average	for	key	assumptions	used in	determining	the	fair	value	of	options	granted	in	the	years	ended	January	28,	2011,	January	29, 2010	and	January	30,	2009,	and	a	summary	of	the	methodology	applied	to	develop	each assumption,	are	as	follows:

|  | January	28, | January	29, | January	30, |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Expected\tdividend\tyield | 0% | 0% | 0\t% |
| Expected\tstock\tprice\tvolatility | 39.1% | 41.2% | 40.2\t% |
| Weighted\taverage\trisk-free\tinterest\trate | 2.8% | 2.8% | 2.8\t% |
| Expected\tterm\tof\toptions\t(years) | 7.0 | 7.4 | 7.4 |

Expected	dividend	yield	-	This	is	an	estimate	of	the	expected	dividend	yield	on	the Company's	stock.	The	Company	is	subject	to	limitations	on	the	payment	of	dividends	under	its Credit	Facilities	as	further	discussed	in	Note	7.	An	increase	in	the	dividend	yield	will	decrease compensation	expense.

Expected	stock	price	volatility	-	This	is	a	measure	of	the	amount	by	which	the	price	of	the Company's	common	stock	has	fluctuated	or	is	expected	to	fluctuate.	Subsequent	to	the	Merger the	expected	volatilities	have	been	based	upon	the	historical	volatilities	of	a	peer	group	of	four companies,	as	the	Company's	common	stock	has	only	been	publicly	traded	for	a	limited	period of	time	relative	to	the	expected	term	of	the	options.	An	increase	in	the	expected	volatility	will increase	compensation	expense.

Weighted	average	risk-free	interest	rate	-	This	is	the	U.S.	Treasury	rate	for	the	week	of the	grant	having	a	term	approximating	the	expected	life	of	the	option.	An	increase	in	the	risk-free interest	rate	will	increase	compensation	expense.

Expected	term	of	options	-	This	is	the	period	of	time	over	which	the	options	granted	are expected	to	remain	outstanding.	Options	granted	have	a	maximum	term	of	10	years.	Due	to	the relatively	limited	historical	data	for	grants	issued	subsequent	to	the	Merger,	the	Company	has estimated	the	expected	term	as	the	mid-point	between	the	vesting	date	and	the	contractual	term of	the	option.	An	increase	in	the	expected	term	will	increase	compensation	expense.

At	January	28,	2011,	53,434	Rollover	Options	were	outstanding,	all	of	which	were exercisable.	The	aggregate	intrinsic	value	of	these	outstanding	Rollover	Options	was	$1.4 million	with	a	weighted	average	remaining	contractual	term	of	4.3	years,	and	a	weighted	average exercise	price	of	$2.1875.

# A	summary	of	Time	Options	activity	during	the	period	ended	January	28,	2011	is	as

|  |  |  | Remaining |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Options | Average | Contractual | Intrinsic |
| (Intrinsic\tvalue\tamounts\treflected\tin\tthousands) | Issued | Exercise\tPrice | Term\tin\tYears | Value |
| Balance,\tJanuary\t29,\t2010 | \t6,123,052 | $8.68 |  |  |
| Granted | \t348,784 | 27.39 |  |  |
| Exercised | \t(342,293) | 8.15 |  |  |
| Canceled | \t(351,412) | 10.53 |  |  |
| Balance,\tJanuary\t28,\t2011 | \t5,778,131 | $9.73 | 7.3 | $108,104 |
| Vested\tor\texpected\tto\tvest\tat\tJanuary\t28,\t2011 | \t5,491,477 | $9.55 | 7.2 | $103,695 |
| Exercisable\tat\tJanuary\t28,\t2011 | \t2,773,235 | $8.31 | 7.0 | $55,706 |

A	summary	of	Performance	Options	activity	during	the	period	ended	January	28,	2011	is as	follows:

|  |  |  | Remaining |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Options | Average | Contractual | Intrinsic |
| (Intrinsic\tvalue\tamounts\treflected\tin\tthousands) | Issued | Exercise\tPrice | Term\tin\tYears | Value |
| Balance,\tJanuary\t29,\t2010 | \t6,251,623 | $8.67 |  |  |
| Granted | \t348,784 | 27.39 |  |  |
| Exercised | \t(777,249) | 8.13 |  |  |
| Canceled | \t(326,134) | 10.58 |  |  |
| Balance,\tJanuary\t28,\t2011 | \t5,497,024 | $9.82 | 7.3 | $102,369 |
| Vested\tor\texpected\tto\tvest\tat\tJanuary\t28,\t2011 | \t5,198,923 | $9.62 | 7.3 | $97,838 |
| Exercisable\tat\tJanuary\t28,\t2011 | \t3,426,809 | $8.68 | 7.0 | $67,597 |

In	April	2010,	the	Company	granted	100,000	options	to	its	Chief	Executive	Officer	with an	exercise	price	of	$29.38	and	a	vesting	period	of	one	year	from	the	date	of	grant.

The	total	intrinsic	value	of	all	stock	options	repurchased	by	the	Company	under	terms	of the	management	stockholders'	agreements	during	2010,	2009	and	2008	was	$0.1	million,	$0.8 million	and	$2.5	million,	respectively.

At	January	28,	2011,	the	total	unrecognized	compensation	cost	related	to	non-vested stock	options	was	$30.8	million	with	an	expected	weighted	average	expense	recognition	period of	2.8	years.

The	Company	currently	believes	that	the	performance	targets	related	to	the	unvested Performance	Options	will	be	achieved.	If	such	goals	are	not	met,	and	there	is	no	change	in control	or	certain	public	offerings	of	the	Company's	common	stock	which	would	result	in	the

acceleration	of	vesting	of	the	Performance	Options,	future	compensation	cost	relating	to unvested	Performance	Options	will	not	be	recognized.

Through	January	28,	2011,	all	Time	Options	and	Performance	Options	have	been	granted to	employees.	During	the	fourth	quarter	of	2009,	the	Company	granted	33,051	non-qualified stock	options	to	members	of	its	Board	of	Directors.	These	options	vest	ratably	on	an	annual	basis over	a	four	year	period	from	the	date	of	grant.

In	January	2008,	the	Company	granted	508,572	nonvested	restricted	shares	to	its	Chief Executive	Officer.	As	a	result	of	the	Company's	initial	public	offering	these	shares	vested,	at	a total	fair	value	equal	to	$11.5	million.	Subsequent	to	the	offering,	the	Company	granted	a	total	of 9,084	restricted	stock	unit	awards	to	members	of	its	Board	of	Directors.	For	2010,	2009	and 2008,	the	share-based	compensation	expense	related	to	nonvested	shares	before	income	taxes was	less	than	$0.1	million,	$3.3	million	($2.0	million	net	of	tax)	and	$1.1	million	($0.7	million net	of	tax),	respectively.	At	January	28,	2011,	the	total	compensation	cost	related	to	nonvested restricted	stock	awards	not	yet	recognized	was	approximately	$0.1	million.

All	nonvested	restricted	stock	and	restricted	stock	unit	awards	granted	in	the	periods presented	had	a	purchase	price	of	zero.	The	Company	records	compensation	expense	on	a straight-line	basis	over	the	restriction	period	based	on	the	market	price	of	the	underlying	stock	on the	date	of	grant.	The	nonvested	restricted	stock	unit	awards	granted	under	the	plan	to	non- employee	directors	during	2009	vested	or	are	scheduled	to	vest	in	one-third	increments	at	each	of the	Company's	three	subsequent	annual	shareholder	meetings.

# 12. Related	party	transactions

Affiliates	of	certain	of	the	Investors	participated	as	(i)	lenders	in	the	Company's	Credit Facilities	discussed	in	Note	7;	(ii)	initial	purchasers	of	the	Company's	Notes	discussed	in	Note	7; (iii)	counterparties	to	certain	interest	rate	swaps	discussed	in	Note	8	and	(iv)	as	advisors	in	the Merger.

The	Company	believes	affiliates	of	KKR	and	Goldman,	Sachs	&	Co.	(among	other entities)	are	lenders	under	the	Term	Loan	Facility.	The	amount	of	principal	outstanding	under	the Term	Loan	Facility	from	the	date	of	the	Merger	to	September	30,	2009,	was	$2.3	billion.	The Company	paid	principal	of	$336.5	million	during	the	remainder	of	2009	and	approximately $53.4	million,	$74.8	million	and	$133.4	million	of	interest	on	the	Term	Loan	Facility	during 2010,	2009	and	2008,	respectively.

Goldman,	Sachs	&	Co.	is	a	counterparty	to	an	amortizing	interest	rate	swap	with	a notional	amount	of	$323.3	million	and	$396.7	million	as	of	January	28,	2011	and	January	29, 2010,	respectively,	entered	into	in	connection	with	the	Term	Loan	Facility.	The	Company	paid Goldman,	Sachs	&	Co.	approximately	$12.9	million,	$17.9	million	and	$9.5	million	in	2010, 2009	and	2008,	respectively,	pursuant	to	the	interest	rate	swap	as	further	discussed	in	Note	8.

The	Company	entered	into	a	sponsor	advisory	agreement,	dated	July	6,	2007,	with	KKR and	Goldman,	Sachs	&	Co.	pursuant	to	which	those	entities	provided	management	and	advisory services	to	the	Company.	Under	the	terms	of	the	sponsor	advisory	agreement,	among	other things,	the	Company	was	obliged	to	pay	to	those	entities	an	aggregate,	initial	management	fee	of

$5.0	million	annually.	Upon	the	completion	of	the	Company's	initial	public	offering	discussed	in Note	2,	pursuant	to	the	advisory	agreement,	the	Company	paid	a	fee	of	$63.6	million	from	cash generated	from	operations	to	KKR	and	Goldman,	Sachs	&	Co.,	which	amount	included	a transaction	fee	equal	to	1%,	or	$4.8	million,	of	the	gross	primary	proceeds	from	the	offering accounted	for	as	a	cost	of	raising	equity	and	a	corresponding	reduction	to	Additional	paid-in capital;	and	approximately	$58.8	million	in	connection	with	its	termination,	which	is	included	in SG&A	expenses	for	2009.	Including	the	transaction	and	termination	fees	discussed	above,	the total	management	fees	and	other	expenses	incurred	for	the	years	ended	January	28,	2011, January	29,	2010	and	January	30,	2009	totaled	$0.2	million,	$68.0	million	and	$6.6	million, respectively.	In	addition,	on	July	6,	2007,	the	Company	entered	into	a	separate	indemnification agreement	with	the	parties	to	the	sponsor	advisory	agreement,	pursuant	to	which	the	Company agreed	to	provide	customary	indemnification	to	such	parties	and	their	affiliates.

From	time	to	time,	the	Company	uses	Capstone	Consulting,	LLC,	a	team	of	executives who	work	exclusively	with	KKR	portfolio	companies	providing	certain	consulting	services.	The Chief	Executive	Officer	of	Capstone	served	on	the	Company's	Board	of	Directors	until	March 2009.	Although	neither	KKR	nor	any	entity	affiliated	with	KKR	owns	any	of	the	equity	of Capstone,	prior	to	January	1,	2007	KKR	had	provided	financing	to	Capstone.	The	aggregate	fees incurred	for	Capstone	services	for	the	periods	ended	January	28,	2011,	January	29,	2010	and January	30,	2009	totaled	zero,	$0.2	million	and	$3.0	million,	respectively.

The	Company	entered	into	an	underwriting	agreement	with	KKR	Capital	Markets	(an affiliate	of	KKR),	Goldman,	Sachs	&	Co.,	Citigroup	Global	Markets	Inc.,	and	several	other entities	to	serve	as	underwriters	in	connection	with	its	initial	public	offering.	The	Company provided	underwriting	discounts	of	approximately	$27.4	million	pursuant	to	the	underwriting agreement,	approximately	$6.0	million	of	which	was	provided	to	each	of	(a)	KKR	Capital Markets;	(b)	Goldman,	Sachs	&	Co.;	and	(c)	Citigroup	Global	Markets	Inc.	The	Company	paid approximately	$3.3	million	in	expenses	related	to	the	initial	public	offering	(excluding underwriting	discounts	and	commissions),	including	the	offering-related	expenses	of	the	selling shareholder	which	the	Company	was	required	to	pay	under	the	terms	of	an	existing	registration rights	agreement.

Affiliates	of	KKR	and	of	Goldman,	Sachs	&	Co.	served	as	underwriters	in	connection with	the	secondary	offerings	of	the	Company's	common	stock	held	by	certain	existing shareholders	that	were	completed	in	April	2010	and	December	2010.	The	Company	did	not	sell shares	of	common	stock,	receive	proceeds	from	the	secondary	sales,	or	pay	any	underwriting fees	in	connection	with	either	secondary	offering.	Certain	members	of	our	management, including	certain	of	our	executive	officers,	exercised	registration	rights	in	connection	with	such offerings.

# 13. Segment	reporting

The	Company	manages	its	business	on	the	basis	of	one	reportable	segment.	See	Note	1 for	a	brief	description	of	the	Company's	business.	As	of	January	28,	2011,	all	of	the	Company's operations	were	located	within	the	United	States	with	the	exception	of	a	Hong	Kong	subsidiary, and	a	liaison	office	in	India,	the	collective	assets	and	revenues	of	which	are	not	material.	The following	net	sales	data	is	presented	in	accordance	with	accounting	standards	related	to disclosures	about	segments	of	an	enterprise.

| (In	thousands) | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Classes\tof\tsimilar\tproducts: |  |  |  |
| Consumables | $9,332,119 | $8,356,381 | $7,248,418 |
| Seasonal | 1,887,917 | 1,711,471 | 1,521,450 |
| Home\tproducts | 917,638 | 869,772 | 862,226 |
| Apparel | 897,326 | 858,756 | 825,574 |
| Net\tsales | $13,035,000 | $11,796,380 | $10,457,668 |

# 14. Quarterly	financial	data	(unaudited)

The	following	is	selected	unaudited	quarterly	financial	data	for	the	fiscal	years	ended January	28,	2011	and	January	29,	2010.	Each	quarterly	period	listed	below	was	a	13-week accounting	period.	The	sum	of	the	four	quarters	for	any	given	year	may	not	equal	annual	totals due	to	rounding.

|  | First | Second | Third | Fourth |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Quarter | Quarter | Quarter | Quarter |
| 2010: |  |  |  |  |
| Net\tsales | $3,111,314 | $3,214,155 | $3,223,427 | $3,486,104 |
| Gross\tprofit | 999,756 | 1,035,979 | 1,010,668 | 1,130,153 |
| Operating\tprofit | 290,723 | 300,757 | 274,334 | 408,251 |
| Net\tincome | 135,996 | 141,195 | 128,120 | 222,546 |
| Basic\tearnings\tper\tshare | 0.40 | 0.41 | 0.38 | 0.65 |
| Diluted\tearnings\tper\tshare | 0.39 | 0.41 | 0.37 | 0.64 |

|  | First | Second | Third | Fourth |
| :--- | :--- | :--- | :--- | :--- |
| (In\tthousands) | Quarter | Quarter | Quarter | Quarter |
| 2009: |  |  |  |  |
| Net\tsales | $2,779,937 | $2,901,907 | $2,928,751 | $3,185,785 |
| Gross\tprofit | 855,358 | 906,042 | 903,082 | 1,025,389 |
| Operating\tprofit | 224,869 | 233,217 | 216,239 | 278,933 |
| Net\tincome | 83,006 | 93,590 | 75,649 | 87,197 |
| Basic\tearnings\tper\tshare | 0.26 | 0.29 | 0.24 | 0.26 |
| Diluted\tearnings\tper\tshare | 0.26 | 0.29 | 0.24 | 0.26 |

As	discussed	in	Note	11,	in	the	first	quarter	of	2010	the	Company	incurred	share-based compensation	expenses	of	$13.3	million	($8.1	million	net	of	tax,	or	$0.02	per	diluted	share)	for the	accelerated	vesting	of	certain	share-based	awards	in	conjunction	with	a	secondary	offering	of the	Company's	common	stock	which	is	included	in	SG&A	expenses.

As	discussed	in	Note	7,	in	the	second	quarter	of	2010,	the	Company	repurchased	$50.0 million	principal	amount	of	its	outstanding	Senior	Notes,	resulting	in	a	pretax	loss	of	$6.5	million ($4.0	million	net	of	tax,	or	$0.01	per	diluted	share)	which	is	recognized	as	Other	(income) expense.

As	discussed	in	Note	7,	in	the	third	quarter	of	2010,	the	Company	repurchased	$65.0 million	principal	amount	of	its	outstanding	Senior	Notes,	resulting	in	a	pretax	loss	of	$8.2	million ($5.0	million	net	of	tax,	or	$0.01	per	diluted	share)	which	is	recognized	as	Other	(income) expense.

As	discussed	in	Note	11,	in	the	fourth	quarter	of	2010	the	Company	incurred	share-based compensation	expenses	of	$3.8	million	($2.3	million	net	of	tax,	or	$0.01	per	diluted	share)	for the	accelerated	vesting	of	certain	share-based	awards	in	conjunction	with	a	secondary	offering	of the	Company's	common	stock	which	is	included	in	SG&A	expenses.

As	discussed	in	Note	12,	in	the	fourth	quarter	of	2009,	the	Company	terminated	an advisory	agreement	with	KKR	and	Goldman,	Sachs	&	Co.	pursuant	to	which	those	entities provided	management	and	advisory	services	to	the	Company,	which	resulted	in	a	pretax	charge of	approximately	$58.8	million	($46.2	million	net	of	tax,	or	$0.14	per	diluted	share),	which	is included	in	SG&A	expenses.

As	discussed	in	Note	7,	in	the	fourth	quarter	of	2009,	the	Company	repurchased	$195.7 million	principal	amount	of	its	outstanding	Senior	Notes,	$205.2	million	principal	amount	of	its outstanding	Senior	Subordinated	Notes,	and	repaid	$325.0	million	principal	amount	on	the	Term Loan	Facility,	resulting	in	a	pretax	loss	of	$55.3	million	($33.8	million	net	of	tax,	or	$0.10	per diluted	share)	which	is	recognized	as	Other	(income)	expense.

As	discussed	in	Note	11,	in	the	fourth	quarter	of	2009	the	Company	incurred	share-based compensation	expenses	of	$9.4	million	($5.8	million	net	of	tax,	or	$0.02	per	diluted	share)	for the	accelerated	vesting	of	certain	share-based	awards	in	conjunction	with	the	Company's	initial public	offering,	which	is	included	in	SG&A	expenses.

# 15. Guarantor	subsidiaries

Certain	of	the	Company's	subsidiaries	(the	"Guarantors")	have	fully	and	unconditionally guaranteed	on	a	joint	and	several	basis	the	Company's	obligations	under	certain	outstanding	debt obligations.	Each	of	the	Guarantors	is	a	direct	or	indirect	wholly-owned	subsidiary	of	the Company.	The	following	consolidating	schedules	present	condensed	financial	information	on	a combined	basis,	in	thousands.

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $111,545 | $364,404 | $21,497 | $- | $497,446 |
| Merchandise\tinventories | - | 1,765,433 | - | - | 1,765,433 |
| Income\ttaxes\treceivable | 13,529 | - | - | (13,529) | - |
| Deferred\tincome\ttaxes\treceivable | 8,877 | - | 6,825 | (15,702) | - |
| Prepaid\texpenses\tand\tother |  |  |  |  |  |
| current\tassets | 741,352 | 3,698,117 | 4,454 | (4,338,977) | 104,946 |
| Total\tcurrent\tassets | 875,303 | 5,827,954 | 32,776 | (4,368,208) | 2,367,825 |
| Net\tproperty\tand\tequipment | 105,155 | 1,419,133 | 287 | - | 1,524,575 |
| Goodwill | 4,338,589 | - | - | - | 4,338,589 |
| Intangible\tassets,\tnet | 1,199,200 | 57,722 | - | - | 1,256,922 |
| Deferred\tincome\ttaxes\treceivable | - | - | 47,690 | (47,690) | - |
| Other\tassets,\tnet | 5,337,522 | 12,675 | 304,285 | (5,596,171) | 58,311 |
| Total\tassets | $11,855,769 | $7,317,484 | $385,038 | $(10,012,069) | $9,546,222 |
| LIABILITIES\tAND |  |  |  |  |  |
| SHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term |  |  |  |  |  |
| obligations | $- | $1,157 | $- | $- | $1,157 |
| Accounts\tpayable | 3,691,564 | 1,541,593 | 50,824 | (4,330,340) | 953,641 |
| Accrued\texpenses\tand\tother | 68,398 | 226,225 | 61,755 | (8,637) | 347,741 |
| Income\ttaxes\tpayable | 11,922 | 13,246 | 14,341 | (13,529) | 25,980 |
| Deferred\tincome\ttaxes\tpayable | - | 52,556 | - | (15,702) | 36,854 |
| Total\tcurrent\tliabilities | 3,771,884 | 1,834,777 | 126,920 | (4,368,208) | 1,365,373 |
| Long-term\tobligations | 3,534,447 | 3,000,877 | - | (3,248,254) | 3,287,070 |
| Deferred\tincome\ttaxes\tpayable | 417,874 | 228,381 | - | (47,690) | 598,565 |
| Other\tliabilities | 67,932 | 27,250 | 136,400 | - | 231,582 |
| Redeemable\tcommon\tstock | 9,153 | - | - | - | 9,153 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | - | - | - | - | - |
| Common\tstock | 298,819 | 23,855 | 100 | (23,955) | 298,819 |
| Additional\tpaid-in\tcapital | 2,945,024 | 431,253 | 19,900 | (451,153) | 2,945,024 |
| Retained\tearnings | 830,932 | 1,771,091 | 101,718 | (1,872,809) | 830,932 |
| Accumulated\tother |  |  |  |  |  |
| comprehensive\tloss | (20,296) | - | - | - | (20,296) |
| Total\tshareholders'\tequity | 4,054,479 | 2,226,199 | 121,718 | (2,347,917) | 4,054,479 |
| Total\tliabilities\tand\tshareholders'\nequity | $11,855,769 | $7,317,484 | $385,038 | $(10,012,069) | $9,546,222 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| BALANCE\tSHEET: |  |  |  |  |  |
| ASSETS |  |  |  |  |  |
| Current\tassets: |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $97,620 | $103,001 | $21,455 | $- | $222,076 |
| Merchandise\tinventories | - | 1,519,578 | - | - | 1,519,578 |
| Income\ttaxes\treceivable | 9,924 | 1,645 | - | (4,026) | 7,543 |
| Deferred\tincome\ttaxes\treceivable | 16,066 | - | 3,559 | (19,625) | - |
| Prepaid\texpenses\tand\tother |  |  |  |  |  |
| current\tassets | 625,157 | 3,040,792 | 704 | (3,570,401) | 96,252 |
| Total\tcurrent\tassets | 748,767 | 4,665,016 | 25,718 | (3,594,052) | 1,845,449 |
| Net\tproperty\tand\tequipment | 99,452 | 1,228,829 | 105 | - | 1,328,386 |
| Goodwill | 4,338,589 | - | - | - | 4,338,589 |
| Intangible\tassets,\tnet | 1,201,223 | 83,060 | - | - | 1,284,283 |
| Deferred\tincome\ttaxes\treceivable | - | - | 36,405 | (36,405) | - |
| Other\tassets,\tnet | 4,288,270 | 8,920 | 297,757 | (4,528,135) | 66,812 |
| Total\tassets | $10,676,301 | $5,985,825 | $359,985 | $(8,158,592) | $8,863,519 |
| LIABILITIES\tAND |  |  |  |  |  |
| SHAREHOLDERS'\tEQUITY |  |  |  |  |  |
| Current\tliabilities: |  |  |  |  |  |
| Current\tportion\tof\tlong-term |  |  |  |  |  |
| obligations | $1,822 | $1,849 | $- | $- | $3,671 |
| Accounts\tpayable | 3,033,723 | 1,311,063 | 46,818 | (3,560,651) | 830,953 |
| Accrued\texpenses\tand\tother | 72,320 | 226,571 | 53,149 | (9,750) | 342,290 |
| Income\ttaxes\tpayable | 4,086 | - | 4,465 | (4,026) | 4,525 |
| Deferred\tincome\ttaxes\tpayable | - | 44,686 | - | (19,625) | 25,061 |
| Total\tcurrent\tliabilities | 3,111,951 | 1,584,169 | 104,432 | (3,594,052) | 1,206,500 |
| Long-term\tobligations | 3,645,820 | 2,689,492 | 13,178 | (2,948,775) | 3,399,715 |
| Deferred\tincome\ttaxes\tpayable | 394,045 | 188,532 | - | (36,405) | 546,172 |
| Other\tliabilities | 115,701 | 40,065 | 146,582 | - | 302,348 |
| Redeemable\tcommon\tstock | 18,486 | - | - | - | 18,486 |
| Shareholders'\tequity: |  |  |  |  |  |
| Preferred\tstock | - | - | - | - | - |
| Common\tstock | 298,013 | 23,855 | 100 | (23,955) | 298,013 |
| Additional\tpaid-in\tcapital | 2,923,377 | 431,253 | 19,900 | (451,153) | 2,923,377 |
| Retained\tearnings | 203,075 | 1,028,459 | 75,793 | (1,104,252) | 203,075 |
| Accumulated\tother |  |  |  |  |  |
| comprehensive\tloss | (34,167) | - | - | - | (34,167) |
| Total\tshareholders'\tequity | 3,390,298 | 1,483,567 | 95,793 | (1,579,360) | 3,390,298 |
| Total\tliabilities\tand\tshareholders'\nequity | $10,676,301 | $5,985,825 | $359,985 | $(8,158,592) | $8,863,519 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tINCOME: |  |  |  |  |  |
| Net\tsales | $311,280 | $13,035,000 | $84,878 | $(396,158) | $13,035,000 |
| Cost\tof\tgoods\tsold | - | 8,858,444 | - | - | 8,858,444 |
| Gross\tprofit | 311,280 | 4,176,556 | 84,878 | (396,158) | 4,176,556 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 283,069 | 2,948,346 | 67,234 | (396,158) | 2,902,491 |
| Operating\tprofit | 28,211 | 1,228,210 | 17,644 | - | 1,274,065 |
| Interest\tincome | (44,677) | (7,025) | (19,986) | 71,468 | (220) |
| Interest\texpense | 300,934 | 44,723 | 23 | (71,468) | 274,212 |
| Other\t(income)\texpense | 15,101 | - | - | - | 15,101 |
| Income\t(loss)\tbefore\tincome\ttaxes | (243,147) | 1,190,512 | 37,607 | - | 984,972 |
| Income\ttax\texpense\t(benefit) | (102,448) | 447,881 | 11,682 | - | 357,115 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet |  |  |  |  |  |
| of\ttaxes | 768,556 | - | - | (768,556) | - |
| Net\tincome | $627,857 | $742,631 | $25,925 | $(768,556) | $627,857 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tINCOME: |  |  |  |  |  |
| Net\tsales | $306,036 | $11,796,380 | $91,265 | $(397,301) | $11,796,380 |
| Cost\tof\tgoods\tsold | - | 8,106,509 | - | - | 8,106,509 |
| Gross\tprofit | 306,036 | 3,689,871 | 91,265 | (397,301) | 3,689,871 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 337,224 | 2,734,793 | 61,897 | (397,301) | 2,736,613 |
| Operating\tprofit\t(loss) | (31,188) | 955,078 | 29,368 | - | 953,258 |
| Interest\tincome | (52,047) | (10,968) | (19,674) | 82,545 | (144) |
| Interest\texpense | 375,280 | 52,980 | 29 | (82,545) | 345,744 |
| Other\t(income)\texpense | 55,542 | - | - | - | 55,542 |
| Income\t(loss)\tbefore\tincome\ttaxes | (409,963) | 913,066 | 49,013 | - | 552,116 |
| Income\ttax\texpense\t(benefit) | (149,478) | 346,117 | 16,035 | - | 212,674 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet |  |  |  |  |  |
| of\ttaxes | 599,927 | - | - | (599,927) | - |
| Net\tincome | $339,442 | $566,949 | $32,978 | $(599,927) | $339,442 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tINCOME: |  |  |  |  |  |
| Net\tsales | $236,682 | $10,457,668 | $97,917 | $(334,599) | $10,457,668 |
| Cost\tof\tgoods\tsold | - | 7,396,571 | - | - | 7,396,571 |
| Gross\tprofit | 236,682 | 3,061,097 | 97,917 | (334,599) | 3,061,097 |
| Selling,\tgeneral\tand\tadministrative |  |  |  |  |  |
| expenses | 210,665 | 2,499,331 | 73,214 | (334,599) | 2,448,611 |
| Litigation\tsettlement\tand\trelated |  |  |  |  |  |
| costs,\tnet | 32,000 | - | - | - | 32,000 |
| Operating\tprofit\t(loss) | (5,983) | 561,766 | 24,703 | - | 580,486 |
| Interest\tincome | (62,722) | (36,844) | (13,532) | 110,037 | (3,061) |
| Interest\texpense | 427,365 | 74,586 | 18 | (110,037) | 391,932 |
| Other\t(income)\texpense | (2,788) | - | - | - | (2,788) |
| Income\t(loss)\tbefore\tincome\ttaxes | (367,838) | 524,024 | 38,217 | - | 194,403 |
| Income\ttax\texpense\t(benefit) | (115,924) | 190,146 | 11,999 | - | 86,221 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet |  |  |  |  |  |
| of\ttaxes | 360,096 | - | - | (360,096) | - |
| Net\tincome | $108,182 | $333,878 | $26,218 | $(360,096) | $108,182 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | $627,857 | $742,631 | $25,925 | $(768,556) | $627,857 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet |  |  |  |  |  |
| cash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 33,015 | 221,851 | 61 | - | 254,927 |
| Deferred\tincome\ttaxes | 17,817 | 47,719 | (14,551) | - | 50,985 |
| Tax\tbenefit\tof\tstock\toptions | (13,905) | - | - | - | (13,905) |
| Loss\ton\tdebt\tretirement,\tnet | 14,576 | - | - | - | 14,576 |
| Non-cash\tshare-based\tcompensation | 15,956 | - | - | - | 15,956 |
| Noncash\tinventory\tadjustments\tand\tasset |  |  |  |  |  |
| impairments | - | 7,607 | - | - | 7,607 |
| Other\tnon-cash\tgains\tand\tlosses | 1,395 | 4,547 | - | - | 5,942 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (768,556) | - | - | 768,556 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | (251,809) | - | - | (251,809) |
| Prepaid\texpenses\tand\tother\tcurrent |  |  |  |  |  |
| assets | (1,646) | (3,642) | (4,869) | - | (10,157) |
| Accounts\tpayable | (5,446) | 124,120 | 4,750 | - | 123,424 |
| Accrued\texpenses\tand\tother | (28,442) | (12,410) | (1,576) | - | (42,428) |
| Income\ttaxes | 18,136 | 14,891 | 9,876 | - | 42,903 |
| Other | 816 | (2,008) | (2) | - | (1,194) |
| Net\tcash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities | (88,427) | 893,497 | 19,614 | - | 824,684 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (22,830) | (397,322) | (243) | - | (420,395) |
| Sales\tof\tproperty\tand\tequipment | - | 1,448 | - | - | 1,448 |
| Net\tcash\tused\tin\tinvesting\tactivities | (22,830) | (395,874) | (243) | - | (418,947) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 631 | - | - | - | 631 |
| Repayments\tof\tlong-term\tobligations | (129,217) | (1,963) | - | - | (131,180) |
| Repurchases\tof\tcommon\tstock\tand |  |  |  |  |  |
| settlement\tof\tequity\tawards,\tnet\tof |  |  |  |  |  |
| employee\ttaxes\tpaid | (13,723) | - | - | - | (13,723) |
| Tax\tbenefit\tof\tstock\toptions | 13,905 | - | - | - | 13,905 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 253,586 | (234,257) | (19,329) | - | - |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing |  |  |  |  |  |
| activities |  |  |  |  |  |
|  | 125,182 | (236,220) | (19,329) | - | (130,367) |
| Net\tincrease\tin\tcash\tand\tcash\tequivalents | 13,925 | 261,403 | 42 | - | 275,370 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof |  |  |  |  |  |
| year | 97,620 | 103,001 | 21,455 | - | 222,076 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $111,545 | $364,404 | $21,497 | $- | $497,446 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | $339,442 | $566,949 | $32,978 | $(599,927) | $339,442 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet |  |  |  |  |  |
| cash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 36,541 | 220,048 | 182 | - | 256,771 |
| Deferred\tincome\ttaxes | (18,571) | 67,317 | (33,886) | - | 14,860 |
| Tax\tbenefit\tof\tstock\toptions | (5,390) | - | - | - | (5,390) |
| Loss\ton\tdebt\tretirement,\tnet | 55,265 | - | - | - | 55,265 |
| Non-cash\tshare-based\tcompensation | 17,295 | - | - | - | 17,295 |
| Noncash\tinventory\tadjustments\tand\tasset |  |  |  |  |  |
| impairments | - | 647 | - | - | 647 |
| Other\tnon-cash\tgains\tand\tlosses | 3,221 | 4,699 | - | - | 7,920 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (599,927) | - | - | 599,927 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | (100,248) | - | - | (100,248) |
| Prepaid\texpenses\tand\tother\tcurrent |  |  |  |  |  |
| assets | 2,582 | (10,252) | 372 | - | (7,298) |
| Accounts\tpayable | 26,535 | 79,515 | (1) | - | 106,049 |
| Accrued\texpenses\tand\tother | (20,672) | 10,494 | (2,465) | - | (12,643) |
| Income\ttaxes | 48,494 | (50,112) | 2,771 | - | 1,153 |
| Other | (3,203) | 2,171 | 32 | - | (1,000) |
| Net\tcash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities | (118,388) | 791,228 | (17) | - | 672,823 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (34,647) | (216,032) | (68) | - | (250,747) |
| Sales\tof\tproperty\tand\tequipment | - | 2,701 | - | - | 2,701 |
| Net\tcash\tused\tin\tinvesting\tactivities | (34,647) | (213,331) | (68) | - | (248,046) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 443,753 | - | - | - | 443,753 |
| Issuance\tof\tlong-term\tobligations | - | 1,080 | - | - | 1,080 |
| Repayments\tof\tlong-term\tobligations | (782,518) | (2,742) | - | - | (785,260) |
| Payment\tof\tcash\tdividends\tand\trelated |  |  |  |  |  |
| amounts | (239,731) | - | - | - | (239,731) |
| Repurchases\tof\tcommon\tstock\tand |  |  |  |  |  |
| settlement\tof\tequity\tawards,\tnet\tof |  |  |  |  |  |
| employee\ttaxes\tpaid | (5,928) | - | - | - | (5,928) |
| Tax\tbenefit\tof\tstock\toptions | 5,390 | - | - | - | 5,390 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 537,052 | (537,638) | 586 | - | - |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing |  |  |  |  |  |
| activities | (41,982) | (539,300) | 586 | - | (580,696) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash |  |  |  |  |  |
| equivalents | (195,017) | 38,597 | 501 | - | (155,919) |
| Cash\tand\tcash\tequivalents,\tbeginning\tof |  |  |  |  |  |
| year | 292,637 | 64,404 | 20,954 | - | 377,995 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $97,620 | $103,001 | $21,455 | $- | $222,076 |

|  | DOLLAR<br>GENERAL<br>CORPORATION | GUARANTOR<br>SUBSIDIARIES | OTHER<br>SUBSIDIARIES | ELIMINATIONS | CONSOLIDATED<br>TOTAL |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENTS\tOF\tCASH\tFLOWS: |  |  |  |  |  |
| Cash\tflows\tfrom\toperating\tactivities: |  |  |  |  |  |
| Net\tincome | $108,182 | $333,878 | $26,218 | $(360,096) | $108,182 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet |  |  |  |  |  |
| cash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities: |  |  |  |  |  |
| Depreciation\tand\tamortization | 34,638 | 213,003 | 258 | - | 247,899 |
| Deferred\tincome\ttaxes | (4,681) | 16,500 | 61,615 | - | 73,434 |
| Tax\tbenefit\tof\tstock\toptions | (950) | - | - | - | (950) |
| Gain\ton\tdebt\tretirement,\tnet | (3,818) | - | - | - | (3,818) |
| Non-cash\tshare-based\tcompensation | 9,958 | - | - | - | 9,958 |
| Noncash\tinventory\tadjustments\tand\tasset |  |  |  |  |  |
| impairments | - | 50,671 | - | - | 50,671 |
| Other\tnon-cash\tgains\tand\tlosses | 714 | 5,538 | - | - | 6,252 |
| Equity\tin\tsubsidiaries'\tearnings,\tnet | (360,096) | - | - | 360,096 | - |
| Change\tin\toperating\tassets\tand\tliabilities: |  |  |  |  |  |
| Merchandise\tinventories | - | (173,014) | - | - | (173,014) |
| Prepaid\texpenses\tand\tother\tcurrent |  |  |  |  |  |
| assets | (2,310) | 3,765 | (2,053) | - | (598) |
| Accounts\tpayable | 18,717 | 121,546 | 93 | - | 140,356 |
| Accrued\texpenses\tand\tother | 11,427 | 46,177 | 11,132 | - | 68,736 |
| Income\ttaxes | 56,596 | (10,797) | (11,813) | - | 33,986 |
| Other | 2,529 | 11,643 | (88) | - | 14,084 |
| Net\tcash\tprovided\tby\t(used\tin)\toperating |  |  |  |  |  |
| activities | (129,094) | 618,910 | 85,362 | - | 575,178 |
| Cash\tflows\tfrom\tinvesting\tactivities: |  |  |  |  |  |
| Purchases\tof\tproperty\tand\tequipment | (16,467) | (189,058) | (21) | - | (205,546) |
| Purchases\tof\tshort-term\tinvestments | - | - | (9,903) | - | (9,903) |
| Sales\tof\tshort-term\tinvestments | - | - | 61,547 | - | 61,547 |
| Sales\tof\tproperty\tand\tequipment | - | 1,266 | - | - | 1,266 |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting |  |  |  |  |  |
| activities | (16,467) | (187,792) | 51,623 | - | (152,636) |
| Cash\tflows\tfrom\tfinancing\tactivities: |  |  |  |  |  |
| Issuance\tof\tcommon\tstock | 4,228 | - | - | - | 4,228 |
| Repayments\tunder\trevolving\tcredit\tfacility | (102,500) | - | - | - | (102,500) |
| Repayments\tof\tlong-term\tobligations | (40,780) | (3,645) | - | - | (44,425) |
| Repurchases\tof\tcommon\tstock\tand |  |  |  |  |  |
| settlement\tof\tequity\tawards,\tnet\tof |  |  |  |  |  |
| employee\ttaxes\tpaid | (3,009) | - | - | - | (3,009) |
| Tax\tbenefit\tof\tstock\toptions | 950 | - | - | - | 950 |
| Changes\tin\tintercompany\tnote\tbalances,\tnet | 570,989 | (422,448) | (148,541) | - | - |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing |  |  |  |  |  |
| activities | 429,878 | (426,093) | (148,541) | - | (144,756) |
| Net\tincrease\t(decrease)\tin\tcash\tand\tcash |  |  |  |  |  |
| equivalents | 284,317 | 5,025 | (11,556) | - | 277,786 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof |  |  |  |  |  |
| year | 8,320 | 59,379 | 32,510 | - | 100,209 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $292,637 | $64,404 | $20,954 | $- | $377,995 |

# ITEM	9. CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# Not	applicable.

# ITEM	9A. 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	15d-15(e)	promulgated	under	the	Securities	Exchange	Act	of 1934,	as	amended	(the	"Exchange	Act").	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) Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting.	Our management	prepared	and	is	responsible	for	the	consolidated	financial	statements	and	all	related financial	information	contained	in	this	report.	This	responsibility	includes	establishing	and maintaining	adequate	internal	control	over	financial	reporting	as	defined	in	Rule	13a-15(f)	or 15d-15(f)	under	the	Exchange	Act.	Our	internal	control	over	financial	reporting	is	designed	to provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation of	financial	statements	for	external	purposes	in	accordance	with	United	States	generally	accepted accounting	principles.

To	comply	with	the	requirements	of	Section	404	of	the	Sarbanes–Oxley	Act	of	2002, management	designed	and	implemented	a	structured	and	comprehensive	assessment	process	to evaluate	the	effectiveness	of	its	internal	control	over	financial	reporting.	Such	assessment	was based	on	criteria	established	in	Internal	Control—Integrated	Framework	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	Because	of	its	inherent limitations,	a	system	of	internal	control	over	financial	reporting	can	provide	only	reasonable assurance	and	may	not	prevent	or	detect	misstatements.	Management	regularly	monitors	our internal	control	over	financial	reporting,	and	actions	are	taken	to	correct	any	deficiencies	as	they are	identified.	Based	on	its	assessment,	management	has	concluded	that	our	internal	control	over financial	reporting	is	effective	as	of	January	28,	2011.

Ernst	&	Young	LLP,	the	independent	registered	public	accounting	firm	that	audited	our consolidated	financial	statements,	has	issued	an	attestation	report	on	management's	assessment	of our	internal	control	over	financial	reporting.	Such	attestation	report	is	contained	below.

# (c)	Attestation	Report	of	Independent	Registered	Public	Accounting	Firm.

We	have	audited	Dollar	General	Corporation	and	subsidiaries'		internal	control	over financial	reporting	as	of	January	28,	2011,	based	on	criteria	established	in	Internal	Control— Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	(the	COSO	criteria).	Dollar	General	Corporation	and	subsidiaries'	management	is responsible	for	maintaining	effective	internal	control	over	financial	reporting,	and	for	its assessment	of	the	effectiveness	of	internal	control	over	financial	reporting	included	in	the accompanying	Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting.	Our responsibility	is	to	express	an	opinion	on	the	company's	internal	control	over	financial	reporting based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and	perform the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial reporting	was	maintained	in	all	material	respects.	Our	audit	included	obtaining	an	understanding of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists, testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the circumstances.	We	believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting principles.	A	company's	internal	control	over	financial	reporting	includes	those	policies	and procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations of	management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	the	company's assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of	effectiveness	to	future periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in conditions,	or	that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	Dollar	General	Corporation	and	subsidiaries	maintained,	in	all	material respects,	effective	internal	control	over	financial	reporting	as	of	January	28,	2011,	based	on	the COSO	criteria.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company Accounting	Oversight	Board	(United	States),	the	accompanying	consolidated	balance	sheets	of Dollar	General	Corporation	and	subsidiaries	as	of	January	28,	2011	and	January	29,	2010,	and the	related	consolidated	statements	of	income,	shareholders'	equity,	and	cash	flows	for	the	years ended	January	28,	2011,	January	29,	2010,	and	January	30,	2009	of	Dollar	General	Corporation and	subsidiaries	and	our	report	dated	March	22,	2011	expressed	an	unqualified	opinion	thereon.

# Nashville,	Tennessee March	22,	2011

(d) Changes	in	Internal	Control	Over	Financial	Reporting.	There	have	been	no changes	during	the	quarter	ended	January	28,	2011	in	our	internal	control	over	financial reporting	(as	defined	in	Exchange	Act	Rule	13a-15(f))	that	have	materially	affected,	or	are reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# ITEM	9B. OTHER	INFORMATION

# PART	III

# ITEM	10. DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE GOVERNANCE

(a) Information	Regarding	Directors	and	Executive	Officers.		The	information required	by	this	Item	10	regarding	our	directors	and	director	nominees	is	contained	under	the captions	"—Who	are	the	nominees	this	year,"	"—What	are	the	backgrounds	of	this	year's nominees,"	"—Are	there	any	familial	relationships	between	any	of	the	nominees"	and	"—How are	directors	identified	and	nominated,"	all	under	"Proposal	1:	Election	of	Directors,"	as	well	as "Corporate	Governance—Does	the	Board	have	standing	Audit,	Compensation,	and	Nominating Committees,"	all	in	our	definitive	Proxy	Statement	to	be	filed	for	our	2011	Annual	Meeting	of Shareholders	to	be	held	on	May	25,	2011	(the	"2011	Proxy	Statement"),	which	information	under such	captions	is	incorporated	herein	by	reference.	Information	required	by	this	Item	10	regarding our	executive	officers	is	contained	in	Part	I	of	this	Form	10-K	under	the	caption	"Executive Officers	of	the	Registrant,"	which	information	under	such	caption	is	incorporated	herein	by reference.

(b) Compliance	with	Section	16(a)	of	the	Exchange	Act.	Information	required	by	this Item	10	regarding	compliance	with	Section	16(a)	of	the	Exchange	Act	is	contained	under	the caption	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	in	the	2011	Proxy Statement,	which	information	under	such	caption	is	incorporated	herein	by	reference.

(c) Code	of	Business	Conduct	and	Ethics.		We	have	adopted	a	Code	of	Business Conduct	and	Ethics	that	applies	to	all	of	our	employees,	officers	and	Board	members.	This	Code is	posted	on	our	Internet	website	at	www.dollargeneral.com.	If	we	choose	to	no	longer	post	such Code,	we	will	provide	a	free	copy	to	any	person	upon	written	request	to	Dollar	General Corporation,	c/o	Investor	Relations	Department,	100	Mission	Ridge,	Goodlettsville,	TN	37072. We	intend	to	provide	any	required	disclosure	of	an	amendment	to	or	waiver	from	the	Code	of Business	Conduct	and	Ethics	that	applies	to	our	principal	executive	officer,	principal	financial officer,	principal	accounting	officer	or	controller,	or	persons	performing	similar	functions,	on	our Internet	website	located	at	www.dollargeneral.com	promptly	following	the	amendment	or waiver.	We	may	elect	to	disclose	any	such	amendment	or	waiver	in	a	report	on	Form	8-K	filed with	the	SEC	either	in	addition	to	or	in	lieu	of	the	website	disclosure.	The	information	contained on	or	connected	to	our	Internet	website	is	not	incorporated	by	reference	into	this	Form	10-K	and should	not	be	considered	part	of	this	or	any	other	report	that	we	file	with	or	furnish	to	the	SEC.

(d) Procedures	for	Shareholders	to	Nominate	Directors.	Information	required	by	this Item	10	regarding	material	changes	to	the	procedures	by	which	shareholders	may	recommend nominees	to	our	Board	of	Directors	is	contained	under	the	captions	"—How	are	directors identified	and	nominated,"	"—How	are	nominees	evaluated;	what	are	the	minimum qualifications"	and	"—Can	shareholders	nominate	directors,"	all	under	"Proposal	1:	Election	of Directors"	in	the	2011	Proxy	Statement,	which	information	under	such	captions	is	incorporated herein	by	reference.

(e) Audit	Committee	Information.	Information	required	by	this	Item	10	regarding	our audit	committee	and	our	audit	committee	financial	expert	is	contained	under	the	captions "Corporate	Governance—Does	the	Board	have	standing	Audit,	Compensation	and	Nominating Committees"	and	"—Does	Dollar	General	have	an	audit	committee	financial	expert	serving	on its	Audit	Committee"	in	the	2011	Proxy	Statement,	which	information	under	such	captions	is incorporated	herein	by	reference.

# ITEM	11. EXECUTIVE	COMPENSATION

The	information	required	by	this	Item	11	regarding	director	and	executive	officer compensation,	including	the	Compensation	Committee	Report,	the	risks	arising	from	our compensation	policies	and	practices	for	employees,	and	compensation	committee	interlocks	and insider	participation	is	contained	under	the	captions	"Director	Compensation"	and	"Executive Compensation"	in	the	2011	Proxy	Statement,	which	information	under	such	captions	is incorporated	herein	by	reference.

# ITEM	12. SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

(a) Equity	Compensation	Plan	Information.		The	following	table	sets	forth information	about	securities	authorized	for	issuance	under	our	compensation	plans	(including individual	compensation	arrangements)	as	of	January	28,	2011:

(1) Column	(a)	consists	of	shares	of	common	stock	issuable	upon	exercise	of	outstanding	options	and	upon vesting	and	payment	of	restricted	stock	units	under	the	2007	Stock	Incentive	Plan	and	shares	of	common stock	issuable	upon	exercise	of	outstanding	options	under	the	1998	Stock	Incentive	Plan.	Restricted	stock units	are	settled	for	shares	of	common	stock	on	a	one-for-one	basis	and	have	no	exercise	price.	Accordingly, those	units	have	been	excluded	for	purposes	of	computing	the	weighted-average	exercise	price	in	column	(b). Column	(c)	consists	of	shares	reserved	for	issuance	pursuant	to	the	2007	Stock	Incentive	Plan,	whether	in	the form	of	stock,	restricted	stock,	restricted	stock	units,	or	other	stock-based	awards	or	upon	the	exercise	of	an option	or	right.	Although	certain	options	remain	outstanding	under	the	1998	Stock	Incentive	Plan,	no	future awards	may	be	granted	thereunder.

(b)		Other	Information.		The	information	required	by	this	Item	12	regarding	security ownership	of	certain	beneficial	owners	and	our	management	is	contained	under	the	caption "Security	Ownership"	in	the	2011	Proxy	Statement,	which	information	under	such	caption	is incorporated	herein	by	reference.

# ITEM	13. CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND DIRECTOR	INDEPENDENCE

The	information	required	by	this	Item	13	regarding	certain	relationships	and	related transactions	is	contained	under	the	caption	"Transactions	with	Management	and	Others"	in	the 2011	Proxy	Statement,	which	information	under	such	caption	is	incorporated	herein	by	reference.

The	information	required	by	this	Item	13	regarding	director	independence	is	contained under	the	caption	"Director	Independence"	in	the	2011	Proxy	Statement,	which	information under	such	caption	is	incorporated	herein	by	reference.

# ITEM	14. PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

The	information	required	by	this	Item	14	regarding	fees	we	paid	to	our	principal accountant	and	the	pre-approval	policies	and	procedures	established	by	the	Audit	Committee	of our	Board	of	Directors	is	contained	under	the	caption	"Fees	Paid	to	Auditors"	in	the	2011	Proxy Statement,	which	information	under	such	caption	is	incorporated	herein	by	reference.

# PART	IV

# ITEM	15. EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

(a) Report	of	Independent	Registered	Public	Accounting	Firm

(b) All	schedules	for	which	provision	is	made	in	the	applicable	accounting	regulations	of the	SEC	are	not	required	under	the	related	instructions,	are	inapplicable	or	the information	is	included	in	the	Consolidated	Financial	Statements	and,	therefore,	have been	omitted.

(c) Exhibits:		See	Exhibit	Index	immediately	following	the	signature	pages	hereto,	which Exhibit	Index	is	incorporated	by	reference	as	if	fully	set	forth	herein.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	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.

Richard	W.	Dreiling,	Chairman	and	Chief

# Executive	Officer

We,	the	undersigned	directors	and	officers	of	the	registrant,	hereby	severally	constitute Richard	W.	Dreiling	and	David	M.	Tehle,	and	each	of	them	singly,	our	true	and	lawful	attorneys with	full	power	to	them	and	each	of	them	to	sign	for	us,	and	in	our	names	in	the	capacities indicated	below,	any	and	all	amendments	to	this	Annual	Report	on	Form	10-K	filed	with	the Securities	and	Exchange	Commission.

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in	the	capacities	and	on	the dates	indicated.

# /s/	William	C.	Rhodes,	III

# Director

# WILLIAM	C.	RHODES,	III

# DAVID	B.	RICKARD

# EXHIBIT	INDEX

4.1 Form	of	Stock	Certificate	for	Common	Stock	(incorporated	by	reference	to	Exhibit	4.1	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))

4.2 Shareholders'	Agreement	of	Dollar	General	Corporation,	dated	as	of	November	9,	2009 (incorporated	by	reference	to	Exhibit	4.1	to	Dollar	General	Corporation's	Current	Report on	Form	8-K	dated	November	18,	2009,	filed	with	the	SEC	on	November	18,	2009	(file no.	001-11421))

Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.18	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.9 Fifth	Supplemental	Indenture	to	the	Senior	Indenture,	dated	as	of	August	30,	2010,	among Retail	Property	Investments,	LLC	and	U.S.	Bank	National	Association,	as	successor trustee	(incorporated	by	reference	to	Exhibit	4.55	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.10 Instrument	of	Resignation,	Appointment	and	Acceptance,	effective	as	of	February	25, 2009,	by	and	among	Dollar	General	Corporation,	Wells	Fargo	Bank,	National Association,	and	U.S.	Bank	National	Association	(incorporated	by	reference	to	Exhibit	99 to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	February	25,	2009, filed	with	the	SEC	on	February	25,	2009	(file	no.	001-11421))

4.11 Senior	Subordinated	Indenture,	dated	July	6,	2007,	among	Buck	Acquisition	Corp., Dollar	General	Corporation,	the	guarantors	named	therein	and	U.S.	Bank	National Association	(the	successor	trustee),	as	trustee	(incorporated	by	reference	to	Exhibit	4.9	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.13 First	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	September 25,	2007,	between	DC	Financial,	LLC,	the	Guaranteeing	Subsidiary,	and	U.S.	Bank National	Association	(the	successor	trustee),	as	trustee	(incorporated	by	reference	to Exhibit	4.16	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file no.	333-148320))

4.14 Second	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of December	31,	2007,	between	Retail	Risk	Solutions,	LLC,	the	Guaranteeing	Subsidiary, and	U.S.	Bank	National	Association	(the	successor	trustee),	as	trustee	(incorporated	by reference	to	Exhibit	4.33	to	Dollar	General	Corporation's	Registration	Statement	on	Form S-4	(file	no.	333-148320))

4.15 Third	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	March 23,	2009,	between	the	Guaranteeing	Subsidiaries	referenced	therein	and	U.S.	Bank National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.23	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.16 Fourth	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	March 25,	2010,	between	the	Guaranteeing	Subsidiaries	referenced	therein	and	U.S.	Bank National	Association,	as	trustee	(incorporated	by	reference	to	Exhibit	4.25	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.17 Fifth	Supplemental	Indenture	to	the	Senior	Subordinated	Indenture,	dated	as	of	August 30,	2010,	among	Retail	Property	Investments,	LLC	and	U.S.	Bank	National	Association, as	successor	trustee	(incorporated	by	reference	to	Exhibit	4.56	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.18 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Acquisition	Corp., Dollar	General	Corporation,	the	guarantors	named	therein	and	the	initial	purchasers named	therein	(incorporated	by	reference	to	Exhibit	4.10	to	Dollar	General	Corporation's Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file no.	001-11421))

4.19 Registration	Rights	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Buck Holdings,	LLC,	Dollar	General	Corporation	and	Shareholders	named	therein (incorporated	by	reference	to	Exhibit	4.18	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-4	(file	no.	333-148320))

4.20 Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as Borrower,	Citicorp	North	America,	Inc.,	as	Administrative	Agent,	and	the	other	lending institutions	from	time	to	time	party	thereto	(incorporated	by	reference	to	Exhibit	4.2	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.21 Guarantee	to	the	Credit	Agreement,	dated	as	of	July	6,	2007,	among	certain	domestic subsidiaries	of	Dollar	General	Corporation,	as	Guarantors	and	Citicorp	North	America, Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.3	to	Dollar	General Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with	the	SEC	on July	12,	2007	(file	no.	001-11421))

4.25 Supplement	No.	4,	dated	as	of	March	25,	2010,	to	the	Guarantee	to	the	Credit	Agreement, between	the	New	Guarantors	referenced	therein	and	Citicorp	North	America,	Inc.,	as

Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.33	to	Dollar	General

4.26 Supplement	No.	5	to	the	Guarantee	to	the	Credit	Agreement,	dated	as	of	August	30,	2010, by	and	between	Retail	Property	Investments,	LLC	and	Citicorp	North	America,	Inc.,	as Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.57	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.27 Security	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as	Grantors,	and	Citicorp North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.4	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.28 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Security	Agreement,	between DC	Financial,	LLC,	as	New	Grantor,	and	Citicorp	North	America,	Inc.,	as	Collateral Agent	(incorporated	by	reference	to	Exhibit	4.25	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.30 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	Security	Agreement,	between	the New	Grantors	referenced	therein	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.34	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-1	(file	no.	333-158281))

4.31 Supplement	No.	4,	dated	as	of	March	25,	2010,	to	the	Security	Agreement,	between	the New	Grantors	referenced	therein	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.38	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-3	(file	no.	333-165799))

4.32 Supplement	No.	5	to	the	Security	Agreement,	dated	as	of	August	30,	2010,	between	Retail Property	Investments,	LLC	and	Citicorp	North	America,	Inc.,	as	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.58	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-3	(file	no.	333-165799))

4.33 Pledge	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation	and certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as	Pledgors,	and	Citicorp North	America,	Inc.,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.5	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	6,	2007,	filed	with the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.34 Supplement	No.1,	dated	as	of	September	11,	2007,	to	the	Pledge	Agreement,	between	DC Financial,	LLC,	as	Additional	Pledgor,	and	Citicorp	North	America,	Inc.,	as	Collateral Agent	(incorporated	by	reference	to	Exhibit	4.27	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.37 Supplement	No.	4,	dated	as	of	March	25,	2010,	to	the	Pledge	Agreement,	between	the Additional	Pledgors	referenced	therein	and	Citicorp	North	America,	Inc.,	as	Collateral Agent	(incorporated	by	reference	to	Exhibit	4.43	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.38 Supplement	No.	5	to	the	Pledge	Agreement,	dated	as	of	August	30,	2010,	between	Retail Property	Investments,	LLC	and	Citicorp	North	America,	inc.,	as	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.59	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-3	(file	no.	333-165799))

4.39 ABL	Credit	Agreement,	dated	as	of	July	6,	2007,	among	Dollar	General	Corporation,	as Parent	Borrower,	certain	domestic	subsidiaries	of	Dollar	General	Corporation,	as Subsidiary	Borrowers,	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Administrative Agent,	and	the	other	lending	institutions	from	time	to	time	party	thereto	(incorporated	by reference	to	Exhibit	4.6	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K dated	July	6,	2007,	filed	with	the	SEC	on	July	12,	2007	(file	no.	001-11421))

4.40 Appointment	of	Successor	Agent	and	Amendment	No.	1	to	the	ABL	Credit	Agreement entered	into	as	of	July	31,	2009,	by	and	among	The	CIT	Group/Business	Credit,	Inc., Wells	Fargo	Retail	Finance,	LLC,	Dollar	General	Corporation	and	the	Subsidiary Borrowers	and	the	Lenders	signatory	thereto	(incorporated	by	reference	to	Exhibit	99	to Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	July	31,	2009,	filed	with the	SEC	on	August	4,	2009	(file	no.	001-11421))

4.41 Guarantee,	dated	as	of	September	11,	2007,	to	the	ABL	Credit	Agreement,	between	DC Financial,	LLC	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent (incorporated	by	reference	to	Exhibit	4.29	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-4	(file	no.	333-148320))

4.42 Supplement	No.	1,	dated	as	of	December	31,	2007,	to	the	Guarantee	to	the	ABL	Credit Agreement,	between	Retail	Risk	Solutions,	LLC,	as	New	Guarantor,	and	The	CIT

Group/Business	Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to Exhibit	4.37	to	Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file no.	333-148320))

4.47 Supplement	No.	1,	dated	as	of	September	11,	2007,	to	the	ABL	Security	Agreement, between	DC	Financial,	LLC,	as	New	Grantor,	and	The	CIT	Group/Business	Credit	Inc., as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.31	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.48 Supplement	No.	2,	dated	as	of	December	31,	2007,	to	the	ABL	Security	Agreement, between	Retail	Risk	Solutions,	LLC,	as	New	Grantor,	and	The	CIT	Group/Business Credit	Inc.,	as	ABL	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.38	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))

4.49 Supplement	No.	3,	dated	as	of	March	23,	2009,	to	the	ABL	Security	Agreement,	between the	New	Grantors	referenced	therein	and	The	CIT	Group/Business	Credit	Inc.,	as	ABL Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.46	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-158281))

4.50 Supplement	No.	4,	dated	as	of	March	30,	2010,	to	the	ABL	Security	Agreement,	between the	New	Grantors	referenced	therein	and	Wells	Fargo	Retail	Finance,	LLC,	as	ABL Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.54	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

4.51 Supplement	No.	5	to	the	Security	Agreement	to	the	ABL	Credit	Agreement,	dated	as	of August	30,	2010,	between	Retail	Property	Investments,	LLC	and	Wells	Fargo	Retail Finance,	LLC,	as	Collateral	Agent	(incorporated	by	reference	to	Exhibit	4.61	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-3	(file	no.	333-165799))

10.1 Amended	and	Restated	2007	Stock	Incentive	Plan	for	Key	Employees	of	Dollar	General Corporation	and	its	affiliates	(as	approved	by	shareholders	on	October	23,	2009) ((incorporated	by	reference	to	Exhibit	10.1	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-1	(file	no.	333-161464))*

10.2 Form	of	Stock	Option	Agreement	between	Dollar	General	Corporation	and	certain officers	of	Dollar	General	Corporation	granting	stock	options	pursuant	to	the	2007	Stock Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.2	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-4	(file	no.	333-148320))*

10.3 Form	of	Option	Rollover	Agreement	between	Dollar	General	Corporation	and	certain officers	of	Dollar	General	Corporation	(incorporated	by	reference	to	Exhibit	10.3	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))*

10.4 Waiver	of	Certain	Limitations	Pertaining	to	Options	Previously	Granted	under	the Amended	and	Restated	2007	Stock	Incentive	Plan,	effective	August	26,	2010 (incorporated	by	reference	to	Exhibit	10.2	to	Dollar	General	Corporation's	Quarterly Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	30,	2010,	filed	with	the	SEC	on August	31,	2010	(file	no.	001-11421))*

10.5 Form	of	Management	Stockholder's	Agreement	among	Dollar	General	Corporation,	Buck Holdings,	L.P.	and	certain	officers	of	Dollar	General	Corporation	(incorporated	by reference	to	Exhibit	10.4	to	Dollar	General	Corporation's	Registration	Statement	on	Form S-4	(file	no.	333-148320))*

10.6 Amendment	to	Management	Stockholder's	Agreement	among	Dollar	General Corporation,	Buck	Holdings,	L.P.	and	key	employees	of	Dollar	General	Corporation (July	2007	grant	group)	(incorporated	by	reference	to	Exhibit	10.2	to	Dollar	General Corporation's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	October	30, 2009,	filed	with	the	SEC	on	December	12,	2009	(file	no.	001-11421))*

10.7 Amendment	to	Management	Stockholder's	Agreement	among	Dollar	General Corporation,	Buck	Holdings,	L.P.	and	key	employees	of	Dollar	General	Corporation (post-July	2007	grant	group)	(incorporated	by	reference	to	Exhibit	10.3	to	Dollar	General Corporation's	Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	October	30, 2009,	filed	with	the	SEC	on	December	12,	2009	(file	no.	001-11421))*

10.8 Second	Amendment	to	Management	Stockholder's	Agreements,	effective	June	3,	2010 (incorporated	by	reference	to	Exhibit	10.4	to	Dollar	General	Corporation's	Quarterly

10.9 Form	of	Director	Restricted	Stock	Unit	Award	Agreement	in	connection	with	restricted stock	unit	grants	made	to	outside	directors	pursuant	to	the	Company's	Amended	and Restated	2007	Stock	Incentive	Plan	(incorporated	by	reference	to	Exhibit	10.15	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-1	(file	no.	333-161464))

10.10 Form	of	Director	Stock	Option	Agreement	in	connection	with	option	grants	made	to outside	directors	pursuant	to	the	Company's	Amended	and	Restated	2007	Stock	Incentive Plan	(incorporated	by	reference	to	Exhibit	10.16	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-1	(file	no.	333-161464))

10.12 Amendment	to	Dollar	General	Corporation	1998	Stock	Incentive	Plan,	effective November	28,	2006	(incorporated	by	reference	to	Exhibit	10.8	to	Dollar	General Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	February	2,	2007, filed	with	the	SEC	on	March	29,	2007	(file	no.	001-11421))*

10.13 Amendment	to	Dollar	General	Corporation	1998	Stock	Incentive	Plan,	effective	August 26,	2010	(incorporated	by	reference	to	Exhibit	10.1	to	Dollar	General	Corporation's Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	July	30,	2010,	filed	with	the SEC	on	August	31,	2010	(file	no.	001-11421))*

10.14 Form	of	Stock	Option	Grant	Notice	in	connection	with	option	grants	made	pursuant	to	the 1998	Stock	Incentive	Plan	(incorporated	by	reference	to	Dollar	General	Corporation's Quarterly	Report	on	Form	10-Q	for	the	quarter	ended	July	29,	2005,	filed	with	the	SEC on	August	25,	2005	(file	no.	001-11421))*

10.15 Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and	restated	effective December	31,	2007)	(incorporated	by	reference	to	Exhibit	10.10	to	Dollar	General Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))*

10.16 First	Amendment	to	the	Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and restated	effective	December	31,	2007)	(incorporated	by	reference	to	Exhibit	10.11	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))*

10.17 Second	Amendment	to	the	Dollar	General	Corporation	CDP/SERP	Plan	(as	amended	and restated	effective	December	31,	2007),	dated	as	of	June	3,	2008	(incorporated	by reference	to	Exhibit	10.6	to	Dollar	General	Corporation's	Quarterly	Report	on	Form	10-

10.18 Amended	and	Restated	Dollar	General	Corporation	Annual	Incentive	Plan	(incorporated by	reference	to	Exhibit	10.14	to	Dollar	General	Corporation's	Registration	Statement	on Form	S-1	(file	no.	333-161464))*

10.19 Dollar	General	Corporation	2010	Teamshare	Bonus	Program	for	Named	Executive Officers	(incorporated	by	reference	to	Exhibit	10.3	to	Dollar	General	Corporation's Quarterly	Report	on	Form	10-Q	for	the	fiscal	quarter	ended	April	30,	2010,	filed	with	the SEC	on	June	8,	2010	(file	no.	001-11421))*

10.20 Summary	of	Dollar	General	Corporation	Life	Insurance	Program	as	Applicable	to Executive	Officers	(incorporated	by	reference	to	Exhibit	10.19	to	Dollar	General Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	February	2,	2007, filed	with	the	SEC	on	March	29,	2007)	(file	no.	001-11421))*

10.21 Dollar	General	Corporation	Domestic	Relocation	Policy	for	Officers	*

10.22 Summary	of	Director	Compensation

10.23 Amended	and	Restated	Employment	Agreement	effective	April	23,	2010,	by	and	between Dollar	General	Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit 99.1	to	Dollar	General	Corporation's	Current	Report	on	Form	8-K	dated	April	23,	2010, filed	with	the	SEC	on	April	27,	2010	(file	no.	001-11421))*

10.24 Stock	Option	Agreement,	dated	as	of	January	21,	2008,	between	Dollar	General Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.29	to	Dollar General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333-148320))*

10.25 Stock	Option	Agreement	dated	April	23,	2010,	by	and	between	Dollar	General Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	99.2	to	Dollar General	Corporation's	Current	Report	on	Form	8-K	dated	April	23,	2010,	filed	with	the SEC	on	April	27,	2010	(file	no.	001-11421))*

10.26 Restricted	Stock	Award	Agreement,	effective	as	of	January	21,	2008,	between	Dollar General	Corporation	and	Richard	Dreiling	(incorporated	by	reference	to	Exhibit	10.32	to Dollar	General	Corporation's	Registration	Statement	on	Form	S-4	(file	no.	333- 148320))*

10.27 Management	Stockholder's	Agreement,	dated	as	of	January	21,	2008,	among	Dollar General	Corporation,	Buck	Holdings,	L.P.	and	Richard	Dreiling	(incorporated	by reference	to	Exhibit	10.30	to	Dollar	General	Corporation's	Registration	Statement	on Form	S-4	(file	no.	333-148320))*

10.28 Employment	Agreement	effective	April	1,	2009,	by	and	between	Dollar	General Corporation	and	David	M.	Tehle	(incorporated	by	reference	to	Exhibit	99.1	to	Dollar

General	Corporation's	Current	Report	on	Form	8-K	dated	March	30,	2009,	filed	with	the

10.29 Employment	Agreement	effective	April	1,	2009,	by	and	between	Dollar	General Corporation	and	Kathleen	R.	Guion	(incorporated	by	reference	to	Exhibit	99.2	to	Dollar General	Corporation's	Current	Report	on	Form	8-K	dated	March	30,	2009,	filed	with	the SEC	on	April	3,	2009	(file	no.	001-11421))*

10.30 Employment	Agreement,	dated	December	1,	2008,	between	Dollar	General	Corporation and	Todd	Vasos	(incorporated	by	reference	to	Exhibit	10.35	to	Dollar	General Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	January	29,	2010, filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.31 Stock	Option	Agreement,	dated	December	19,	2008,	between	Dollar	General	Corporation and	Todd	Vasos	(incorporated	by	reference	to	Exhibit	10.36	to	Dollar	General Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	January	29,	2010, filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.32 Management	Stockholder's	Agreement,	dated	December	19,	2008,	among	Dollar	General Corporation,	Buck	Holdings,	L.P.,	and	Todd	Vasos	(incorporated	by	reference	to	Exhibit 10.37	to	Dollar	General	Corporation's	Annual	Report	on	Form	10-K	for	the	fiscal	year ended	January	29,	2010,	filed	with	the	SEC	on	March	24,	2009	(file	no.	001-11421))*

10.33 Employment	Agreement,	effective	March	24,	2010,	by	and	between	Dollar	General Corporation	and	John	Flanigan*

10.34 Stock	Option	Agreement,	dated	as	of	August	28,	2008,	by	and	between	Dollar	General Corporation	and	John	Flanigan*

10.35 Stock	Option	Agreement,	dated	as	of	May	28,	2009,	by	and	between	Dollar	General Corporation	and	John	Flanigan*

10.36 Stock	Option	Agreement,	dated	as	of	March	24,	2010,	by	and	between	Dollar	General Corporation	and	John	Flanigan*

10.37 Subscription	Agreement	entered	into	as	of	March	24,	2010,	by	and	between	Dollar General	Corporation	and	John	Flanigan*

10.38 Management	Stockholder's	Agreement,	dated	as	of	August	28,	2008,	by	and	between Dollar	General	Corporation,	Buck	Holdings,	L.P.,	and	John	Flanigan*

10.39 Employment	Agreement,	effective	March	24,	2010,	by	and	between	Dollar	General Corporation	and	Robert	Ravener*

10.40 Stock	Option	Agreement,	dated	as	of	August	28,	2008,	by	and	between	Dollar	General Corporation	and	Robert	Ravener*

10.41 Stock	Option	Agreement,	dated	as	of	December	19,	2008,	by	and	between	Dollar	General Corporation	and	Robert	Ravener*

10.42 Stock	Option	Agreement,	dated	as	of	March	24,	2010,	by	and	between	Dollar	General Corporation	and	Robert	Ravener*

10.43 Subscription	Agreement	entered	into	as	of	December	19,	2008	by	and	between	Dollar General	Corporation	and	Robert	Ravener*

10.44 Management	Stockholder's	Agreement	entered	into	as	of	August	28,	2008	among	Dollar General	Corporation,	Buck	Holdings,	L.P.,	and	Robert	Ravener*

10.45 Indemnification	Agreement,	dated	July	6,	2007,	among	Buck	Holdings,	L.P.,	Dollar General	Corporation,	Kohlberg	Kravis	Roberts	&	Co	L.P.,	and	Goldman,	Sachs	&	Co. (incorporated	by	reference	to	Exhibit	10.26	to	Dollar	General	Corporation's	Registration Statement	on	Form	S-4	(file	no.	333-148320))

10.46 Indemnification	Priority	and	Information	Sharing	Agreement,	dated	as	of	June	30,	2009, among	Kohlberg	Kravis	Roberts	&	Co.	L.P.,	the	funds	named	therein	and	Dollar	General Corporation	(incorporated	by	reference	to	Exhibit	10.42	to	Dollar	General	Corporation's Registration	Statement	on	Form	S-1	(file	no.	333-161464))



Question: what is the maximum depreciation rate that can be used for furniture fixtures and equipment?
Calculation:   max_depreciation = 100
 depreciation_rate = 100 / 3
answer = depreciation_rate
Answer: 33.3%