Todd Vasos
Chief Executive Officer at Dollar General
Thank you, Kelly. I want to take the next few minutes to provide an update on our Back to Basics efforts in our stores, supply chain and merchandising. When I spoke with you one year ago and announced this plan, we noted that our customers rely on Dollar General to provide the products they need at great values in convenient, friendly and easy-to-shop stores. And when we step back and look at our business through the eyes of the customer, we weren't meeting that goal consistently across our chain. We laid out several important goals for the team to address these concerns, and I'm proud to note we have made substantial progress executing on these objectives and improving the overall customer experience.
With that in mind, I want to share a little about our progress in each area. I'll start with our stores, where everything begins and ends for our customer. Our goal in our stores is to deliver value and convenience in a clean and friendly shopping environment. We have made significant progress on this front with a meaningful increase in the number of stores that we believe meet or exceed our expectations as well as those of our customers. As we view our stores through the eyes of the customer, we have seen this notable improvement continue to develop in our own unannounced store visits and, more importantly, our customers are telling us as they have noted this improvement through our survey results at checkout.
Notably, as of the end of Q3, customer satisfaction levels have increased by more than 900 basis points since Q1 when we first had these surveys available in the majority of our stores. This coincides with improving in-stock levels, which increased approximately 180 basis points from Q3 of 2020 through to the end of Q3 of 2024. These results are a testament to the hard work of the team as well as the focus on increasing the front-of-store employee presence and sharpening our perpetual inventory management in our stores.
Our supply chain and merchandising teams have made significant contributions to our efforts in the store by helping to simplify operations for our teams, which enhances both the associate and customer experience in our stores. All of these improvements have continued to help drive lower year-over-year turnover at all levels within our retail operations including regional director, district manager, store manager, assistant store manager and sales associate. We still have work to do, but we're proud of the progress in the stores over the last year and we continue to be pleased with the associate and customer response to these efforts. As a result, we believe we are well positioned to continue to elevate the in-store experience.
Let me provide a quick update on our supply chain. Our top priority in this area continues to be improving our rates of on-time and in-full truck deliveries with which we refer to as OTIF. Our focused efforts here have led to significantly improved OTIF levels in Q3 compared to the same time last year. Notably, we have improved our on-time deliveries by approximately 470 basis points and in-full rates by approximately 900 basis points over that period. We continue to be pleased with what we have seen in both our traditional and fresh supply chain, but believe we have room for further improvement.
As a reminder, as we drive our OTIF rates higher, we simplify the work inside of our stores, which ultimately results in a better overall experience for both our customers and associates. In addition, we have continued making good progress in optimizing our distribution capacity and, in fact, have been able to accelerate our plans to exit temporary warehouse facilities. We exited four more facilities in Q3 for a total of 15 within the last 12 months. This will leave us with three remaining opportunities, all of which we plan to exit in 2025. By closing these temporary facilities, we are able to improve overall efficiency in our supply chain while also reducing costs.
Meanwhile, we've augmented our permanent DC footprint with two new facilities in Colorado and Arkansas, each of which is open and now shipping to stores. By the end of this year, we anticipate these efforts will result in year-over-year reductions in stem miles of approximately 4% or greater in both our fresh and traditional supply chains.
I also want to note that we implemented an automated system that utilizes advanced technology to store and retrieve products in our Arkansas DC. As a reminder, we added automation in a DC for the first time last year in South Carolina and have been pleased with the performance and results in that facility. Over time, we believe automation in these facilities can increase efficiency for our teams, optimize storage in the facility and drive even greater inventory and order accuracy to further enhance the way we serve our stores.
Finally, earlier this year we began the first full scale refresh of our sorting process within our distribution centers since 2017. As a reminder, the ultimate goal of this effort is to enable our store teams to stock shelves more quickly, which should drive greater on-shelf availability for our customers and ultimately support ongoing sales growth. We have made significant progress on this front. And as planned, we are on pace to complete this work by the end of the year. Overall, we remain focused on enhancing the agility of our supply chain, allowing us to meet changing demands and respond quickly to challenges, all while keeping costs low, driving greater efficiencies and further improving the experience for our store teams and customers.
Finally, I want to provide an update on our merchandising efforts. As a reminder, our top priority is providing meaningful value to our customer. We have a multifaceted approach to deliver that value, including strong everyday low prices on national and private brands, compelling promotions and sales events such as our DG Deal Days, which featured discounts on more than 6,000 items store wide during the holiday season and low opening price points including approximately 2,000 items at or below $1.
To that end, comp sales in our Value Valley section of the store, which is comprised of a variety of items at the $1 price point, outperformed the rest of the store in Q3 by more than 600 basis points. We have also continued our strong progress in total inventory reduction this year, as Kelly previously noted, with a 3% overall decrease and a 7% decrease on a per store basis, all while improving in-stock levels and growing sales. Earlier this year, we began working toward a net reduction of approximately 1,000 SKUs within our chain by the end of the year and we are well on our way to meeting that goal with the vast majority of these items already out of the planograms.
Finally, our merchants have continued working with our operators to reduce activity and simplify work inside of our stores. For example, we recently reached an important goal by completing the reduction of the number of floor stands by approximately 50% compared to Q3 of last year. As demonstrated by these results, Back to Basics has a significant positive impact on our business over the last year.
While we still have room to improve, we have made substantial progress in each of our three priority areas and we believe we are well positioned to continue advancing this progress moving forward. I'm excited about the work we have done to solidify our foundation and position us to deliver even stronger customer experience in 2025 and beyond. With that in mind, while we are committed to executing on these basics at even a higher level as we move forward, we are excited to progress our discussion beyond Back to Basics and focus on our initiatives and plans to drive growth and value for customers and shareholders.
I'll share a couple of updates today on how we are enhancing the value and convenience proposition in new and exciting ways for our customers and then we expect to share more of our plans for 2025 on our Q4 call in March. First, I'm excited to announce that we began a test of same-day home delivery from our stores during the quarter. This pilot launched in September and we are currently partnering with a third party to offer delivery through our DG app from approximately 75 stores. As a reminder, we have a highly successful and incremental delivery partnership with DoorDash in approximately 16,000 of our stores and the learnings from that initiative and our own customer work have provided the foundation from which to test our own delivery offering.
With our unique customer base, we believe this offering will even further enhance the convenience of our customers expect from Dollar General while still providing the value they need. We are quickly learning and refining our process and, over time, we believe we can have delivery through the DG app available the same number of stores as our DoorDash offering, which we expect to continue expanding over time. We are excited about the opportunity for our customers. Our goal is to drive greater customer loyalty within the digital platform while ultimately increasing market share and accelerating growth.
Next, as we look to extend and enhance the unique combination of value and convenience at Dollar General, I want to discuss our plans for real estate growth in 2025. With more than 20,000 stores across 48 states, Dollar General is located within five miles or less of approximately 75% of the U.S. population. And with approximately 80% of these stores in towns of 20,000 or fewer people, we are uniquely positioned to serve an underserved customer in rural America.
As we look to leverage our real estate strength, we plan to increase the number of real estate projects next year. More specifically, we continue to see very strong returns in our remodel projects. We are expanding and enhancing our efforts to impact our mature stores. Accordingly, the growth in projects this year is focused on our remodels while continuing to balance our portfolio and capture growth opportunities through a significant number of new stores as well. With that in mind, in fiscal 2025, we plan to execute approximately 4,885 projects, including 575 new store openings in the U.S., 2,000 full remodels and an additional 2,250 Project Elevate remodels and 45 relocations, and we plan to open up to 15 additional stores in Mexico.
With regards to our remodels, we are revamping our approach to further improve the shopping experience and elevate our brand through our mature store base. In our full remodels, we are increasing the scope of work to include additional upgrades and refreshes to the physical store assets. We expect more than 80% next year to be in our DGTP format, which will continue to allow for incremental cooler counts to provide a fuller shopping trip for our customers.
We continue to expect average returns in our remodels that are consistent with what we have seen historically and are even greater than what we have seen from our new stores, driven by expected first year comp sales lifts in our full remodels of approximately 6% to 8% on average. We are also introducing a new remodel approach that is incremental to our full remodel program in order to expand the number of mature stores we impact each year. We are calling this incremental remodel initiative Project Elevate and our goal is to bolster performance in portions of the mature store base that are not yet old enough to be part of the full remodel pipeline.
These projects will include nearly all of the same assortment updates as our full remodels other than cooler expansion and the addition of produce. Notably, they will include planogram optimizations and expansions across the store, updated adjacencies and physical asset refreshes in most prominent customer facing areas in the store. Our investment in these stores will be less than our full remodels and, in turn, our goal is to drive first year comp sales lists in the range of approximately 3% to 5% in these projects. We believe our customers will respond very favorably to these updates in their local stores and ultimately believe that this will enhance the associate and customer experience in our mature stores while also driving incremental sales growth.
Turning to our new stores. As a reminder, we monitor the following five metrics of our portfolio including performance against pro forma sales expectations; new store productivity compared to the mature store base; cannibalization, which overall has remained consistent and predictable; cash payback, which we continue to expect in approximately two years and new store returns which we expect to be approximately 17% on average in 2025.
I want to note that our expectations for new store returns, while still very strong, have been down modestly from our historic targets of 20%-plus. As we discussed for our '24 pipeline, this change is also driven by higher new store occupancy cost as well as by higher operating costs. We continue to work to mitigate some of these higher costs where possible and continue to see significant opportunities for growth with approximately 12,000 opportunities for Dollar General branded stores in the U.S.
As we said before, for a variety of reasons, we will not capture each of these opportunities, but we are pleased that the overall number of opportunities remains high. We anticipate that more than 80% of our new stores next year will be in one of our 8,500 square foot store formats and will predominantly be located in rural communities and nearly all of our relocations are planned for one of our 8,500 or 9,500 square foot stores. These stores continue to drive increased sales productivity per square foot as compared to our traditional 7,300 square foot box and also provide additional opportunities to serve our customers, including expanded cooler offerings, more health and beauty products and we anticipate adding fresh produce to approximately 300 new stores in 2025, bringing our expected total to approximately 7,000 by the end of next year.
I also want to note that we do not plan to open any additional pOpshelf stores in 2025. We have continued to test and learn in our existing store base with new products and layouts, but in light of the current weaker customer shopping trends in discretionary categories, do not believe opening new stores in the coming year isn't the best use of our capital. Collectively, we believe our planned real estate projects will further solidify Dollar General as an essential partner to communities in rural America while strengthening our foundation to drive long-term sustainable growth.
In closing, I want to reiterate that we are pleased with the tremendous progress the team has delivered through our Back to Basics plan, and we are poised to continue building on that progress through the remainder of this year and into 2025 as we continue to strengthen the foundation for more meaningful growth in the future. With that in mind, I'm looking forward to sharing more about our plans and goals for 2025 and beyond in the months ahead. We are confident in this business and the actions we are taking to deliver value for our associates, customers and shareholders. As we move through our busy holiday season, I want to again thank our more than 195,000 employees for their commitment and dedication to fulfilling our mission of serving others.
With that, operator, we would now like to open the lines for questions.
