Good market position in "extreme Value" retail segment; and New management should be able to accelerate operational turnaround process. Intensely competitive industry; Very high debt leverage; and Poor operating performance for the past seven quarters. The ratings on Dollar General Corp. reflect its very highly leveraged capital structure, recent execution difficulties that have resulted in falling operating margins, and the company's participation in the highly competitive discount retail environment. Gross margins have steadily declined since early 2005 as a result of rapid growth, uneven merchandising, a lack of focus on store-level profitability, and inventory markdowns incurred during 2006 related to the Goodlettsville, Tenn.-based company's elimination of its "packaway" inventory management model. Kohlberg Kravis Roberts&Co. L.P. seeks to improve
