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Family Dollar downsizing domestics

Family Dollar is somewhat downsizing its discretionary merchandise mix — mainly hanging apparel but also some items of domestics (towels, sheets and pillows), giftware and seasonal goods, which performed below expectations during the period — to make more room for consumables, said Howard Levine, chairman of the board and CEO, during the company's third quarter conference call last week.

"Our focus is moving more to consumables. We're expanding our mix of household chemicals, paper goods and food," he said. "We have had some bright spots in the home area. However, recent results are not as consistent as in the past. We're now focusing on more opening price points and opportunistic buys to offer the best value to our customers."

The company is also plunging forward with an urban initiative to expand its presence and boost the performance of its units located in inner city markets, Levine added.

As part of the urban focus, which was embraced earlier this fiscal year, Family Dollar has "undertaken two initiatives intended to significantly improve our importance as an urban operator," said R. David Alexander Jr., president and chief operating officer.

In its larger city markets, the retailer has been refining "what we call operational excellence;" and secondly, since February, it has been piloting an "opportunity market programs, and we're seeing immediate returns from these efforts," he said.

The company's sales in urban-based stores are its highest in any segment. "Over 80 of our top 100 stores are located in urban markets, and one of these stores is now closing in on $6 million of annual sales," Alexander said. Even so, this is the area of the chain where improvement is most needed, he admitted.

Over the next 12-month period, Family Dollar is rolling out "a significant urban initiative to 30 major markets affecting over 1,000 stores," he said.

The company is performing a detailed evaluation of the real estate for each of these markets, showing where it needs to expand, relocate and remodel stores. It is also evaluating its loss-prevention controls to show where to make capital investments and where to increase headcount, enhance human resources and provide initial support to these markets.

"We're making important organizational changes and allocating additional funds for payroll and we'll re-evaluate, refine and retrain our engineering," Alexander said. "We're more convinced then ever before of the validity of this focus and taking our performance to the next level."

In its broader real estate initiatives, Family Dollar plans to open about 500 to 560 new units and close 60 to 70 by the end of this fiscal year, which is Aug. 28. Alexander said 60 to 70 percent of the new stores will be located in urban markets.

To support the growth, the company is adding internal and external staff, including eight additional real estate managers, while also adding resources in a number of major urban markets by entering into exclusive agreements with brokerage firms.

"We'll need to significantly increase our visibility to new opportunities," Alexander explained. "We've completed the international phase of our log rollout, and now have complete visibility, tracking and better reporting on all import shipments."

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