Family Dollar's 4Q profits jump 11%

Don Hogsett, October 15, 2001

Matthews, NC — Lifted by stronger same-store sales and and more than 110 net new units, fourth-quarter profits at neighborhood value retailer Family Dollar Stores Inc. jumped up by 11.1 percent, to $34.1 million from $30.3 million last year.

Sales at the 4,165-store chain advanced by 16.6 percent, to $920.8 million from $789.8 million the prior year, as consumers continue to shun higher-priced department stores and chains, hunting instead for deals at discounters and off-pricers. Sales also benefited from a big shift to food and consumables, which has drawn in more customers, and got them spending more.

Gaining on consumers' continuing quest for bargains, same-store sales at Family Dollar jumped up by 6.1 percent in the quarter ended Sept. 1, a number few American retailers are able to match in today's uncertain environment of rapidly mounting layoffs.

Not only were more shoppers walking through their doors, consumers were also spending more, the chain reported. Customer count — measured by the number of register transactions in existing stores — advanced about 2.5 percent, the retailer said. And the average transaction increased about 3.5 percent, to $8.45.

Sales of hardlines improved substantially, climbing by 9.8 percent, while softlines had a rougher time of it, sales declining by 4.2 percent.

Howard Levine, president and ceo, said, "In this difficult sales environment, Family Dollar is gaining market share as customers continue to respond favorably to the good values offered in a wider selection of low-priced, basic consumable merchandise in departments such as food, household chemicals and paper products." The retailer made room for additional hardlines consumables by reducing space allocated to hanging apparel in a program that was completed in all stores in October 2000.

Especially in the wake of recent terrorist attacks, Levine said, Family Dollar will continue to focus on consumables. Recent events, he said, "make it more likely that the difficult retail sales environment may exist throughout the fiscal year that began Sept. 2, 2001, and that consumer spending will continue to be focused on lower-margin consumables." The shift to increased consumables will continue going forward, he said, with more space being allocated to consumables and less space to shoes.

Given the emphasis on lower-margin consumables, average gross margin thinned out modestly during the closing quarter, narrowing by 30 basis points to 31.6 percent from 31.9 percent the prior year. But partially offsetting the margin shrinkage, costs were whittled down by 10 basis points, to 25.7 percent from 25.8 percent a year ago.

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