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Consumables Claw at Family Dollar Home Space

MATTHEWS, N.C. - Family Dollar said it is actively cutting back discretionary receipts - mostly in home - by $100 million in addition to repositioning discretionary goods in the store to accommodate the faster-turning consumables segment with added space and up to 1,500 more skus by yearend.
     Still, one goal in 2013 is "to get discretionary back in line with sales trend by fiscal yearend," said Howard Levine, chairman and ceo, during the company's quarterly conference call last week.
     The company has pared space from discretionary categories for several years to make room for sku expansions in health & beauty and food. "But we have all those sku sets done, and we now are making a renewed effort in some of the discretionary categories to drive those," he said.
     Most of the effort involves apparel, which is moving back to the front of the store right in front of consumables. "Our customer buys on need, and basic apparel is showing some stability," noted Michael Bloom, president and coo.
     During the second quarter, top sales drivers included key consumables like frozen foods, tobacco and health & beauty items. Home represented 11.1% of total quarterly sales, compared to 13.3% in the year ago quarter.
     Net income for the quarter ended March 2 rose 4.8% to $140.1 million compared to $136.4 million, or $1.21 per share - just missing analysts estimates of $1.23 EPS.
     Total sales jumped 17.7% to $2.89 billion, with comps up 2.9% as a result of higher customer traffic and an increase in the average customer transaction value.
     Levine said Family Dollar saw sales trends improve toward the end of the quarter as customers began to receive their tax refunds.
     Year to date, net income increased 4.2% to $22.4 million, or earnings per share of $1.90. Sales climbed 15.4% to $5.3 billion.
     Levine added that as the company moves into the second half of fiscal 2013, its discretionary sales continue to be challenged by both the financial pressures facing customers as well as unseasonably cold spring weather. The company reduced its overall outlook to reflect lower-than-anticipated home and apparel sales.
     The company now expects comparable store sales in the second half of the year to increase between 2% and 4%, with comps in the third quarter to fall in the lower end of the range and comps in the fourth to land in the upper end of the range.

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