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Family Dollar turns immediate attention to consumables at some expense of home

Matthews, N.C. -- While the still-downtrodden home department is en route to potentially brighter days via a new store plan-o-gram rolling out this summer, Family Dollar divulged its ramped up focus on its faster-selling consumables offerings and its plans to expand the presence and space for these less discretionary goods.

The effort is in response to customer demand, which continues to increase for consumables, including perishable and refrigerated items.

"Delivering stronger shareholder returns begins with increasing sales per square foot, and this quarter, we began to implement a number of initiatives to broaden our consumable assortment and satisfy more of our customers' shopping trips," explained Michael Bloom, president and coo, during the chain's third quarter earnings call today.

However, he added, most of these initiatives began late in the quarter, as planned, "and had little impact on our third quarter sales results."

In the quarter, sales of home and apparel "continue to be volatile," he said, citing that both categories "continue to be pressured" by the lingering macro-economic woes affecting the retailer's largely lower-income core customers.

Home product sales in the quarter declined by 1.8% to $270,015 from $275,048 as of late May 2011. In contrast, consumables were up 12.2% to $1.6 million from $1.4 million.

As a result, the 7,267-unit discount chain has opted to "delay our annual home plan-o-gram reset to enable us to focus on our consumables expansion," Bloom said. "In August with the new plan-o-gram, we expect trends in home to improve."

The new plan-o-gram is set to come out in July and be completed chain-wide by August, and "we are excited about the changes we are making [in the plan-o-gram] within our home segment," he continued.

Family Dollar's net income in the third quarter, which ended May 26, increased 12.1% to $124.5 million compared with $111.1 million for the 2011 third quarter. Net income per diluted share for the quarter increased 16.5% to $1.06 compared with $0.91 a year ago.

"I am especially pleased that we delivered these record results even as we launched multiple initiatives late in the quarter to increase our relevancy to the customer and drive greater store productivity," said Howard Levine, chairman and ceo.

Total net sales for the period increased 9.6% to $2.36 billion versus $2.15 billion last year, and comparable store sales increased 5.0% as a result of increased customer traffic, as measured by the number of register transactions, and an increase in the average customer transaction value.

Sales in the quarter were strongest in the seasonal, electronics, and consumables categories.

Year-to-date results included: a 4.9% increase in net income to $341.3 billion and an 8.6% increase in net sales to $6.9 billion.

Looking ahead, Family Dollar said it expects for its fourth quarter comparable store sales to increase between 5% and 7% and earnings per diluted share to be between 71 and 81cents compared with 66 cents in the fourth quarter of fiscal 2011.

For the full year, the company expects earnings per diluted share to be between $3.60 and $3.70 compared with $3.12 in fiscal 2011.

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