Family Dollar keeps ramping up consumables, but mindful of home

Retail Editor 4, March 30, 2011

Matthews, N.C. - As consumables take much of the credit for Family Dollar's continually improving sales trends, the chain has plans of further expanding the assortment this year at the expense of some discretionary categories.

But home was identified as the next best performing area - albeit a far second - during the retailer's second quarter, the category increasing sales by 3% to $328,633 during period.

"We saw a solid performance in both home and apparel," said James Kelly, president and coo, responding to an analyst's question about plans for both discretionary business segments going forward during Family Dollar's second quarter earnings webcast this morning.

"We will continue to work on those areas," Kelly continued. "They are part of our strategy, and we will work on them. But given the macro-economic event, we will do so cautiously."

As employment and the general economy continue to be soft, Family Dollar is turning most of its attention to growing its lower-margin but higher-turning consumables and health-and-beauty categories, adding about 350 new skus in these areas in the coming months.

"Our plan is to increase our investment in consumables...and broaden our assortment of food and health and beauty aids while reducing some more discretionary areas," added Howard Levine, chairman and ceo.

In the second quarter, consumables accounted for 62.2% of total sales.

Family Dollar's ongoing store renovation effort calls for 800 units to be completed this year and all 6,800-plus units to be updated within the next four years. Additionally, the chain plans to open about 300 new units this year.

Net income for the second quarter, ended Feb. 26, increased 9.8% to $123.2 million, or 98 cents per share.

Sales rose 8.3% to approximately $2.263 billion and comps increased 5.1%.

Year to date, net income climbed 4.6% to $197.5 million, and sales were up 8.9% to $4.3 million.


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