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Home Helps Margins at Family Dollar

A major contributor to gross margin improvement during the fourth quarter for Family Dollar Stores was the home category, which the 6,430-unit discount chain said had the second strongest sales increase of the retailer's mix during the period.

Home and apparel (also cited as an improved category) are part of Family Dollar's "treasure hunt" strategy, which is being "refined and developed," said Howard Levine, chairman and ceo.

Aiding this effort is the further development of Family Dollar's global sourcing group, which Levine said "will play a significant role in our success this year as we strengthen our quality and value proposition." This also includes plans to "selectively leverage national brands within our treasure hunt categories," he said.

The gross profit margin, as a percentage of sales, was 33.1% in the fourth quarter of fiscal 2007 compared to 32.4% in the fourth quarter of fiscal 2006, a rise of 70 basis points. SG&A costs, meanwhile, crept up 30 basis points to 29.3% of sales.

Family Dollar is No. 13 on HTT's Top 50 Retailing Giants, with 2006 home textiles sales of $400.0 million. But feeding most of the chain's growth is its food category. Coolers continue to roll out, with another 575 stores soon to be equipped. In-store space devoted to food items is being expanded to 2,800 additional locations.

The company reported net income for the fourth quarter ended Sept. 1 of $37.8 million, up 17.0% from $32.3 million one year ago. Fiscal year income of $242.9 million was up a robust 24.5% from $195.1 million in 2006. Sales for the year were up 6.9% to $6.8 billion, while comp store sales edged up 0.9%.

On the real estate front, Family Dollar is tempering its new-store growth for fiscal 2008 to about 300 new units – a "measured pace" that will enable an improved performance of new stores while also improving returns in existing stores, Levine said.

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