Family Dollar taking one fiscal step at a time

MATTHEWS, N.C. —Family Dollar plans to pursue a measured pace of expansion and has adopted a conservative view of sales growth for its new fiscal year amid lingering concerns over the impact of the economy and volatile energy prices on its customers.

Such an approach is understandable given the pressures on the low-and middle-income consumers the company targets with its 6,430 stores. As a result, Family Dollar plans to open 300 new stores—the same number as last year—during its fiscal year, which began Sept. 2, but will continue to move aggressively to expand the assortment of food it offers. Approximately 2,800 stores are slated to receive expanded food assortments while the company completes the expansion of a cooler program by equipping 575 units with refrigerated equipment. Those efforts are a continuation of strategies the company pursued aggressively during the recently ended fiscal year when the cooler program was expanded to 1,300 stores and selling space devoted to food was increased in 2,700 stores.

In addition to the emphasis on food, Family Dollar intends to make its stores more interesting to shop in through efforts in the home and apparel categories.

“We plan to continue to develop and refine our Treasure Hunt strategy,” said chairman and ceo Howard Levine. “For example, in the home and apparel categories, we will continue to focus on providing the customer with a better assortment of quality family apparel and home decor at great values.”

As a result of the growth initiatives, the company said it expects total sales for its fiscal year ending Aug. 30, 2008, to increase 4% to 6%, and is looking for a same-store sales increase of 1% to 3%.

The announcement of those plans followed the release of financial results for the fourth quarter and fiscal year ended Sept. 1. The company’s full year sales increased 6.9% to $6.8 billion, while profits increased 24% to $243 million. Same-store sales increased slightly less than 1%. Gross profit margin as a percentage of sales increased to 34% compared to 33.1% from the prior year due to a more favorable merchandise sales mix and better merchandise markup, while lower inventory shrinkage more than offset higher markdowns, the company said.

Improved store manager retention, which is at the highest level since 2003, and lower inventory levels, were credited with helping the company reduce shrinkage levels.