Family Dollar’s consumables bolster fourth quarter results

Family Dollar saw strong growth in refrigerated and frozen food, health aids and tobacco, which buoyed sales in consumables to 8.3% for the fourth quarter ended Aug. 31. Despite the increase, comparable store sales for the quarter were flat.

The company’s total net sales for the quarter increased 5.8% to $2.5 billion compared with total net sales of $2.4 billion in the fourth quarter of fiscal 2012. However, customer traffic and the average customer transaction value were flat during the quarter.

“This morning we reported record sales and earnings results for the fourth quarter and fiscal 2013,” said Howard R. Levine, chairman and CEO. “While the environment was more challenging than expected, I am pleased with our progress. We have increased our market share, we have stabilized margins and we are increasing profitability. Our strategy is working, and we remain on course with our long-term goal to drive continued profitable growth and increase shareholder returns.”

Gross profit for the quarter increased 8.6% to $868.4 million, or 34.7% of net sales, compared with $799.7 million, or 33.8% of net sales, in the fourth quarter of fiscal 2012. As a percentage of net sales, higher markups and lower freight expense were partially offset by the impact of stronger sales of lower-margin consumables, higher markdowns and increased inventory shrinkage.

Net income for the quarter increased 26.3% to $102.2 million compared with $80.9 million in the fourth quarter of fiscal 2012.

The company is taking a cautious approach to fiscal 2014, given uncertain economic environment and how it’s affected consumers.

“Building on the progress we've made to increase market share, stabilize gross margin and improve inventory productivity, we will continue to invest in fiscal 2014 to increase our relevancy, provide customers with more value, and drive more trips,” explained Levine. “While the first quarter will be our most difficult sales comparison, as we cycle a 6.6% increase in comparable store sales, these comparisons will ease as we move through the year. An improving sales trend, combined with continued gross margin expansion and tight expense control, should result in higher profitability as we move through fiscal 2014.”

In other company-related news, Family Dollar has entered into a multi-year agreement with Checkpoint Systems that includes the deployment of Checkpoint's electronic article surveillance solutions in all of its existing and future stores.

The rollout in the chain's existing 7,900 stores is expected to be completed by December 2014.

For the past three years, Family Dollar and Checkpoint have been analyzing results in test stores across the nation. Based on the results, Family Dollar is installing Checkpoint's Evolve P10 ECO solution, which is designed to reduce shrink and lower energy costs. (Evolve reduces energy consumption up to 75% over alternatives, according to Checkpoint.)

"We are encouraged by the success we have already experienced in our test stores, and I am confident that installing Checkpoint's system in all our locations will deliver an immediate impact on our profitability by reducing our shrink and increasing sales," said Chris Nielsen, VP-loss prevention, Family Dollar.

Family Dollar operates more than 7,900 stores in rural and urban settings across 46 states.