Family Dollar Expands Food

MATTHEWS, N.C. — Consumer demand for cheap consumables continues to drive robust sales at Family Dollar Stores — and has persuaded the discounter to devote more space to them in its stores.

The company last week said it will begin to revamp layouts in its 6,660 stores in late May to provide more space and an easier shop for consumables, which include food, household cleaning products, health and beauty aids and pet food. These areas have been producing double-digit comparable-store sales results over the last year, officials noted, including a 13% gain during the fiscal second quarter, which ended Feb. 28.

“We've got to provide these areas of our stores with a bit more room, and we are investing more in terms of meeting our customer demand in those areas,” James Kelly, president and chief operating officer, said in a conference call discussing results.

Family Dollar officials added that the change in store layouts reflects changes in the demands of customers, who are increasingly seeing the store as a source for value on the items they need. Consumables accounted for 61% of all sales at Family Dollar during the quarter, up from 57% during the same period last year.

“Right now our customers are focused on needs, and so that's why we're focused on driving consumables,” Kenneth Smith, chief financial officer, said. “That's where the action is today.”

Consumable sales helped the chain post 6% overall comps for the quarter, and store traffic and average purchase size increased during the period, Family Dollar said. Gross profits increased by 1%, to 33.7%, during the quarter as markdowns, freight expense and shrink were reduced, and product markups were higher, offsetting the margin hit from a greater mix of consumables.

The performance drove net income up by 32.9% to $84.1 million, or 60 cents per share, and prompted the retailer to increase its annual earnings forecast to between $1.90 and $2 per share.