MATTHEWS, N.C. — Family Dollar Stores here said last week it hopes to drive increased traffic with more in-store and direct-marketing campaigns that focus on its increased assortments of consumables and private-brand merchandise.
“We’re also increasing targeted digital marketing efforts and executing more promotional events to leverage our growing customer traffic,” Howard R. Levine, chairman and chief executive officer, told analysts during a conference call to discuss financial results for the fiscal second quarter, which ended Feb. 26.
He was not specific about any of those plans.
According to Levine, consumables accounted for 62.2% of sales in the second quarter, compared with 60.8% a year ago.
Having already expanded the assortment of grocery and health and beauty aids at 300 stores last year, Family Dollar intends to add more than 350 SKUs of grocery and personal care merchandise to another 500 stores this year, Levine said, “by leveraging slightly higher shelf heights and reducing space in some underperforming discretionary categories.”
Private-brand sales at Family Dollar rose 23% through the first half of the year, he noted, with private-brand consumables up 29%.
Asked about the impact of rising gas prices on sales, Levine said the company did quite well during a similar period of increases in 2008, “and having added more consumables to our mix than we had back then positions us well for the challenges the consumer is facing.”
For the quarter, net income increased 9.8% to $123.2 million, while sales rose 8.3% to $2.3 billion. Comparable-store sales were up 5.1%. For the half, net income climbed 9.8% to $197.5 million, while sales were up 8.9% to $4.3 billion and comps rose 6%.
During the half, Family Dollar opened 146 new stores, compared with 86 a year ago, and renovated 313 locations.
Regarding the unsolicited effort by Trian Group in February to acquire Family Dollar for between $55 and $60 per share, Levine said the chain’s board of directors determined “that the continued implementation of our strategic plan remains the best way to deliver value to all of our shareholders. The board also determined that the proposal substantially undervalued Family Dollar and that pursuing a sale of the company is not in the best interest of our shareholders.”
