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Food Sales Boost Family Dollar

An ongoing effort to expand space for food and consumable goods at Family Dollar Stores is continuing to reap benefits, the retailer said last week. The discounter said increased traffic and demand for low-priced basics helped sales improve by 2.6% to $1.8 billion in the fiscal fourth quarter that ended Aug. 29. Comparable-store sales increased by 1%, despite the anniversary of stimulus

MATTHEWS, N.C. — An ongoing effort to expand space for food and consumable goods at Family Dollar Stores is continuing to reap benefits, the retailer said last week.

The discounter said increased traffic and demand for low-priced basics helped sales improve by 2.6% to $1.8 billion in the fiscal fourth quarter that ended Aug. 29. Comparable-store sales increased by 1%, despite the anniversary of stimulus checks that boosted sales figures by 5.6% in the same period last year.

Family Dollar also boosted quarterly net earnings by 13.2% to $60.1 million, primarily driven by lower freight expense, reduced shrinkage and higher markups, which offset the effect of a mix shift toward lower-margin consumables including food.

Sales of consumables at Family Dollar increased 6.7% from the same period last year and 12% for the fiscal year. Consumables constituted 64.4% of all sales at Family Dollar in 2009, vs. 61% in 2008. Sales of home products, apparel and seasonal items all decreased during the year.

In a conference call discussing results, officials said an effort to devote more space in stores to growing categories like food at the expense of slower-moving items such as apparel has been well received by shoppers. The program, launched in June, involved moving between 60% and 70% items in a store and takes about a week to complete.

Family Dollar had completed such changes at about 3,000 of its stores through the end of its fiscal year. The changes have been well received by shoppers, including an influx of middle-income shoppers “trading down” to Family Dollar, despite some disruptions.

“The customer response was initially very, very positive,” Jim Kelly, Family Dollar's president and chief operating officer, said. “The challenge for some customers was that we moved a lot of items. The good news is that by September, which is fairly quickly for this kind of change, the stores in which we had changed the merchandising were already outperforming the rest of the chain.”

For the fiscal year, Family Dollar reported net income of $291.3 million, a 25% increase, on sales of $7.4 billion. Sales were up 6% for the year and comps improved by 4%.

Q4 RESULTS
Qtr Ended 8/29/09 8/30/08
Sales $1.81B $1.77B
Change 2.6%
Comp-store 1%
Net Income $60.1M $53.2M
Change 13.2%
Inc./Share 43 cents 38 cents
52 Weeks 2009 2008
Sales $7.40B $6.98B
Change 6%
Comp-store 4%
Net Income $291M $233M
Change 25%
Inc./Share $2.07 $1.66
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