Traffic Up at Family Dollar

MATTHEWS, N.C. — Family Dollar Stores here said last week it hopes to accelerate top-line growth by continuing to expand its assortment of traffic-driving consumables while increasing its marketing efforts.

Consumables accounted for 60.8% of total sales through the first half of fiscal 2010, up 10 basis points, Kenneth T. Smith, senior vice president and chief financial officer, said during a conference call last week with investors to discuss financial results for the second quarter, which ended Feb. 27.

Net income for the quarter rose 33.4% to $112.2 million, while sales jumped 4.9% to $2.1 billion. Comparable-store sales rose 3.6%. For the half, net income increased 25.4% to $179.8 million, with sales rising 4.5% to $3.9 billion. The company did not release a comp sales number for the half.

Comp sales rose 11% during March, Smith added, and said comps are expected to be up 6% to 8% for the third quarter.

He said customer traffic continued to be the primary driver of comp sales, with consumables being the primary driver of traffic — which is up 5% this year on top of a 15% increase last year, he noted — though average ticket sales also increased.

Howard R. Levine, chairman and chief executive officer, said Family Dollar intends to expand both national brands and private-label products “to broaden our customer reach while also increasing the productivity of these categories.”

The company will boost its marketing efforts “because consumers continue to be sensitive to marketing, promotions and coupons,” Levine said. “In response, we are investing in how we communicate with our customers.

“To reinforce our value proposition and increase awareness of and loyalty to the Family Dollar brand, we are working to better integrate all our customer touch points, including print advertising, in-store communications and digital media tools.”

The company is also making its stores more shopper-friendly with improved layouts, reduced clutter and new fixtures to facilitate stronger merchandise presentations, Levine said. “We know the customers' experience in the store will often determine if she becomes a loyal shopper, so we are making improvements to enhance the shopability of our stores.”

After several years of spending capital to invest in systems and merchandising rather than unit growth, Family Dollar plans to shift its focus to reaccelerate growth, Levine said.

The company expects to invest $190 million to $210 million this year on capital expenditures — a jump of between 22.6% and 35.5% compared with the $155 million spent last year.

Plans call for 200 store openings and between 60 and 80 closings, plus investments in store fixtures and distribution center enhancements as it expands merchandise assortments, Levine said.

Q2 RESULTS