STORES Magazine - July 2008 - (Page 27)

ment of inventory risk and a lift from the nation’s tax stimulus package. So far, so good: For May, Family Dollar reported a net sales increase of 4.4 percent, with the strongest momentum in the consumables category. Comparable-store sales rose 1.8 percent. “There’s no question that food is a traffic generator at Family Dollar because their customers, who are extremely pricesensitive and price-savvy, know they’re getting good value,” says Meredith Adler, an equity analyst at New York-based Lehman Bros. “I continue to believe that there are opportunities in the dollar store space; the market is not saturated. But making this model work is not easy. GMROI is better than the margins imply because food turns quickly. The goal here is to get the customer to add one more item to the basket.” Deborah Weinswig, managing director and senior equity research analyst at Citi Investment Research in New York, also expects consumables to drive Family Dollar’s top-line growth – “particularly in the current economic environment, as cashstrapped low-end consumers cut back on discretionary purchases. However, given the lower associated margins on consumables, the company will experience continued margin pressure ahead.” Family Dollar’s enhanced food offering appears well timed, given the state of the economy and the fundamental shifts occurring in what consumers are buying — and where. Still, Zelmanovich insists he doesn’t have a crystal ball tucked away in An expanded a back room; the food strategy currently assortment of foods was added in place is several years in the making. to 2,800 more And, truth be told, Family Dollar can stores earlier this trace its beginnings in the food business to year. the early 1970s. “Our approach to the food assortment has really been evolutionary,” he says. “We’ve moved from largely promotional buys of cookies, candy and snacks in the ’70s to the introduction of carbonated beverages in the early ’80s.” By the second half of that decade, Family Dollar had shifted to a more brand-oriented approach, adding category leaders like Coca-Cola, Frito Lay, Kraft and Procter & Gamble to the mix. Family Dollar began to introduce private label food items, marketed under the Family Pantry brand, in 2000. It was 2004 when the decision was made to install coolers for the sale of refrigerated foods. To date, the company has outfitted approximately 85 percent of its stores with coolers, which allows it to extend its offering to include items such as frozen pizza, ice cream, bacon and cold cuts. A broader food assortment, including 12 feet of cereal and an expanded offering of off-the-shelf staple foods focused on the quick-prep and ready-to-eat, debuted in approximately 2,300 stores in February 2007; the expanded assortment was STORES / JULY 2008 27

Table of Contents Feed for the Digital Edition of STORES Magazine - July 2008

STORES Magazine - July 2008 Contents Executive Editor's Page President's Page Dearth of Retail Creativity What Shoppers Think Wow, Is That a Wawa? 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Merchandising Strategy Concept2Watch Point of Sale Outsourcing Human Resources Top 100 Retailers Store Design RFID IT Operations Systems Managements LP Vantage Point Newsbeat Cover Story Emergency Response Systems Background Checks LOEB Retail Letter Point of View NRF News Retail Crossword Retail Industry Calendar Last Laugh

STORES Magazine - July 2008

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