Family Dollar: A Different Kind Of Discount Store

There is a lot to like when it comes to the growth trajectory at Family Dollar and its record of consistency. The company just reported its 17th consecutive quarter of double-digit earnings per share growth, and the foundation is in place for more of the same.

Total sales increased 9.6% to nearly $2.4 billion, and same-store sales increased 5% during the third quarter ended May 26. Profits during the period increased 12.1% to $124.5 million, and earnings per share increased 16.5% to $1.06 compared with 91 cents the prior year. The company ended the quarter with 7,216 stores and is on track to end its fiscal year in late August with the addition of 450 to 500 new stores.

The knock on Family Dollar during the most recent quarter related to a decline in gross margins, but that appears to be a case of the company incurring some short-term pain in the name of long-term gain. As Family Dollar has expanded its assortment of food and consumables, its rate of profitability has come down.

Gross margins declined to 35.8% during the third quarter compared with 36.2% the prior year. Of course the bright side of increased sales of lower margin frequently purchased products is they do wonders for customer traffic. During the third quarter, Family Dollar’s same-store sales increase was attributable to more people shopping its stores and buying more stuff per visit.

Another knock on Family Dollar is that it is not Dollar General. The company’s larger rival operates roughly 3,000 more stores than Family Dollar and recently surpassed 10,000 units with the opening of its first stores and a new distribution center in California. The two companies target the same customer base with similarly sized stores offering a comparable product assortment, except Dollar General produces superior financial returns.

For example, while Family Dollar’s gross margin rate declined in the third quarter, it offset the drop by reducing its expenses, but did so at a slower pace. Expenses as a percent of sales sank to 27.4% in the third quarter compared with 27.7% the prior year. As a result, the company’s operating margin rate declined to 8.4% compared with 8.6% the prior year.

By comparison, Dollar General’s lower expense structure allows it to produce a superior operating margin even though its gross margin rate is lower than Family Dollar’s. Dollar General’s expenses as a percent of sale were 21.7%, its gross margin was 31.8%, and its operating margin was slightly more than 10% during the company’s most recent fiscal year.

Family Dollar chairman and CEO Howard Levine knows that to close the gap the company must increase the productivity of its selling space.

“Delivering stronger shareholder returns begins with increasing sales per square foot, and this quarter, we began to implement a number of initiatives to broaden our consumable assortment and satisfy more of our customers’ shopping trips,” Levine said last month.

Among the initiatives to which he is referring are the addition of even more food and consumables to more stores, new brands such as Pepsi and expanded health and beauty offerings, the addition of tobacco products and Red Box movie rental kiosks.

“As planned, most of these initiatives began late in the quarter and had little impact on our third-quarter sales results. We are on schedule, and I am very pleased with the progress our teams have made in such a short period of time,” Levine said. “As we complete most of these initiatives in the fourth quarter, we will have a fully competitive assortment and will be well-positioned to accelerate sales productivity further.”

Source: retailingtoday.com

America’s “General” store maintains momentum

Surging profits and a 6.7% first quarter same-store sales increase prompted Dollar General to raise its full-year profit forecast by three cents.

Dollar General shows no signs of slowing down this year, after posting first-quarter results that saw the company’s total sales increase 13% to nearly $3.5 billion and net income increase 36% to $213 million. The 6.7% comp increase was driven by an increase in customer traffic and average transaction size, according to the company.

“Dollar General is starting off 2012 with strong performance in the first quarter due to excellent same-store sales growth of 6.7%, representing the fifth consecutive quarter of accelerating improvement,” said Rick Dreiling, chairman and CEO. “We are pleased to raise our full year financial outlook to now reflect adjusted (earnings per share) of $2.68 to $2.78. Our first quarter was strong, and we are pleased with our May sales performance.”

The company had previously forecast full-year earnings in the range of $2.65 to $2.75.  I believe we are positioned well to invest in the future of our business as we continue to redefine small-box retailing and reinforce Dollar General’s role as America’s general store,” said Dreiling.

During the quarter, the company opened 128 new stores and remodeled or relocated 224 stores. In addition, a new distribution center in Alabama and a new leased distribution center in California began shipping merchandise to stores.

Source: retailingtoday.com

Dollar General Opens 10,00th Store

Nothing seems to be able to slow down the discount store channel right now as Dollar General opens it's 10,000th store.  

“Opening the doors of our 10,000th store is a meaningful day for all of us at Dollar General, and we are excited to celebrate the occasion in California,” said Rick Dreiling, Dollar General’s chairman and CEO. “This milestone reiterates our commitment to bringing unmatched convenience and value to customers across the nation.”

The need for detailed POS analytics with 10,000 stores is hard to understate but the quantity of data produced from a chain of 10,000 stores is pretty massive.  Even with a small number of SKU's a vendor supplying to Dollar General has a large amount of data to analyze which makes exception reports critical. Working with our vendors we create inventory and sales exception reports to sort through the data quickly and make sense of it.  For example, an inventory report at a store/SKU grain which identifies any out of stock or low weeks of supply is a fantastic tool for staying on top of inventory.  We also use a sales exception report to identify any SKU/store with a large percentage change in sales over a rolling four week period.  

Exception reports are the key to managing large amounts of data quickly.  What exceptions are you monitoring?

Dollar General Profits Up 33%

Dollar General reported quarterly profits were up 33% to a record $299 million for the quarter.  Total sales and same store sales were also up significantly.  

The value Dollar General offers to cost aware consumers is clearly paying off for them.  Our teams provide reporting and analytics on Dollar General EDI 852 and we have noticed strong sales as well.   When you are a vendor to a retailer like Dollar General with 9,800+ stores, using EDI 852 to closely monitor sales and inventory is critical.  Imagine if you have just 5 SKU's at every Dollar General store - you would have about 50,000 SKU/store combinations to manage and keep an eye on.   Dollar General offers both a daily and weekly EDI 852 feed so you can get visibility into store sales performance and help partner to grow the business.