Retailer News / News

Family Dollar Looking Strong Thanks To PL

October 5, 2012

Family Dollar closed out its fiscal 2012 on a high note, posting its best same-store sales of the year in the fourth quarter, in large part behind the continued strength of its private label program.

The company reported this week that sales in 2012 rose 9.2 percent from a year earlier, and same-store sales climbed 4.7 percent. Same-store sales in the fourth quarter rose 5.4 percent, and consumables market share rose over the past 12, 24, and 52 weeks.

And growth is expected to be the name of the game, particularly in the company’s private brands division, now under the command of retail veteran Tammy DeBoer.

“Yes, so as far as private brands go, I – it’s of the areas I’m actually most excited about – we’ve … added about 400 SKUs last year, we’re going to add 500 SKUs this year,” Family Dollar President Mike Bloom told analysts, according to transcripts from Seeking Alpha. “Consumables growing, I think it’s in the neighborhood of 16 percent in private brands this year. We’re improving our quality. We’ve improved our packaging. We’ve got new leadership in private brands – Tammy DeBoer just came on board.

“Again, just all upside, very excited. We’ve got the pricing model. We feel pretty good about our pricing model in private brands today. So again, all good news and increased penetration. You saw that in our food category, our private brands outpaced our national brands. So all good news.”

Bloom said on the call that Family Dollar was on track to double its private brands sales by 2015. A report from Planet Retail analyst Katie Mathis said that is expected to equate to 2,000 SKUs in 2015. Bloom also singled out the spread in the food category as positive news for the private label program.

“And just as importantly, private brand food growth outpaced national brands,” he told analysts. “Key private brand additions, like our new Family Gourmet water, canned vegetables and cereals, give our customers new private brand options with national brand quality at a great price.”

Company CEO Howard Levine brought his own price for the company’s private brands to the analyst call this week.

“But when I think about what we've done with our renovation program, the way we've grown our assortment, importantly, our focus on improving the quality, our private brand merchandise, when you see Family Gourmet  -- in fact, I'm having a Family Gourmet water today as we speak,” he said. “It's fantastic merchandise. It tastes good. It looks good. All those things are critically important, not only to our core customer and that we're not losing focus on, but particularly this higher-income customer and how we can capture more per wallet.”

Mathis said the emphasis on private brands was expected to continue, and to bring profits.

“Planet Retail believes that these partnerships will help Family Dollar drive sales as its merchandise assortment continues to grow with more national brands and a strong private label scheme to support its value statement,” she said.

In addition to the growth in consumables and private brands in 2013, company officials said they expected to continue to open new stores and remodel its current fleet. Mathis said both moves were signs of strength for the future.

“Family Dollar is looking to become a well-known and trusted name in both mass merchandise and consumables,” she said in the report. “Strengthening its merchandise portfolio with improved national brand and private label offers, as well as partnering with McLane for an enhanced variety for refrigerated and frozen foods, positions Family Dollar with the potential to become a consumables destination.”

In addition, the company is spending money to improve its shopper analytics, and combined with new store growth and potential new markets to expand into, Mathis said Family Dollar could start to build stores that look similar to the small format stores that big-box retailers such as Walmart and Target are opening.

“More advanced shopper analytics and revamped store designs are attracting a broader shopper base, increasing sales and allowing for market expansion,” she said. “Further entry into the West Coast will make Family Dollar a truly national player and a force in the value channel. Family Dollar is showing no signs of slowing down and is proving a fierce competitor.”

Family Dollar moved into California in 2012 for the first time, and is working on opening a new distribution center in Utah in 2013. Mathis said that opened the possibility for more Western expansion.

“As Family Dollar finishes building its Utah distribution center in 2013, Planet Retail anticipates further westward expansion into Oregon, Washington and Montana,” she said. “Planet Retail expects Family Dollar to continue its prolific growth story by accelerating new store development, improving shopability and expanding both national and private brands with an emphasis on consumables. These upgrades will likely facilitate a rise in shopper visits and transaction sizes, as well as attract a wider variety of shoppers in 2013.”

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