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Sales of private label food soared in the fiscal first quarter of 2013 for Family Dollar, the company reported last week.
Family Dollar President Mike Bloom said the development of the company’s private brand program continued to show strong growth, with private label food sales up 50 percent from the fiscal first quarter of 2012, and overall private label consumables sales up 20 percent from a year earlier.
“Similar to last year, private brand food sales outpaced national brand food growth, and this growth speaks to our investments in quality, branding and assortment,” Bloom told analysts on a conference call announcing earnings, according to transcripts from Seeking Alpha. “Customers love our Family Gourmet brand, and we will continue to look for select categories to increase our penetration.”
The growth showed on the health and beauty side as well, with sales up 16 percent over the previous year, led by Family Wellness SKUs in vitamins, headache, fever, pain and cold and allergy categories, Bloom said.
That is encouraging the retailer to push forward with more Family Wellness products in 2013.
“In the second half of fiscal 2013, we will introduce another large wave of Family Wellness SKUs in our assortment,” Bloom told analysts, according to Seeking Alpha. “We will continue to convert existing health and beauty aid SKUs from a control brand to a Family Dollar private brand while also introducing new private brand alternatives to our customers' favorite national brands.”
CEO Howard Levine, in response to a question, said he expected private label sales to cut into national brand sales in fiscal 2013, particularly in Family Wellness.
“For Family Wellness , or actually for private brands in total this year, we'll add about 450 to 500 items,” Levine said. “And a lot of those will obviously be in our – a majority of those will be in our consumables area, and the majority of those will be in our health and beauty aids area. Do they take away from national brand sales? The answer to that is sure, there's a transfer from national brand to private brand, albeit at higher margins, though. So while the sales may be lower, the margins are higher. So it's a trade-off that we're happy to make.”
In response to another question, Bloom said the trend of consumable sales at Family Dollar continues to point up.
“I think we had a huge impact on that with the addition of the 40 percent SKU count in food and HBA, the moves we made in tobacco, the improvements in our cooler and refrigerated,” Bloom said. “So clearly the company's initiatives impacted the shifting to the consumable side of the business. I think it exacerbated as we move through the quarter and into the month of December further than we had expected as a result of lack of discretionary sales. We've kind of seen something that just continued to grow as the month of December progressed, customers very focused on basic needs, and the discretionary business was much softer than we had thought. But we continue to be pleased with the number of the sales-driving initiatives.”
And Bloom said the company’s contract with McLane signed last year has helped speed the transition of consumables, particularly the refrigerated and frozen foods.
“McLane provides us with a consolidated supply chain solution that replaces a fragmented network of over 50 wholesalers around the country,” he said. “This long-term strategic partnership enables us to dramatically expand our assortment, improve our cooler in-stocks with re-deliveries in all stores, cluster our assortment by region, and accelerate our development of private brand refrigerated and frozen food.”