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Consumables Still Driving Family Dollar Sales

April 11, 2013

As Family Dollar reported slowing same-store sales in its fiscal second quarter, its share of consumable sales continued to climb, driven strongly by its private label products.

Chief Financial Officer Mary Winston reported that consumables gained sales share from home and apparel in the quarter, growing 26.9 percent to represent 69.5 percent of the retailer’s sales. Private label consumable sales, meanwhile, rose 27.5 percent in the quarter.

“We remain on track this year to add 500 new Family Dollar private brand consumable SKUs to the assortment, with about 400 coming in the second half of the year,” Family Dollar President Michael Bloom told analysts, according to transcripts from Seeking Alpha. “We expect to finish the year with about 1,500 private brand SKUs in the assortment, up about 30 percent over last year.”

As the consumable mix grew in the quarter, though, Family Dollar’s gross margin fell 1.46 percent, though SG&A expense in the quarter fell 0.2 percent.

Still, CEO Howard Levine told analysts that the company was seeing the success it wanted from its focus on consumables.

“Our investments to drive trips and become more relevant to our customers continued to deliver results,” Levine said, according to Seeking Alpha transcripts. “Maintaining our strong value image is paramount as our customers balance their finances during these uncertain times.”

That doesn’t just mean simply food, though. It also includes the retailer’s health and beauty initiatives.

“The additions to our food and HBA assortments have been very successful for us,” Levine said. “Our customers’ response has been strong. I think it’s an appropriate addition to our assortment and really positions us better competitively over the long term. … I think we’re a better company … in a better position to compete and feel very good about what we’ve done there.”

Levine also pointed out the affect that private label has made on the food and health categories.

“If you’ve been in our stores and seen some of our private brand improvements and the quality of the product, it’s been excellent,” he said, according to the Seeking Alpha transcripts. “Our customer response has been very strong on some of our private brand additions, and we continue to add that.”

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