Family Dollar propels 3Q profits

By Don Hogsett -- Home Textiles Today, 7/8/2002 12:00:00 AM

MATTHEWS, SC —

Sparked by stronger sales and lower costs, third-quarter profits at Family Dollar Stores Inc., a rapidly growing neighborhood retailer with more than 4,400 stores, climbed by 14.2 percent, to $61.1 million from $53.5 million last year.

Sales increased by 15.2 percent, to $1.0 billion from $887.0 million the prior year, driven entirely by sales of hardlines, as sales of softlines retreated. Same-store sales rose by 6.1 percent.

Same-store sales of hardlines, said the retailer, jumped up by 8.5 percent during the period, while sales of softlines decreased by 1.4 percent. Average transaction price increased by 2.7 percent, to $8.65, and customer count — measured by the number of register transactions in existing stores — rose by 3.2 percent.

Leveraging the stronger sales into increased productivity, the retailer lowered its operating costs by 30 basis points, to 25.4 percent from 25.7 percent a year ago. But lower costs weren't enough to offset eroding margins, which narrowed by 40 basis points, to 34.8 percent from 35.2 percent the preceding year. Taking a toll on margins were stronger sales of low-margin basic consumables.

Inventory productivity continued to improve, with stockpiles well controlled and rising just 6.5 percent from year-before levels. Measured on a same-store basis, merchandise inventories actually declined by about 3 percent. In another prop to the bottom line, the chain remains debt-free and unencumbered by the interest payments which dent the profits of other retailers.

Driving the double-digit top-line growth, in addition to stronger same-store sales, the neighborhood discount chain opened 135 new stores and shuttered three older units. Third-quarter openings include the chain's first stores in Utah, which now put Family Dollar into 40 states.

Aggressively stepping up its rollout of new units, the chain plans to open about 525 new stores this year, while closing about 50, for a net gain of 475. For the fiscal year beginning Sept. 1, the chain said it will speed up store openings by more than 10 percent, adding about 575 new stores and closing about 50 others, for a net gain next year of about 525 units.

Family Dollar Stores Inc.