Family Dollar on Track

Matthews, N.C. — Climbing back on track, helped by stepped-up sales of food and new merchandising programs, Family Dollar Stores pushed fourth-fiscal quarter profits up by 32.8%, to $38.8 million from $29.2 million last year.

Sales at the neighborhood retailer rose by 10.4%, to $1.6 billion from $1.4 billion, while same-store sales improved by 4.9%. After installing coolers in more stores, rolling out Treasure Hunt merchandise programs and refining its Urban Initiative, customer count was off slightly, by 0.5%, but the average transaction price climbed by 5.2%, to $9.45, the low-cost retailer said.

“Two years ago, Family Dollar began aggressively investing” in all three programs to boost sales and profitability,” said Howard Levine, chairman and ceo. “These investments provided the foundation for this year's improved results.”

Helped by a more favorable merchandise mix, improved mark-up, and an improvement in shrinkage expense, which more than offset higher freight and fuel costs, the average gross margin improved by 50 basis points, or half a percentage point, to 32.4% from 31.9% during the same period a year ago.

Costs were whittled down by 30 basis points, or three-tenths of a percentage point, to 28.4% of sales from 28.7% a year ago, helped by lower property taxes, store payroll, and more favorable trends in workers' compensation and healthcare claims.

Like an increasing number of American retailers, Family Dollar benefits from money it's stashed in the bank, and interest income more than doubled during the quarter, rising to $1.8 million from $888,000 a year ago. But interest expense climbed as well, to $3.2 million from zero last year, as the company installed more coolers and continued to invest in the new merchandising programs.

Inventories were also pared by 4.9%, even as sales improved at a double-digit pace. Stockpiles were trimmed to $1.04 billion from $1.09 billion during the same period a year ago, saving the retailer about $52.9 million in merchandise costs.