Family Dollar Opens 500-Plus Stores, Deploys Delivery Program

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Family Dollar Opens 500-Plus Stores, Deploys Delivery Program

By Nicole Giannopoulos - 02/03/2014
Discount retailer Family Dollar sets the stage for a positive year with investments in assortment planning, a new pallet delivery program and preparing to open more than 500 new stores in 2015.
 
In addition to taking steps to increase customer traffic, the retailer is also working to reduce cost and improve profitability. For example, through its procurement process, the retailer recently consolidated store maintenance services to one vendor, resulting in significant expense savings this year. As the top line is likely to remain challenged, we will continue to look aggressively for additional opportunity to reduce our core operating cost.
 
The new pallet delivery program is an important investment to help improve the long-term efficiency of the supply chain, simplify store processes and increase workforce retention. Through this new method, goods are sorted by product group at the distribution center and delivered to stores on pallets. This process makes it easier for the support teams to unload trucks and replenish goods to the sales floor more quickly. The North Carolina distribution center has been converted to the new process. Thus far, Family Dollar is seeing improved delivery service rates, reduction in merchandise damages and higher customer satisfaction in stores, and store teams love it. There are plans to convert three additional distribution centers this year.
 
"We are committed to our new store program," said Levine. "With strong returns on investment and ample market opportunity, opening new stores continues to be an investment priority. This year, we plan to open 525 new stores. New store returns remained strong and initial sales productivity has remained consistent, between 85% and 90% of an average store. We believe we can double the size of our chain."
 
The retailer also continues to invest in its store renovation program, tweaking the layout and assortment to optimize performance. Renovated stores continue to outperform the chain and the retailer remains on track to complete the chain by 2016, according to Howard Levine, CEO of Family Dollar.
 
While the increased promotional activity will likely result in higher markdowns at the end of the quarter than we originally planned, we continue to expect modest gross margin expansion in the second quarter.
 
"We believe that we’re making the right investments to stabilize the business," noted Mary Winston, chief financial officer, chief accounting officer and EVP for Family Dollar. "It will take time to reverse the recent earnings trends especially given the challenging environment, but we expect that the trend will improve modestly in the second half of the year."
 
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