Family Dollar Managing the Tough Parts

Retailers who have been successful in the recession usually have had some kind of value offering in food and consumables, which might range from inexpensive produce to discount pricing on diapers, products that seems like an everyday shopping bargain to some group of consumers, but progress for Family Dollar has also meant managing those parts of the business that are slumping while being opportunistic elsewhere.

Wedbush Morgan analyst Joan Storms noted that food and consumables have driven Family Dollar sales and earnings, which beat her guidance for the second quarter, but she also said the company had addressed challenges in other departments effectively. For example, many retailers have experienced hemorrhaging home department sales going back before the recession. Of course, the fall off there can drag down the positive sale elsewhere. Family Dollar addressed its troubles in the department by launching a Home Remodel event that featured inexpensive decorative goods, by doing a better job promoting merchandise with in-store circulars and by developing better displays at the head of each aisle.

The company also focused on making specific but limited investments in departments that were seasonally relevant, such as toys, to generate excitement with new products and expanded presentations while keeping inventory associated costs low.

Second quarter results were a measure of success, with Family Dollar enjoying a boost in comparable store sales, which measures activity at stores open for at least a year, up 6.4%, as well as total sales, up 8.7%. Also, the company raised its earnings guidance to the 59 cents to 61 cents range from the previous 48 cents to 51 cents.