Family Dollar Stores’ CEO Howard Levine knows how difficult the past couple of years have been, but through significant restructuring on items such as pricing and number of stores, the company is optimistic about its future.
During the company’s Oct. 9 conference call to discuss fourth-quarter and full-year fiscal 2014 financial results, Levine said that fiscal 2014 was “one of the most difficult years in our company’s history,” according to a Seeking Alpha transcript.
Comp store sales declined 2.1% and earnings on an adjusted basis and excluding the extra week last year declined about 19%.
“While our long term positioning and growth prospects remain strong, our results were pressured on multiple fronts throughout the year,” Levine explained. “In response, we initiated an in-depth business review last winter to identify immediate opportunities to strengthen our value proposition and increase operational efficiencies to improve our financial performance. This work culminated in the implementation of a number of initiatives designed to drive top line sales and reposition our cost structure.”
In 2013, the company raised some prices and customers noticed, Levine said.
“In an effort to refocus our core customer and to strengthen our value proposition, in late March of this year, we invested more than $50 million on an annualized basis, to reduce prices on nearly 1,000 basic items,” he said. “We are encouraged by the mid-single digit increases in unit sales and believe there is additional upside that can be achieved as we realize the full benefits of this price investment.”
What’s more, Family Dollar Stores closed 377 underperforming stores in the second half of its fiscal 2014.
“Generally, these stores were older, generated sales and profits well below the company’s average, and continued to deteriorate in the current environment,” Levine said. “The combination of our workforce reduction efforts and store closures are expected to result in 40 million to 45 million of annualized operating benefit.”
Levine said the company also reviewed the pace of new store growth.
“New stores have always delivered a high return on investment for Family Dollar,” he explained. “But as our operating margin has contracted and our capital investment has increased, our return on investment trends have been pressured. To improve these trends, we re-evaluated our site selection criteria and refined our real estate models. As a result, we made the decision to slow new store growth to approximately 375 stores beginning in fiscal ‘15.”
Using customer feedback, the company continues to refine its store layouts to drive higher productivity.
Private brand consumable sales increased about 11%.
“The stabilization of our inventory levels, lower store manager turnover, and certain technology investments all contribute to the decrease in shrink,” Levine said.