Family Dollar 2009 Annual Report Download - page 28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion summarizes the significant factors affecting our consolidated results of operations
and financial condition for fiscal 2009, fiscal 2008 and fiscal 2007 and our expectations for fiscal 2010. You
should read this discussion in conjunction with our Consolidated Financial Statements and the Notes to
Consolidated Financial Statements, which are included in this Report. Our discussion contains forward-looking
statements which are based upon our current expectations and which involve risks and uncertainties. Actual
results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those set forth in the “Cautionary Statement Regarding
Forward Looking Statements” in the General Information section of this Report and the “Risk Factors” listed in
Part I, Item 1A of this Report.
Our fiscal year generally ends on the Saturday closest to August 31 of each year, which generally results in
an extra week every six years. Fiscal 2009 and fiscal 2008 were 52-week years compared with a 53-week year in
fiscal 2007. The second quarter of fiscal 2009 and the second quarter of fiscal 2008 included 13 weeks compared
with 14 weeks in the second quarter of fiscal 2007.
Executive Overview
We operate a chain of more than 6,600 general merchandise retail discount stores in 44 states, providing
primarily low to middle income consumers with a selection of competitively priced merchandise in convenient
neighborhood stores. Our merchandise assortment includes consumables, home products, apparel and
accessories, and seasonal and electronics. We sell merchandise at prices that generally range from less than $1 to
$10.
During fiscal 2009 as compared with fiscal 2008, our net sales increased 6.0% to $7.4 billion, our net
income increased 25.0% to $291.3 million, and our diluted net income per common share increased 24.7% to
$2.07. Comparable store sales (stores open more than 13 months) for fiscal 2009 increased 4.0% compared with
fiscal 2008. Our strong results during fiscal 2009 were due primarily to strong sales of consumable merchandise
and improvements in cost of sales, as a percentage of net sales.
Although the economic environment remained difficult for our customers during fiscal 2009, with rapidly
rising unemployment and a decline in average hours worked, we believe our customers benefited from lower
energy costs and certain government stimulus programs. We believe our strategy of providing both value and
convenience continues to resonate well with budget-minded consumers. During fiscal 2009, we experienced an
increase in customer traffic and the dollar value of the average transaction. Our customer research suggests that
our core low-income customer is shopping us more frequently and spending more when they shop at our stores.
In addition, we are seeing growth in the number of shopping trips and average transaction from more middle-
income customers. The various components affecting our results for fiscal 2009 are discussed in more detail
below.
During fiscal 2009, we focused on driving revenues, mitigating risk and managing costs through the
following key initiatives:
• We continued the expansion of our assortment of traffic-driving consumables, providing customers
with more of what they need in a challenging economic environment. During fiscal 2009, we initiated
efforts to re-align space in our stores to accommodate strong customer demand for consumable
merchandise and improve the in-store shopping experience. Approximately 48% of the chain was
impacted by these efforts during fiscal 2009.
• To strengthen the Family Dollar brand with customers and to reinforce the values we offer, we focused
on increasing the productivity and returns of our advertising and customer communications and
improving our in-store execution of promotional events.
20