Family Dollar 2010 Annual Report Download - page 9

products, home cleaning supplies, housewares, stationery, seasonal goods, apparel and home fashions. Our stores
operate on a self-service basis, and our low overhead enables us to sell merchandise at a relatively moderate
markup. In the typical Family Dollar store, the majority of the products are priced at $10 or less, with many of
the products priced at $1 or less. In fiscal 2010, the average customer transaction was $9.91.
Current Strategic Initiatives
We believe that balancing initiatives targeted to deliver short-term financial results with investments that
may require longer-term development will help us weather difficult macro-environments and enable us to
achieve our long-term financial goals.
Several years ago, we began to slow new store growth to focus more on improving returns in existing stores
and the chain overall. Since then, we have completed an end-to-end re-engineering of our merchandising and
supply chain processes, enhanced the performance of our store teams, refreshed our store technology platform,
and created a store layout for new stores that is more convenient and easier to shop. As a result of these
investments, we upgraded our operational capabilities, increased profitability, gained productivity and expanded
our financial returns. More importantly, these investments provide us with a strong foundation to accelerate
revenue growth going forward.
Building on the improvements we have made over the past several years, we plan to continue to strengthen
our value and convenience proposition in fiscal 2011. In addition, we plan to re-accelerate our new store growth
while also launching a comprehensive store renovation program.
Our new store performance has improved significantly in the last several years as a result of the utilization
of stronger site selection tools as well as enhancements driven by our strategic initiatives. Our operational
improvements, combined with softening real estate markets and a growing customer base, have resulted in
additional opportunities for new store growth. During fiscal 2011, we plan to open approximately 300 new stores,
a 50% increase over fiscal 2010 openings. We also expect to build the pipeline for further acceleration of our
new store growth over the next two to three years.
Leveraging our concept renewal efforts, enhanced merchandising and supply chain capabilities, a refreshed
store technology platform, and a better-trained and more productive workforce, we are initiating a comprehensive
renovation program intended to re-energize the Family Dollar brand. During fiscal 2011, we plan to renovate 600
to 800 stores at a projected cost of $100,000 to $130,000 per store. The renovations will address both the interior
and exterior of the stores and will create more customer-focused assortments and layouts, rejuvenated physical
stores and more customer-centric teams.
While we are making significant investments to drive revenue growth, we also continue to pursue
opportunities to further enhance our profitability and financial returns. Key areas of focus will include the
continued expansion of our private brand programs and the continued development of our global sourcing
capabilities, as well as our ongoing efforts to improve operational productivity.
In fiscal 2010, we launched or refreshed several Family Dollar brands, increasing sales of private brand
merchandise from 19% of net sales in fiscal 2009 to 22% of net sales in fiscal 2010. In fiscal 2011, we plan to
continue to enhance and develop our private brand programs with an increased focus on consumable categories,
and we plan to leverage our enhanced marketing capabilities to drive greater brand awareness and strengthen our
overall quality perception.
Our efforts to expand our global sourcing capabilities will also support our private brand goals. Since
launching our global sourcing effort, we have improved the quality of our private brands through the
establishment of standardized product specifications and more rigorous testing protocols. We believe that we
have additional opportunity to manage our costs better through the diversification of our supplier network, and
we expect to establish a local presence in China during the first half of fiscal 2011.
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