Family Dollar 2013 Annual Report Download - page 10

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Private brands remain an opportunity to increase sales and profitability. In fiscal 2013, we made further
progress in increasing our penetration of private brands. Private brands sales increased approximately 10% in
fiscal 2013, as compared to fiscal 2012, and private brand consumable sales performed especially well,
increasing approximately 21% in fiscal 2013, as compared to fiscal 2012. In fiscal 2013, private brands sales
represented approximately 26% of total sales and approximately 18% of total consumable sales. To drive this
growth, we introduced 500 new and converted private brand consumables SKUs to our assortment in fiscal 2013.
Building on this momentum, in fiscal 2014 we intend to increase our penetration of private brands even further
with a focus on quality. We expect to refresh certain private brands in Home and Apparel to offer our customers
more quality and value while broadening their appeal. In addition, we intend to drive greater awareness of our
private brands program through increased marketing and visual merchandising support.
In fiscal 2013, we continued to expand our Global Sourcing programs as we increased merchandise
purchases (at cost) direct from the factory by nearly 90% to approximately 5% of our total purchased
merchandise (at cost) as compared to fiscal 2012. While we continue to rely on third-parties to help us procure
merchandise, we are progressively moving toward a more efficient, direct model. In fiscal 2013, we expanded
our sourcing teams in Shanghai, Luxembourg, and Bangkok. While we still source the majority of our
merchandise from China, we expanded our business network into key developing markets including Vietnam and
Cambodia. Today, these teams are strengthening and expanding our supplier network. In fiscal 2014, we plan to
continue to expand our Global Sourcing teams, develop stronger processes to help us integrate our sourcing
activities with our category management efforts, and continue to expand our supplier network.
Drive continuous improvement
In fiscal 2013, we continued to improve our efficiency and effectiveness through a number of process
improvement initiatives.
As a low-cost provider, protecting our strong price perception and delivering value to our customers is
critical to our long-term success. Over the last several years, we have invested significantly in new
merchandising processes, including price management capabilities, customer research and category management
tools. In fiscal 2013, we established a strategic pricing team to help us improve our price and value perception
while also increasing profitability. We optimized core pricing strategies for private brands, implemented a new
zone pricing strategy and leveraged detailed SKU analysis and testing to increase our profitability.
In fiscal 2013, we launched a cross-functional effort to simplify store-level tasks and improve store-level
execution. Our goals were to eliminate or limit certain tasks, improve processes and systems, reduce time
necessary to complete tasks, and reinvest hours saved into other higher-value tasks. We also designed and tested
a new pallet delivery program to enable store teams to unload and process freight faster and more easily than
traditional door-to-shelf processes. We intend to begin implementing the new pallet delivery program in fiscal
2014 and expect to execute the program in all stores over the next several fiscal years.
While we made significant progress in most of our margin-driving initiatives, inventory shrinkage continued
to be a challenge for us in fiscal 2013. We evaluated our security tagging program and plan to introduce a new
system in fiscal 2014 that is less costly to maintain and manage. We have also implemented a new security DVR
camera system that is more user-friendly than our previous platform, and we are adding additional cameras to the
sales floor in new stores. These investments, combined with team stabilization, provide a foundation to reverse
the negative inventory shrinkage trends we experienced in fiscal 2013.
Develop diverse, high-performing teams
We believe customer satisfaction is strongly linked with employee engagement, which is why we continue to
invest in developing diverse, high-performing teams. We continue to focus on strengthening the Family Dollar culture
and engaging Team Members while also optimizing talent and building leadership capabilities. Improvements were
made in key leadership roles, programs and processes, with a focus toward improving store Team Member experience.
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