Family Dollar 2013 Annual Report Download - page 29

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• We expanded our teams in Shanghai, Luxembourg and Bangkok as part of our Global Sourcing
program. Through this program, we increased merchandise purchases (at cost) direct from the factory
by nearly 90% to approximately 5% of our total merchandise purchases (at cost).
• We launched a six-year exclusive partnership with McLane, a highly successful supply chain services
company, to allow us to offer an expanded assortment of frozen and refrigerated foods, improve our in-
stock levels, and distribute tobacco products to our stores efficiently.
• We established a strategic pricing organization to optimize core pricing strategies for private brands,
implement a new zone pricing strategy, and leverage detailed analysis and testing to increase our
profitability.
• We increased our organizational focus on being more store-centric by creating cross-functional teams
to identify opportunities to improve service to stores, including our planned pallet delivery program
which is expected to launch in fiscal 2014. In support of this initiative the Corporate Office was
renamed the Store Support Center.
Fiscal 2014 Outlook
Building on the improvements we made over the past several years, we plan to continue to execute on our
initiatives designed to increase our relevancy with customers, deliver profitable sales growth and strengthen our
value and convenience proposition in fiscal 2014.
During fiscal 2014, we expect to open approximately 525 new stores and renovate, relocate, or expand
approximately 850 stores. By the end of fiscal 2014, we expect to have renovated approximately 75% of the
chain and we plan to complete this chain-wide renovation by the end of fiscal 2016. We have also designed and
tested a new pallet delivery program to enable store teams to unload and restock merchandise faster, which we
expect to begin implementing during fiscal 2014. Capital expenditures for fiscal 2014 are expected to be between
$550 and $600 million.
During fiscal 2013, we adjusted our plans to reflect an expectation that our customers’ discretionary spend
would remain constrained. We took proactive steps to improve the performance of our discretionary businesses
by aggressively managing receipts and clearing unproductive merchandise. Our goal in fiscal 2014 is to stabilize
our discretionary businesses by providing our customers with value, quality and a better assortment. In addition,
we will continue to optimize our assortment of Consumables merchandise to continue to respond to our
customers needs.
In fiscal 2013, we introduced 500 new and converted private brand consumable SKUs to our assortment. In
fiscal 2014 we expect to build on this momentum to expand private brands, including a refresh of certain private
brands in Home and Apparel to offer our customers more quality and value while broadening their appeal. We
intend to drive greater awareness of our private brands program through increased marketing and visual
merchandising support.
Global Sourcing also remains an opportunity to increase profitability. 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. 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.
Inventory shrinkage continued to be a challenge for us in fiscal 2013 as we faced higher store manager
turnover and elevated inventory levels. In fiscal 2014, we expect to stabilize store manager turnover through our
store simplification effort and better inventory management. In addition, we expect to reduce inventory shrinkage
by introducing new technology in our stores. In fiscal 2013, we implemented a new security DVR camera system
that is more user-friendly than our previous platform and we plan to introduce a new security tagging program
and add additional security cameras to the sales floor in new stores.
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