Family Dollar 2013 Annual Report Download - page 9

In fiscal 2011, we launched a comprehensive, multi-year store renovation program intended to increase our
competitiveness and sales productivity by transforming our customer’s shopping experience. In fiscal 2013, we
enhanced this program based on operational learnings and customer feedback. As a part of this program, we:
• Introduced an updated store layout, which repositioned Apparel and Home to drive more impulse
purchases and enhance profitability;
• Expanded other key consumable categories and created more intuitive merchandise adjacencies;
• Improved navigational signage and leveraged new fixtures that enhance customer sightlines, increase
capacity and simplify restocking and recovery processes;
• Created a warmer, more inviting shopping environment that includes a refresh of the building façade
and exterior signage and improved store standards;
• Raised our customer service standards by strengthening our team member engagement with enhanced
training, improved recognition programs and more consistent team member branding.
As of the end of fiscal 2013, more than 4,000 new and existing stores reflected these enhancements. During
fiscal 2014, we expect to renovate, relocate or expand approximately 850 stores in this format. By the end of
fiscal 2014, we expect to have renovated approximately 75% of the chain, and plan to complete this chain-wide
renovation effort by the end of fiscal 2016.
We believe our business model has significant future growth opportunity, and we have targeted annual
square footage growth of 5% to 7%. In fiscal 2013, we opened 500 new stores and increased our selling square
footage by 6.8%. We also opened our first store in Montana. In fiscal 2014, we expect to open approximately 525
new stores.
Deliver profitable sales growth
In an effort to become more relevant and to drive more trips to our stores, we successfully executed a
number of merchandising initiatives in fiscal 2012 to increase our consumables assortment. We expanded our
assortment of food, increased our selection of health and beauty aids, and added a number of new merchandise
categories, including tobacco products.
In fiscal 2013, we leveraged these investments and continued our focus on increasing our relevancy with
customers and driving sales productivity in our stores. In September 2012, we launched a six-year, exclusive
partnership with McLane Company, Inc. (“McLane”), a highly successful supply chain services company. This
strategic partnership allows us to offer an expanded assortment of frozen and refrigerated food, improve our in-
stock levels and distribute tobacco products to our stores efficiently.
Reflecting customer response to the assortment changes we made in fiscal 2012 and in fiscal 2013, we
continued to drive increases in customer traffic and market share gains in key consumable categories. In fiscal
2013, our consumables sales increased 16.9% to 72.4% of our total sales as compared to fiscal 2012. We expect
this trend will continue in fiscal 2014 and we will continue to optimize our consumables assortment.
While sales of consumables were strong in fiscal 2013, our sales in more discretionary categories were
challenged. Persistent fiscal cliff issues, payroll tax increases, tax refund delays, and slow job growth for our core
customer resulted in an increased focus on basic needs and a reduction of discretionary spending. As a result,
discretionary sales decreased 0.9% in fiscal 2013 as compared to fiscal 2012, which had a direct impact on gross
margin. 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 our performance, aggressively managing
receipts and clearing unproductive merchandise. Our goal in fiscal 2014 is to stabilize our discretionary business
by providing our customers with value, quality and a better assortment.
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