Dollar Tree 2009 Annual Report Download - page 17

Management’s Discussion And Analysis Of Financial Condition
And Results Of Operations
million฀selling฀square฀feet฀at฀January฀31,฀2009.฀During฀
scal฀2009,฀we฀opened฀240฀stores,฀expanded฀75฀stores฀
and฀closed฀25฀stores,฀compared฀to฀231฀new฀stores฀
opened,฀86฀stores฀expanded฀and฀51฀stores฀closed฀during฀
scal฀2008.฀In฀the฀current฀year฀we฀increased฀our฀selling฀
square฀footage฀by฀6.6%.฀Of฀the฀2.0฀million฀selling฀
square฀foot฀increase฀in฀2009,฀0.3฀million฀was฀added฀by฀
expanding฀existing฀stores.฀The฀average฀size฀of฀our฀stores฀
opened฀in฀2009฀was฀approximately฀8,500฀selling฀square฀
feet฀(or฀about฀10,800฀gross฀square฀feet).฀For฀2010,฀we฀
continue to plan to open stores that are approximately
8,000฀-฀10,000฀selling฀square฀feet฀(or฀about฀10,000฀-฀
12,000฀gross฀square฀feet).฀We฀believe฀that฀this฀store฀size฀
is฀our฀optimal฀size฀operationally฀and฀that฀this฀size฀also฀
gives our customers an ideal shopping environment that
invites them to shop longer and buy more.
In฀scal฀2009,฀comparable฀store฀net฀sales฀increased฀
by฀7.2%.฀The฀comparable฀store฀net฀sales฀increase฀was฀
primarily the result of an increase in the number of
transactions.฀We฀believe฀comparable฀store฀net฀sales฀
continued to be positively affected by a number of
our initiatives, as debit and credit card penetration
continued฀to฀increase฀in฀2009,฀and฀we฀continued฀the฀
roll-out฀of฀frozen฀and฀refrigerated฀merchandise฀to฀more฀
of฀our฀stores.฀At฀January฀30,฀2010฀we฀had฀frozen฀and฀
refrigerated฀merchandise฀in฀approximately฀1,400฀stores฀
compared฀to฀approximately฀1,200฀stores฀at฀January฀
31,฀2009.฀We฀believe฀that฀the฀addition฀of฀frozen฀and฀
refrigerated product enables us to increase sales and
earnings by increasing the number of shopping trips
made฀by฀our฀customers.฀In฀addition,฀we฀accept฀food฀
stamps (under the Supplemental Nutrition Assistance
Program฀(“SNAP”))฀in฀approximately฀2,900฀qualied฀
stores฀compared฀to฀2,200฀at฀the฀end฀of฀2008.฀
With฀the฀pressures฀of฀the฀current฀economic฀
environment, we have seen increases in the demand
for฀basic,฀consumable฀products฀in฀2009.฀As฀a฀result,฀we฀
have shifted the mix of inventory carried in our stores
to more consumer product merchandise which we
believe฀increases฀the฀trafc฀in฀our฀stores฀and฀has฀helped฀
to increase our sales even during the current economic
downturn.฀While฀this฀shift฀in฀mix฀has฀impacted฀our฀
merchandise costs we were able to offset that impact in
the current year with decreased costs for merchandise
in many of our categories.
Our point-of-sale technology provides us with
valuable sales and inventory information to assist our
of this change, we will record a non-cash charge
to฀gross฀prot฀and฀a฀corresponding฀reduction฀in฀
inventory,฀at฀cost,฀of฀approximately฀$26฀million฀
in฀the฀rst฀quarter฀of฀2010.฀This฀is฀a฀prospective฀
change and will not have any effect on prior periods.
•฀฀On฀November฀2,฀2009,฀we฀purchased฀a฀new฀
distribution center in San Bernardino, California.
We฀have฀spent฀approximately฀$31.0฀million฀in฀
capital expenditures for this new distribution center
through฀scal฀2009.฀We฀plan฀to฀spend฀an฀additional฀
$6.0฀million฀in฀the฀rst฀quarter฀of฀2010฀to฀nish฀
the฀project฀before฀the฀building฀starts฀receiving฀
merchandise. This new distribution center will
replace our Salt Lake City, Utah leased facility
when฀its฀lease฀ends฀in฀April฀2010.฀
•฀฀On฀February฀20,฀2008,฀we฀entered฀into฀a฀ve-year฀
$550.0฀million฀unsecured฀Credit฀Agreement฀(the฀
Agreement).฀The฀Agreement฀provides฀for฀a฀$300.0฀
million revolving line of credit, including up to
$150.0฀million฀in฀available฀letters฀of฀credit,฀and฀a฀
$250.0฀million฀term฀loan.฀The฀interest฀rate฀on฀the฀
facility฀is฀based,฀at฀our฀option,฀on฀a฀LIBOR฀rate,฀
plus a margin, or an alternate base rate, plus a
margin.
•฀฀On฀March฀20,฀2008,฀we฀entered฀into฀two฀$75.0฀
million interest rate swap agreements. These
interest rate swaps are used to manage the risk asso-
ciated with interest rate fluctuations on a portion of
our฀$250.0฀million฀variable-rate฀term฀loan.฀
Overview
Our net sales are derived from the sale of merchandise.
Two฀major฀factors฀tend฀to฀affect฀our฀net฀sales฀trends.฀
First is our success at opening new stores or adding new
stores through acquisitions. Second, sales vary at our
existing฀stores฀from฀one฀year฀to฀the฀next.฀We฀refer฀to฀
this change as a change in comparable store net sales,
because we compare only those stores that are open
throughout฀both฀of฀the฀periods฀being฀compared.฀We฀
include sales from stores expanded during the year in
the calculation of comparable store net sales, which
has the effect of increasing our comparable store net
sales.฀The฀term฀‘expanded’฀also฀includes฀stores฀that฀are฀
relocated.
At฀January฀30,฀2010,฀we฀operated฀3,806฀stores฀in฀48฀
states฀and฀the฀District฀of฀Columbia,฀with฀32.3฀million฀
selling฀square฀feet฀compared฀to฀3,591฀stores฀with฀30.3฀
฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report฀฀฀15