Dollar Tree 2014 Annual Report Download - page 23

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At any point in time, we carry approximately 6,800 items in our stores and as of the end of 2014 approximately 35% of our
items are automatically replenished. The remaining items are pushed to the stores and a portion can be reordered by our store
managers on a weekly basis. Through automatic replenishment and our store managers’ ability to order product, each store
manager is able to satisfy the demands of his or her particular customer base.
Customer Payment Methods. All of our stores in the United States accept cash, checks, debit cards and credit
cards. Along with the rollout of freezers and coolers, we have increased the number of stores accepting Electronic Benefits
Transfer (EBT) cards and food stamps (under the Supplemental Nutrition Assistance Program (“SNAP”)) to approximately
5,000 stores as of January 31, 2015.
Convenient Locations and Store Size. We primarily focus on opening new stores in strip shopping centers anchored by
large retailers who draw target customers we believe to be similar to ours. Our stores are successful in metropolitan areas, mid-
sized cities and small towns. The range of our store sizes allows us to target a particular location with a store that best suits that
market and takes advantage of available real estate opportunities. Our stores are attractively designed and create an inviting
atmosphere for shoppers by using bright lighting, vibrant colors and decorative signs. We enhance the store design with
attractive merchandise displays. We believe this design attracts new and repeat customers and enhances our image as both a
destination and impulse purchase store.
For more information on retail locations and retail store leases, see Item 2 "Properties” beginning on page 19 of this Form
10-K.
Profitable Stores with Strong Cash Flow. We maintain a disciplined, cost-sensitive approach to store site selection in order
to minimize the initial capital investment required and maximize our potential to generate high operating margins and strong
cash flows. We believe that our stores have a relatively small shopping radius, which allows us to profitably concentrate
multiple stores within a single market. Our ability to open new stores is dependent upon, among other factors, locating suitable
sites and negotiating favorable lease terms.
The strong cash flows generated by our stores allow us to self-fund infrastructure investment and new stores. Over the
past five years, cash flows from operating activities have exceeded capital expenditures.
For more information on our results of operations, see Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations” beginning on page 25 of this Form 10-K.
Cost Control. We believe that our substantial buying power and our flexibility in making sourcing decisions contributes to
our successful purchasing strategy, which includes targeted merchandise margin goals by category. We also believe our ability
to select quality merchandise helps to minimize markdowns. We buy products on an order-by-order basis and have no material
long-term purchase contracts or other assurances of continued product supply or guaranteed product cost. No vendor
accounted for more than 10% of total merchandise purchased in any of the past five years.
Our supply chain systems continue to provide us with valuable sales information to assist our buyers and improve
merchandise allocation to our stores. Controlling our inventory levels has resulted in more efficient distribution and store
operations.
Information Systems. We believe that investments in technology help us to increase sales and control costs. Our inventory
management system has allowed us to improve the efficiency of our supply chain, improve merchandise flow, increase
inventory turnover and control distribution and store operating costs. It is also used to provide information to calculate our
estimate of inventory cost under the retail inventory method, which is widely used in the retail industry. Our automatic
replenishment system replenishes key items, based on actual store level sales and inventory. At the end of 2014,
approximately 35% of our items are on automatic replenishment.
Point-of-sale data allows us to track sales and inventory by merchandise category at the store level and assists us in
planning for future purchases of inventory. We believe that this information allows us to ship the appropriate product to stores
at the quantities commensurate with selling patterns. Using this point-of-sale data to plan purchases of inventory has helped us
manage our inventory levels.
Corporate Culture and Values. We believe that honesty and integrity, doing the right things for the right reasons, and
treating people fairly and with respect are core values within our corporate culture. We believe that running a business, and
certainly a public company, carries with it a responsibility to be above reproach when making operational and financial
decisions. Our executive management team visits and shops our stores like every customer, and ideas and individual creativity
on the part of our associates are encouraged, particularly from our store managers who know their stores and their
customers. We have standards for store displays, merchandise presentation, and store operations. We maintain an open door