Dollar Tree 2014 Annual Report Download - page 25

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Merchandising and Distribution. Expanding our customer base is important to our growth plans. We plan to continue to
stock our new stores with a compelling mix of ever-changing merchandise that our customers have come to
appreciate. Consumable merchandise typically leads to more frequent return trips to our stores resulting in increased
sales. The presentation and display of merchandise in our stores are critical to communicating value to our customers and
creating a more exciting shopping experience. We believe our approach to visual merchandising results in higher sales volume
and an environment that encourages impulse purchases.
A strong and efficient distribution network is critical to our ability to grow and to maintain a low-cost operating structure.
In 2014, we expanded our Joliet, Illinois distribution center to 1.5 million square feet. In 2013, we completed construction on a
new 1.0 million square foot distribution center in Windsor, Connecticut which began shipping merchandise in June 2013 and
expanded our Marietta, Oklahoma distribution center to 1.0 million square feet. In addition, we leased an additional 0.4 million
square feet at our San Bernardino, California distribution center in 2013. We believe our distribution center network is
currently capable of supporting approximately $10.5 billion in annual sales in the United States. New distribution sites are
strategically located to reduce stem miles, maintain flexibility and improve efficiency in our store service areas. We also are a
party to an agreement which provides distribution services from two facilities in Canada.
Our stores receive approximately 90% of their inventory from our distribution centers via contract carriers. The remaining
store inventory, primarily perishable consumable items and other vendor-maintained display items, are delivered directly to our
stores from vendors. For more information on our distribution center network, see Item 2 “Properties” beginning on page 19 of
this Form 10-K.
Family Dollar Acquisition
Dollar Tree's proposed acquisition (the "Acquisition") of Family Dollar Stores, Inc. was approved by the Family Dollar
shareholders on January 22, 2015. We believe that the combined company will benefit from the following competitive
strengths:
Size and Scale. Upon consummation of the Acquisition, we will become one of the largest retailers in North America, with
approximately 13,000 stores in operation across 48 states, the District of Columbia and five Canadian Provinces. By banner,
our store base and infrastructure will include Dollar Tree’s approximately 5,300 stores (including over 200 Deals stores) and 10
distribution centers and Family Dollar’s over 8,100 stores and 11 distribution centers, subject to adjustment for any stores that
are divested in connection with the Acquisition. Dollar Tree has not yet reached an agreement with the Federal Trade
Commission (‘‘FTC’’) regarding the number of stores that it will be required to divest but continues to believe that it will need
to divest no more than roughly 300 stores, although the actual number of divestitures may be above or below 300, as the
number of divestitures that the FTC will require remains subject to uncertainties.
Complementary business models across fixed- and multi-price points. Dollar Tree is the nation’s leading operator of fixed-
price point stores, selling everything for $1 or less and Family Dollar is a leading national operator of multi-price point stores,
selling the majority of its products at $10 or less. Following the Acquisition, we will create a diversified and complementary
business model across both fixed-price and multi-price points which will allow us to offer our customers a broader assortment
of compelling, fresh and fun merchandise at incredible values.
Targets broad range of customers and geographies. Dollar Tree targets customers within a broad range of Middle America
with stores located primarily in suburban areas while Family Dollar targets low- and lower-middle income households through
its urban and rural locations. We plan to operate and grow both banners. The Dollar Tree and Family Dollar store concepts are
complementary and co-locate successfully in the same market with little cannibalization. Consequently, following the
Acquisition we believe we will be able to significantly extend our reach to a broader base of customers and serve them with
even greater value, choice and convenience.
Complementary product offering, providing a broad, compelling and fresh merchandise assortment at incredible values.
Upon the consummation of the Acquisition, we will be able to leverage our complementary merchandise assortments across
Dollar Tree and Family Dollar stores to deliver a broad, compelling and fresh product offering to our customers. Dollar Tree’s
assortment consists of consumable merchandise (49%); variety merchandise (47%); and seasonal merchandise (4%) while
Family Dollar’s assortment consists of consumable merchandise (73%); home products (10%); seasonal and electronics (10%);
and apparel and accessories (7%). These complementary assortments will enable the combined company to leverage Dollar
Tree's variety and seasonal expertise and Family Dollar's consumables expertise across both store banners and enhance the
overall quality of our combined business’s merchandise offering.
Stable and recession resilient business. We believe that the retail segment in which we operate is a stable and recession
resilient industry that grows through various economic cycles and experiences less volatility relative to other retail segments.