Dollar Tree 2014 Annual Report Download - page 5

Our stores are convenient, bright, fun, friendly and lled
with great merchandise at tremendous values.
Our merchandising model is powerful and exible.
Our product assortments are planned to oer the greatest
value to the customer for $1.00 and to do so at a cost that
meets our merchandise margin threshold. We utilize this
strategy of ever-changing assortments to our advantage.
Our customers have grown to expect that there is always
something new at Dollar Tree. Customers can nd a
balanced assortment of the high-value basics they need
and the fun, exciting discretionary merchandise they want
on each and every store visit. Seasonal assortments are
fresh and colorful, providing merchandise energy to the
customer’s shopping experience as they enter the front
door at the stores.
This strategic advantage has been validated by results
in varying consumer climates. History demonstrates
that we have increased our relevance throughout both
inationary and deationary cycles by leveraging our scale
and our exibility to change the product or the source
while maintaining our focus on providing surprising value
to our customers and achieving margin targets. We are
dierent. When faced with cost pressures, most retailers
“keep the item and change the price.” At Dollar Tree,
we “keep the price and change the item” to continue
delivering great values at our $1 price point. And our
customers love us for this approach.
Transformational Opportunity
I am extremely excited about the potential of our
combined organization. Adding the well-known and
established Family Dollar banner to our portfolio of brands
will be transformational to our business.
The strategic rationale for this combination is powerful:
• We are combining two very large companies with
more than 13,000 stores achieving almost $19 billion
in sales and more than $2 billion in adjusted EBITDA.
• We are combining two established and respected
brands in the most economically resilient sector of
retailing. The Discount Retail sector has ourished
through all economic cycles.
• We will operate and grow both banners, combining
two complementary business models across xed-
and multi-priced strategies with the ability to serve
a broader range of customers and geography. The
Dollar Tree target customer is largely a suburban
customer while the Family Dollar customer is largely
urban and rural.
• We are combining complementary merchandise
expertise, adding the Family Dollar expertise in
name brand consumable products to the Dollar
Tree variety, seasonal and discretionary product and
global sourcing power.
• This combination generates signicant and
immediate opportunities for operational
improvement and near-term opportunities for
synergies. We have identied the opportunity to
realize at least $300 million in annual run-rate hard-
cost synergies by the end of Year 3.
Our primary areas of initial focus regarding the integration
will include:
• The Customer – An intense focus on the value
customer and delivering the merchandise
assortment to serve their needs and wants. This
will include a mix of name-brand and private-label
basics alongside variety and seasonally relevant
product. We will continue the return to EDLP by
delivering everyday values at competitive prices.
• Improving sales per foot and inventory productivity
by expanding high-performing categories and
eliminating products that do not meet our sales and
protability thresholds.
• Enhancing the customer experience and improving
the table stakes by developing plans to consistently
deliver the promise of a bright, clean and friendly
store to shop. We will be tracking key metrics
closely to monitor progress.
• Increasing new store, remodel and expansion
performance with a keen focus on protability
improvement metrics and ROIC.
Dollar Tree Annual Report 2014 3
consecutive years of gross
margin exceeding 35%
consecutive years of
double-digit operating
margins
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