Dollar Tree 2015 Annual Report Download - page 25

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• overhead, through the reduction of shared services costs and redundant public company and Board costs.
Take advantage of significant white-space opportunity. Over the past decade we have built a solid and scalable
infrastructure, which provides a strong foundation for our future growth. We are committed to growing our combined business
to take advantage of significant white space opportunities that we believe exist for both the Dollar Tree and Family Dollar store
concepts. Using our proven real estate strategy across our combined business, we intend to drive future store openings by
capitalizing on insights regarding location, target customer profile, competitive dynamics and cost structure. Over
the long-term, we believe that we can operate more than 7,000 Dollar Tree stores and 12,000 Family Dollar stores across the
United States.
Convenient Locations and Store Size. We primarily focus on opening new Dollar Tree 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, 8,000 - 10,000 selling square feet for Dollar
Tree and 6,000 - 8,000 selling square feet for Family Dollar, 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.
We open new Family Dollar stores in strip shopping centers, freestanding buildings and downtown buildings. The range of
size of our Family Dollar stores allows us to select store locations in neighborhoods convenient to our customers in each of
these market areas.
For more information on retail locations and retail store leases, see "Item 2. Properties" beginning on page 18 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 26 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.
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, 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