Penny-pinching single moms are drawn to Family Dollar. The nation's #2 dollar store (behind Dollar General) targets forty-something women shopping for a family earning less than $40,000 a year. It operates more than 7,475 stores across some 45 states and Washington, DC. Consumables (food, health and beauty aids, and household items) account for more than two-thirds of sales; stores also sell apparel, shoes, and linens. Family Dollar runs small neighborhood stores near its low- and middle-income customers in rural and urban areas. Most merchandise costs less than $10. Family Dollar was founded in 1959 by the father of CEO Howard Levine.
Sales & Marketing
Family Dollar Stores spent $19.6 million on advertising in fiscal 2012 (ends August), up from $17.1 million in 2011.
The retailer's fiscal 2012 (ends August) sales increased 9% vs. the prior year to $9.3 billion. Net income also was up more than 8% over the same period. Same-store sales increased nearly 5%, as more low-income and also middle-income families frequented its stores and spent more per visit. Indeed, Family Dollar's sales have nearly doubled over the past nine years. While the chain and its rivals have clearly benefitted from the economic pain of many working families, Family Dollar has seen competition for those dollars increase.
After shunning a hostile advance in 2011, Family Dollar reaffirmed its own strategic growth plans. The retailer believes that its shareholders are best served through new store openings and remodeling existing locations. Indeed, retail expansion has hastened since the height of the recession. Family Dollar accelerated the pace of new store openings in fiscal 2012 (ends August), adding more than 400 locations, including 44 stores in California (its first in the Golden State). Going forward, the fast-growing chain plans to open 500 new stores in fiscal 2013.
In the face of increased competition from mass discounters, such as Wal-Mart, the company has also increased purchases of lower-margin consumables and avoided higher-priced merchandise. Its food assortment includes milk and other perishables, as well as more quick-prep and ready-to-eat products. In a move designed to broaden its grocery offering, including refrigerated and frozen food, Family Dollar in spring 2012 formed a strategic partnership with grocery distributor McLane. Family Dollar has shifted to an "everyday low price" strategy, as opposed to short-lived promotional advertising, while increasing the number of brand-name goods it carries. Also, after learning that smokers make more shopping trips per year, the company added tobacco products to its offering in fiscal 2012 with the intent of capturing both tobacco sales and spill over to other merchandise categories.
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