* Focused on getting middle-income shoppers to spend more
* Will renovate older stores
* Continues to target double-digit earnings growth
* Will have $5 toys for holiday season
* Shares down 1.5 pct
(Adds CEO comments, updates stock price)
By Nicole Maestri
NEW YORK, Nov 3 Family Dollar Stores IncFDO.N
said on Tuesday that it will expand its business by opening new
stores, renovating older locations and selling more to the
middle-income consumers who are looking for bargains.
Chief Executive Howard Levine also said at the retailer's
analyst meeting, which was broadcast over the Internet, that
Family Dollar continues to target double-digit earnings
The company provided few other financial details and did
not update its earnings forecast or comment on sales for the
month of October. Many large chain stores will report their
monthly sales results on Thursday. [ID:nN01495324]
"We're really talking about some of the things we are
working on for the long term, and are going to stay away from
some of the shorter-term questions," Levine said.
Shares fell 1.3 percent to $28.36.
Family Dollar, which sells most of its merchandise for $10
or less, caters to lower-income shoppers, with household
incomes below $40,000. But the retailer has said it is now
attracting more shoppers with household incomes of up to
$70,000 as unemployment rises and credit remains tight.
Family Dollar told analysts that it has an opportunity
to boost sales by selling more to that higher-income shopper.
"She's coming to our store, but she's not shopping the
whole store," said President James Kelly.
To gain customers' trust of its name-brand food selection,
it is introducing a new advertising campaign. Ads will show
products like Kraft Macaroni & Cheese with the slogan: "Exactly
the same as the grocery store. We just price them lower."
To sell more to shoppers during each visit, Family Dollar
is grouping similar products, such as baby items, in one
location. It is also trying to make its stores easier to
navigate by improving signs and removing clutter.
To improve margins, it wants private label merchandise to
account for 25 percent of total sales, up from its current 20
percent. Such goods typically sell for less than name-brand
goods but provide better margins.
NEW STORE GROWTH
A few years ago, Family Dollar slowed its new store
openings to focus on boosting results in existing locations.
It has also worked to implement a new check-out system that
allows it to accept more payment types, including food stamps
and credit cards. That roll-out is expected to be completed in
Kelly said Family Dollar, which has more than 6,600 stores,
is now "in a better position to focus on new store growth."
It will renovate older stores, too, to make them as
productive and easy to shop as the newer locations.
Levine said some investors believe Family Dollar performs
best in a recession, when shoppers need to stretch tight
household budgets. But he said: "I would much rather operate in
a robust economy."
As the economy improves, Levine said shoppers buy more
discretionary merchandise, like clothes or holiday decorations,
which have higher profit margins than consumable items, like
food, that are currently driving the bulk of its sales.
That is good news for Family Dollar because the basket of
items that its shoppers buy "becomes more balanced and more
profitable," he said.
Levine said he expects the upcoming holiday to be a tough
one for shoppers. This year, he said Family Dollar will have a
large selection of toys and gifts priced at $5. Wal-Mart Stores
Inc (WMT.N) is selling 100 toys for $10 each.
When Family Dollar reported fourth-quarter results at the
beginning of October, it forecast full-year earnings of $2.15
per share to $2.35 per share and said it planned to open about
200 new stores. For its fiscal year ended Aug. 29, its earnings
per share rose almost 25 percent to $2.07.
(Reporting by Nicole Maestri, Editing by Maureen Bavdek and
Gerald E. McCormick)