Family Dollar 4Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

Not happy with results

“While we are convinced that we are making the right long-term investments, we are not happy with our recent financial results.”

Business needs stabilizing

“priorities are stabilizing the business, reenergizing our focus on providing customers with exciting values and reaccelerating traffic into our stores. It will take time to reverse the recent trends, especially given the challenging environment, but I have confidence in our team.”

Low end consumer still getting hit

“Over the last 2 years, I think we’ve seen a growing bifurcation of households. Higher-income households who have benefited from market gains, better employment opportunities or improvements in the housing markets have become more comfortable and confident in their financial situation. But our core lower-income customers have faced high unemployment levels, higher payroll taxes and more recently, reductions in government assistance programs. All of these factors have resulted in incremental financial pressure and reduction in overall spend in the market.”

This seems like a lot of new stores

“This year, we plan to open 525 new stores.”

Pretty candid about reasons for executive departure

“we announced that Mike Bloom has left the company. While we’ve made some progress during Mike’s tenure, we weren’t happy with our financial results. Ultimately, Mike and I were not aligned on our merchandising strategy and we decided to make a change.”

Comps Declined, fewer transactions

“Comparable store sales decreased to 2.8%…The decrease in comp sales was primarily due to fewer customer transactions.”

Note the calendar shift

“As a reminder, the comp store sales period this year included 6 fewer selling days during the holiday season as compared to last year. We believe this shift negatively impacted our comp store sales in the first quarter this year.”

On the plus side, GM stable, slightly higher

” gross margin expanded 14 basis points, as compared with the first quarter of fiscal 2013.”

Guiding for continued negative comps

“Reflecting our December results, we now expect comp store sales in the second quarter will decline in the low-single-digit range.”

A consumer that’s living paycheck to paycheck

“ne of the things that is critically to our unique customer who is absolutely living paycheck to paycheck, standing for an everyday low price proposition is critically important.”

New stores still performing well so no need to trim new openings

“if we were to see our new returns slip, we would certainly consider a reduction there. To explain why we are so bullish on new stores is because our new stores are performing well.”

Reading between the lines, sounds like change at the President position two years ago has caused some internal struggle over strategy: EDLP vs. Promotions.

” I think if anything, one of the benefits that we’ve seen over the last 2 years is how important it is to maintain and have a consistent merchandising strategy. It’s not only confusing to the customer, it’s confusing to our teams internally.”

The Macro is going to be difficult

“I will tell you the way we’re thinking about it is the playing field is going to be difficult. The macroenvironment, as we talked about, is going to be challenging and we can’t do anything about that.”

Traffic deteriorated in November and December

“I think the way we looked at it was September and October were okay. What we saw was a deteriorating trend particularly the last couple of weeks of November, when discretionary sales became more important, as well as through the month of December when traffic started to decelerate.”